For the next interview in the StockTickr Interview Series (RSS feed), I spoke with Ugly from Uglychart.com. Ugly is doing what many traders would love to do – trade for a living. He trades with a proprietary trading firm (or “prop firm” for short). A prop firm gives you several times your money to trade and then you keep part of the profits.
Every day on Ugly’s site, he posts a simple, but powerful phrase: Good morning, my name is Ugly, and I am a loser. I have it in me to do serious financial damage to my account. Many of you will remember that phrase from the psychology section of Alexander Elder’s excellent book, Trading for a Living, where he compares a losing trader to an alcoholic.
I spoke with Ugly about his prop trading arrangement and how it’s working out.
Read on to find out about Ugly’s prop trading, why he decided to start with a prop firm, and how much capital he risks on each trade.
StockTickr: Tell us a little about yourself, Ugly.
Ugly: I live in Philadelphia but I am from Ohio. I am socially awkward but get along very well with nerds and other social outcasts. I try to be a good person, but I often fail at this even in very simple situations. Gandhi and Tolstoy have been inspirations to me and have given me a much greater idea of the purpose of my life.
StockTickr: How did you get started trading stocks?
Ugly: I made my first trade four years ago at the age of 25. Everything I have learned about the market has one way or another come from the internet. I don’t know anyone personally who trades. My system and every idea I have about trading originated either from somewhere on the internet or from someone I met on the internet.
My interest in the stock market rapidly grew once I realized that it could be predicted to some degree. I became very interested once I realized that a stock could be predicted by looking at its chart. The art of charting amazed me and continues to fascinate me.
StockTickr: Most traders have a horror story about losing their shirt when they first started trading. What’s yours?
Ugly: Not long after my first trade I loaded up everything into a penny stock, MTWV, after I made a quick $1000 one day. I totally fell in love with the stock, recommeding it to my friends and family. It started to go down and I bought as much as I could (luckily I didn’t yet use margin). One day, the stock tanked and my account was down about 30%. At around 3:30 that day, I read this message on a Yahoo message board.
Obviously you can’t really trust anyone on the yahoo message boards, but I had been reading messages from this guy for a while and I sold everything about 15 minutes before the close. After the close they announced bankruptcy and the stock opened 90% down or something like that. It was a big loss, but it could have been a lot worse. I learned a nice lesson without having to pay for it as much as I probably should have.
StockTickr: You’re trading for a living by trading at a prop firm (proprietary trading firm). Can you share some details of that arrangement?
Ugly: They allow me trade more money (currently 10 times my account) for a percentage of my profits (currently 10%). They also give discounted commissions. When looking for a prop trading firm I wanted to make sure that I could trade any system I wanted to trade and that they only made money when I made money.
StockTickr: How did you come to the decision to make that leap?
Ugly: I love trading and I wanted to do it for a living. I had confidence that I could do it. I enjoy the challenge and risk. I couldn’t really stand the mediocrity of my (then current) job. And it was a time in my life when I was comfortable taking the risk. These are some of the things I was thinking about.
StockTickr: Trading with a prop firm is not for everyone. What type of person do you think could thrive in that type of arrangement?
Ugly: Someone who doesn’t have a lot of money but wants to trade for a living. Someone who can trade profitably. I prefer trading by myself at home, but some people might trade better in a trading room with other traders – which is available. Someone who trades a system that can take advantage of a lot of leverage without adding too much risk.
StockTickr: What single lesson did you learn along the way that has helped you the most in your trading?
Ugly: If I had to pick one thing it would probably be when I realized that the market can be consistently predicted with some accuracy. Once I knew that it could be done, everything else is about understanding how to do it – and then doing it.
StockTickr: Describe your style of trading. How long do you typically hold stocks?
Ugly: I enter positions from 10:15 until early afternoon and then I am either stopped out or close at the end of the day. On average I make three or four round-trip trades per day.
StockTickr: What’s your exit strategy for winning and losing trades?
Ugly: I have a stop that is based on technical support that I place immediately after I enter each trade. If the stop is hit, I exit. If it moves in my direction, I will usually adjust the stop to breakeven and then hold until the close. If the trade really starts to run in my favor, I might close half of it.
StockTickr: What 3 books do you recommend traders read?
- Market Wizards by Jack Schwager
- How to Make Money in Stocks by William O’Neil
- How I Made 2,000,000 in the Stock Market by Darvas
- I have more recommendations on my site.
StockTickr: Other than your own, what are your 3 favorite blogs?
StockTickr: What is your typical R value per trade? i.e. what % of your portfolio do you risk with each trade?
Ugly: It is currently about 1%, but I am experimenting with this to see the effect it has on my trading.
StockTickr: What technical indicators could you not live without?
Ugly: If you can call volume a technical indicator, it is the thing I could not live without. Volume is the power that moves the market. I also currently only trade stocks with a high weighted alpha. I don’t really use many other technical indicators. Simple moving averages are another one that I use less often.
StockTickr: How do you think the market has changed over the last several years? How have you adapted?
Ugly: I haven’t been trading that long so I am not sure how it has changed. It seems to change every day, and that’s what I love about it. It also stays the same at a fundamental level, and that it also what I love about it – that it can be predicted to some degree.
StockTickr: Do you backtest? Why or why not?
Ugly: I don’t really backtest. The only thing I do is go back and look at the way a chart looked before it made a big move. Then I try to find a chart that looks the same way.
StockTickr: What advice can you offer traders who are just starting out?
Ugly: In my humble opionion, the market is a game of morals. You need humilty and self-discipline. You need to manage your risk and develop a system that is profitable. Although somewhat obvious, compunding your returns is something that I am only now learning is very important. Use the internet to find out what everyone else is doing and take parts to make it your own. Trade a stye that you are comfortable with. You’re never as good or as bad as you think you are. Don’t let anyone tell you that you can’t do it and don’t ever give up.
StockTickr: What do you like best about trading?
Ugly: I like the challenge – going up against the world. I also love the freedom.
StockTickr: When did you start your blog and what prompted you to do so?
Ugly: I started my blog almost exactly two years ago. I had a handwritten journal, but I realized it was much more easy to do the same thing in a blog and I thought some others may find it useful or interesting.
StockTickr: Why the name uglycharts?
Ugly: One time I was reading the yahoo message boards and the subject of a message was “uglychart.com” and it linked to a chart with an ugly chart. I looked up the domain name and it was available.
StockTickr: Thanks, Ugly!
Stay tuned – there are several interviews on the way. You can subscribe to these interviews via RSS feed.
- Alan Farley
- Declan Fallon
- Smita Sadana
- Bill Cara
- Van K. Tharp – Free autographed copies of Van’s book still available! Get yours now!
- Brett Steenbarger
- Eyal Maoz
- Gary B. Smith, the Chartman
- Nusair Bawla (alibawla on StockTickr)
- Dave Landry, Swing Trader
- Jeff White, the Stock Bandit
Do you have suggestions for other traders you’d like to see an interview with? Let us know!