by Brady Dahl
Because you let it ride…
Absolutely.
What’s your biggest disappointment?
That I didn’t find trading much earlier in life. I should have known because I liked numbers and was a math major at Florida State, but I didn’t graduate. I drank myself into oblivion and tried to get as much
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ass as possible because I was a moron. But I m the guy who can stare at Level II for 20 hours straight and enjoy it. It seems obvious now.
What’s your proudest moment in trading?
When I knew I could do this for a living. I knew this was it. They say 90 percent of traders fail and 10 percent succeed, right? Well about two years ago I had really kicked it up a notch, crossed seven figures in total profits, and I realized I am one of the 10 percent. I finally felt like I had all the equipment necessary to be included in that small minority.
It’s such an exclusive minority, people question whether trading can be learned at all, that perhaps it’s an innate skill…
It is an innate skill. But I think it can be learned if you generally enjoy numbers, charts, geometry, and everything involved with it.
But you think you need to be born with something…
Absolutely. I think part of it is ingrained. At one point, I thought about introducing trading to someone close to me, but the more we talked, the more I realized it just wasn’t a good fit for that person. It just wasn’t. But for me, I no longer consider it work. I put 50 hours in a week but this is living. I have my wonderful family and I’m so dedicated to them, but trading is what makes me feel alive. I love it.
What are you doing to make yourself a better trader?
I m never satisfied. Every day I try to stay on top of what’s current. I follow everyone I find pertinent. Adapt with the market and learn.
What’s something you do that you don’t think other traders do?
I think other traders do the basics. They follow the leaders but they don't learn to be the leaders. They show up to the market and think, oh boy, where do we go today? They don’t take charge of their own trading. I’m in charge. I know where I’m going at market open.
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You take responsibility for your trades…
Absolutely. If Nate throws a curveball stock at 8:30 a.m., I’ll take a look at it, but I m in charge, man. I know what stocks are on my list, and 1 usually know what I’m going to do with them and when. I’m in charge after 19 cups of coffee, (laughs)
What do you do well and what do you do poorly?
Like a lot of traders, cutting my losers is a weakness. Simple. But what I do very well is add to winners. I think I’m one of the best when it comes to that.
What are traits of a successful trader?
First and foremost, he’s prepared. He loves his work. All day long. He pays himself along the way by taking profits, he cuts losers, and he’s a leader. He trades what he sets out to trade.
What’s the most important advice you can give to new traders?
Reign in your losses. Be schooled. Get educated. Find traders who are successful and very patiently learn from them. Don’t jump right in, overzealous and foolish. Just like any other occupation, find experienced people to flat out leam from.
How do you judge success in trading? In life?
Success in life is simple. Are you managing your monthly nut, taking care of your family, and have some comfort? Are you in a place of peace and happiness? Are you still growing as a person? Success in trading I suppose is whether or not you’re profitable. But also are you putting yourself in scary, stressful situations with wild swings every day? Going nuts and scaring yourself certainly isn’t success. You must be very peaceful in what you do. Even though I’m profitable, I would like to end some of that scariness. That stress takes a toll. I could stand to take that stress level down a notch to improve my health.
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Sounds like you’re far from the emotionless robot everyone thinks traders need to be, yet you still make great money…
Yeah, I celebrate the wins and stress over the losers. But do you think trading would be any fun if I couldn’t be a little enthusiastic about being up $70K in a trade? You must celebrate a little. But when you’re down $51K and doubled over with heartburn, that’s not healthy either.
So find the happy medium.
What do your friends and family think of your trading career?
They couldn’t care any less, quite frankly.
What is the public’s biggest misconception about trading?
They don’t believe any trader can really know what they’re doing or figure out how to consistently make money in the market. They think it’s gambling. What they don’t realize is that good trading, getting into a great trade, is like holding pocket aces against deuce-seven off-suit.
The odds are in your favor…
Exactly.
If you could change one thing about trading, the market, or its participants, what would that be?
I wouldn’t change anything. I believe all the things traders fight, bitch, and moan about, like the short sale restriction or funds manipulating stocks, are at some point everything the market needs to sustain itself.
Just face it The bulls run the market. They all have an agenda, and that agenda is their money, period. I say you have to play off of every bit of that. You have to adjust and use it to your advantage.
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Where do you see yourself in five to 10 years?
I just hope my brain is as sharp as it is today, because if it is, I’ll have the same smile on my face. It’s a wonderful life.
Do you want to ramp it up? Get into eight- figure territory?
Oh yeah, I’m trying to ramp it up, absolutely. But more importantly, I want to be constantly growing, learning, and becoming more successful. I’m trying to build something. A legacy, maybe, I don’t know. Don’t think for one moment that where I’m at is where I need to be. I have profits of $960K right now for the year. My best year prior was about $810K. I’m on the cusp of making a million bucks, but I wouldn’t even know what to do with that kind of money if I tried. It’s more about getting better as a trader.
And money happens to be the measure when it comes to trading…
I guess so. But I just hate to lose. I want to win.
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The Youngster
“In the end, you’re fighting to take each other’s money.”
Derrick Leon (@DerrickJLeon) is a 23-year-old trader from Colorado who placed his first trade at age 17 after opening a guardian account under his uncle’s name.
His immediate family didn’t support his quest to make a career out of trading, but if that has been a chip on his shoulder, it seems to have only served as an impetus for him to strive harder. He’s the youngest trader interviewed here and perhaps the least experienced, but that has not stopped him from quickly becoming a consistent professional.
After having to mooch food from his aunt just a few short years ago to now earning more in a week than the average American does in a year, his life has changed dramatically. Even so, Derrick would be the first to admit that he’s still figuring it all out and that this is only the beginning.
What brought you to making your first trade at 17?
During my sophomore year in high school my parents decided it was time to get divorced. And it wasn’t an ordinary divorce. It was family against family. It totally messed with my mind, and I dropped right out
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of school, even though I had a 3.8 or 3.9 grade-point average. I dropped out and started gaming.
Gaming?
Yeah, for about a year straight I played Call of Duty. Every morning I’d wake up and just start playing. I didn’t know what I wanted to do with my life. And then something happened that I tell people about all the time yet they don’t believe me. An E*Trade baby commercial came on TV, advertising $10 per ticket to trade sto
cks, and I decided to open an account and start trading.
Because of a baby commercial…
Yeah. It’s crazy. My uncle had done a few things in the market as an investor, but I’m the first person in my family to trade. I still have that E*Trade account, too. There’s like 100 bucks sitting in there.
Do you remember any of your first trades?
I just remember one of them was gaming.
Makes sense.
Yeah. It was an online gaming company, something to do with poker or casinos. It was a pump and dump scam of course, but back then I thought it was legit. I ended up buying 25K shares and being up $7,500 after the first day. It gapped up huge the next morning putting me up something like $15K. Then it tanked. I went from being up $15K to down $15K within minutes. Of course now I know you should sell that gap up, but I didn’t at the time and took the loss. That was one of my first trades.
Did that hook you? The rush of being up so much?
It hooked me, yeah. But it was a bad couple weeks after that, (laughs)
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How did you get out of that hole? How did you gather the courage and start again?
I didn’t. I stopped trading. I only traded for about two or three weeks and ended up losing half my account. It was money that had been set aside for college, but my parents said I could do whatever I wanted with it. Of course after they learned about those first few losses, they didn’t want me trading ever again. I took their advice and went back to high school.
But you did eventually come back to trading…
Yeah, I was in some sort of business class where they gave us $100K
in fake paper trading money to invest. Whoever made the most profit won first place and some sort of prize. I remember thinking, “I’ve tried trading already, I could win this.” I turned the $100K into around $600K. Of course I was doing some pretty stupid stuff to get those results, but I ended up doing pretty well, well enough to decide it was time to get back to really trading.
And that was three or four years ago?
Maybe three years ago. I don’t remember exacdy. It was right around the time the promoter Awesome Penny Stocks was huge. I don’t remember if it was PTOG, NSRS, or SNPK, but I just bought and held and ended up turning a small account into a $55K account. And that was my re-introduction to stocks.
Some of those pumps were insane. But now you primarily trade Nasdaq stocks?
Well, I started in a well-known penny stock chat room when PTOG, NSRS, SNPK happened. But those trades seemed like once-in-a-lifetime opportunities. You don’t see those kind of moves anymore.
And I suck at OTC. It’s not my forte. But I knew people were shorting these big moves on the way down, and I asked a moderator in chat,
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how do you short stocks? He satd you hit the “short” button on .
montage and then the “cover” button. (laughs) But you couldn’t short penny stocks in your E*Trade account…
Right. That’s when I decided to put some money into a prop account at SureTrader. My first short trade was HEA , think. I shorted loo shares and didn’t cover for a couple of days. I made two or three hundred bucks on the trade and thought I could get used to that! So I started messing with shorts and quickly blew up my account on SGOC
and GTIM. That’s when someone mentioned Nate and the chat room at Investors Underground. I’ve been with his service ever since.
And doing well, too. What made you believe that trading could be your full-time gig?
I was becoming more consistent. What used to be five red days was now four green days and one red day. When I had a month where I had 17 green days and only three red days, I knew I was getting better.
Although I did have some “oh shit״ moments along the way: FNMA, FSLR, and KATE. Those three trades combined for losses of about $75K. But besides those, the consistency made me realize I might be able to make this work.
What’s your daily routine when trading?
It s 7.30 a.m. here when the market opens. I wake up anywhere from 5.00 to 5:45 a.m. I go to the gym and run to get my mind focused.
Then I come back, eat breakfast, and develop a new trading plan for the day because last night’s plan might not look quite the same when stocks have gapped up, gapped down, had news, etc. Then I trade the market open. Usually that’s when most of my money is made, at the open or in the late afternoons. I try to take lunch hours off because that’s when most of my losses happen. Trying to predict where trades go during the chop or the lull is just a mess.
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Do you stay at your desk or do you literally leave?
Sometimes I take off. I’ll go have lunch and leave completely. Other times I’ll just go upstairs and take a nap, come back, have some lunch, and get back at it for afternoon trading. Unless there’s a really hot stock moving like one of the low float stocks currently. In that case I’ll stay at my desk the entire day. Then during late day trading, I see if I want to take any gappers. I hardly ever hold stocks overnight, but if I do, I make sure they’re awesome.
And how do you make sure of that?
I’m looking for good news released near the close, not earlier in the day. Or maybe it’s a stock breaking out on the daily chart. Or if I think the trade just has a great risk to reward ratio left to play out.
What do you do after the market closes?
I’ll have a little snack and then go to the gym for my main workout.
Cardio in the morning, weights in the afternoon. Forget about the market until I do my nightly scans. Trading is stressful and you need to get away from it to have a free and clear mind.
Do you review your trades or keep a trader’s journal?
Unless I really mess up on a trade, I don’t review my trades that much.
It’s not a rule of mine, I just don’t do it. Some say the more you review your trades, the better you can get, but at the same time it can sort of mess with you a bit. The stock market changes on a daily basis, and you have to change with it. If you keep taking the same trades or only looking for the exact same setups, it may not work in the exact same way again.
So you have to be flexible…
Right.
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What does your trading desk look like? Platforms, monitors, etc?
Macbook Pro for the Investors Underground chatroom. Then on my four monitors are my ETC account, my Wedbush account, and all my charts on DAS Trader Pro. I’ve developed a taste for the DAS Trader platform for some reason. I used to hate it, but now I just love it.
Do you use different accounts for different reasons?
I usually use ETC for longs and Wedbush for shorts. I keep it separate so if I find myself in a sketchy situation, like being short a low float stock that can swing from down 50 percent to up 50 percent intraday, I have the ability to box my shares.
Can you explain for newbies why you would box your shares?
Boxing can be sketchy sometimes. Some guys are doing it just to avoid losses. They know the stock is coming back down at some point but when? For me it’s more about the mental aspect. It has saved my ass a few times when I’ve been stubborn. Either I didn’t want to realize the I loss at the moment or the offer is just way too thin and I didn’t want to chase the stock up.
How do you pick your trades? Is it purely technical analysis or is some of it based on fundamentals or news?
I’m a strictly technical trader. Lately people are shorting these low float stocks based on the fundamentals, but they don’t realize everyone in the world is going short. The stock is actually about to squeeze.
And that’s when you go long in your ETC account...
Yes, that’s exactly what I do. I’m looking for long entries in stocks that are heavily shorted. That’s my specialty. That’s where I tend to make most of my money. Those are my bread and butter plays.
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Do you generally find that squeeze setup in the afternoon?
Usually what happens is in the morning and during the lull, people are shorting the stock, but it’s not coming down and it’s not going up.
They’re just getting tired of watching it. And that’s when you spot those trends. It seems like the squeeze always happens when everyone is tired during the lull or into close.
Do you use technical indicators like Bollinger bands or VWAP?
I use VWAP mainly when I’m shorting blue chip stocks, but I’ll keep it up on others because it gives you a small idea where the stock could potentially go. But I don’t really focus on it that much.
What kind of charts do you use?
I usually use 1-min charts. WTien I’m looking to spot weakness or a bullish sign in the stock, I’ll check the 15-min or 30-min charts just to get a sneak peek at it. Maybe check for lines of resistance or support.
But most of my trading is based off 1-min charts.
What’s your opinion on using social media for trading?
Social media, (laughs) Let’s put it this way: when I see a lot of people shorting a stock…
… makes you want to go long?
Well, I start looking for trends to go long. I start looking for a trend to confirm that my thesis on the long side is correct. I’m not going to short a stock or long a stock just because someone on twitter is doing the opposite.
Let’s talk about entries. Do you remove or provide liquidity?
Both. When I’m trying to long a stock, I tend to be a trader who is looking for dips on the way down. My average full size is between 10K
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and 15K shares, so I’ll start in with 2,500 shares on a dip, probably, and providing liquidity. And if the next dip is a higher low, I’ll add. If it’s a lower low, I’ll leave it alone. Basically I only add on higher lows and once the position is moving in my direction, not against. Then I’ll add the final shares on the breakout point, which is when I might hit the offer and take liquidity. I won’t have the very best average but I have a decent average. Decent enough so that if it goes against me, I have room to gauge whether or not the position is still good to hold or not.