For the next interview in the StockTickr Interview Series (RSS feed), I spoke with Jamie Hodge, the director of education at Trade-Ideas and an automated trader. He’s made the switch to almost completely automated trading these days. Jamie’s also the one you’ll be able to have a 1-on-1 training session with when you sign up for Trade-Ideas.
Read more about how Jamie trades, how he got started in the business, and how he lost a wad of money early in his trading career.
Jamie has agreed to answer questions in the comments of this post, so feel free to ask away.
StockTickr: Tell us a little about yourself, Jamie.
Jamie: My name is Jamie Hodge and I currently reside in Carlsbad, CA. I relocated to California from Austin, TX in January 2007 in order to work more closely with the Trade-Ideas crew. Since I’ve been here we have been heavily involved in getting our auto trade and back testing module (OddsMaker) active with some of the major platforms in the professional day trading community.
I’ve been day trading for a living since 1996; I began my career in the Block Trading office in Austin.
StockTickr: How did you get started trading stocks?
Jamie: I graduated from Southwest Texas State University (now referred to as Texas State). In the fall of 92, I took the series 7 and started out as a broker for a small regional firm. I started hearing thru a broker friend about his friends from college who had started a day trading office and were using the SOES system to rack up huge gains on a monthly basis. As it turns out, his friend ended up being Jeff Burke who was one of two founders of Block trading; Chris Block being the other.
StockTickr: Most traders have a horror story about losing their shirt when they first started trading. What’s yours?
Jamie: In 95 a broker colleague and I started a retail broker/dealer in order to facilitate our business as we were sick of getting gouged by the major firms. During this time a good friend of mine had been given the opportunity to go work in Saudi Arabia and make really nice cash; So he would send me his excess money every month and I would buy mutual funds for him. After about a year at the new place I just couldn’t take it any more, I hated being a salesman and trading was all I could think about and so I walked away from it. My friend in Saudi and I had a talk and we ended up liquidating his funds and off I went to day trade with $17k. Chris Block ended up funding the rest of my account and to make a long story a bit shorter, I whittled it down to under $5k before I turned the corner. Talk about feeling worthless, try sleeping when you’re teetering on loosing all of your buddies money that he has been working hard for. Not fun. In the end I ended up giving him back over 2.5x what he gave me and everything worked out.
StockTickr: What single lesson did you learn along the way that has helped you the most in your trading?
Jamie: Never become complacent especially when you’ve been gimmick trading all of your career. I refer to any trading practice that can become extinct from a rule change or system replacement as gimmick. The prime example was soes. Once the soes phenomenon started taking root, the big boys were already laying plans to do away with it and replace it with a better system. One that would allow more shares and faster executions, one that would put the advantage back into their hands. They succeeded in 01 when they replaced it with the supermontage, and thus soes became relegated to the history books.
After stumbling around aimlessly and wasting about a year liquidity trading before worldcom finally kicked the bucket. I started hearing about traders of my ilk (quick gratification type scalping large blocks and small moves) who were making decent cash trading on the nyse. Once again, the gimmick game was on, and then one by one they started sealing up all the holes. NYSE open book was great for a while, and let’s not forget all the fun we had using bullets(synthetic hedges from Essex) to hammer our favorite specialist from time to time.
The gimmicks were fun, but I feel that with my current style, there really isn’t anything that could impact it adversely (barring me breaking all of the rules and/or the market just sitting there). In other words, as soon as I was hitting my stride with one of my old styles, then it would end and you’d have to start all over with something different. What I am doing now has longevity, and so over time, as I improve I should really be able to achieve some nice velocity.
StockTickr: What’s your exit strategy for winning and losing trades?
Jamie: Anything that I trade these days is generated from alerts fabricated through TI with the use of the Odds Maker. Not to say that I won’t trade anything else, but I’d say 95% of my signals originate from the TI engine. Most of my hold times are short, my typical hold time is probably 20 minutes. As far as exit strategy it’s pretty simple, once I am in a position, I stay in it until it’s time period has expired or I get stopped out. If a poiion is approaching its time limit and it’s still moving for me, I’ll tell the bot to ignore the exit signal and then manually adjust my stop.
StockTickr: How do you recommend established discretionary traders get their feet wet in automated trading?
Jamie: Anyone who is entertaining the idea of auto trading should first become familiar with using the Odds Maker, since this is the tool that will be used to find/fabricate strategies used in an auto execute environment.
StockTickr: How many automated strategies are you comfortable trading simultaneously?
Jamie: Currently I am launching 15-16 different strategies every open.
StockTickr: What 3 books do you recommend traders read?
StockTickr: How do you think the market has changed over the last several years? How have you adapted?
Jamie: The biggest issue has been the systematic retooling of the trading network over the past 7 years. In 96 when I first started trading there were 0 ECNS, it was just all market maker’s thick bids and offers and you could see exactly who you were trading against. It’s quite the opposite today, no liquidity and you can’t see anything. Take all of your ecn books, lvl II, and any other feed you can pay good money for and you’re lucky if you’re seeing 10% of the real order flow. Just like casinos have banned card counting at black jack the big boys have taken every advantage away from the small day trader. Now more than ever, you need to fight algorithms with algorithms.
StockTickr: Do you backtest and if not, how do you instill belief in your systems?
Jamie: All of my strategies are fabricated using the Odds Makers’ – everything’s a 15 day event based back test.
StockTickr: What advice can you offer traders who are just starting out?
Jamie: You have to come in with a game plan. In advance you have to know exactly how you’re going to react. Most of the time a trader can look back and pinpoint exactly what it was that caused an undesirable result; If you don’t know why, then you have a problem. The biggest thing is constantly making yourself aware that trading is 90% mental.
StockTickr: What do you like best about trading?
Jamie: The freedom and lifestyle that it allows.
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