Brian Shannon

A champion poker player abides by several concrete rules including: 1) know when to fold, 2) know your opponent, 3) bet the proper size, and 4) push your advantage when you have the best cards. Similarly, professional independent trader Brian Shannon uses discipline and risk-management to consistently win in the markets.

Brian is one of my trading mentors. I spent a few years following his blog and ultimately his book Technical Analysis on Multiple Timeframes. During that time I learned what Curtis Faith meant when he said, “One of the ways great traders distinguish themselves from average traders is by their ability to adhere to methods.” Brian’s methods are clear and simple. Like a great trainer, Brian perpetually brings the wandering students back to the basics. He reminds us we are playing a game of probabilities and if we confuse this point, we cannot be successful over the long term.

I firmly believe that twenty years from now when we look back at this Golden Era of Day Trading, Brian Shannon will be one of the faces and voices that will define this space and time. He is both a true student and teacher of the markets who can teach you to be a professional trader if you have the right combination of skills and discipline.

I recently had the chance to chat with Brian about his career, his Premium Service at StockTwits, his advice for traders, what he looks for in successful traders, and how his best and worst trades affected his career. So, let’s deal the cards and see how the master plays our hand …

Damien Hoffman: Tell me a little bit about that sweet rush with trading and you became addicted and you knew you were hooked?

Brian: The first time I got that needle in my arm was when I was about 14 or 15-years old. I was living in Boston, Massachusetts. At the time Boston was the car theft capital of the world. There was a local company called LoJack trying to come up with a solution. I saw something on the news about the company — how they were giving away the tracking units to the State Police. I had been watching Wall St. Week with my Dad for a couple years, and I finally said, “Dad, would that be a good stock to buy?” I had some money saved from different jobs I did as a teen. He said, “Yeah, let’s invest.” I told him I had $500. He said the stock was at $4 and he’d put up the rest of the money so I could buy 1000 shares.

Long story short, he gave me the leverage — I didn’t realize it was leverage at the time. We bought 1000 shares and the stock went from $4 a share to $10 in about 3 or 4 months. As a teen, I thought I was going to be rich beyond my wildest dreams. I thought, “Why would anyone ever get a normal job when you could just do something like this that is obviously so easy?”

Damien: Do you feel as though you have not had a regular job since you’ve been a trader?

Brian: Not exactly. I have had regular jobs. I started in the industry as a retail stock broker. In my mind that job was a glorified telemarketing position rather than a job in high finance. I’ve had a number of brokerage jobs. Then I worked as a proprietary trader, managed a proprietary trading desk, and managed a small hedge fund for period of time. So, I’ve had little detours along the way, but I always consider myself a trader first and foremost.

Damien: I’ve noticed a theme in my interviews with traders. Many of them started because they thought it looked easy or did well on the first few tries. At what point did you realize trading required a lot of effort to be successful?

Brian: I had always been attracted to momentum names. And, I had experienced some heart breaking losses along the way that brought me back to reality. To survive in this game is difficult for people because our emotions get in the way. But, if you do the work — which is hard work — and you’re disciplined, then there is an equal chance for all of us to succeed.

As far as daily preparation goes, it really begins a little bit after the market closes. I might go exercise or something, then come back to my desk for a couple hours. I usually look through 150 or 200 different stocks and ETFs. I like to get a feel for set ups with the potentially lowest risk yet high probability of profits.

It’s a process of elimination to go through the charts on a lot of different time frames and try to imagine different scenarios: good and bad. Then I develop a risk-reward proposition and check if earnings are due out. So, that’s the evening routine. Then, about an hour and a half before the market opens, I’m sitting down, going through some emails and looking at some headlines. I don’t read the news much — just the headlines. I’m trying to see what’s shaping the sentiment of the day. I want to see if there is any unusual activity with the stocks I was looking to trade. I set alerts, write notes in front of me as little reminders, and try to get into that zone for the open. I make sure I have a plan of action so I don’t become just a reactionary participant — which I think a lot of people tend to do.

Damien: Sounds like you had great training and experience. At what point did you decide to leave the prop trading firm and go out on your own?

Brian: I left the retail brokerage industry in ’93 or ’94. At that time I became a proprietary trader for a firm in New York. That meant I had to put up $25,000 and they would give me 10:1 or 20:1 leverage. There really wasn’t much support. They made me call in my orders because the internet was still 28K dial-up — 56K was the big deal. Prior to that I had scraped together $25,000 and was trying to build a little cushion. I was trading a stock that had this miracle wrinkled cream which cured all wrinkles [both laugh]. I traded it over and over again. Then one Thursday evening I left a position open over night. I blew off the next day of work to go skiing with my Dad in Vail. Before the market opened I called the office to see where the stock was trading. It was halted! The company was being investigated because they had a bullshit product that didn’t work. The FDA shut them down.

Obviously I got hit with a major mental blow. There I was about to be a proprietary trader in the next two weeks and I just got hit hard. I thought, “This is going to be tough.” So, I persevered and went through with it anyways. Since that first day I worked as an individual trader. I had a small hedge fund for a while, but the numbers didn’t make sense. The fund was about a million and a half dollars, so I don’t think you could call it a hedge fund. Then I ran a day trading office. From there our business got bought out by MarketWise, a local competitor, who was involved in trading and investor education. I went to work for them. I developed courses and traded as a proprietary trader for MarketWise. I developed some software and did a lot of different things. They always gave me a good amount to trade with as well.

Then, about three and a half years ago I started doing a daily blog to help keep my thoughts fresh. At MartketWise I had also written a daily newsletter. Writing was really good discipline for me to organize my thoughts and think about what might happen the next day. So, I started the blog to keep my good habits flowing. Then I slowly built up the blog to the point where it made sense to monetize. I partnered with StockTwits to accomplish that.

Damien: You and Joe Donohue — Upsidetrader — were the centerpiece of core growth in the very beginning at StockTwits. Can you tell me about your experience and the value you see in StockTwits?

Brian: At first, I was a little skeptical of StockTwits. When Howard Lindzon approached me with the idea, I thought, “I don’t know. It could be like a Yahoo! Message Board and if I want a friend I’ll get a dog.” [Laughing] I didn’t expect to see such high quality people on StockTwits. It’s really a positive platform. People call things honestly. Everyone makes mistakes and if you do them out in the open, people will see that and trust you more. It’s great to find people who are similar and also somewhat different from my approach. I like to get different perspectives.

The danger for newer people is to blindly follow others into trades. That can be a concern. For example, I’ll say I bought a certain stock and later I’ll tweet I sold it for break-even. Two days later someone will email me and say, “Hey, I’m still holding that stock. What do you think?” I’ll try to be as polite as possible and say, “You’re on your own. I told you I got out of that stock.” So, the danger is that people just blindly follow others. Regardless, StockTwits a great source for identifying symbols you might not normally look at, getting some news, and great links to real fascinating stories.

StockTwits is what you choose to make of it. The people I follow have chosen to take it seriously. They put forth a positive effort which makes it really exciting for me. Also, StockTwits TV gives you a lot of great views where it’s more than just 140 characters. You can get a full dimensional aspect.

Damien: Who do you follow on Stocktwits?

Brian: I’ve found some good traders and good friends on StockTwits. There are also people that fit into both of those categories such as Joe Donohue (Upsidetrader), Todd Stottlemyre whose skills as trader I respect a lot, TodayTrader who does a great job, SMB Capital is a professional trading firm with consistently valuable insights, and AnnMarie2006 has a great head on her shoulders. There are a lot of others I follow, but those are the core.

Damien: Brian, you have seen and taught many traders. What are three of the most important things you think every trader must learn to be successful? On the flip-side, what are three of the most common mistakes every trader must avoid?

Brian: First, successful traders must have flexibility in their opinion. The market doesn’t care what you or I think about a stock. The market is going to do what it does. Things will happen that seem very irrational. So, you just have to be prepared for anything. You must have a back up plan for every situation.

Second, keep your analysis fairly straight forward and simple. By that I mean understand the market structure and then learn to trade the stocks that match your personality in terms of price, volume, and that sort of thing.

Third, at the end of the day, it’s only price that pays. Everything else is just opinion. Even if it comes from the President of the United States, George Soros or anyone else, the market will show their opinion is wrong at times. So, if you blindly hold onto something because of your belief of ego, you can get run over and then backed up on.

Insofar as mistakes, the first is trying to master short-term trading before understanding longer-term fundamentals. Basically, trying to run before you learn how to walk. You have to go into it slow. The market will be there. But people have to slow down a little and not try to get rich on every trade.

Second, realize that you’re going to make mistakes. If you can cut those losers quickly, you’ll keep those losses small enough to come back the next day. There are always more opportunities.

Third, right now a timely mistake is not understanding what they’re trading. Leveraged ETFs are a perfect example. To this day I am shocked I get horror stories emailed to me about people who are still holding FAZ and not understanding why they haven’t broken even yet. So, understand what it is you are trading and be aware of the leverage.

Damien: When I interviewed Mike Bellafiore from SMB Capital, he talked a about how his firm screens for candidates who have the characteristics of a good trader. If you were screening candidates to start your own trading firm, what would those screens be looking for as both strengths and weaknesses?

Brian: Obviously, you want somebody who is smart –someone who has the horsepower to understand the markets. But, not necessarily the MBAs. They don’t always make the best candidates. I prefer street smarts — someone who is a bit of a hustler and quick on their feet. If I was interviewing a candidate to come trade my money, I would also want to know that he or she has the ability to change their opinion when they see evidence mounting that they are wrong.

I think a good way to judge some of those things is to go out drinking with someone and see them get their guard down. Then they will reveal who they really are. If they can maintain their clever wit, I would be impressed. Another test would be to go driving with them — and not in that order! I’d like to see aggressive drivers who can successfully drive through traffic and various things that get thrown up at them without endangering anyone. I’d like to see someone who is anticipatory in their thought flow. For example, if they see a light turning yellow, do they have enough time to make it safe or should they start slowing down. What is their instinct? Do they stop at every yellow light? Or, do they go for it on some of those when it looks safe. That’s oversimplifying it, but I think they have to be anticipatory and driving could be a good way to effectively measure it.

Damien: Moving on to some more trading specific topics, I want to discuss the Volume Weighted Average Price (VWAP) indicator. My lessons with you taught me about VWAP. Can you explain why VWAP is important yet remains underutilized by individual traders?

Brian: VWAP gives us a benchmark of value throughout the time period a trader references. On a one-day timeframe, VWAP tells us who is in control — the buyers or sellers. If VWAP is rising throughout the day, then buyers are firmly in control. So, there is no reason to short that market. If VWAP is falling throughout the day, then sellers are firmly in control. So, there is no reason to buy that market. VWAP is a great way of looking at supply and demand as it changes throughout the day.

VWAP is underutilized because it’s still not known well or offered by many places. Until recently, VWAP has been considered an institutional tool. So, most people haven’t found enough information about how to use it. However, I am starting to see it available more often and discussed more each day, so that is changing.

Damien: Brian, if you were hanging out with another pro trader who asked what are the one or two most important lessons you have, how would you answer?

Brian: All of my secrets to success are in my book. But in that situation I would say to focus on the cyclical rhythms of capital through the markets on all timeframes. Then, learn how to understand the way each timeframe fits in with another. The long-term trend is nothing more than a bunch of shorter-term trends. So, the short-term trend leads the long-term trend. You have to understand that different participants come into the market at various levels and timeframes.

The market is always a moving target. However, if you can understand who is doing what — rather than memorizing patterns — you will be successful. Put yourself in an investors shoes and ask, “How would you feel if you were a swing trader or day trader at this point on the chart?” Then you can think about the cumulative perspective of the market and support it with the lines and bars on our charts.

Damien: You mentioned trends. I’ve also noticed you have a great nose for sniffing out trends. As you know, the conventional wisdom says that once something reaches the headlines, you’re too late. At what point do you get involved with the trending stocks?

Brian: I understand the fundamentals of a lot of companies. It’s a fine balance. For example, I’ve traded the stem cell stocks over the past few election cycles. Bush was going to veto them and Obama promised to give federal funding to stem cell companies. So, watching the television and headlines made me realize this issue was coming into the public perception. Then I look at the charts to see whether the stocks have already made a move. If they have, I will dismiss them. If not, I will start stalking the stocks and wait for evidence that larger players are accumulating the shares. Then I will establish positions as the stocks start to break out before big volume starts coming in.

But you have to be very active and attentive. In the case of stem cells, the stocks plummeted the day Obama signed the bill. It was a classic case of “buy the rumor, sell the news.” The problem is these companies are years away from making money or bringing things to market. Ordinary investors at home don’t recognize this. They just think, “Wow. That’s great news. I’m going to invest because maybe it can cure diseases.” This person is going to be late to the game if they are investing this way. Unfortunately, it’s simply a matter of not understanding how the stock market works.

Damien: Brian, what is it like to become such a successful trader outside the traditional system? Do you ever dream of running a fund or trading a book for a huge financial firm?

Brian: Definitely. The first time I ever heard of George Soros I fell in love with the idea of getting wealthy doing such an interesting thing. It’s something I will look at in the future because my current projects still require a lot of attention. Even at 41-years old I am still young in this business. I hope the opportunity will be there a little later down the line.

I’m not very interested in all the back-end, administrative stuff. So I’d probably be a much better partner for someone who wants to manage that part.

Damien: We took some questions for you from our Twitter followers. A frequently asked question was to share your best trade and worst trade. Do you mind sharing?

Brian: I don’t mind at all. My best trade was a sector trade. Back in 2001 I recognized that security stocks would be more important in an increasingly unsafe world. So, I identified about a dozen companies — many of which are no longer around. I have always been a fairly conservative trader. I don’t usually swing for the fences. But at this point in time I had deep conviction these stocks would rally. So, I presented the thesis to my boss. I asked him for additional buying power to take advantage of the opportunity.
After I got the necessary approval, I loaded up on five different companies and rode the trend perfectly. The prices kept running higher and the stories got bigger. I made more than one trade, but it was a memorable score.

Fortunately, on the negative side, I didn’t load up and explode. I have two “worst trade” stories. One is already on my blog, so I’ll share a different one. Back seven or eight years ago, the company Taser went on a run. Some days the stock could move 10 or 20 points. Then it was splitting and running again. Well, one day I thought, “This has got to be it.” So, I went to sell the stock short but there were no shares to borrow. Unlucky for me, I found Taser warrants. Since there were no restrictions to short them, I decided to trade those instead.

I started my trade very conservatively with smaller batches of shares. The stock would drop 10 points in a heartbeat and I thought, “I got it! I rode the stock on the way up, now I’m going to be the master of the warrants on the way down.” Then one day I shorted a few hundred shares and they went against me a couple points. So, I decided to add to my position and short a little more … and short a little more … and short a little more. Before I knew it I was down about $15,000 or $20,000 on the day.

As a result of my experience, I have the strongest conviction that you really need to trade the trend. You can catch little blips in the opposite direction, but you must stick with the primary trend.

Damien: A lot of traders deal with the dreaded deer-in-the-headlights moment when things spiral out of control. At what point did you know you had to pull the rip chord to prevent a career ending experience?

Brian: In both my worst trade experiences, I exited because it was the end of the day. The financial damage was horrible and I knew I would beat myself emotionally later. I didn’t want to then lose sleep worrying that the stock would open the next day and continue going against me. So I say, “Rip the band-aid. Feel the pain. Move on.” Don’t compound the problem by drawing it out over time. Once something goes against you, you have to accept that you’re wrong and move on. You must start trading real small and recovering your loss — a couple hundred bucks at a time. It feels insignificant. However, you never want to try to get it all back at up on five different companies and rode the trend perfectly. The prices kept running higher and the stories got bigger. I made more than one trade, but it was a memorable score.

Damien: Brian, this has been a real treat to review this great trading wisdom. Thanks for taking the time and I look forward to speaking with you again soon.

Brian: Thanks, Damien. You guys are building a great site and I’m glad to talk with you anytime.

Todd Stottlemyre

Todd Stottlemyre is a master of games. Todd is best known as a former Major League Baseball pitcher. However, he is quickly becoming equally well-known for his professional successes as an investor and trader.

Todd points out three critical keys to success: never give up; never stop learning; and, believe you can accomplish anything within your talent set. Todd is an incredible example of how a burning desire to learn can empower dreams. Todd meticulously studied his opponents on the baseball field, but his humble work ethic as a trader may be his greatest accomplishment yet.

In several days Todd will be partnering with friend and professional financier Joe Donohue to launch a new hedge fund called Desert Shores Capital. Despite the challenging times in private equity, Todd is ready to shoulder the responsibility to his investors. Moreover, like his family legacy in Major League Baseball, Todd wants to build a legacy in finance which one day may be carried on by his children.

In true Market Wizards fashion, when I got off the phone with Todd I was ready to conquer the markets. There is something special many professional athletes and military personal bring to a career in finance, and Todd was kind enough to share “It” …

Damien Hoffman: Todd, tell me a little about your high school experience. Were you a jock? An intellectual? Or, a student-athlete?

Todd: I was definitely a student-athlete. When you’re in high school you’re always looking ahead, “Man, I can’t wait to graduate and move on.” But when you look back at high school, they are great days growing up. I had great friends and sporting activities. I look back at the teams I played on — whether it was a baseball or basketball team — with fond memories. Those were great times. No matter where you live or where you go to high school, where you grow up is home. And home is always a part of you.

Damien: Although I was also a student-athlete in high school, I was more of a jock until I got to college. Then I became more interested in intellectual pursuits because I wasn’t an athlete. I felt like I developed a neglected side of me. How did you balance being a great athlete as well as a smart guy interested in things outside of sports?

Todd: There are definitely different groups in school. But I went to a really diverse school which set me up for life. We had a lot of different cultures and races. For example, your skin color didn’t matter. Whether we were learning or participating on the fields or in the gym, we were just kids being kids.

People weren’t pigeonholed into “he’s on the basketball team,” “she’s on the cheer squad,” or “those are the cool kids.” I’m very fortunate to say that whether you were a singer or in the school play I attended a school that was really bound together very tightly. That experience was very cool. So, I didn’t just hung out with the smart kids or the kids on the baseball and basketball teams. I hung out with the people in the cooking class, too. I hung out with the people in the photography class. I grew up in a small town. So maybe it was the small town roots that made it that way.

Damien: Since you were never pigeonholed as “Todd the baseball player” or “Todd the student,” when you moved through your baseball career in college and the pros, did you always have an eye on what you’d do when your playing career ended?

Todd: I’d like to say yes, but I did not. Until I was a senior in high school I was just participating in sports and being a kid. Then, when I was a senior in high school, my baseball career clicked. For the first time I thought, “Maybe I can play for the biggest stage someday …” That day arrived when I signed my first professional Major League Baseball contract with the Toronto Blue Jays. A very close friend of mine used to babysit me in New York when my dad was playing for the Yankees — a guy by the name of Frank Ayello. Frank had worked on Wall Street. When I signed with the Blue Jays and got a little bonus money, Frank managed it. Frank helped me manage my money during my entire career.

The first stock we ever bought was Pepsi. It went up from 30 to 100 and split three-for-one that year. I thought, “Wow! How did that happen? I want to figure that out!” [Both laugh] The issue wasn’t the return because we only had a few shares. It was a game in itself to me.

So, I began to study the market. It was a home study for me. I didn’t advertise it — I just did it. I studied securities analysis, the Graham and Dodd books, Warren Buffet, Peter Lynch, and Jesse Livermore. I studied the Market Wizard books and wanted to understand what traders were looking at. I wanted to know the difference between an investor investor and a trader. So, I continued to read business book after business book and Wall Street book after Wall Street book. As I made more money during my baseball career, I became more active in the market — for better or worse.

You can read all the books you want and do all the studying you want, but you won’t truly learn what discipline means until you are physically trading and investing. That’s when you learn how to invest or trade to fit your personality. That’s when you set yourself up to be successful.

There are many different ways to trade and invest. However, I say this all the time: If you watch a Major League Baseball pitcher every night, everybody’s motion is different. Whether it’s slightly or dramatically different, it’s different. Everybody throws a different type of fast ball, a different type of curve ball. No two sliders are the same from one guy to the next. However, you can take two guys and get similar results even if they throw with different hands or varying speeds. Same thing in markets. You can have strategies from A to Z. You might be a quant, an investor, a technical trader, or a fundamental trader. All those people can have success using different strategies.

Success depends on discipline. Do you fit with your discipline? Do you cut your losses and write them down? At the end of the day, it comes down to discipline. I learned my discipline on the baseball field. It took a long time. In a sense, I learned how to be a trader from being a pitcher. As a pitcher I had to understand preparation: What hitter was I going to face? What were his strengths? Where were his aggressive swings in the strike zone? What were my strengths? Was I willing to match my strengths against his strengths? The answers to your questions depend on the type of game you are playing. In trading, we look at different stocks, indices, and ETFs. We ask, “Where are they strong? When are they strong? When are they weak? When should you be short? When should you be long?” The key to my success has been preparation, strategy, and discipline.

Damien: Todd, like a true market wizard, it sounds like you are always learning.

Todd: That’s true. Let me tell you a story: I’ll never forget my last day in uniform. I knew it was my last day. My arm was shot. My body was shot. I left everything on the field. It was the team’s last day for the year [2002], but I knew it was my last day playing the game of baseball for the rest of my life. It was extremely difficult to take off the uniform that day. More importantly, even on that last day I was still learning about the game of baseball. Even after fifteen years, on the day I was going to take off the uniform for the last time, I still learned something about hitters, pitchers, and the game. That attitude as transformed me as a trader. I am now able to move into a role as a hedge fund manager. And if I’m fortunate enough to live twenty, fifty, or even sixty years from now, I can promise you on my last day, on my last trade, before my last breath, there will be something to learn in the market.

The minute you think you’ve got the game as an athlete figured out, the market as a participant figured out, or the world as the President figured out, that is the minute you’re surprised and something bad happens. That’s when you realize you don’t have it all figured out.

It goes back to discipline. If you’re passionate about something, passion will drive the learning experience. I would say that my goal moving forward is to become the best trader I can possibly be within my skill set and intellect. If that means I could someday become the best trader in the world, then that’s my goal. Even if I became the best trader in the world, how hard would it be to maintain that position? People make it to the big leagues and play Major League Baseball. It’s hard to get there. But it’s harder to stay there.

Damien: You said we’re all different and need to understand our strengths. What is Todd’s trading style and how does that relate back to the strengths you took from baseball?

Todd: I’m probably a better trader than investor. I’m an instant gratification guy. So, I want my positions to work fast. Based on that, it would be hard for me to value invest because value investors are buying depressed assets that reflect value over long periods of time. I don’t have the patience for that. So, today I’m not interested in buying Citigroup as a value play. If Citigroup at three dollars a share is a value play, maybe someday it trades to ten, fifteen, twenty dollars. But, it might take five, six, seven, eight years to get there. That’s not my style.

If I’m looking at Citigroup, I’m looking for particular triggers — either on the long or short side. On the long side, a breakout of a three month high. I’ll look inside those charts and try to understand what’s going on in the thirty-minute and hour time frames. I want to see supply and demand on those time frames. Then I drill down to a daily chart and look for the right triggers. If I get my move, the trade is on. That’s my strength as a trader.

Damien: Would you ride something so long as it’s moving in your favor? Or, is there a part of you that says, “Lock in gains … out and onto the next thing”?

Todd: It’s a card game, right? To never lock in a gain is to never make any money. If I like a certain area where I’m going to buy a stock, I might scale into it with a certain spread that says, “OK, I’ll stop scaling into it at twenty, and my stop-loss will be below that.” There’s also a scale out approach. I’ll move up my stop-loss on the stock to make sure I never turn a winning trade into a loser.

Damien: A couple years ago, Brian Shannon taught me the value of scaling out of stocks.

Todd: I love Brian Shannon. I read his blog. I’ve read his book [Technical Analysis on Multiple Timeframes]. Brian has become a friend. Brian taught me how to look inside a daily chart and understanding the deeper activity. Today I talk about that skill as part of my strategy and discipline. That wasn’t something I studied ten years ago. It’s something I picked up from Brian in the last year. It might not help me buy the next stock, but it helps me with my risk management.

Damien: Brian has also taught me the art of patience. Since learning from him over the years, I stopped trying to make X number of trades a day and started simply trading only when my setups said, “Trade!”

Todd: Brian also helped me with the discipline to wait for good setups. Sometime the best trade is no trade at all. I have days when I can’t get comfortable trading. Maybe I’m not reading the markets correctly. Or maybe I’m getting whipped. So, I’ll fold my arms and become a spectator. I will go through all kinds of charts. If something jumps out at me, the trade could be on.

I’ve had days when I’m getting a great feel. I get real aggressive on those days because those are the days when you’re in the zone. You’re in your sweet spot. It’s almost like you’re seeing things before they happen. Those are very fun days. On the other hand, you can make a lot of mistakes on days when you don’t feel good — when you’re not in the zone and trying to force something to happen.

Damien: Definitely. I can attest to that.

Todd: We’ve all done it. We’re all human. If you don’t take a good trade setup, you don’t make any money. If you’re forcing something, you’re losing money. On those days you might say, “Why did I even do anything? I lost some money today and that money shouldn’t have been lost because the entry target price never hit.” When you’re losing money you’re thinking, “Hey, that stinks. I hate losing money!” Actually, I hate losing in general. However, I must understand that if I’m right 60% of the time, that means I’m going to be wrong 40% of the time. During the 40% of the time I’m wrong, the discipline has to come into play to push the button and say, “I’m out.” You must preserve that capital.

Damien: Sometimes not wanting to lose can cause people to ride their losers. How do you prevent your aversion to losing or emotions from screwing you? How do you keep that from becoming a weakness of yours and instead use it as a strength?

Todd: We all have the primal desire to be right. But being right can mean taking a loss. That’s a positive. It seems like a negative because you just lost money. I had to lose a lot of money to figure that out. There were plenty of times when I got into a trade and the trade turned into an investment. The minute a trade turns into an investment, that’s a loser. If you don’t cut it loose, it could be a big loser. Instead of losing one or two percent on that loser, you might be down eighteen or twenty percent before you can even breathe. To prevent that problem, I have a specific exit where I say that’s all the pain I will take. Generally speaking, that pain threshold is based on looking at different charts. If I get long, I’m looking for certain break points where maybe there’s no support or the support is too far under my cost. I don’t want to take that much risk.

I always look for setups. I’m willing to lose one to win four. That would be a great risk-reward ratio. It’s not always one to four. Sometimes it’s one to three, or one to two. But if the risk-reward is one to one, then there’s a better trade somewhere else.

If you lose enough money enough times by riding something down, eventually you’ll be frustrated and take your loss. Unfortunately, sometimes the market tries to talk you back in. Let’s say your stop loss has been hit and you’re out. Then the stock reverses and runs back up, so you re-enter. Then, you get stopped out again. After the market has done that five or six times, you start saying, “This is a dumb strategy. Let me widen my stops.” But, the moment you start widening your stops from your original stop price, you start saying, “Maybe I should buy it here because it’s going to reverse.” Then, my friend, you’ve bought yourself into a falling knife. Maybe you’re down 30% and your twice your original trade size. You’ve gotten yourself into an ugly scenario.

That happened to me on my worst trade of all-time. I was trading options. Then I doubled up. Then I doubled up again. Then I doubled up again. I was two or three days facing expiration and my options were worth nothing. I’m trying to sell them and nobody’s buying. I had a huge loss. That day will stick with me for the rest of my life. Doubling down while thinking you’re right is dangerous. You might believe the fundamentals are right and you’re right, but the market will tell you, “Guess what … you’re wrong!” And you’ll know you’re wrong because the price is going down.

Damien: We’ve been talking about trading, but can you back up a bit and walk me from the time you stepped off the mound to when you became a recommended person on Stock Twits?

Todd: Sure. I retired from baseball in 2002. I was only 37 years old. My goal was to take off a year, but after six months I was ready to do something new. Since I had an interest in the markets I thought about setting up a hedge fund. But how many people were going to trust me with their money since I didn’t have a track record? I just walked off the baseball field throwing a 3-2 slider with the bases loaded, right?

I was fortunate to have the financial stability to do anything I wanted at the time. So, I wanted to do what I loved to do. My next door neighbor, Alan Fonner, was the director of Merrill-Lynch and he said, “Hey, we’d love to have you if you want to give it a shot.” So I took the leap of faith and went to the training program at Merrill-Lynch. I got all licensed up and started gathering assets. After a couple of years, I was successful at bringing in assets and had built a nice little team. I grew bored because I really wanted to trade.

Merrill-Lynch has a great business model and they’re a great institution. But it didn’t fit my passion. I wanted to make a decision. I was used to being the pitcher. I decided when to throw a fast ball, in, out, or a slider. As a broker just brought in the assets, diversified the assets, and handed them off to institutional money managers. Then they make all the decisions about trading the money. I wanted to do that.

Damien: Sounds like moving from pitching to ticket sales when you’re used to being in charge of the whole game on the field.

Todd: Exactly. When you’re a pitcher standing in the middle of the field, you have a huge responsibility. You have a huge responsibility to your teammates, the manager, the pitching coach, the coaches, and everybody who bought a ticket that day to root for you. You’re responsible for all of those people on that particular day. As a broker I was responsible for the family who gave me their money, but now I handed off the responsibility to somebody else. And those people get all the credit. Obviously those people have MBAs and CFAs. They went to business school and they’re really bright people. But for me personally, I wasn’t used to handing off responsibility. So, after about four and a half years I decided I wanted to be a trader. I wasn’t going to get any better at being a trader while I was a broker, so I walked out the door on good graces with the people at Merrill. I have great respect for them.

Could I pick a worse time than September of 2007 to become a professional trader? [Both laugh] You can look at it the other way and say, “Woah, that’s a great time.” The de-leveraging phase created the discipline I have today. During that time I met a gentleman by the name of Howard Lindzon. I was in the process of presenting Howard a private equity deal and he presented me a private equity deal called Stock Twits. I thought, “Wow. This is a great idea. I’d really like to be involved.” That day I made a small investment, Howard signed me up on Twitter, and soon after posted my trades.

One day I noticed a guy on the system that goes by “UpsideTrader.” He’s a very fast, nimble, and successful trader. When he took his losses they were really tight losses. So I looked into his background. He was a guy who had been in the financial markets for twenty five years. He had worked as a retail broker, ran a hedge fund, and was very successful. So I sent him a direct messaged said, “Hey, Joe. I’d love to talk to you about your strategy.”

About a week later, I picked up the phone because he’d sent me his number. I said, “I am going to call this guy and just start asking him questions.” Every time I asked him a question and he answered, he’d go into how he looks at a trade. He explained his understanding of what’s going on from a macro-global standpoint, how it fits with different sectors, how those sectors fit with different stocks, and how different types of charts break down the stocks. He’s looking for breakouts and breakdowns, whether to be short or long, and tries to understand market psychology.

At first he advised I just start eyeballing this process he had laid out for me. He said, “After a few days, see if you’re picking up on winners.” I actually didn’t trade for three or four days — I just watched and used the process. Then, when I started, I picked winners. I called Joe, “Hey, Joe! Check this one out.” He would make a few dollars on the trade and he’d call me back and say, “Great eyes. That was a great trade. Hey, I made eighty cents on it.” After doing this for a few days I thought, “To heck with this. I’m putting real money in this!” So I began trading for real. Joe continues to mentor me. We talk every day.

Then I got listed as one of the top traders on Twitter with Nobel Prize winners like [Nouriel] Roubini. There are all these famous traders and then this guy who walked off the baseball field and spent a few years at Merrill-Lynch. I was humbled to be named with these guys. It was awesome. But at the same time that was a whole new pressure. I got all of these new followers because of people said, “This guy’s a top trader. I’ll follow him.” When I put on my trades and posted them I wanted to make sure I could live up to the expectations. It’s like pitching the big game and the bright lights are on. If you’re already thinking about your interview afterwords, you’re finished. In fact, if you’re thinking anything past the next pitch in that game, you’re in trouble. But that’s the animal in every one of us.

Damien: So how did you take that newfound notoriety and parlay it into starting the new fund Desert Shores Capital?

Todd: The conversation with Joe carried on. We began trading together while shooting each other charts and setups. We built a bond and friendship while looking for opportunities in the market. About six months after that, Joe flew to Arizona and we talked about managing a fund together. We had several reasons. Number one, we were successful in very difficult markets. Number two, everywhere we turned it seemed like a scam going on. People were getting taken for their hard-earned money.

Emotionally, that bothered me. It’s one thing to fail while running an honest strategy and working as hard as you can. But to just steal money is the scum of the earth. So, I said to Joe, “If we’re going to to do this, let’s be transparent. Let’s build a legacy that we’ll work hard and have the passion to excel in the markets. Let’s do good by doing good for other people.” If we stick to that discipline for our entire career, we’ll do well and never have to worry about people wanting to invest with us. The honesty and hard work will show up in our returns. We’ll build something very special.

Damien: Where are you with the new fund?

Todd: We’re going to start trading the fund August 17th. We began raising some capital. It’s a very tight circle of money. It’s family, friends, and people within our own circles because there’s no track record yet. So the money we’ve attracted is from people who know us and trust we’ll work hard. I also feel very honored to say I’m putting my own money in this fund. There’s a huge responsibility because no matter who puts money in this fund, every dollar and trade will be like it’s mine. That’s a great dynamic when the managers and investors have the same goals because they’re all together. At Merrill-Lynch I used to say, “I don’t want to show any client anything I don’t have my own personal money in.” I tried to live by that as close as I could. But in this case, I have my money, my father’s money, my brother’s money, and we’re all in this as a family. Joe is the same way.

The fund will be a relatively very small fund to start. We’ll build this thing one brick at a time. This is not a sprint. This is not a fund in which we’re going to chase performance for two years so the managers can get a performance fee, we’re rich, sell out the fund and move on. This is the concept of building a legacy. My father played Major League Baseball and after he played Major League Baseball he was a coach in Major League Baseball. He was probably in Major League Baseball for fifty-some odd years. That’s a legacy. I was fortunate to follow in his footsteps as a player. My brother followed in his footsteps and is now a pitching coach for the Arizona Diamondbacks. That’s the legacy of baseball.

I would love to leave a legacy of running a fund and finance company that someday my children say they want to be a part of. So, this is a journey. August 17th will be the first day of the rest of my life. It’s actually the first time I have had the same passion, excitement, and work ethic I had when I played the game of baseball. The pressure comes in the form of posting results every month. Joe warned me, “Hey, it’s every month.” I said, “That’s cool. I used to pitch five games a month and my results were posted once a week. So if you’re worried about me from the pressure of having running other people’s money, I have no issues with that.”

Our fund will be very disciplined. Cash is a position in our fund. Preserving capital is a priority. Growing capital is another priority. That doesn’t happen fast. This isn’t a get rich quick scheme. It’s a two man show: me and Joe. We’re going to build the infrastructure as money comes into the fund. If we have capacity issues with how much money is coming in, we’ll build up the organization to handle it one man or woman at a time.

Damien: Todd, recently we all saw in the media that Lenny Dykstra is going bankrupt after running a fund and multiple investment-related businesses. What would you say to a prospective investor who just heard about Dykstra and might be scared of investing with a former athlete?

Todd: First, I’m not up to speed with the Lenny Dykstra situation. I’m not sure what happened there. But if you take a look back to last year, look at all the different money managers who were wrong. I’ll never forget almost everybody calling for the crisis to be over in early 2008 –that was the worst part, by the way. So a lot of people were very wrong. Unfortunately, somehow it touched Lenny. But I don’t know what side of the fence he was on as far as running money and doing all those things. I’m certainly not here to judge anybody. Now, how does this relate to me? Obviously, somebody is going to say, “Here’s another athlete coming into the world of finance. How long will it take for him to blow up?”

My goal is ten years from now during an introduction at a business meeting the other person would never believe I played baseball beforehand. Today people are going to see the name and say, “I think he played in the majors, right?” My goal isn’t going to happen overnight. I’m not going to earn the trust of an institution overnight. We have to go out and prove ourselves. I have no problem putting in the hard work and doing this one brick at a time to prove myself to people who may want to make an investment.

There are always going to be people taking shots. Trust me. When I took the mound half the people in the stadium liked me and the other half didn’t — even at my home ballparks. I’m not worried about whether people like us. We have to perform, preserve their capital, and earn trust. That trust isn’t like the wind or weather which comes and goes. Earning trust takes time. Today I talked to my children about trust. I told them when trust is broken from one person to another, it takes a long time to earn that trust again.

So, I don’t look at myself as just another athlete entering the world of finance. I don’t look at it as, “Lenny Dykstra wore a baseball uniform and Todd wore a baseball uniform, we should be grouped together.” Roger Staubach wore a uniform too. Look at the success Roger has built in real estate. He has become a leader for a company. Comparing me to Lenny is like saying every hedge fund manager is a Ponzi scheme artist like Madoff. I’m not out here to fight the demons of people’s thoughts and thought processes. My focus is to build the legacy one brick at a time.

Let me say I wish Lenny all the best. I don’t know what happened there. A lot of CEOs had a lot of wealth tied up in their own stock, margined that stock, and lost it all. Some very brilliant guys did that. As we move forward in this launch time will show how am I different from other guys. I hope that someday I might be compared to some of the best traders in the world rather than somebody who took off a baseball uniform and entered the world of finance.

Damien: Based on the trustworthy and successful people who have surrounded themselves by you, I am sure you will be successful at your new fund with Joe. With that said, what kind of advice do you have for young student-athletes like who are interested in finance when they are done with sports?

Todd: Three things: never give up; never stop learning; and, you can do anything, regardless of those who say you can’t. You can be whatever you want if you have the passion and will to learn and never give up. I played baseball as a kid. Then I was fortunate enough to play Major League Baseball. I am extremely fortunate to have a mother and father who taught me about being responsible. My parents are the greatest parents in the world. If not for them, I wouldn’t have been able to do many things. In our family there was no such thing as giving up or can’t. My parents taught me I can do anything I want if I’m willing to do the work. I’m very thankful for that.

I also did stupid things and made dumb mistakes. I made dumb statements that caused sleepless nights. I had those sleepless nights because I had the responsibility that was given down from my parents. They told me I am responsible for whatever I say and do. My dad used to say, “If you’re gonna dance, you have to pay the fiddler. If you throw up, you sleep in it.” [Both laugh] I’ve had plenty of times when I’d call him up and say, “Hey, Dad …” and he’d respond, “You threw up again, didn’t you?” I’d say “Yup.” And he’d say “Well, you gotta sleep in it now.” He meant to take responsibility for my actions.

The other day I was telling a young college kid there were a lot of times in high school I couldn’t wait to go to college. When I was in college, I couldn’t wait to go pro. When I was in the pros, I couldn’t wait to go to the big leagues. When I retired from baseball and went to Merrill-Lynch, I couldn’t wait to have my own fund. Basically, you can always look to the future because there’s always something. It’s great to have goals and dreams, but don’t forget to take care of today before you look forward to tomorrow.

With our fund there are a lot of bricks that have to be laid before August 17th — and the 17th will be here soon enough. I’m not looking to the 17th right now. Today I’m doing what I have to do to set up our fund for success. I always ask, “What can I do today?” Then, tomorrow I ask the same question. But I can’t take care of anything tomorrow until I finish today’s tasks. And when the fund launches it’s going to stay one day at a time. How can we make money every day? That will be the focus. Concentrating on one day at a time leads to success.

Damien: Todd, I think that’s the perfect ending to an incredibly inspirational conversation. I wish you guys all the best with the fund and look forward to following up with you in the coming months.

Todd: Anytime, Damien. Joe and I love your interviews and I’m honored you were interested in interviewing me.

Steven Place has a gift for making complicated options strategies seem simple. Below is a video tutorial in which Steven explains the basics of using Iron Condors as an options strategy:

If you don’t participate in Steven’s StockTwits Brunch on Saturdays at 10 AM EST, you should. Also, if you are interested in an inexpensive yet platinum quality mentor for trading options, you can sign up for Steven’s Premium StockTwits Service by clicking here.

This video was posted with permission from Steven Place at Investing With Options.

Interested in more Trading 201? Check out these posts:

Level 2: Video Tutorial With Brian Shannon

Don’t Get Burned – Confirm

Learning to Take Losses Without Trauma

Nip Tuck: Don’t Chase

Chasing the Pot: What Happens in Vegas Happens on Wall St.

In life, following directions is half the battle. When trading, avoiding the top mistakes is equally as important.

I recently spoke with top StockTwits traders Joe Donahue (UpsideTrader) and Joey Fundora (DowntownTrader) to learn what they believe are the top three mistakes new traders must avoid. These guys are true pros who give you real-time access to their trades via StockTwits. I think you will benefit greatly from their advice. Let’s start uptown, then take the A-C-E subway downtown …

Joe Donahue (UpsideTrader): Top Three Mistakes New Traders Must Avoid

1) Not Selling Fast When You Are Wrong. What I can lose on a given trade is always more important to me than what I can make. Most new traders will make a purchase or initiate a short position, but when the trade turns against them, they immediately forget why they bought or shorted the stock. As a result, they will let “hope” take over as their new strategy. Hope is not a strategy! Wall Street is littered with traders, hedge fund managers, and investors who begged to differ on that fact. If you are looking for evidence, just look at GM, AIG, or Citigroup. These are longer term examples, but the same holds true for day trading. Take your medicine and accept defeat when you are on the wrong side of a trade. Great traders have tough skin and move on.

The solution for this problem is to use stops. I always use stops when I trade. The percentage you are willing to lose will be a direct byproduct of your own risk tolerance — but use them always. I use approximately a 2% stop on all my trades (sometimes less). I sleep at night and usually make money.

2) Using Multiple Approaches or Strategies. Many new traders think they have a strategy … until they don’t. They feel they are comfortable with an approach, but at the first sign of failure they stray. Thus, they become aimless and reckless. Before they know it they are trading rumors, chasing stocks, and ultimately blowing up their account (before they have any real success at all).

New traders will “over trade” or do what I call “revenge” trading right after a loser. Revenge doesn’t work in the market and the only person that benefits from over trading is your broker. I have one strategy I use. Is it the only strategy that works? Definitely not. As a matter of fact almost every trader I know uses their own approach. Some strategies are proprietary systems. Some are plain vanilla strategies that are very basic in nature. The point is have a plan and an approach! So, learn one thing and be the best at it. There is way too much “noise” out there in the new and old media. Everyone claims to be a bull or bear market genius. Put the media on mute so you can follow and perfect your plan.

Being a voracious learner is absolutely key. Be a sponge and learn as much as you can. If you are a day trader, use the websites and read the books that will help you become the best. There are some phenomenal trading blogs out there. Most information is a click away.

3) Trading Too Large. I ran a sizable hedge fund and thankfully always beat the indices in good or bad markets. Much of my initiation and experience was baptism by fire. But if a novice trader asked me the one thing he or she should do to get a feel for the market, I would tell them to paper trade or use     very small dollar amounts. There is absolutely no substitute for “screen hours.” Tiger Woods hits five hundred to a thousand balls a day, and he is already the best in the world. If trading is truly your passion, then be in front of your trading screen all day. If I miss twenty minutes of trading because I am out of the office, I genuinely feel like I missed the whole day — my rhythm is gone and my edge becomes diminished. You may be able to get away with less screen     time if you are a longer term investor. But if your passion is perfecting the short term trading game, you won’t stand a chance. Good luck out there and don’t listen to the pundits.

Joey Fundora (DowntownTrader): Top Three Mistakes New Traders Must Avoid

1) Not having a defined trading strategy. To consistently make money in the markets, a trader must have an edge that can be repeatedly exploited. Many traders don’t understand what this really means. Instead, they hop around from one trade to the next relying solely on intuition. While a trader can have periods of success trading without a plan, in the long run it would be extremely difficult to maintain any level of success without a repeatable core strategy.

I remember attending a trading conference with my brother and a friend. During one of the breaks chatted with some other traders. We discussed Investors Business Daily and the IBD100 when another trader walked up. The trader asked a few questions about the types of traders we were and how we scanned for stocks. When we returned the question, he mentioned he was a momentum trader and loved trading stocks in the IBD 100. When asked about his strategy, his exact words were “you know, I just look at something that looks good, and just try to get on and see what happens. Once I’m in I try to make a little and then see where it goes. Of course sometimes you get caught and you have to wait it out till it comes back.” That was the extent of his strategy. Of course this is an extreme, but there are many traders who mistakenly believe they have a well defined strategy.

In reality, the most common mistake is there are many traders who have a perfectly acceptable strategy, but consistently find themselves straying from it in order to chase what is hot in the markets. It’s not enough to have a strategy — a trader must refrain from getting away from it when tempted by greed. There are thousands of trading strategies that will work consistently, but all of them will fail without the discipline to stick to them. Trading is more about discipline and consistency, and less about fancy trading systems. A trader will usually be successful so long as they have a method to cut their losses quickly and maximize their profits on winning trades.

2) Ignorance of time frame. This mistake can probably be rolled up into Mistake #1, but is important enough to mention on its own. Knowing your time frame goes beyond what time frame charts you look at for trading. The first thing a trader needs to know is what they are trying to accomplish with a trade. While making money is the obvious answer, I’m talking about determining what move a trader is trying to capture. Often, a trader focuses his entire attention on getting into a trade. He or she has little regard for how they will get out of the trade. This usually leads to wavering back and forth on when to exit. Traders need to know how long they will be in a trade and what they are trying to accomplish. Otherwise, the markets dictate how they will exit. Traders need to define what part of a trend they are trying to capture, then act accordingly. While the signals don’t have to be defined to the point of being mechanical, traders should have a clear and definite direction they are taking in a trade.

There are several different trading styles out there — from scalping a tick chart, to position trading off weekly charts. For instance, if you are trading to capture a several day trend, then your target and stop loss should complement that objective. I often see traders say they are trying to capture a multi-day move. They leave an open-ended target, then panic on an intraday pullback. While there is nothing wrong with leaving an open-ended target, traders need to be willing to suffer through a pullback if they are trying to let a trend run its course.

Too often, I see traders entering trades with no real ultimate target and no clear understanding of how to identify when they are wrong in the trade. Stop losses are intimately tied to targets, yet this is an area which confuses many traders. Many traders also mix up their time frames once they are in a trade. Basically, if you’re going to scalp, then scalp and scale or get out on strength. Don’t worry about missing a continuation move that falls out of your time frame. First of all, this wasn’t your planned trade. Second, as humans we tend to have a selective memory. We tend to discard the myriad of times when holding would have been unsuccessful. If you are a trend follower position trading, it makes more sense to trad without a target and keep a very loose trailing stop. Otherwise you will not allow the trend to unfold. Many traders don’t realize their objective, then set incompatible exit orders. While traders don’t need to lock themselves down to a specific time frame, every trade setup in their arsenal should attempt to capture a well defined movement.

3) Thinking about what is supposed to happen instead of focusing on what is happening. Recently, I’ve seen traders fighting the tape on the entire rally off the March lows. I’ve seen very smart individuals going to cash because they can’t see how this rally can be for real with the economic picture so bleak. Many traders are crying foul, saying the government is manipulating this or that, fudging employment data, economic reports, etc. I don’t know if any if that is true, and I don’t really care. I’m not a naïve person. I understand there is a certain amount of manipulation and unfair trading practices that exist. However, I also believe that this behavior is prevalent in any industry/activity where large amounts of money is involved. Greed is one of the most powerful emotions we have as humans — probably rooted deeply in our survival instincts. There will always be corruption and manipulation in the financial markets. However, this should not stand in the way of any trader stepping in and making money. It’s okay to feel however you want, but in the markets only price pays. The old Jesse Livermore quote says it perfectly: “There is only one side to the stock market; not the bull side or the bear side, but the right side.”

Traders should learn to focus on what is occurring in the markets and try to remain objective. While there is nothing wrong with using your intuition and intelligence to uncover possible themes or trading scenarios, traders should also remain objective and let the markets either agree or disagree with their thesis. It makes no sense to throw up your hands and let the markets run you over because they disagree with your beliefs.

In summary, the cure for most trading mistakes is to have a plan for dealing with whatever the markets throw your way. Once you have a plan you will not react to the markets. Instead you will proactively trade a well thought out plan.

To learn more about Joe Donahue and his excellent Premium StockTwits service, please click here.

To learn more about Joey Fundora, please click here.

If you are interested in real-time market analysis and trades, click here to follow me on Twitter.

Feel like sponging up more Trading Basics? Try these posts:

Getting Started Trading: The Setup

Chapter 1: Change
Lesson 4: Change Your Environment, Change Yourself

Many traders desire to change their ways when things are not working. However, I’ve noticed that these same traders continue to repeat their mistakes as if they are processing a software program they cannot escape.

For example, I know a trader who was continuously getting stopped-out of good trades. I told him to decrease his position size, increase the distance to his stop-loss point, and plan trades rather than working on the one-minute time frame. Strangely, he simply could not bring himself to change his ways. Thus, he continued to get stopped-out and lose confidence.

In Lesson 4 of The Daily Trading Coach, Dr. Brett explains that “it’s the mental routines — the mental environment — that we most need to change to break unwanted and unprofitable patters of thought and behavior.” Many traders make the mistake of changing their physical environment to break negative patters, but our mental environment follows us everywhere we go.

For this lesson I chose to apply one of the four exercises Dr. Brett recommends: Seek Out Divergent Views. This exercise states: “Conversations with traders who trade differently from you — different time frames, markets, styles — can often help cement your views or question them. Similarly, reading materials from fresh perspectives puts your ideas in a different light and pushes you to question your assumptions.”

I recently watched a video by Rick Dugan which explained how to categorize traders in TweetDeck. I used Rick’s suggestion and created some new TweetDeck categories based on trading styles. My goal was to separate traders by style, then start focusing on one different style at a time until I understood the new framework. I knew this would help me diversify my trading strategies as well as learn new insights about my primary strategy (i.e., trading reactions to key levels of support/resistance).

I am a more risk-averse trader. However, I believe I can learn some valuable things from higher risk traders. For example, trader Kunal Desai is a very disciplined higher risk trader who I respect. He performs thorough due diligence similar to mine. Therefore, I know I can learn something from him (and hopefully reciprocate ideas to him). So, I created a TweetDeck category called “High Risk” and added Kunal to this category so I could focus on his stream of twits. Since I started this exercise, I am already learning more nuanced information about how to work with out-of-favor sectors which are showing signs of resurrection. I am also working on challenging my more risk-averse conditioning.

What is your trading style? Do you respect some different style traders on StockTwits? If so, I recommend trying the exercise above to expand your skill-set and improve your P&L statement.

If you want a treasure trove of additional exercises and advice, check out the textbook for the WSCS Trading Combine:

If you are interested in real-time market analysis and trades, click here to follow me on Twitter.

Want to Catch Up on the Previous WSCS Trading Combine Lessons? Try these posts:

WSCS Trading Combine: Lesson One

WSCS Trading Combine: Lesson Two

WSCS Trading Combine: Lesson Three

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