Interview with Matt Davio, Misstrade

December 5th, 2007

For the next interview in the StockTickr Interview Series (RSS feed), I spoke with Matt Davio, a.k.a. Misstrade from Trading for the Masses. Matt’s blog has some nice daily linkdumps which are always popular.

Read on for more about how Matt trades, the biggest losing position he ever had, and how much money you really should start out with to trade stocks.

StockTickr: Tell us a little about yourself, Matt.

Matt: I live in Oregon after moving from the east coast in early 01, we arrived here to live a more complete life and enjoy more than just the markets. The northwest offered our family the best opportunities to both work and live with the living taking precedent. We arrrived with 2 kids, one on the way and have since had our 4th child, 3 boys and 1 girl.

Prior to turning to trading my own money, I worked for two hedge funds, one out of Chicago and one out of San Francisco. I also ran my own fund for 3 years. Before I turned to trading markets full time over the past 11 years. I worked in the medical device industry, in sales/marketing and management. I have a very non traditional path of coming to this business full time. One that I think serves me in understanding business from a non trading perspective.

StockTickr: When and how did you get interested in trading the stock market?

Matt: I started trading stocks when I was about 10. My father encouraged me to save/invest my money that I earned from my paper route I had for 5 years. I was long only at first and my midwest roots kept me focused on local companies I was aware of.

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

Matt: I remember being short KKD in 2001 and was stopped out of a rather large postiion that was complicated by leverage our fund had in long put options and short call positions. Ultimately, our position would have paid but our risk manager at our hedge fund stopped us out literally 2 weeks before the top of the stock price in I believe June of 2001.

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

Matt: Trade what you see not what you think you know is the lesson that most helps me every day.

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

Matt: I am a swing trader when it comes to stocks. My typical position is 0-4 weeks. I prefer to scale in and out of positions and I favor the short side of the market. I find gravity to be more severe to the downside.

StockTickr: Which should new traders trade: stocks or futures and why?

Matt: I think that unless you have a minimum of 500k for stocks. Futures are the best vehicle for new traders to hone their craft. You can focus on a few markets that way and trade them actively with the bonus and risk/reward that futures offer along with the key component all traders should concentrate on, which is liquidity. Without liquidity a trader is dead. Futures/Currencies truly offer the greatest levels of liquidity for a trader. Plus they are more fluid in their periods of time that one can trade.

StockTickr: What 3 books do you recommend traders read?

Matt: My favorite 3 books are:

  1. Pit Bull by Schwartz
  2. [amtap amazon:book=0471678759]

  3. When Super Traders Meet Kryptonite
  4. Fooled by Randomness by Taleb

Pit Bull When SuperTraders Meet Kryptonite Fooled By Randomness 

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

Matt: Favorite Blogs are Calculated Risk, Big Picture, and The Slope of Hope.

StockTickr: What technical indicators could you not live without?

Matt: Price, Volume, and Moving Averages are all I need.

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

Matt: I think the market has been tighter and tighter the last few years do to continued computerized trading programs. It is what it is, but the volatility is still there, you just have to find the vehicle and trade it.

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

Matt: I have backtested and tried thousands of styles. I am finally comfortable with my reversion to the mean style but it took my years of over testing to get comfortable with my own style. I could tell you exactly what I do, but I would have to kill you. Seriously, I have shared my basic skills with hundreds and everyone interprets my way entirely differently. I use many other traders’ skills I have seen over the years and incorporate them into my own personal style. I think every trader has to arrive at this point in their own manner of time and style.

StockTickr: What do you like best about trading?

Matt: The thing I like about trading is my decisions, whether right or wrong are truly mine. Live or die by the decisions you make. You alone can set the risk parameters and time frames and risk/rewards associated with your methods. You are justly rewarded or the game is taken away from you if you do not acknowledge the risk inherent in the game. It is a game and to me the best game in the world and one that is constantly evolving. What’s not to like about the physical and mental challenges of a game like that? I learn every day from other traders and blogs that I read by putting myself in some one else’s shoes as best I can. I would love if my children wanted to learn this game.

StockTickr: Thanks, Matt!

Matt: Sure, Dave.

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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!

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