by Brady Dahl
What are you currently doing to make yourself a better trader?
I told you I don’t really put much into this, (laughs) I guess I just try to learn from my mistakes. And I’ve been trying to hone my entries and exits a bit, being more patient when sizing in.
What’s something you do that you don’t think other traders do?
Go to sleep when they’re in losing positions, (laughs) No, a lot of guys think they’re just going to show up in chat and follow someone, but it’s hard to follow someone. You’re not going to get the same entries and exits as that person. So something I do is dig into the stocks and do my own research. I hate reading 10-Qs, but you find so much stuff in there. I never just blindly follow.
How did you get so proficient at understanding 10-Qs?
First, from being a broker, but second, from doing so much of it over time. I’ve definitely done more of it while a trader than I did as a broker. But that’s where you find everything you need if you want to trade on fundamentals.
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How many filings do you typically go through?
Usually just the last one the company put out is enough, but I win go back further if necessary.
And what are you looking for specifically?
I look for insider sales. Are they cashing out? I see if there are any convertible preferred shares people could be ready to dump on the market. I check the bum rate, how much cash the company has and how much they’re losing each month. I also want to see what they’re paying themselves in salary. Things like that.
Is it a red flag when people are getting paid too much?
Yeah, definitely. Most of these companies are losing money, so how much of it goes to them?
What else is a strength of yours?
Dealing with being down. I do that well. I don’t get emotional and I think clearly through it all.
Any advice on how to do that?
I think it’s just my personality. I’ve been through so much and have seen it all. A good example of my emotions came last year while I was playing in a baccarat tournament. I don’t play anymore, but I used to play in whatever tournament the casinos were having, baccarat, blackjack, craps, whatever, (laughs) But anyway, this winner-take-all tournament came down to the last hand between me and another guy.
I was on “player.” He was on “bank.” “Player” came in and I won $300K. My wife was there watching and the guy next to her says,
“Does he know he just won?” Because I had no reaction. I just don’t get emotional. If I have the conviction that I’m going to be right, I can handle being down. And if it ends up a loss, I can handle it. I know some guys who think they’re going to have heart attacks, or can’t
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sleep, or stay up through the night and research their positions, but I know it’s not going to do me any good not sleeping. I already did the research. If I lose, it’s just part of the game. I’ll make it back.
What do you think other traders do better than you?
Entries and exits. Which I’m working on. But I have trouble waiting for the backside of big parabolic moves. Instead I start in on the front side too early. I can see a blow-off type move at the top—I can recognize it—but I just have trouble waiting for it. I don’t want to miss out. Of course other times I think we’re already seeing the backside of something, jump in short, and then realize it’s not. But a lot of that comes back to the fact that I base my trades on fundamentals. So if I know a stock currently at $5 is going to $2, it doesn’t really matter to me if it goes to $7 first. I can sustain that drawdown. Plus it really just creates more of an opportunity when everybody else is covering in a panic.
Do you keep a set of trading rules handy like some traders do?
I don’t have anything written down, but listening to some of the speakers at Traders4ACause last year I realized I do most of the same things they do. I just don’t think about them. It’s part of how I trade. I don’t think I work as hard as most people who do this for a living. I’ve become comfortable with how things are and don’t want to put any more time into it than I have to.
What is one of the most important traits of a successful trader?
Discipline.
Even though some might consider you undisciplined…
Yeah, I do have discipline, even if it sounds like I m a guy who just adds and adds to everything. But that s just not the case. You 11 blow up doing that, and I would have been out of the game a long time ago.
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How do you judge success when it comes to trading?
If you can consistently make a living trading, enjoy it, do it every day, and provide for your family, I think you’re successful. I don’t think there’s a dollar amount on it. It’s personal. And I don’t look at it day to day. I don’t ask myself, was today successful? I look back at the end of the year and if I made a good living, it was successful.
When you first started, was the goal to make like $80K a year?
Yeah, I think I wanted to make $1K a day. But obviously that changed over time.
How did that progression work? How did you push it to the next level so quickly?
I realized that I was right most of the time. As a result, my bankroll grew, which allowed me to take more and more risk. If you can trade 1K shares and be right 90 percent of the time, why wouldn’t you trade 10K shares next time? And I don’t take money out of my accounts.
Well I do sometimes if I need it for something, but I don’t have a rule of taking money out when I reach certain levels or anything like that.
You need that money to build your trading size as you grow.
Some traders get comfortable at a certain point, when they’re making enough each week…
Yeah, I’ve seen that happen, but you can’t do that if you’re trying to push to bigger trading. You can’t quit because you’ve already made X
this week, you have to just wait for the next opportunity. Some days there will be more than others.
What’s your best advice for beginning traders?
You can’t blindly follow someone. You can see what they’re trading, but then you need to research it and understand the trade. Also, keep smaller size until you are making money consistently. Build your
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confidence up. Because not everyone can do this. It’s not easy. And I hate saving that, because I’ve been so successful and don’t want to put anyone down, but I’ve seen it over and over again where guys just can’t do it. I understand that feeling too, because I had friends making millions as brokers yet I couldn’t even pick up the phone to make a cold call. So stay small, manage size and risk until you’re consistent and can build. Also save up enough money before you jump in. Not having enough of a bankroll can definitely affect your trading.
Some say the need to be proven right while trading leads to losses, yet your conviction serves you very well…
Yeah, but you don’t want to feel a need to be proven right. I don’t have an oversized ego about it. Even right now I’m scaling out of a trade that I know I’m right in, but it’s hanging around and the borrow fees are adding up too quickly, so it’s not worth it to hold. It makes sense to move on.
What do you wish the public knew about trading or traders that they currently don’t?
I wish they gave it a little more respect. They don’t seem to understand that it’s a real business, a real living. The failure rate is so high, people don’t believe it’s possible for anyone. When they find out what I do for a living, I always get looked at like, is that all you do? My friends around here are all CFO’s of gaming or presidents of companies, so sometimes I wish I had a title like that, but I wouldn’t trade jobs with them. Making more money than most of those guys while sitting behind my desk at home for whatever hours I want—it’s the best job in the world.
What do your friends and family think about trading?
My friends must know I’m successful at it. They’
ve seen my house.
They’ve seen me go on exotic vacations and stuff like that. And I’m sure my family is really proud of me. Blue collar, fixed income, they gave me everything they could, but we didn’t have a lot growing up.
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Just seeing everything I have now… I think they actually believe in trading finally since I’ve been successful for so long, (laughs) I don’t think they understood it for a long, long time.
Did they understand you were making millions?
Between the restaurants, houses and vacations, they have to know now, but it took the longest time. Although my dad must have caught on at some point because one day he asked if I could give him a million dollars, (laughs) Meanwhile my mom was probably still worried I was doing something illegal.
What one thing would you change about the market?
The whole SSR, Short-Sale rule. That wasn’t in effect back when I first started, and it’s aggravating. Stocks don’t trade naturally when it’s on.
Plus it just helps people pump and manipulate stocks. Shorts always get the worst rap, calling us un-American, but the biggest manipulators in the market are on the long side. You see it all the time where they force a stock down 10 percent at the open just to get the SSR put on.
A stock runs from $1 to $6 with no problem, but now it drops $0.60
and the SSR comes on. It’s a joke. You short a stock because you see w something wrong with it. It’s a valid opinion.
Plus a lot of these trash companies go public for the sole purpose of milking Ma and Pa’s hard earned money…
Yeah. I actually believe shorting helps the public. Ma and Pa are the ones who are buying these trash companies at the top, and these stocks would be a lot higher if it weren’t for shorts. Everyone looks at shorts in a negative light, but we are the equalizers.
Do you consider yourself an addict?
I am. I miss it when I'm not trading. I want to trade. I enjoy it. I look forward to it. I wish the market was open on weekends.
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Any goals aside from trading lately?
Life’s more about being a good father and husband now. It’s exciting to be able to give my kids experiences I didn’t have as a kid. I also have the restaurants. I opened up one here on the strip last year, which had always been a goal of mine. So I still like taking on whatever new challenges come my way.
Where do you see yourself in five to 10 years?
I can’t see myself not trading. I enjoy it, it comes easily, and I make money at it. Plus I can do it from anywhere. On the other hand, would I want my son doing it? I don’t know. I find it difficult to recommend this profession to anyone. I wouldn't want to stop someone from continuing their education and becoming a great doctor or the president of some great company.
. Any advice for other successful traders on diversifying?
Not really. Although I will say not to make a lot of stupid investments early on like I did. I made a ton of money trading and turned around and blew it on bad investments, gambling, and partying. Now I’m older, more responsible, and have a family, so I learned from those mistakes and don’t do that stuff anymore. I try to make wiser decisions, like the few real estate investments I’ve had over the years and the restaurants I’ve opened. Although one dumb decision that actually turned out well was drilling an oil well in North Dakota in 2002. We just sold our interest in July of 2014.
Wow, right before oil prices plummeted…
Yeah, I met a guy at the blackjack table and he convinced me to drill an oil well with him. (laughs) But really I just made too much money too quickly so I was very loose with my money. Plus when I started trading I always thought I would eventually lose it all anyway, (laughs) Hasn’t happened yet..
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227 The Resilient
The Resilient
“Trade wel and profits fol ow.”
Nathan Michaud (@InvestorsLive) is a 30-year-old trader from New Hampshire who runs the well-known trading community at InvestorsUnderground.com.
He had a middle-class upbringing, working at places like KFC and Taco Bell during high school, but was exposed to the “good life”
through his uncle and knew how much work it would take to get there.
During college he became one of the top Staples salesman in the district while also building websites for customers on the side. His work ethic and knowledge of web design have served him well and contributed to the success he has achieved today.
From nearly going broke after earning close to a million dollars his first year trading to since becoming one of the most respected and prolific traders on Twitter, he has run the gamut of emotions the industry has to offer.
Whien he’s not trading, teaching, or helping members of his chat room, he can be found trying to find balance in life, whether with his wife, at the gym, or working on Traders4ACause, the charity he founded.
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What kind of kid were you?
I was always a hustler, always trying to make a buck. But I had business sense. I wanted to own a business one day. And I worked hard for whatever I wanted. It takes a long time to pay off a $750 dirt bike when you’re working in a fast food restaurant for $5.15 an hour.
So I was always doing other stuff, like building websites. I knew enough to set them up, design them, and then outsource the programming. I sensed what the client was willing to pay, got it done for less, and kept the difference.
What got you involved with the market?
It was just something I was interested in. And my uncle was into stocks. We’d go to his place in Cape Cod during the summers, and I always considered that lifestyle to be the “good life.” So I sort of knew I wanted to be involved in stocks at some point in my life. It wasn’t until high school when I started to regain that interest, though.
Someone gave me a stock tip that I ended up checking into, which led me to different stock message boards like InvestorsHub. I started getting into it and really revisited the idea that I might want to actually get involved in the stock market. I was working at Staples at the time and they were absolutely killing it, beating their earnings projections quarter after quarter, so I wanted to buy some Staples stock. I didn’t have a brokerage, though, so my uncle offered to buy it in his account and cut me a check for any profits when I was ready to sell.
What age were you then?
Around 17 or 18. I considered my uncle’s offer but ended up just opening my own account.
Was Staples the first buy you made?
Actually, no. It was going to be my first trade, but I ended up buying ESLR, which was a local solar company, and Lucent Technology LU, instead. I had absolutely no idea what I was doing. I woke up one
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Friday morning and ESLR had reported earnings but I had no idea I should be aware of something like that. Luckily it was good news and I was up $350.1 went ahead and took the profits, and I’ve been addicted since that day.
Wow, you actually took profits. A lot of newbies would have just held for more and eventually sold for even or a loss…
Exactly. But on the other trade, LU, I held all the way down for about a 50 percent loss. I could find breakouts, but I never knew when it was the right time to sell.
Did you start day trading right from the start?
Yeah, but at the time there was no pattern day trader rule, so you could trade as much as you wanted even if you didn't have $25K. So that wasn’t a big hurdle for me like it is for some new traders today.
Although it did take me quite some time to get over that $25K mark, anyway, because I had two big problems at the start of my career—I didn’t take losses, and I believed and invested in OTC stocks, which is A about the worst thing you can possibly do. Once I learned not to invest in OTC stocks, and after refunding my $5,000 account three or four times, I finally started to see some kind of consistency. By the summer between my sophomore and junior years in college, I was sel
f-sufficient and able to make a daily wage on a regular basis.
What was your major?
Finance with a hospitality minor.
Did you know you were going to be an independent trader at this point yet?
I was interested in business, so I was thinking maybe a broker of some sort. I actually applied for an internship at Morgan Stanley, and on my resume I wrote “professional day trader. I was denied the internship, which ended up being possibly the best denial of my life, (laughs)
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So you actually had a close call with a 9-to-5 job…
Yeah, very close. But once I failed that interview and it wasn’t “easy,” I just said the hell with it and started doing my own thing trading.
Yet you finished your finance degree?
Yeah, if I start something, I like to finish it. And I always wanted to have that fall-back plan, because reality is, you never know. But do I use the finance degree? Absolutely not. But it is helpful in trading to be quick with numbers, and I was always good at math.
So you’re trading well by the time you start your junior year…
Yeah, freshman and sophomore year I was buying stuff and overstaying. I was making money on trades where I would actually take gains on, but those successes were masked by all these bag holds, all these OTC stocks I foolishly believed in. I could make a few hundred or a thousand dollars intraday but end up even or down on the day because of these stocks I was holding, hoping they were going to go back up. And they never did. When I finally figured out how to take losses on trades that weren’t working, I started making money. I quit working at Staples and started providing online customer support for my friend’s software company. I did it from home on a computer, so I had all the time I needed to watch these tickers go up and down all day. I could learn.
