Exclusive Interview: Pro Trader Adam Guren
Professional trader Adam Guren is not taking a random walk down Wall Street. In 2008, his extraordinary skills garnered him a spot on Trader Magazine’s Top 30 Under 30 list. Although many of his peers have gone bust during the wildest market crash since 1929, Guren had his best year yet. Such is the mark of a true pro.
Guren has had an adventurous life. After playing varsity soccer for a nationally ranked Duke University soccer team, he was drafted and played professional soccer for a year. As you will see, his competitive instincts and discipline have helped him succeed in the markets.
With five years experience as a professional trader, Guren has a wealth of great information for pros and novices alike. Our conversation includes Guren’s start as a trader, techniques for trading, and advice on what leads to success in the markets. I am proud to bring you Wall St. Cheat Sheet’s first interview in what we’ve lined up to become a most valuable Q&A Series with some of the brightest minds in business and policy. Enjoy!
Damien Hoffman: Adam, how did you get started as a trader?
Adam: After graduating Duke in 2003, I played professional soccer for a season with the Cleveland Force. I was drafted first by the Force, so I decided to play — not a difficult decision for me. So, I went and played that first season. I really enjoyed it. At the same time, while I was playing I decided it wasn’t what I wanted to do in the long run.
I had heard from a bunch of different trading companies when I was finishing school and had a couple offers. I heard about First New York [Securities] and interviewed with them while I was still playing pro soccer. The firm offered me a job to start when I was finished playing soccer in May 2004. I started at First NY in the training program which is basically a clerkship where I learned how to trade various strategies. I was placed on the international desk and went through a 14 month program before I started trading on my own.
When I first came out of the training program I was trading Europe and the US. Then I decided I wanted to focus more on Asia because “China” was the buzzword back in ’04-’05 and that’s where the growth was. From there, China took off and peaked in ’07. Since I focused on China during its bubble phase, I was able to make a lot of money. Since the global markets have been heading down, I’ve been trading a global book. Although I still trade China, I have broadened out and trade financials in Europe, the US, and Asia.
Damien: Wow. So does trading the whole world require you to keep crazy hours?
Adam: [Laughs] I’ve kind of gotten to the point where …
Damien: Where you don’t sleep anymore?
Adam: [Laughs] Yeah. I’m at the point where I don’t sleep much when the markets are volatile. But I can’t trade 24 hours, so I have to pick my moments. For example, for the last month or two, it’s been quieter because the volatility is coming down a bit. Since I need volatility and volume to make money I just don’t trade as much when that’s the case. Now, if the volatility starts picking up again I will sleep in intervals of three hours.
Damien: So what is a typical day like in the work life of Adam Guren?
Adam: Well, my day starts when the world starts its day, which is in Asia — 8PM in the US [EST]. I actually just finished trading Japan and I worked between 7:30PM and 8:30PM. Then I usually take some time off and trade the Hong Kong open at 10:00PM and trade for an hour depending on what’s going on. Then I’ll be off again until the Asia close. So, usually I am up until 12:30AM or 1:30AM. Last night I was up until 1:30AM because Asian markets were reacting to the Indian elections. Then in the morning I was up at 7:50AM to trade the US open and worked until the Europe close until 11:30AM. After that, I break until I trade the US close [2:00PM-4:00M].
Damien: So you trade the open and close for the volatility and volume?
Adam: Exactly. The best volatility and volume comes on the open and close of every market. So that’s when I do a majority of my trading. I get more bang for my buck at the opening and close.
It does take it’s toll. If there’s a lot going on I will trade every open and close I can, but I can’t do everything. So I try to pick my spots and not burn out. Sometimes I’m exhausted by Thursday just from staying up and not getting enough sleep. But my work schedule depends on the markets. Recently I’ve gotten a lot of sleep since the markets haven’t been as volatile.
Damien: How do you trade each successive market?
Adam: My trading style changes every year or so. The markets change. So I adapt to where I think there is money to be made. For example, I started my career trading European ADRs such as Nokia and BP. I had a basket of 50 names I followed. I got really good at trading those names just by keeping up with what’s going on. Once I got good at trading 50 names, I didn’t have to do too much prep because I was pretty much up to speed as far as research goes. So I took this style and applied it to Asia ADRs with BHP, Toyota, Sony, China Mobile.
So when I log on premarket, I spend maybe an hour, maybe thirty minutes, seeing if there’s news out in these names and figuring out if there’s any opportunities. I’m basically looking for newsworthy events that are going to move the stock.
Damien: So once you identify opportunities, do you have any technical indicators to signal entries?
Adam: I’m not a technician and I really don’t study charts. That’s not to say I won’t look at them to see where things are. Especially in a place like China where there are psychological levels at key figures. For example, if a stock is around 10, it will trade near there a lot because there will be large bids and offers. At the same time, I’m not a big fundamental guy based on the nature of how long I hold a position. I mean, I do understand the fundamentals of each stock and what people generally expect, but for the most part I rely heavily on intuition and the feel I have for a stock based on watching it for so long. After watching the same 50-100 names, you start to easily understand how they trade and what moves them. It’s pattern recognition.
Damien: So how do you know when to enter or exit a stock?
Adam: Good question. Getting into a stock is my strength. Getting out is not my strong suit. I use stops to manage risk, but sometimes I exit too soon and don’t let my profits run. I guess I just try to take profits when they are there. Especially in these volatile times. My old boss told me, “You don’t go broke taking profits.”
Let’s say I’m long something and in the money. If I think it’s right to sell, I’ll just sell it. But that breaks a basic rule because most pro traders will tell you “Don’t sell unless you think you should be shorting it.” I don’t trade that way. If I think I’m right, then I say, “I’m going to take this [trade] off now, take my profits, and move on to the next trade.”
Another rule is to leave a scrap on. I’m pretty good at this. For example, if I have 10,000 shares of something and I want to get out, I may sell 9,000 and leave the scrap on just to see where it goes. Over the long run, that really pays off if you do it enough.
Damien: What about risk-reward?
Adam: Every trade I get into I have a very good understanding of the risk-reward. One of the keys to success is measuring risk-reward. And one of the best ways to do that, as elementary as it sounds, is to buy low and sell high. So you want to buy when things are beat up and sell when things are overdone on the upside. I’d say I do a good job of measuring risk. It’s probably one of the main reasons why I am successful at trading.
Damien: Do you like to enter when things look like the are bottoming or when they get going?
Adam: I’m definitely not a momentum guy. I’m not a good momentum trader. I am more of a contrarian who buys into weakness and sells into strength.
Damien: That’s great. It seems to have worked really well for guys like Warren Buffett and George Soros.
Adam: That’s true. But psychologically it’s tough because it’s counter to your natural instincts. But over time I’ve learned by watching. And I know it works. It’s the pattern recognition. It’s a matter of being patient and catching those moves properly. But it definitely can be done.
Damien: Do you prefer to trade long or short?
Adam: Actually, I prefer to trade long because I’m a natural optimist, so it’s painful for me to watch the market go down. But I can make money either way. In fact, I made more money in 2008 than 2007. But I still find it more difficult to trade a down market because the moves are more volatile. Maybe that’s simply because we just went through the most volatile time in history and we happened to be going down. I don’t know. But down markets are known for having strong volatility on the way down and outrageous short squeezes back up. So you have to be very careful when you’re trading and make sure to have tight stops while taking profits when you have them.
Damien: So, with all the volatility, are you flat [all cash] at the end of the day? Or will you hold stuff longer term?
Adam: I’m almost never flat at the end of the day because I really don’t have an end of day. I am holding stocks across many markets so they can be affected when others are open. But 90% of my positions are held under a week and I always have risk on with exception of vacation.
Damien: Do you have any mentors?
Adam: My mentor was a guy named Scott Schaffer at First NY Securities. He’s a partner there. I definitely learned a lot from him. The way I trade is very similar to him in that he doesn’t really look at fundamentals and technicals either. He’s more of a feel guy.
The other thing he’s really good at is taking his emotions out of the game. I think that’s something most traders have difficulty doing. He is very calm and can look at things very logically even if positions are moving against him.