I visited with Mike a few weeks ago and am planning another trip down there hopefully in a few days. Formerly a swing trader, Mike made a switch to day trading using the dummy method last year and hasn’t looked back. Mike has influenced my trading in a big way and is every bit as friendly in person as he seems online.
Read on for more about TraderMike, why he switched from trading 15 minute charts to 30 minute charts, why he’s considering changing his risk level, and what he would do differently if he were to start his site from scratch. TraderMike has agreed to answer any questions you might have for him. If you have a question, ask it in the comments at the end of the post.
StockTickr: Tell us a little about yourself, Mike.
TraderMike: I’m a 38 year old ex-software developer with a bachelor’s degree in electrical engineering. I grew up in Los Angeles but I’ve been living in Atlanta, GA since 1993.
StockTickr: How did you get started trading stocks?
TraderMike: My introduction to the stock market was via an investment club that some college friends started in the mid 1990s. A couple of year later I opened my own account for investing. I began reading a lot of trading books and getting more & more active in the market. A few years later, in 1999, I quit my job to try trading for a living.
StockTickr: Most traders have a horror story about losing their shirt when they first started trading. What’s yours?
TraderMike: I don’t have a horror story like that. I’ve always been careful with my position sizing so that even the real bad times I’ve had didn’t take me out of the game. The worst periods for me were while the bubble was popping back in 2000, when I gave back a good portion of the profits I made on the way up, and the days after 9/11 because I had just opened a few long positions the days before.
StockTickr: How did you get the guts to start trading for a living?
TraderMike: I don’t know if it was guts so much as over-confidence. The markets were very easy in the late 90s and I remember sitting in my office with my co-workers high-fiving each other over all the money were were pulling out of the market. Some days I would make more trading than I was from my “real” job. In times like those it seemed foolish not to quit your job to trade. It also helped that I was bored with my job. I figured it was then or never for me to give full-time trading a shot.
StockTickr: What single lesson did you learn along the way that has helped you the most in your trading?
TraderMike: If I had to pick one thing it would be something that Todd Harrison used to say — “Try anything, just use a stop.” I would have gone bust long ago if not for learning to cut my losses while they were small.
StockTickr: You made a well known switch from swing trading to day trading. How did you prepare for that jump?
TraderMike: I tried a few of MaoXian’s dummy trades while I was still “officially” a swing trader. But once I decided to make the switch to day trading I just did it. I quickly discovered that I was on the wrong commission structure with my broker. I was paying $10 per trade and was racking up the commissions. Because of their rules I had to wait until the beginning of the next month to switch to their 6 cents per share commission structure. That may have been a blessing in disguise because I traded in demo mode for those couple of weeks. That time was well spent because it gave me a chance to figure some things out without risking any money.
StockTickr: Do you ever see yourself adopting a different style of trading or do you think you’ve found YOUR holy grail in dummy trading?
TraderMike: I’m always open to new styles / setups. I’ve started implementing some of the setups from John Carter’s Mastering the Trade, namely the gap fade and TICK fades. I don’t know if I’ll go back to swing trading though because I really like being in cash at the end of the day in my trading account.
StockTickr: You traded the 15 minute bars for a good while and recently changed to the 30 minute bars. Why did you make that switch and are you happy so far with your results?
TraderMike: I made the switch in the middle of the summer because I was getting chopped to bits on the 15 minute time frame. The market was very choppy then and moving to 30 minute bars did two things. First, they allowed me to trade and think at a more relaxed pace. They also forced me to wait until 10:30 to enter trades. I like that because it allows the market to set a full 60 minute opening range. If that range is narrow I’ll just wait until it’s broken before entering any positions. Yes, so far I’m happy with my results.
StockTickr: How do you go about developing and tinkering with your exit strategy?
TraderMike: It really just trial & error. I always say that exits are more of an art than a science. I came up with a set of guidelines based on experience and studying my trading journal. I try to stick to those guidelines but sometimes I’ll see things in the broad market that will make be bail.
StockTickr: What mistakes do you think most beginning “dummy traders” make?
TraderMike: I’m not sure that I’m the right person to answer that since it’s Chairman MaoXian‘s system. From what I’ve seen on some blogs though, I’d say that people aren’t focusing on “unusual suspects” — stocks which are unusually active based on an increase in volume and volatility. Having said that, people have to modify systems to suit themselves. My volume surge threshold is a lot lower than MaoXian’s.
StockTickr: What 3 books do you recommend traders read?
TraderMike: It’s tough for me to narrow it down to only three. My answers would vary based on how experienced a given trader was. But I’ll go with:
- Trading in the Zone by Mark Douglas — This is probably the most important book for traders to read. It covers the stuff that 95% of trading and investing books don’t — psychology, discipline and understanding that trading is nothing but a probabilities game. A key point from the book is that a trader does NOT have to know what the market will do next in order to make money.
- Trader Vic — Methods of a Wall Street Master by Victor Sperandeo — Has great info about how to blend fundamental analysis with technicals. One thing that a lot of people could use is his lessons on drawing a proper trendline.
- Trade Your Way to Financial Freedom and/or Financial Freedom through Electronic Day Trading by Van K. Tharp. — Both of these books cover critical aspects of trading — position sizing and expectancy. The second book also gives details on keeping a journal and creating a business plan.
StockTickr: Other than your own, what are your 3 favorite sites?
TraderMike: Again, just 3 is tough because I track so many. Since it’s so tough for new blogs to break through I’d like to mention 3 of my favorite new blogs. I really like what Brian’s doing at Alpha Trends with his videos. I also find myself visiting Move the Markets and NYSE Scalper a lot lately.
StockTickr: What percentage of your portfolio do you risk with each trade? Are you looking to increase or decrease that level?
TraderMike: Right now I’m risking 0.75% of my equity per trade. When I started day trading my R was only 0.35%. I was supposed to be slowing increasing it until I got to 1% but now I’m actually considering reducing R a bit. That’s because I often find myself running out of buying power. Depending on how tight my stops are and the price of the stocks I’m trading I can run out of buying power with just 3 positions. I’d like to be able to put on more positions than that and dialing back my risk per trade would allow me to do that.
StockTickr: What technical indicators could you not live without?
TraderMike: First would have to be Japanese candlesticks charts. If a chart’s not in candlestick form I don’t even want to see it. I also couldn’t give up volume or moving averages.
StockTickr: How do you think the market has changed over the last several years? How have you adapted?
TraderMike: I don’t think it’s changed at all. It’s as tough and tricky as ever.
StockTickr: You’ve said you aren’t a fan of backtesting. How do you instill a solid belief in your system?
TraderMike: By actually trading. I think that’s the best way to do it. You can just trade really small and increase your size slowly. Paper trading and backtesting may be good to a point but things change when real money is on the line. That’s when the emotions kick in and that’s when the potential problems begin.
StockTickr: What advice can you offer traders who are just starting out?
TraderMike: Understand that trading is nothing but a game of probabilities. You’ll be fine as long as you can accept small losses and never fall in love with a position. If you’re trying to trade for a living get adequately capitalized. or, better yet, have one or more other streams of income. When you have to trade to make your next mortgage / rent payment you’ll start to do things that you shouldn’t, like taking profits too soon or forcing trades.
StockTickr: What do you like best about trading?
TraderMike: The challenge. The market is like a puzzle that can never be completely solved. I’m a person who gets bored easily. Back when I had a “real” job I’d usually get bored with my projects within a matter of weeks. But after all these years of trading I still look forward to the opening bell in the morning.
StockTickr: If you could start your blog over from scratch, what would you do differently?
TraderMike: First thing is I would find the perfect hosting firm. It’s become an annual ritual for me to change hosts because of their technical issues and/or because my site gets too much traffic for their over-sold, under-powered servers. After finding that mythical perfect host I would attach keywords (tags) to my posts and create a table of contents.
StockTickr: Thanks, Mike!
TraderMike: Sure, Dave.
Stay tuned – there are several interviews on the way. You can subscribe to these interviews via RSS feed.
- Roger Nusbaum
- Dave Johnson
- J.C., the NYSE Scalper
- Brian Shannon, AlphaTrends
- Jamie, Wall St. Warrior
- Howard Lindzon
- Kernan of TRADEthemove.com
- Richard Todd
- Andy Swan
- Steve Nison of Candlestick Charts
- Dan Mirkin from Trade-Ideas
- Bruce Brotnov
- Eric Cahoon
- Ugly from Uglychart.com
- 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!