a good friend of mine interviewed me for his trading web site…
Describe your style of trading (short / medium / long term, trending / contra trend, what instruments….)
I would describe myself as a trader in a combination of short-term and medium-term time frames. In my short term trading I would classify myself as intraday with willingness to hold overnight if circumstances warrant it. My medium-term timeframe consists of swing trading and once a week adjustments to my asset allocation strategies. I usually have a combination of both trend following and countertrend trading techniques (otherwise known as reversion to the mean, which is a very important component of my overall strategy.)
Could your trading methodology be programmed into a computer?
I try to analyze my successful discretionary trading into rule sets that could be performed mechanically but currently I have a strong discretionary component to almost all of my techniques. When I do my back testing I always test against a mechanical rule set in order to determine if there is an edge that is persistent. Then in my trading I separate out the combination of mechanical rules and discretionary trading in order to see what my personal value add as a trader is, if any.
What data services do you use? What does this cost a year?
I keep it pretty simple really, I get live price quotes from ScottTrade which is appropriate to use to manage all my accounts except for a few prototype testing accounts. I use Yahoo real time quotes because I like the way it integrates with Excel.
Describe your computer set up
I use a widescreen monitor for my primary trading machine which is a high performance laptop with a broadband connection. I keep a second laptop with a separate Internet connection open at all times as my fail safe.
How many hours per week do you dedicate to trading?
I dedicate 3 to 4 hours a night to preparation for the next day’s trading session with probably an additional five hours on the weekend for research and additional preparation. And then of course I am alert to the market when the US market is open. I probably work harder in preparation than I do an actual trading, because preparation is all about what might happen, whereas actual trading focuses simply on what is happening.
What sort of annualised return should a trader reasonably expect?
From a design perspective I think you want to target 20% return per year with no negative months and a maximum drawdown of 10%. This is simply a heuristic to use as a target for assessing the potential of specific trading strategies and as a benchmark for my own.
Describe a trading strategy that you used to use (and, if you dont use it anymore, why not?)
You should try to catch breakouts and ride them for a long way. I used to try to trade the after-hours market. I used to try to time news events and initial public offerings. All three of these strategies I have proven to my own satisfaction that I cannot do. No amount of wishing will make it so.
How do you go about creating a trading strategy? Do you back test?
These days it normally begins with the observation of opportunity that catches my eye and looks like it might offer signals that I could take advantage of given my current setups and preferences. I start looking for that pattern to manifest with some frequency in stocks or exchange traded funds. If I see it happening often enough I will start designing some rules. I also have other strategies for different time frames and styles of trading that as I look at the interplay between them sometimes ideas for extending them will just jump into my head. I use a lot of reasoning by analogy and many times that will suggest a style of trading that I hadn’t previously considered. I read books with different ideas to see if I can find something that appeals to my style.
If your trading strategy was a car, what model would it be?
The 1993 Volvo 940 Turbo station wagon that is blue in color with leather seats and plenty of comfort and safety for long distance rides. It’s a steel cage surrounding me, because safety is most important. It has plenty of room to carry all my gear and lots of friends. It gets excellent gas mileage of 25 miles a gallon. I expect it to run for at least 20 more years. It is completely indifferent to the stylistic concerns or opinions of others.
Do you like volatile markets?
I absolutely love volatile markets because it allows me to get the most return in the shortest period of time and features more human psychology than quiet markets. Since I believe my edge consists of trading against human psychology, volatility is for me.
If you had to recommend one book on trading, what would it be?
I think the most important book on trading is your trading journal which reports all of your preparations, your notes and insights and trading records, periodic debriefings, your trading plan, and which represents your professional trading practice in action. If you don’t have that book you are in deep trouble.
If you had to make just one recommendation to spread bettors, what would it be?
Work out why the guy on the other side of your trade is in the trade; and then work out what can go wrong so that you can know your risk and avoid running off a cliff.
Do you agree with the saying: trading is a hard way to make an easy living?
Trading is certainly hard work, something you have to do every day to stay on your game. I think it’s like anything, in that if you really enjoy it it doesn’t seem like work.
Do you offer any services to traders?
I share my strategies, techniques, ideas, and personal records through a website, e-mail distribution, and host a daily live trading chat room for like-minded traders. I charge just enough to cover my costs, and keep my wife off my back. I publish my thoughts about trading on my blog atwww.kansasreflections.wordpress.com . A lot of people seem to enjoy reading them and I know that helps me by getting the words out of my head onto paper where I can review and reflect. My website is www.tortoisecapital.org and I invite your readers who are interested to try my unlimited free trial.
Any other thoughts on spread betting or trading?
Respect the game and give it the effort and attention that it deserves. Always know your risk and never be afraid to walk away from something that you don’t understand. And remember that when you think you understand, something might just be about ready to change.
- Rookies Corner: Covered Calls – Knowing the Risks (tradeking.com)
- Chatroom reflections on analyzing new ideas (kansasreflections.wordpress.com)
- Stock Trading Strategies To Consider (stocktrading.net)
- Limit Up trading strategy now being tracked live on Collective2.com (limituptrading.wordpress.com)
- NewsWatch: U.S. stocks drop; Dow relinquishes weekly gain (marketwatch.com)
- Live Trading Room Offers Unique Trading Strategy – WebWire (press … (tradingforex-beginner.com)
- For Every Time and Season, There’s a “Right” Options Strategy (community.tradeking.com)
- Why oil’s wild ride is far from over (business.financialpost.com)