Why I Trade
In 1996, I began aggressively investing in various mutual funds. Like most, I mistakenly thought the diversification mutual funds offered would protect my capital. After the crash of 2008, I realized I could produce better returns investing in individual equities then going through a mutual fund middleman. More importantly, I truly enjoy every aspect of trading!
How My Trading Developed
Many people ask me, "how do you know so much about trading". The answer to this great mystery is... by reading books written by the best, most successful traders as well as books on performance psychology. I also relentlessly researched answers to my own questions and topics I didn't quite understand. I haven't done anything that anyone else couldn't easily do. I believe learning is a lifetime pursuit.
Risk/Reward
No one can make a stock move up or down so my main attention is on controlling the amount of money I lose (i.e. the frequency and severity of loss). My primary focus is controlling risk! I use different risk reward ratios for different conditions and strategies. I focus on performance statistics that matter such as my average risk reward ratio, average percentage of profitable vs. unprofitable trades, and average gains vs. average losses.
Entries & Exits
I focus on inefficient, growth & momentum stocks. I prefer stocks with strong or accelerating fundamentals and relative strength, sound bases or consolidations, and signs of institutional volume for position trades. Entries and exits rely heavily on technical action. I prefer to scale in and out when possible. Taking partial profit allows me to ring the register, maintain emotional control and still participate in unforeseen profitable swings. I will let a winning day trade swing over in order to "let my winners run". And roll over a successful swing trade into a position trade if a longer term opportunity exists. I combine offensive and defensive strategies plus dynamic and static signals for exits.
Market Timing
Market health & trending direction are the most important factors in whether I chose to go long or short in a trade. I'm looking for candidates that will move the quickest or longest. My goal is to time entries just before price makes a significant move and to gain a profit cushion immediately. Additionally, I'm attempting to participate in potential, favorable outlier moves. In an effort to enhance timing and candidate selection, I've created quantitative market models and proprietary stock screening reports to track acceleration and deceleration in the major indices, sectors, industry groups, and individual stocks.
Position Trades
In 2010, after minimal success (+3% to 10% returns) following the crowd I shifted to trading growth stocks. Using statistical research and historical precedent as a logical & quantifiable approach struck me as high probability. My returns dramatically increased (jumping +30% to +100%) once I began focusing on growth stocks.
Day & Swing Trades
I’ve been a full-time day, swing and position trader since 2012. For day & swing trades, my focus is primarily on momentum & growth stocks trading with sufficient volume (liquidity) and volatility (measured by ATR).
Generally speaking, I'm looking for low-risk (aka high probability), small risk (shortest distance to "wrong") and well-defined risk (logical stops vs. arbitrary ones that give the trade room to work) trades with a potential risk reward skewed heavily on the reward side.
My entries are based on simple, robust strategies and popular technical patterns. I trade both the long and short sides. Simply put, I look to go long strength and short weakness. At times I will trade index, sector and inverse ETF's as a "hedge" against existing profitable balances on open positions. I also trade futures.
Intraday I pay close attention to the 10 minute action on the S&P 500 and Nasdaq as well as various futures contracts, maintaining a top down awareness. I have found an edge in breaking a day's session into several 'observed time tendency' segments. I prefer to pursue the 'easy money' by trading with the trend and fading obvious price extremes.