by Brady Dahl
“If you don’t have a plan, you don’t have a trade.” I always have a game plan for each trade, whether it’s a scalp reaction trade or not.
”If you re wrong, be wrong.” If the trade goes against you and you were wrong, take the loss. If you can’t let yourself be wrong, you’ll soon be out of the game.
You have seen so many traders come through chat… What type of people make successful traders?
Driven people. People that get back up quickly when they’ve been beaten down. Some of the best traders I’ve seen have that staying power. Oftentimes they get beat down right when they start too, but the best traders fight right back. Another thing I notice is consistency.
The best traders don’t swing for the fences every at-bat. The get base hits with consistency and every once in awhile one goes out of the
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park. So when they have a drawdown, what do they fall back on? Their consistency. They know how to go the market each day and collect a paycheck. Winning traders are also able to disconnect themselves from their capital. It’s just a number on a screen. Once you sever your connection to the money, the trades work for themselves.
What is something you wish you would have been told when you first started trading?
Not to invest in penny stocks. But believe it or not, most people still come into trading through penny stocks. They know a guy who knows a guy who has a hot penny stock tip, and that’s their first introduction to trading. Someone always knows a friend of a friend who hit it big in the stock market, so they mistakenly believe if they just had that one tip, that one pick, they could also hit it big. I could have saved a lot of money if I had stayed away from investing in penny stocks and knew how important taking a loss was. I also think it’s important to learn from someone who is experienced and consistently profitable.
What other mistakes do you think beginning traders often make?
Being too influenced by others. Not having a plan. Always looking for the easy way. I’ve seen a lot of traders have success as a beginner, go from $5K to $20K quickly, and then go right back to zero. They become influenced by the first few lucky trades they had and how easy it was, so they take wild risks. Easy come, easy go. They don't take the time to learn the right way.
How you judge success when it comes to trading?
Monetarily. The more you make. But what I’ve noticed, in always trying to get to the next level and the next level and the next level, is that it’s never good enough. If you’re always trying to get more, more, more, your life is just going to fly by. So you need to find some type of balance. Yes, you need to have that aggressive, striving mentality to be successful, but at the same time you need to find some balance between life, wife, and trading. It’s something continually work on.
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It’s a battle to make sure you’re on the path you want to be on. Before you know it, you’ll be 50 or 60 years old and wishing you would have done other things. You’ll wish you would have taken that vacation or gone on that cruise but you didn’t. You allowed trading to come first.
So balance is the key to happiness…
Yeah, because if money is where your happiness lies, you’ll never be truly happy. At first you'll just want to reach $100K, but once you’re there, it'll be $500K, then a million, and then two million—notice the trend? Find a structure to your life where you can make time for other things that matter. It’s not the money that drives me, anyway. It’s my passion for trading, the industry, and helping others that motivates me.
I could be having an amazing month business-wise, but if I’m not trading well, I’m not happy. It doesn’t matter if my profits are $10K or $100K for the month, as long as I’m following my rules and trading well, I’m happy.
What do friends and family think of your career?
They’ve always known that I’m into the stock market and that I do
“well,” so they always have investment questions for me like what to do with their 401K or what age to retire at, etc. But the reality is I’m scared shitless of the market. I have absolutely zero long-term investments and probably never will because I don’t trust it. I can’t even hold a stock for more than a minute sometimes, (laughs) On the other hand, I m just a normal Joe Schmo to them. I don’t talk about how much I make or things like that. My close friends know I have great success, but you can’t unload to your friends. You can’t whine about giving back $5K of your $10K intraday profits to somebody making $25 an hour. You just can’t. In fact, when I got engaged to Laura, her parents—as any good parents would—asked her if I was going to keep trading or find something more secure. Basically what I did for a living didn't appear to be that steady. They knew I did okay, but they didn't really know to what extent. Actually it wasn't until after about seven years with Laura, when we started looking for and eventually budding our house, that she even really knew.
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You were like, Hey, I have the money in cash…
(laughs) Exactly. I guess I had remained a little too quiet about what I was making. Although to her credit, she had saved up a considerable chunk of cash to put towards the house, too.
What is the public’s biggest misconception about trading?
When people learn that I’m a day trader, the most common question I get is, “Do you actually make money doing that?” I shit you not. As if it’s not what I actually do for a living when they just asked me what I did for a living. The other thing people hear is that 90 percent of day traders fail, so they assume it’s all gambling. But it’s not. It’s an educated risk. If you’re trading with setups you’re familiar with, setups that we study, and you come to the market prepared with a plan, trading is an educated risk. If you step away from that, then yes, it’s gambling and you’re at the liberty of the market.
What one thing would you change about the market?
I don’t think I’d really change anything. As a trader, you have to continually adapt to the changes that are made to the market over the years, like when they started showing true bid and offer size on Level II for OTC stocks or when they put the SSR rule into effect. I feel like I’ve been fairly quick at figuring out what advantages lie in each new change, so I gain an edge for a period of time until other people start to catch up.
Do you consider yourself an addict?
I’m absolutely a recovering addict, (laughs) My wife now knows that I need one day to decompress before I’m actually able to get into vacation mode. I need to be able to check quotes for the first day to sort of detox and realize I’m on vacation and then it goes more smoothly. I didn’t take that day in the past and would end up sneaking in work here and there for the entire vacation, never fully pulling away from the market, but I’m getting better. I still get anxious, though. I
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worry about what I’ll miss and how much money I could have made on that perfect setup that happened. Suddenly your $5K vacation becomes a $50K vacation because of opportunity cost.
Where do you see yourself in five to 10 years?
I want to continue to do what I do, find a happy balance between work and life, and figure out how to make the most with the least amount of stress. I’ve even taken on a like-minded partner to handle the business side of things while I continue to trade and develop as a trader. But wherever this takes me in the next 10 years, that’s where it takes me. The beauty of the community we’ve developed is that I’m continually meeting new people from all over the country and developing great new relationships. It’s always been just me and the screens, so being able to make a difference in people’s lives is a great feeling. And starting the charity is just another step in the right direction. Other than that, I take one day at a time and hope to continue building an amazing community of traders.
So you’d be happy still trading in 10 years, right?
Absolutely. And have a dozen of me to run the chat room. Actually, a dozen Derricks. And you can quote that. (laughs
)
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The Swing Trader
“I would rather wish I was in a trade than wish I was out.”
Michele Koenig (@offshorehunters) is a 47-year-old trader who specializes in technical swing trading, moderates the Swing Chat at InvestorsUnderground.com, and runs TradeOnTheFly.com.
She grew up in a middle class family with a stay-at-home mother and a businessman father. Her family enjoyed hunting, fishing, camping and riding horses across the Montana countryside. She even showed horses competitively through grade school and into her 20s, earning her several national championships at the Morgan Grand National in Oklahoma City.
With a business finance degree from Montana State University and her father’s entrepreneurial spirit, she grew restless as an employee in several post-college positions before finally taking the plunge to become a full-time, independent trader. Now nearly 15 years later, she’s still trading successfully, hunting and fishing regularly, and riding horses in Montana.
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What got you first interested in the market?
Two things during college really sparked my interest in the market.
The first one involved a college professor who was actually a broker for D.A. Davidson. He had real world experience in the financial markets, which made the whole thing more relatable in a way. He made us team up with another classmate to research stocks and pick one that we thought was a good buy. My partner and I picked Kellogg—solely based on fundamentals since we knew nothing about technical analysis at the time—and presented it to the class. They chose it as the most logical buy and therefore the winner of the competition. So that made an impression on me. The second thing that really influenced me was an older student in my finance classes.
While the rest of us were working at the pizza shop or flipping burgers to help pay for school, he wasn’t. He said he went down to his broker every month and bought stock. If it did well, he didn’t have to work that month or that quarter. If it didn’t do well, he’d get a job like the rest of us. I remember that idea just stuck in my mind for years and years, but I didn’t immediately start trading after college. I worked in pharmaceutical sales for awhile before leaving that job to move back to Montana. There I worked different hourly jobs just to make ends meet. But the idea of him buying stock and making enough money to live on was something that stayed with me.
How did you end up trading then?
One of the jobs I got was at Edward Jones as an office manager. I learned a few things from a broker there and it started opening my mind even more to the idea that maybe there’s a way to make a living trading. After a short time there I went back to software sales and ended up sitting in front of a computer all day long right when the online brokerages like E*Trade and TD Ameritrade were starting to gain in popularity. I had less than $10K saved but I decided to start trading part-time. I didn’t have a mentor or chat rooms or Twitter. I didn’t even have a strategy. I had no idea. I would look at message boards and try to find things online, but there was no rhyme or reason
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to what I was doing. After about a year of making some and losing some, not really gaining any traction, I bought John Murphy’s, book, Technical Analysis of the Financial Markets. I read it cover to cover several times. The idea of analyzing charts made sense to me because I’m a really visual person. I started using TA in my trading. That was right when the Internet bubble popped and the company I worked for lost a bunch of its venture funding and started laying people off, so I decided it was time to try to make the leap into trading full-time.
That was brave…
I was fortunate that I was married and my husband had a full-time gig that could pay our bills. I didn’t have the pressure on me to make a mortgage payment with my trading profits. Otherwise it would have been much more difficult. I was also fortunate to have a ton of success very early. I started with about $40K and more than doubled it in less than six months. It was exciting and thrilling but horrible for my discipline. I thought trading was so easy I was going to make a million bucks. And with that overconfidence quickly came a very painful lesson. I blew up my account. It was nearing $100K when I blew it up to less than $20K and had to start over again. And I did that more than once early in my trading career. I was slow to learn my lessons.
How long did it take before you were consistently profitable?
I would say it took about three years to get things figured out and stop making a ton of mistakes. I wish I would have had a mentor or the access to information and other traders we have today. I feel like my learning curve would have been a lot shorter. But I was trying to figure things out by trial and error, and there were a lot of errors.
What do you think held you back the most in those early years.
Lack of discipline. I let myself ride the emotional rollercoaster of trading. When things were going well, I just felt amazing. Then that overconfidence would lead to overtadnig and taking too much size, and when it started to slip I would feel horrible. And I hear that all the
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time from new traders. They all experience the crazy ups and downs from highs to lows, but you need to remain disciplined in order to combat that. All these years later I’m able to feel very little while trading. If I make $30K. or $40 K. on a trade, it feels good, but I don’t feel the ecstatic happiness I did in the beginning. Vice versa, if I have a bad trade and lose $20K or $30K, I just move forward with my trading strategy and try not to dwell on it. I don t spend a lot of time looking back, good or bad. It's an unnecessary distraction. I want to find the next trade and trade it well. If I can do that, the money will follow.
How would you describe what type of trader you are?
I would say I’m a hybrid trader because I swing trade about 75 percent of the time but also day trade when the opportunity presents itself.
Although that ratio fluctuates depending on market behavior. If the market is choppy it makes swing trading more difficult, so I’ll focus on more intraday stuff. And I’d definitely describe myself as a technical trader. I’m using chart patterns, support and resistance, moving averages, trend lines. . several technical indicators to help make trade decisions. I’d say only five percent to 10 percent of my swing trades incorporate fundamentals. In those cases, I look at things like the short interest, size of the float, institutional holdings, and maybe an earnings report if it’s a position I’m going to hold for awhile. I just look to see if there’s something more that will help drive the stock.
But I don’t spend a lot of time on fundamentals.
Let’s go over your trading routine…
I get up between 5:30 and 6:00 a.m. MST and get coffee going, feed the dogs, and get downstairs to my computer by 6:30 a.m., an hour before open. I do a lot of my preparation the afternoon and night before, so III have sticky notes on my desk of the stocks I’m interested in. 111 check on those, see what they’re doing premarket, check CNBC for any news related stuff, and log on to chat to see what’s moving otherwise. But I don’t do a lot of trading premarket or after hours anymore, unless it’s something that has really good volume and liquidity. But as I’ve gotten older, more and more I’ve tried to put
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my blinders so Fm not distracted from what works for me. If I stick to my plan, stay patient, and not get distracted with whatever momentum play is happening that day, Fm usually better off.
What happens when the market opens?
I’m usually very active for the first couple of hours. A lot of my setups trigger during the first half of the day, so that’s a busy time for me.
Then I try not to stay and stare at my computer all day. Staring at a swing trade is not healthy for the trade. If you’re following every tick on the 1-min or 5-min chart, you’re probably not going to let it work for you. Worse yet, you might remove a stop and let something go against you. So I try to take breaks, go outside, turn the ponies out, do ch
ores, and then come back after lunch to scan and review charts.
What kind of scans are you running?
I’m old school in the fact that I don’t actually run scans. But I probably look at between 300 and 500 charts every day. And I have lists of different stocks according to sector, like oil, natural gas, agricultural, brokerages, healthcare, cyber security, etc. So if a certain sector is moving that day I can bring up the charts I like to watch and figure out what they look like right now. I have thousands of charts stored at StockCharts.com, which is what I’ve used since pretty much the beginning of my career. My trade setup list has 240 stock charts in it right now. So I’ll scan through those charts one by one throughout the day to see how they’re setting up, to see which ones may have pulled back, and to see which ones may be shaping up into a familiar chart pattern. I pull the ones I like and move them over to my thinkorswim platform, where I probably have between 50 and 70
charts I’m always scanning intraday. Then I jot down my favorites on a sticky note for the next day.
What happens after hours?
I try to leave as soon as the market closes, unless there’s some expected news I want to watch. Although I don’t hold anything into
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earnings. I learned too many painful lessons over the years doing that.
When the market closes I go outside, do chores, ride horses, go fishing, plant trees, work in my flower beds. . whatever it is, I get out of here. I don’t stick around. I remember as a new trader I would be glued to my screens from early morning until some crazy hour at night, but that’s not healthy. These days I only come back to my office or laptop in the evenings to answer emails, work on tradeonthefly.com, and review more charts for the next day.
What’s your trading desk look like?
I have a sit/stand geek desk, although I spend too much time sitting at it. I have three big monitors and a laptop. The laptop runs my emails, Twitter, and occasionally I pull charts up on it. My monitors have the chat room and my thinkorswim platform with all my charts. I have so many charts up that I have to tab through them. They could never fit on the screens.
