Interview with Jason (a.k.a. Estocastica)

November 7th, 2006

For the next interview in the StockTickr Interview Series (RSS feed), I interviewed Jason (a.k.a. estocastica), a daytrader that logs trades on his site, Mercado de Estocástica.

Jason takes an honest approach on his site by posting all the trades he takes where they’re wins or losses – an approach that I respect and wish others would do. It says a lot about a bloggers intentions if they only post winning trades like lots do. Jason is not that way – his site exists to give back rather than take from the trading community. That’s why it’s one of the first sites I’ll check in my RSS reader in the evenings.

Read on for more about how Jason got started trading, how much (or how little) he tries to trade with the overall market tide, and what type of setups he looks for. Ask Jason questions in the comments and I’ll see if he can answer them.

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StockTickr: Tell us a little about yourself, Jason.

Jason: My name is Jason and I reside in southwest Florida. I’m 28 years old and have been married to my high school sweetheart for 5 wonderful years. I hold a bachelors degree in industrial engineering and a masters degree in financial engineering/operations research. After finishing undergrad, I spent several years in San Diego, CA and Portland, OR where I worked as an engineer for a large semiconductor manufacturer. Within a couple of years, my interest in the stock market began to grow and I wanted to become more involved. After much introspection, I decided to direct my career towards the financial world, which led to graduate school, a stint as a corporate financial analyst, and finally culminated in my jump to full-time trader.

StockTickr: How did you get started trading stocks?

Jason: I owe my love of the stock market and trading to my father. I was about 10 years old and clearly remember my dad spending the weekends and evenings backtesting quantitative trading systems. Being the late 1980’s, his Intel 386 processor would labor for hours on a single backtest. During these long data crunching sessions, he would prominently place a handwritten note across the computer’s keyboard stating “DO NOT TOUCH!” in order to keep me from accidentally interrupting the program. However, this merely added to the intrigue and mysteriousness of his work. Eventually, I’d asked him about the markets and he explained the basics to me for the first time. This planted the seed that would eventually grow into my obsession with the stock market. It’s interesting how childhood experiences can be so powerful and withstanding.

My father remains an active trader and I’ve always felt that entering this business under his guidance would be an excellent opportunity for me. About six months ago, I decided to act on this intuition. I feel very fortunate to have had this luxury and, as a result, have progressed quickly. Concepts that other beginning traders struggle with, such as money/risk management, I now take for granted. This, and many other valuable traits, are a direct result of his mentoring.

StockTickr: Most traders have a horror story about losing their shirt when they first started trading. What’s yours?

Jason: No horror stories and I don’t plan to ever have one. I am a firm believer in strict money management and never risk more than 1% of my capital. This is where many of the skills I learned in graduate school are helpful. Although I don’t apply financial engineering techniques per se to my day-trading, the stochastic calculus/probability theory I studied have helped to lay the foundation of proper risk and money management.

StockTickr: Do you trade for a living now?

Jason: Going on 6 months now.

StockTickr: What single lesson did you learn along the way that has helped you the most in your trading?

Jason: I’ve learned that a good risk management plan takes most of the emotion out of trading. When I enter a trade, I know that I’m willing to risk up to 1% of my capital on the trade. If the trade fails, I’m prepared to accept the loss. No surprises.

StockTickr: Describe your style of trading. How long do you typically hold stocks?

Jason: My trading style is based on that of Trader-X (interview) blended with techniques from my father’s trading style and other blogs such as Trader Mike (interview) and Wall St. Warrior (interview). I trade opening price gaps, both long and short, and tend not to worry about the overall market’s trend. I typically enter trades between 10am and 1pm based on both 15-min and 30-min candlestick charts. On average, I make 2-5 trades per day and I always close all positions before the day’s close.

StockTickr: What’s your exit strategy for winning and losing trades?

Jason: I always place a stop-loss order just after entering a trade. No exceptions. Otherwise, I use key Fibonacci levels, moving averages, and candlestick patterns for exit signals for both winning and losing trades.

StockTickr: What 3 books do you recommend traders read?

Jason: Honestly, I haven’t read many trading books — much of my knowledge originated from my father and various trading blogs. In my opinion, blogs are an invaluable tool for traders because most have purely altruistic motivations. However, there are some great books out there such as:

Study Guide to Technical Analysis of the Financial Markets (New York Institute of Finance) Japanese Candlestick Charting - Second Edition

StockTickr: Other than your own, what are your 3 favorite sites?

Jason: It’s difficult to narrow to just 3 but I’ll try.

  • Trader-X…views from a distorted mind : This is the first site I point my browser to each morning. Great analysis and highly entertaining. As I mentioned above, my system is based on his methodologies — I owe him many thanks! His guest blogger, Tom C., also makes excellent contributions.
  • TraderMike: Extremely well organized site with the best repository of interesting trading links on the web. Mike seems like a really great guy and I get the feeling he spends night and day working to maintain and continually improve his site. He recently invited Michelle B. to join the blog. She’s added another dimension to the site’s content and I think her articles are uninhibited and, quite frankly, excellent. She’s quickly become one of my favorite bloggers on the web, trading or otherwise.
  • Uglychart: Ugly’s site offers something more than excellent trading advice: it’s a philosophical journey. Many of his posts are truly insightful and I believe they would be well received by a more diverse audience than the trading community alone.

StockTickr: What is your typical R value per trade? i.e. what % of your portfolio do you risk with each trade?

Jason: I risk a maximum of 1% of my portfolio on any trade with no more than 25% of my total account utilized on a single trade.

StockTickr: What technical indicators could you not live without?

Jason: Candlesticks, Fibonacci retracements/extensions, and the 34 & 5 period moving averages. The 5 period moving average is one of Trader-X’s recent implementations and I’ve had excellent results so far!

StockTickr: How do you think the market has changed over the last several years? How have you adapted?

Jason: I really don’t know because I haven’t been trading long enough to observe any long term trends. However, I imagine the markets are, and always will be, challenging and humbling.

StockTickr: Do you backtest and if not, how do you instill a belief in your trading system?

Jason: I do not formally backtest but I do review many charts at the end of each trading day to see how my system would have performed on those stocks which presented a valid entry. That’s the extent of my testing…simple but effective.

StockTickr: What advice can you offer traders who are just starting out?

Jason: First and foremost, decide how you will manage your risk and position sizes. Second, find a system that suits your personality. Finally, don’t let your emotions play games with you — learn to make objective decisions under pressure. For what it’s worth, I believe every trader, regardless of his or her experience level, struggles with their emotions day in and day out. It’s a constant battle for self-control and discipline that never ceases. To be successful, this challenge must be embraced; I think this is what makes trading so rewarding and enjoyable!

StockTickr: What do you like best about trading?

Jason: Being my own boss. It is extremely liberating when the bottom line is dependent on just one person — yourself.

StockTickr: When did you start your site and what prompted you to do so?

Jason: I started my blog 2 months ago. I wanted to give back to the trading community what other bloggers had given me. If my blog helps just a few folks become better traders, then it’s worth all the effort.

StockTickr: Thanks, Jason!

Jason: Dave, thanks so much for the opportunity to share my background and experiences.

Stay tuned – there are several interviews on the way. You can subscribe to these interviews via RSS feed.

Previous interviews in the StockTickr Interview Series (RSS feed):

Do you have suggestions for other traders you’d like to see an interview with? Let us know!

9 Comments

  1. Michael Said,

    November 7, 2006 @ 7:41 am

    Interesting interview Jason. After coming from Van Tharp’s seminar over the weekend and reading that your Dad trades I feel compelled to ask what he thinks of you trading for a living.

    BTW, thanks for the kind words about me & my site… your check is in the mail. ­čśë

  2. Michelle B Said,

    November 7, 2006 @ 11:12 am

    Great interview, guys. I am also compelled to ask what is the working relationship that you have with your Dad regarding trading (You mentioned “under his guidance”).

  3. estocastica Said,

    November 7, 2006 @ 11:15 am

    Hi Mike:

    Thanks for your comment. Your site has played an intergral part in my success and you deserve the praise.

    Actually, my Dad was very excited to have me start a career in trading. From his own experiences, I think he realized that once the trading bug gets you, no other career path will satisfy. I’m grateful that he has supported me throughout my career, trading and otherwise.

    Thanks again Mike!

  4. estocastica Said,

    November 7, 2006 @ 11:56 am

    Michelle:

    Thanks for the complement!

    For the first couple of months with my Dad, I observed his daily trading routine in real-time, spent hours upon hours pouring over charts at Trader-X’s blog, studied Trader Mike’s position sizing/expectancy topics, read a few key trading books, analyzed my father’s trades, and studied other charts he found educational. After building some confidence, I began to help him analyze charts in real-time, while making a few small trades myself here and there. After 3 months, I began trading independently. However, we reconvene every few days to share our learnings and critique our trades. As you may expect, our trading styles have diverged somewhat over the past few months. Our differing styles have actually increased the value of sharing with one another, as we tend garner new insights from our differences, as opposed to falling into a trading groupthink.

    Thanks for commenting Michelle, and I hope this helps to answer your question.

  5. Michelle B Said,

    November 7, 2006 @ 12:59 pm

    Jason, thanks for the very comprehensive reply. Those months of preparation that you did before trading independently truly shows in your present stage of development as a trader. Dr. Steenbarger has commented that beginning traders need to have feedback from an experienced trader as you have had with your Dad.

    Though you have started trading fulltime relatively recently, your progress is very impressive. I had wondered how it was possible as it is very rare (at least in my experience). Unfortunately, it is not possible for many beginning traders to have what you had. The many excellent blogs around do and can provide feedback, but still they are not quite as the same as having an experienced trader giving you feedback as you trade.

    Also, the rapport between your Dad and you is very important, because I have a hunch that not any experienced trader can work successfully with any beginner.

  6. estocastica Said,

    November 7, 2006 @ 9:15 pm

    Michelle: Thanks for your kind words. I am very lucky to have a great relationship with my father, working and otherwise. I sincerely appreciate the advantageous situation in which I find myself. I view my blog as an outlet to share my good fortune.

  7. nothoo.com » Blog Archive » My Brother Said,

    November 10, 2006 @ 8:08 pm

    […] My brother too has a blog. He was even interviewed by another blog author. Check it out, especially if you are at all interested in the world of trading stocks for a living. Reading his blog, in spite of my being a rather profound ignoramus when it comes to trading stocks, I find myself drawn to the world of day-trading. […]

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