Momo Traders

by Brady Dahl

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  grand and just letting the trade play out. It it’s working, why exit? Most recently I had an $83K day which was the result of nailing the right read on the market and scoring with an ETF

  That uas earlv in our career. Did you do anything crazy after?

  Not really. I was sort of calm, cool, and collected. Nobody really knew what I was making and I didn’t have anybody to tell, besides Bao maybe, who was probably making double what I was making on the same trade, (laughs)

  How big of an account were you trading at the time?

  Probably between a $300K to $500K account. That was back on the original run-up to $900K. There were a lot of great promotional plays that added to that run-up. SNPK was another nice $50K win. Before the SEC came down on Awesome Penny Stocks, they were incredibly hot. We were always watching particular stocks for promotional type activity. You could speculate on what might be the next big pick based on the filings and structure of a particular company. So SNPK starts to come down late one afternoon and all of a sudden the volume explodes with one million, two million, five million shares…

  A ton of volume at the bottom, right?

  Yeah, it basically went from $0.50 to $0.20 really quick. Then you could tell it was coming close to a bottom because it wasn’t coming down 10 cents at a time anymore. It dropped five cents, then three cents, then two, and then all of a sudden you saw block after block of giant volume trades. I was on a hot streak trading at the time, so I thought it was worth risking about $20K to $30K and bought a couple hundred thousand shares right around $0.25 or so at about 3.15 p.m. I stared at it for the next 15 minutes before I thought, the hell with this, and asked my buddy, Tyler, to head to the bar with me for a late lunch.

  I figured we’d have a few casuals and pray for SNPK to gap up the next morning. We ended up having a couple drinks and then hitting the gym. Backwards, I know, but I remember doing fist pumps at the

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  gym when Awesome Penny Stocks sent the SNPK alert out to all of their lists after hours instead of just one or two lists like they had done sometimes. They had about 20 different websites, so you wanted the subscribers at all of them to get the alert. It was a good night.

  And the next day?

  It gapped up about 10 or 15 cents and then ran further at the open. I ended up selling between $0.50 and $0.55 on its way to $0.80. Then it pulled back, and I felt okay about the sales, until it ran all the way back up to over $1 and beyond. I left a ton on the table.

  But you had more than doubled your money…

  Yeah. In about 45 minutes of work. Owned it for the last 30 minutes before close and sold it in the first 15 minutes the next day.

  Those were the good ‘ol days…

  Yeah. The days where you could just sit and watch your email inbox without trading because you knew a big pick was coming. I remember one time Laura and I were scheduled to go on vacation the same day a new pick was coming, so of course I was stressed out and dreading that I would miss it. Well, we were at the airport waiting for the airplane when they released the pick. I quickly bought the stock, but then it was time to get on the plane with no Wi-Fi. I was so confident in the promoters back then I gave my buddy my login information and told him to sell half the position before market close and keep the rest.

  When we landed I checked and he had sold half. I was up 100 percent on the trade. As traders we worry about missing trades on vacation, but that was one of the best vacations I’ve ever had because by the time I landed at my destination I was up $30K. In fact, another promoter who was hot at the time came out with their new pick a few days later while I was on that same vacation. I had just made $30K, so I figured why not and bought 40K shares. The stock went up a buck and I sold for $40K profit.

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  What’s your biggest loss?

  My biggest loss to date was CPNE, which was over a quarter of a million dollars. It came as part of the destruction we discussed after I had such a great run to my original $900K. The wins were just rolling in so quickly you never had to worry about anything with the promotions. I became way too comfortable with the dips and CPNE

  was just an averaging-down nightmare. From $2.50 to $2.00 to $1.50

  to $0.80 to eventually selling all of it between $0.35 and $0.40.

  You had sort of become a bag-holding believer, right?

  Yeah, it was supposed to be uplisted to Nasdaq, and then it was supposed to be bought out by a Nasdaq company, and on and on. I started calling investors relations on a biweekly basis, and you know how that goes—they just tell you what you want to hear while the stock continues to plummet day after day. Then they missed earnings and continued to miss earnings. It was just a complete disaster.

  It was really an investment rather than a trade…

  Exactly. A bad investment. And I continually threw money down the rat hole, continually averaging down, because like most people, I mistakenly believed the only way to make it out in one piece was to get my average lower. Of course in doing that, you learn that your losses just compound at a much faster rate and it soon becomes an exponential, horrible loss. I don’t have losses like that now because I have the “oh shit” handle number and I don’t hold stocks and average down anymore. My biggest losses these days come from being stubborn on the front side of parabolic shorts, when I think the stock has gone up too far too fast, but it doesn’t stop. Eventually it gets to the “oh shit” handle number.

  So losses these days don’t bring you to contemplate quitting…

  No. But there have been times where I’ve been consistently profitable for days and days and then that one stubborn trade wipes out an entire

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  month of profits… You sit there and wonder why the heck you trade every single day. Is it worth it? Is it even worth trying to get to the next level? So those emotions are still there. I still get frustrated with trading, but not to the level of quitting, no.

  How do you handle those periodic drawdowns?

  The way I always tell people to look at it is trade well and profits follow. It seems simple, but that’s the reality. You need to realize you’re a good trader and just continue trading, onward and upward. I don’t wire money into accounts either. I can move money from one to the other, but I never wire in from savings. I figure if I’m in a drawdown, why throw good money after bad? Instead, why not be on a “timeout” with your smaller account while you go back to doing what made you profitable. Once you build the account value back up, then you can start pushing again. But you need to build that confidence up again. If you’re still dwelling on that $2K loss you just took, you won’t think a $600 profit on the next trade is good enough.

  Then more often than not that $600 unrealized profit becomes zero or even a loss because you were trying to “make it back.” But if you just go back to trading well and letting profits follow, before you know it you’re going to have that big day you’re waiting for. It always happens.

  I lost $43K on GENE a week ago, but I didn’t let it faze me. I just traded well and I’ve already made up for that loss without forcing it.

  Do you ever have unprofitable months? Or years?

  I’ve never had an unprofitable year, and I can only recall maybe two months out of the last five years where I’ve ended it red. Both were due to pushing on stubborn trades. The losses could have been prevented had I stuck to the plan. But typically I’m very slow, steady and consistent. I always start small and then add to the winners.

  What would you call a turning point in your career?

  There are a couple. First I would say the transition from OTC trading to Nasdaq was a turning point. I used to trade the OTC market about

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  90 percent of the time. I never really had a consistent game plan for trading Nasdaq. I was good at trading OTCs, nailing tops and bottoms, and it just became second nature to me. But when the OTC

  market started to die, t
he liquidity dried up. You had to adapt or perish, and now I probably trade Nasdaq 99.9 percent of the time. A total flip. Then a more recent turning point came when Gregg made that comment about me wiring out. It sort of pushed me toward the next level, toward disconnecting from the money more than I already had. Now all that matters is whether or not the trade is working. If it is, then why would I be exiting the position? Although I still do combat the urge to exit because I still do like to take profits along the way, but I’m getting better at it. IVe taken the last six to eight months to focus on my own trading instead of concentrating on verifying trades and proving myself to others. I realized I’m a trader first, service second. To get to the next level of trading, I need to focus on me.

  What do you find disappointing about trading?

  When the trade is right, you’re never in big enough. When the trade is wrong, you’re always in too big.

  What makes you proud when trading?

  When you come to the market prepared and then nail it. The trade immediately does what you thought it would and gives you that adrenaline rush, that fist-pump type emotion. That’s why I trade. As far as running the service, I’m proud of people when they nail a huge trade. I start to live through other traders at times. I may only be up $1K on the day but see that Derrick just made $60K and I’m ready to celebrate for him. It’s awesome.

  Do you ever worry that you won’t be able to make a living trading one day?

  Not really. I worry about making the right trade decisions and not continually fighting something that might blow up an account and then I’m dealing with wiring in, etc. But it’s not even a fear really…

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  It’s just in the back of your mind somewhere…

  Somewhere deep, (laughs)

  Some traders worry about whether or not their strategies will remain profitable…

  I think the way to combat that is to be willing to adapt. If you’re continually adapting, you’re going to fight the potential of becoming unprofitable. One suggestion I have for people is to never live beyond their means. I don’t live beyond mine. And when things are going well, pay down bigger portions of your mortgage and things like that, just in case of a rainy day. God forbid you have an extended period of unprofitability, you’ll still be able to live within your means and not have to drastically change your lifestyle. That’s been important for me.

  Do you think trading is an innate skill or can it be learned?

  It can definitely be learned, but it’s something that takes time. People think they can just choose to be a full-time day trader one day, but it doesn’t really work that way. You need to attempt it, see if you understand it, see if you have any success at it, see if you have any consistency, and then maybe at that point you can consider making it a career. And before taking that plunge I think you should have at least two years salary in the bank. Although I will say we’ve had very smart people join the chat, scientists even, and they’re almost too smart for trading. They overanalyze every single aspect of a trade, which prevents them from making the right decisions at the right times. So you have to allow for some leeway, some intuition, or some feel.

  Do you think there are characteristics of your personality that lend well to trading, though?

  Sure. If you find simple mathematics difficult, I think you’re going t°

  have a tough time day trading. You should know right away that on 1K shares a 50 cent move is $500, a 10 cent move on 3K shares is $300, and stuff like that. I see people who have times tables where you

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  plug in the amount of money you want to risk and the price of the stock and it will tell you how many shares you should buy… by the time you do all that, the trade is already gone.

  What are you currently doing to make yourself a better trader?

  One thing I’ve been focusing on lately is organizing my trading by separating different types of trades into different accounts, sort of organizing the thought processes behind each trade. So I day trade in my main account, put my bigger picture trades in another account, and swing trade in my E*Trade account.

  You’ve also been increasing sizes and trying to hold trades for longer lately…

  Yeah. One of the easiest mistakes to make is to add to a loser because we feel the need to make it “less bad” by bringing our average closer, when what we should be doing is the exact opposite—adding to winners. It’s so stupid simple and makes so much sense, but I’ve been working on that. My plan is to start into a trade small, give myself room for higher or lower, depending on whether I’m short or long, and then continually look for spots to add when the trade goes in my direction. By doing that, you begin compounding profits instead of losses. And you can use the house’s money as risk. If you’re already up $1K and start to add a bit but then it starts to go against you, you can still stop out even or with a bit of profit.

  Let’s run through an example of adding to a winner. You start in short on a parabolic move up, and then it comes down a bit in your favor. Where are you trying to add? On the next lower high?

  Or when it breaks below previous support?

  Let’s say I nail the entry on a parabolic. I’m short a quarter or third size position because I always start small. If it starts to pull back and then pops up again but forms a lower high, I want to see it retest that lower high a few times. Then once it puts in another lower high, lower than the first, I can start to risk off that first lower high. That first

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  lower high would be a good place to stop if it goes back up there.

  That’s how I add to my winner on pops, not on pullbacks. I don’t want to add emotionally just because I don’t want to miss it. I want to add to pops on a downtrend.

  But if it cracks a major support, would you pile in more?

  The only time I would do that is if it’s been bouncing around a good support level and it has that look. . I know that’s subjective, but it has that look where I’m already in half size, I have a nice unrealized position, it’s starting to get heavy, offers are coming down, it really looks like it’s about to snap, it’s retesting and retesting support, and the offer is getting crowded… that’s when I might double down. But if it doesn’t snap, I’ll go ahead and scale back out.

  Immediately?

  If I’m anticipating a crack, and it doesn’t crack, then yes. Or if it does crack, but then quickly reclaims the support level, I also size back down because everybody was anticipating a crack and it didn’t happen, so it’s probably about to go the other way.

  Anything else you’re doing to become a better trader?

  I’m trying to wait for prime setups. I used to try to nail everything. I suffered from "FOMO," the fear of missing out, which many new traders will experience. But what makes more sense, making $1K each on two trades or making $200 each on 10 trades? Basically it boils down to using your resources wisely, focusing on the best of the best, and then sizing in accordingly.

  Interesting advice coming from one of the most prolific traders I know, seemingly trading hundreds of tickers a day. Is that something you’re changing?

  Yeah, because my best days are when I trade three to five tickers I might alert more trades or discuss more setups in chat, but that’s

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  because at the end of the day I still run a service. I want to continually find other plays in ease members didn’t trade what we found earlier.

  But reality is, when I trade less and focus more. 1 make more money What’s something you do very well when it comes to trading?

  I make good entries. I can usually nail the top or bottom within a couple cents, which has to do with intuition and thinking about the opposite side of the trade. And the other thing I do well, which is a double-edged sword, is take profits. I like to pay myself along the way, which can be both good and bad, like we’ve discussed, because you might limit your upside on winning trades. But generally I'm just a prepared trader. I come
to the market prepared and ready to nail it.

  Weaknesses?

  I definitely soil battle the fear of missing out. Overtrading. Or holding something short overnight just because I’m afraid I won’t have borrows available the next day. And I’m still stubborn. Especially when I form a really strong bias on something. Another weakness is continuing to trade through the afternoon even though I’ve had a great morning. Instead of sitting on my hands with a nice $10K or $20K. profit for the day, I’ll continue to risk for no reason and sometimes give profits back. I try to combat that by doing something else, writing a blog or going to the gym, but it still happens.

  What’s something you do that you think other traders don’t?

  Ignore the trolls, (laughs) I quickly get over things. I get upset when I make mistakes, but I’m pretty good about not letting anger turn things into bigger losses. There’s always another trade. I don’t let losses get me down. I’m good at rebounding and staying in check emotionally.

  What do other traders do better than you?

  Definitely the fundamental side of things. I have a finance degree, and I understand accounting, but the fundamentals aren’t really a strong

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  suit of mine. I want to reach a point where I understand what each filing actually means, what certain trials mean for biotechs, why they need to raise money, etc. I want to have confidence in taking a sizable short swing position on a company that needs to raise cash, for example. But I want to determine that on my own, not just based on the advice of really successful people I’ve surrounded myself with.

  Any trading rules you live by?

  “Trade well and profits fol ow.”

  “Trade the ticker, not the company.” If you enter a trade based on technical analysis but then find yourself reading the Yahoo! Finance message boards or trying to rationalize why you’re in the trade, it’s probably not a very good trade.

  “Nail and bail, don’t stay and pray.” Applies to trading the front side of a large move the first day it’s up. You want to take profits quickly. Don’t fight the trend and add as it moves against you with the hope that it comes back.