Nikki Dunn — Combining technicals with fundamentals for long-term trading | Smarter Trading
welcome to the smarter trading podcast if you want to sharpen your trading skills or become a more savvy investor then you're in the right place every week we sit down with professional traders who are ready to share practical insights on what it takes to succeed in modern day markets smarter trading the show to watch to trade smarter kevin medeiros is the founder and ceo of the trade risk all opinions expressed by guests are solely their own opinions and do not reflect the opinion of evan or the trade risk this podcast is for informational purposes only and should not be relied upon as the basis for investment decisions evan and guests may maintain positions in securities discussed in this podcast this episode of smarter trading is sponsored by investors business daily ibd has been around for over 35 years helping investors navigate each and every market cycle if you want the best analysis and actionable trade ideas from the leader in growth investing check out ibd digital go to investors.com evan that's e-v-a-n to get your first two months for only twenty dollars subscribe today and start trading smarter at investors.com evan thank you ibd for supporting financial education and making this episode possible now let's get on with the show hello everybody our guest today is nikki dunn a trader investor and certified financial planner nikki is the creator of she talks finance a financial education platform to help people learn money in a fun and approachable way in this episode we talk about nikki's framework for picking companies and investing in stocks she discusses the fundamental criteria she looks for trading around positions and the mental side of holding stocks for the long haul we also get into the value that a certified financial planner brings to the table and some of the optimization points active traders should think about like trading in the right account structures taxes and a lot more please enjoy this episode with nikki dunn where are you where are you calling from i'm in austin texas nice so you are you are at the epicenter of all the inflow that's where everybody's rushing to right now tell me about it the housing prices the rent it's it's a mess over here yeah well it's good if you're already established because then at least yeah i guess um it is for hope we don't own a home we're renters we're nomadic so um you know that's been our story but uh we do have a lot of friends that have been homeowners for a while here and they're just beside themselves with their home values right now it's so funny good for them yeah yeah lots of home equity being racked up for sure um so i know a little bit about your origin story i know at one point you were a day trading renegade slinging around stock all over the screen but i i don't think you're doing much of that today so why don't you give us a little bit of your sort of progression how you get started and kind of where you are today as a trader yeah so i actually started day trading futures and then i transitioned into day trading individual stocks i was like you know what like stocks seem sexy and cool i want to learn how to do this so um i ended up journeying there and um you know it was it was a grind like day trading day trading has been glamorized um over the years especially over the past year with wall street bets and you know all of that fun stuff um but it's a grind like you got to be doing watchless every single day you have to be you know at your desk if you get up to use the bathroom you could lose an opportunity or miss an opportunity and day trading you know what i mean so it's it's kind of tough i mean yes you can set limit orders and things like that but i was always i was always very controlling over my day trading and i wanted to like be there when the order filled and you know just i just was kind of a little bit crazy about that but i got a little burnt out about it and um then i ended up you know having trouble because the market was shifting you know back when i started trading futures it was kind of like the heyday um and things were things were good and then the algorithms kicked in they got harder and harder and then with the day trading it was kind of the same thing my strategy was working and then the strategy just kind of stopped working and all of my stops were getting hit and then you had to pull your stops back and you had to increase your risk and you know it was good just kind of this this this progression and i was finally you know introduced to somebody that kind of changed the whole trajectory of my whole investing and trading strategy i met a prior hedge fund uh guy he's he's actually today a great friend of mine he's on my uh the podcast with myself and my husband on we talk money and he ran a hedge fund for years and he's very experienced professional investor and you know we would all go out for drinks and you know we were just friends but we had this in common the mark the market's in common and he would you know talk to me about you know his strategy i would poke at him and ask him a bunch of questions and he's really the one who got me into fundamental stock investing so i completely switched my strategy from day trading just on technicals to more of a swing trading slash long-term investing fundamentally you know driven but i was able to take a lot of what i learned from my technical analysis because i mean technical analysis is something that i'm very fond of you know i don't think it's voodoo like a lot of people do i think it's a tool it's not necessarily something that you can fully count on but it's a it's a tool and so i was able to combine my skill set with technical analysis and the fundamentals and kind of put them together and marry them together and i've really found that strategy to help me a ton so that's kind of the progression from day trader to more fundamental longer-term investor that makes a lot of sense and and on some level it's sort of common to kind of start off with the with the action craze of like hey i'm gonna get rich i'm gonna you know trade stocks and and be super quick and and then slowly you realize like oh this is hard this takes a lot of work this takes a ton of emotional discipline and fortitude to not just wanna blow your brains out at the end of the day uh when things aren't going well and you kind of go to that longer term sort of uh approach which sounds like that's kind of the path that you took it's a very similar path to what i took um and i think the cool thing and tell me if you agree but the the lessons we learn as day traders to really be humbled by the market to understand price action i mean that is invaluable when you start taking it to the longer term approach even which is it would you agree to that i agree a thousand percent i'm i wouldn't suggest people go day trading first i would suggest you know learn the basis of the market invest get long term invested and then you know if you are interested in trading then you have at least you know a foundation but what i will say is that my experience day trading i actually ended up um really fine-tuning the um the mental side of trading you know while i was doing that i i had the discipline to be able to teach myself how to not be emotional and think more calculated and create a strategy to help me uh not be emotional but i'm i consider myself maybe one of the lucky ones like there are a lot of people that don't learn those lessons um but i do think overall people that are day trading they are um taking a lot of things with them into the long-term strategy that helps them um you know for years years on end you know going into retirement so i do totally agree with that when you think about your approach today so you're kind of marrying the technicals with the fundamentals i mean is it fair to say do you consider yourself like a macro trader you're starting at the top or is it all kind of like the company from the ground up i care about companies over the macro environment so i will say part of my portfolio the way i've done it now is part is is passively invested which is like investing in funds you know set it and forget it strategy the other part is i actively invest a section of my capital where i'm picking stocks i'm researching i'm looking at macro trends i'm you know what's the fed gonna do next what's monetary you know and fiscal policy what's going on here how is this going to affect the market and interest rates and inflation like i do pay attention to a lot of those things um for the purpose of my active portfolio because if you get into a bunch of stocks the fundamentals look great you know that's fine but you want to be aware of where the overall market stands and where the overall economy stands because it helps you reduce or eliminate surprises that you know if the market does correct 10 15 and all of your stocks even though they're fundamentally sound you know the market is just selling off so everything's selling off it kind of helps you stay level-headed you know you're like okay i know nothing fundamentally is changing here the market is just selling off for you know whatever reason it may and of course that reason may end up being something to worry about if we're moving into a recession or you know if the fed is going to raise interest rates or something like that you know that's of course something to think about um but generally i do kind of i do pay attention to the macro but i don't let it necessarily derail me if i have a strong fundamental thesis in an investment especially if it's long term so you have your magnifying glass out dissecting jerome powell's words but but not too much uh not not too crazy but but just enough to uh understand what he's talking about i got it yeah yeah so no that makes sense and i like that approach and it i totally agree i mean understanding the climate the landscape that we're in is just a smart thing to do if you're going to be you know putting money at risk and investing in longer term ideas or position trades so when we start talking about maybe the company side of things when you say you're doing kind of fundamental analysis or homework on a stock what is what does that actually mean what what are some of the things you're looking for when you're picking individual stocks yeah so you know the first few things that i look at when i see a ticker and i'm like oh this is an interesting company let me dive in i'll look at things like revenue growth you know how quickly are they growing revenues are we looking at a high growth company are we looking at something maybe lower growth that's more of a value stock type of situation i'm looking at you know how much debt they have i'm looking at their valuation something like an enterprise value to sales type of valuation metric that i'll actually take and i'll compare that evaluation metric to other similar companies and kind of see okay where are we at with this company is this company overvalued compared to this undervalued is it somewhere in the middle is there room here for growth and then you know if all of that looks good to me that's when i decided to dive in a little deeper i listened to you know all the the recent earnings calls try to get a feel for where management stands how management sounds sometimes you can hear in the earnings calls that management has no clue what they're doing and sometimes they sound really sharp and really you know focused um it's kind of funny so i try to of course not you can't always you know sometimes they swoon you and sound like everything's rosy but everything's not rosy too but you know it's just something i do um and if if you know i i try to figure out what their growth levels are i try to figure out where could this company go next what are they not doing that they could be doing what are they talking about doing that's going to help them grow and expand and um i try to just kind of take all that and put it together and and make a decision uh as to if it's worth my capital to invest in it or not and where i think it could go is the risk to reward there for me essentially yeah yeah so yeah you really get your arms around kind of the whole the whole stock the company and really sort of understand kind of everything that's going into it so does that mean so i you know a lot of the times and maybe this is something that's maybe bad or incorrect with our industry is i think a lot of people when they think oh fundamental investor you're immediately in like a value camp sort of like oh you're only looking for value stocks but is that the case are you you know obviously we all want good value but does does um growth stocks and investing in the higher beta type of names is that something that you will still do or is it absolutely yeah yeah um i definitely i call it actually my my hedge fund buddy uh his name is travis um him and i we call it growth at a reasonable price you know you're it can be a company that's growing revenues double digits or very at very high rates but for some reason or another it's trading at a discount to its peers right it could be a scandal it could be an outage you know that happened and if it's a tech company or something like that um but yeah i have some value in the portfolio but um i also have some growth in the portfolio portfolio as well and i'll even sometimes put in the portfolio um some really i don't want to call them like i don't want to call them like kathy wood type of stuff but you know some vision you know looking way ahead in the future thinking about what this technology could look like 10 20 years from now is it a little speculative probably you know do they have a lot of revenue now you know there's the occasional uh name that's kind of in that camp like we're thinking really long term with this and i'll put something like that in the portfolio as well but it won't be a large position for me you know generally i try to stick with the value and the growth at a reasonable price that um you know i'm i can sleep well at night knowing that i'm not you know buying some absurd valuation yeah yeah that makes sense i like that i mean it's it's very common sense and i like the i like that phrase growth at a reasonable price and yeah i mean if something's growing at 60 i mean the price is probably going to be pretty expensive but maybe it's justifiable if it's growing at that type of uh year-over-year type of rate so i like that um and that makes a lot of sense to me so when you are i guess first coming up with an idea you just gave us a lot of great criteria you are looking through on the fundamental side what usually comes first is it is it the technicals where you're looking at charts and saying oh that that's an interesting sort of chart here that's an interesting trend and then you go look at the fundamentals or do you have pockets of the market that you're looking at and you kind of start fundamental first and then technicals that's a great question and i always go technicals first okay nice always yeah it's like in my blood i can't i can't stop first thing i do is i pop up a chart and i look at the chart and i read it and i say okay this this like something that's gone like parabolic for you know months on end or whatever i i'm gonna really you know say okay let me really look at this carefully and make sure i you know at plus as a technical trainer you're always trying to like get the best uh price around support and resistance levels or you know some type of key love price level that you're looking for um to retest you know by nature i sort of look for deals in that manner if that makes sense yeah that makes total sense i like it can't get the uh the technicals out of your blood so that i can't yeah that's good that's good though um because that's usually synonymous with risk management and all that stuff so that's a that's a good thing i think um so how many how many different positions would you have on in this type of portfolio what's what's maybe a full-on 100 percent long portfolio look like for you in terms of number of positions i can have um anywhere from 15 positions up to sometimes 25 positions um so it can kind of range you know depending on what the market is doing and what the positions are doing um i try not to be too over active in that portfolio because you know one thing i've learned in this is a lot of times you need time for things to play out and patience and so uh but generally yeah anywhere from like 15 to 25 depending on market conditions and what positions are doing yeah that's a it's a good solid number each position contributes a pretty meaningful amount but still gives you that diversity so that makes a lot of sense um do you have is there a market environment i should say that you would have no positions would you go down to a full cash or or fixed income type of portfolio on this um probably not okay uh if like you know there are just some names i'm never gonna sell or it's gonna be really difficult for me to sell them yeah you know like my apple and my square i've been you know scaling out some profits along the way on some of those names but like i'm always gonna hold probably unless something crazy happens i'm likely gonna hold those names for a very long time even though they're in my active portfolio i'm i'm still you know managing them and i'm gonna you know likely keep them in so there are some names like that that i can see myself being in for just a very very long time um and i feel like in the markets there's always opportunity coming and going it's for me you know with earning seasons you know there's always drops in price and rises in price and there's just always things moving so sometimes it can be difficult to like not have any positions on in in my case with the way i'm doing it because i'm there are so many stocks and there's constantly like this rolling uh you know tumbleweed of opportunities that's always coming along just because of the nature of the markets there's always a scandal there's always you know some crisis or something happening earnings um flop or whatever that's causing these movements and and with that brings all kinds of opportunities yeah yeah that makes a lot of sense um so when you think about your i mean i guess your ideal holding period is is forever in the sense of it's a great company that's just you know hitting the marks every single quarter but what tends to be the more realistic average hold time would you say in in your sort of holding periods i would say right now about a couple of years okay maybe two to three years right now that of course i do have positions in the portfolio that um i will get in and out of in months you know or in one year but i would say on average a lot of the stuff i've got in right now i'm letting it work and i've been letting it work especially with 2020 you know um kind of pushing things along a little bit more sure a lot of positions you know went higher than we expected and it was just the way it went so a lot of that stuff i'm still kind of writing but you know a couple of years is is usually pretty common for me and are you trading around that position are you harvesting like profits into strength and then potentially adding back if it dipped enough i've done that multiple times i'm still doing that you know i've got a position right now uh in pinterest that i've scaled out of on the way up i still have a you know a little bit in there but now it's come down because of earnings doing more research trying to figure out if it's worth adding to the position again round tripping it so to speak if you know for lack of a better word yeah but yeah i'll do that for sure and the ultimate exit or the ultimate kind of okay this time to move this position out of the portfolio is that technical if there's technical like major trend breakdown on long-term charts or is does that have to come from your fundamental sort of thesis is broken or invalidated or no longer there that's a good question i i would say more so on the fundamental side is kind of what's guiding that because i've had death charts that look like death stocks that looked like they were never going to come back and that market just hated them for whatever reason at the time and then the fundamentals show themselves and the market finally realizes what i'm feeling or what i'm thinking and the company executes and executes and executes and then price turns around so sometimes the technicals can actually be misleading when you're dealing with fundamentals um and if you would have gotten out because of the technicals but the fundamentals were still there for you then you could have missed out on that turnaround in price because that's very common i mean uh multiple multiple times i've i've thought that a stock is never gonna work and then you know your patient you continue to listen to the calls and look at their reports and say well management's executing like what am i supposed to do here like this stock is still a good value and then eventually it just comes so obviously that's a blanket statement that's not always how it works but um i would say that uh i tried to focus on the technicals if that's truly what i'm in for now i have and i still do take swing trades based on just technicals alone it's it's not as common but i still do it um occasionally and in that case yes i've got very that's like technicals only i've got very defined set risk set reward and if that breaks that breaks like i'm not trying to become a bag holder right right so that's what i do there right so so this the shorter term swing trading you're more kind of executing like a like a machine and you're just you're going in for that a plus setup trying to get it and that's it if it works or it doesn't type of thing exactly yeah okay so i know you've done a lot of work on sort of the on on yourself on the emotional side of trading and the mental state of trading and you kind of touched on it just a moment ago but i know personally for me so i you know i hear you talking and i'm saying you know i love this approach there's plenty of companies where i'd love to hold them for two three years because it seems like you know they're in all the right things or doing all the right spots or you know so on and so forth but the hardest part for me is just holding on because the day trader in me the old day trader in me you know looks at like a daily chart and sees that big outside reversal right and on a stock i may like but i'm still like oh this is going to come back for like two weeks i need to get out of this and i'm sabotaging the long-term vision so what are the tips or techniques to hold on to these winners that you sort of think about on a daily basis i think that first of all it's important to define your strategy and understand if you're trading multiple strategies like for me i'm trading i'm a passive investor i'm a short-term swing trader and i'm also a long-term fundamental investor it's like you know a lot of people are getting their wires crossed and different strategies have to be managed very differently so i think the first step is recognizing okay what's my strategy how do i manage this strategy if i'm working with a whole other strategy in addition to that let me make sure that i don't confuse management styles in each strategy right so um i think that that's the first step and then you know the second step is you want to make sure that you're going into the trade or investment with a plan i think i think looking at the technicals is really helpful um but if you don't have a plan and you don't have set risk and set reward and understand okay if this company you know understand fundamentally it's kind of confusing because we're talking technicals and fundamentals and that you know when you're combining the two what's really important is is this company still fundamentally sound and executing if it's not if my thesis is broken i'm going to get out and i think that sharpening that skill set on the fundamental side helps you learn when you need to cut it and when you need to stay so you know it's really easy to say that like oh just know when it's fundamentally sound or not and when you get out you know it's like easy to say but i will tell you this that like the more you work with fundamental uh fundamental strategies and the more that you research and the more that you look at charts and and back test things and and and get that that skill set so fine-tuned the easier that becomes so don't like expect you know you're going to nail it on the on the first try right this is a practice i consider i consider trading and investing a practice just like yoga um you know that's the best analogy i have right now you're every day you're coming to the markets you're learning something new you're getting a little bit better a little bit more flexible and a little bit more disciplined so that's kind of how how i like to approach it um not i think position sizing is also a real key part of that too if you are not properly sized for your risk tolerance and you get into something and and it starts going against you the emotions are just going to take over it's just the way it goes yeah what's the uh i forget the saying is like there's there's really only two positions in markets it's having too much exposure and then just not having enough and it's what we always deal with where something we own is just going straight up bitcoin or tesla or whatever and it's like oh i wish i had more of that but if it's going down you're always like oh god i wish i had less of this so yeah i totally agree there position size is super key and it can make your life difficult or very pleasant and we will be right back those of you who know trade risk know we are all about rules-based investing and that's why we are so excited to have investors business daily as a podcast 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evan that's investors.com evan to get started for only twenty dollars now back to the show i wanna sort of switch gears a little bit because you are a certified financial planner and first off what does that mean what does a financial planner do for their clients yeah so a certified financial planner essentially is trained on all aspects of finance they're trained you know how you have a certified public accountant cpa um well it's a similar type of you know it's a designation just like cpa is a designation a cfp is a designation that you can earn as well or the cfa which is um chartered financial analyst i believe and so it's just like that um but we're we're trained across all things finance so our knowledge goes very very wide you know everything from taxes tax strategy to insurance planning to retirement planning to investment management to uh budgeting and just estate planning and everything you know in between there so i i got into this as i was running a business and working with a cpa actually he became kind of like a mentor to me and i became just enthralled with tax planning and um strategies to you know save money on taxes and and save the money on taxes over my lifetime not just now but but my whole life and i you know have been utilizing my knowledge and my education to manage my own portfolio my own wealth um and so yeah we're just we're just finance people i love it so it all fits i mean it all comes together so it makes total sense so when you're on like that side of the the business or working with a client in that respect um the stock market or the investing side might actually only be a small part of what you're doing with that person is that fair to say and yeah yeah okay i actually am more focused on things like helping freelancers figure out how to set up their business you know helping self-employed people uh navigate um everything that they need to do to stay organized have the right tax uh structure or business structure and you know it's it's there's so much more than investing in our financial lives and i think that's what a lot of people kind of miss is we all want to be invested we all want to do the sexy thing which is investing and trading right but if you don't have an emergency fund if you are not investing in trading in the right types of accounts for your tax situation if you you know are not protecting your family with the right types of insurance if you need it you know things like that there's just so much that it goes beyond just investing um and i just try to try to teach that to people that uh it's not sexy but it's essential totally and it's the stuff that really matters and moves the needle and is the foundation so i think yeah it's super important and then where do you see how do you how do you make sense of someone that should be maybe more passive versus active i guess what's the what has to lead someone into an active management scenario is it is it just their own interest in it type of thing or is there like a personality trait is it a certain return profile like who who should be actively touching their money great question um so people that nobody should or most people should not be actively investing in their portfolio okay most people don't have the time to do the research that is typically required to do it in a in a in a wise way um and that's fine that's totally fine i would say passive investing fits for most people but there are some people that love the markets and those are typically the people that you know i've i've dealt with you know whether working with them on the mental side or working with them on something else they love the markets they want to be actively investing they love researching stocks it's just a passion of theirs you have to love it because it does take extra leg work you know if you want to do it right so i would say most people passively invest in their 401k or in a robo-advisor and that's totally fine and that's for most people but there is that subset of the population that just loves the markets and they want to do it if you don't like research and you don't like volatility you know because because active investing can come with some volatility um that you have to be able to stomach um it's just that the nature of the beast because stocks that are in you know individual stocks they move on earnings releases all the time in different ways i mean one quarter it could be down the next quarter it's right back up where it was and you have to be able to handle that so uh i would say that you know it just takes it just takes somebody that's truly interested in it yeah yeah yeah and i mean i guess you're i mean the perfect example you are a professional investor but yet you still have a strategy you still have an allocation to just kind of passive indexing right if i'm absolutely so you're doing and i think a lot of people could kind of get the best of both worlds where they have some percentage dedicated to longer term and then they take a little bit and you know have fun themselves or hopefully it's not just fun it's you know doing it in a serious capacity to manage and invest yeah exactly is there anything so we get a lot of traders chart just technical traders that are listening to this and you know maybe hear that you are you know kind of a certified financial planner like is there anything that maybe the heads-down trader that is just trying to scrape out a slightly better entry you know method for their strategy like is there any maybe upper level things they can be thinking about that maybe can improve their bottom line you mentioned taxes like you mentioned and obviously everybody's tax situations be different but like there any other like just above the ground get your head out of the charts for a moment make sure you have a couple of things in order um to maybe improve their bottom lines anything come to mind yeah um you know if you have a lot of day traders that are listening which um i don't know if you do or not but you know for day trading if you're truly meeting the definition of a day trader in the eyes of the irs there are things that you can do to be able to like for the typical person we have a cap on how how much in capital losses that we can deduct on our taxes it's three thousand dollars and then you can carry over for the next years anything you don't use but you know for traders they may have a lot more losses um than that and there is a way to be able to qualify for being a trader and having a trading business and then you can write off your losses against you know your gains you can write off expenses to run your trading business and things like that but that the problem is is you really have to be an active everyday trader to be able to do this trading business strategy and i you know always talk to a cpa and and find out if that's something that you can do um if you cannot uh do that and you are not a day trader by the irs's view then what i would consider is making sure that you're tracking tracking everything very well tracking your cost basis tracking commissions because you know when you are when you are actually i know commissions kind of aren't really a thing anymore but they are i mean like if you're trading on a heavy-duty trading platform there's typically still fees i mean i haven't i've been i know like for for my trading platform i'm still having to pay some commissions like i i don't know about you or other people but um you know keep track of that so that your gain is is smaller and reduced by any commissions or fees that you pay and then trade in the right account uh because believe it or not you can trade in an ira you can trade in a roth ira you can trade in a traditional ira you can do a self-directed ira and actually get um you know get access to a really you know nice trading platform and be able to trade uh and if you're doing this in the right accounts for your tax situation that can really you know help you you know in the long run uh because we have many different types of accounts we can be using we can be using a taxable brokerage which most people are using a tax taxable brokerage because they want to be able to access the funds now but um you know you can you can actually invest in your in your ira do a little bit of active investing there if you really wanted to uh roth iras are pretty amazing if you can get a hold of one if you qualify you know for the for being able to contribute to one um and i i would say that for most people understand that over trading can affect your wealth big time and it you know if if you find yourself trading too much and the turnover is very high um that typically that that can be something that you need to watch out for um make sure that your strategy is actually working still get real with yourself and and um double check that what you're doing is not going to blow out your account you know i i try to tell people um just to get real with themselves so to speak and it's hard to do it's kind of hard to do very hard but it's essential you know yeah i love those tips and yeah one of the you know i think i published a blog post a few years back on the fact that like i love trading my active strategies in my ira and my self-directed ira because i don't have to pay uncle sam a dime on that any you know at the end of the year and it gets a lot of interesting kind of feedback though and i think i mean you're not saying i'm not saying it i don't think a new trader should just go take a full ira account and just start trading with it like that's a horrible idea but yeah if you're a pro if you've demonstrated success if you've been doing this for a number of years and now you can start to shift that to a tax deferred account i mean you can really compound wealth in a 10 15 year time horizon with not paying any taxes on that and that's a huge benefit yeah that's a good point because the thing about a taxable brokerage and trading you're dealing with ordinary income tax rates you know if you don't hold it for a year and a day so um that's something to keep in mind if you are trying to keep your income below a certain amount because maybe you want to qualify for certain certain tax credits or you know maybe you want to keep your adjusted gross income under a certain amount for a particular reason then you want to be careful with taxable brokerages because if you're a trader you're likely short-term that's going to be ordinary income it's going to increase your income so um and and and that's one thing um it's if you can go for long-term capital gains rates in a taxable brokerage that's ideal right but traders they typically are in and out and they're not getting that long-term cap gains rate so that's kind of the issue there yeah yeah and yeah i mean that's i've never so i i've never traded futures but i know futures has the benefit too if you're a short-term trader i know you said you'd started off day trading futures but there is some tax advantage right 60 40 yeah 60 40. yeah i think it's i want to say it's 60 long-term game 40 short-term gain you'll have to double-check that so yeah another little hack there on uh uncertainly on the taxes side of things so um yeah as we start to sort of wind down a couple of of questions stand out do you journal your your your trading you're investing your kind of day-to-day activity do you journal so when i was a day trader i journaled yes every single trade i actually i found some of my old journals a few weeks ago and i was just laughing it's just so funny to to read back on that stuff um but now what i do is i basically have a note for every single uh stock i'm either researching or something that i'm in and you know i'll kind of go in and i have this this ongoing note of things that are happening with the company and i can you know quickly go into the note and i'll see oh the prior quarter i had written these notes down and i can quickly compare the two so i do i i guess you can call it journaling but i i'm documenting thoughts and statistics and things like that in a notebook yeah yeah nice are there any beliefs that you have that you would consider maybe contrarian based on conventional wisdom so something that i mean maybe the like we were just talking about the the actively trading and tax deferred accounts that's kind of something where um you know maybe some people don't fully agree with that i i had another trader on recently and we were talking about the old adage of uh breakout trading and there's got to be volume on a breakout if you're going to take a break yeah and you know and then we're debating well does it really need to because i've done a lot of testing and like it doesn't really seem to matter nice it's nice but it's not essential yeah that's funny yeah so it's it's kind of one of those things so is there anything that kind of comes to mind that maybe either grinds your gears or you just find that you think of a little bit differently than other traders people i will say that i'm pretty well known in our community for loving short squeezes so like i am not afraid to buy a stock that has a high short interest if i think fundamentally there's like a turnaround or like something like that like just because it has a short just because it has a high short interest does not necessarily mean that it's a bad company and it always feels like there's like a time of year where suddenly all those stocks are just moving it always is like around the holidays right where we start to see like all those stocks getting squeezed i don't know maybe it's my imagination on that i love scanning for short squeezes short squeeze companies i it's like one of my favorite things to do that and insider buying insider buying is a good one yeah yeah yeah yeah um i oh i guess this would be a contrarian viewpoint i don't know i kind of touched on this earlier but i do think that people should invest long-term before they go for any type of day trading or trading period i think it's opposite i think that most people go trader to investor but i think that the right way to do it is go investor to trader and the reason for that is because when you're investing long term the longer your money is in the markets the better even if you have to just buy like an s p 500 index fund or any other kind of index fund you can quickly learn about what index funds are and you can you know pretty easily get invested in one that's working for you that's earning dividends you know set it and forget it then once that money is set and in there then you start looking at capital that you want to try to grow by trading it so i don't know if many people would agree with me on that but it's my viewpoint yeah i mean it's probably a it's probably a healthier way to start let's put it that way from the emotional state you know just just because yeah but but unfortunately i think a lot of people i don't know maybe maybe it's just getting started young but i feel like most of the people that i know that got started young trading or investing were just going at it to make you know to make to make that lifestyle right or whatever the case was so is there anything we left out anything that's maybe lingering or you want to touch on that we didn't get to talk about in this um i think we touched on a lot of stuff yeah too i don't know if we touched on enough of the of the mental side of trading stuff but i know we did touch on that so let's let's um dissect that just a little bit because it is i mean it is so important so my so the way i combat a lot of that is just i want to just be 100 rules based and and more on the quant side and that's how i sort of circumvent a lot of not to say that there's not emotions in that approach because obviously i have to look at the systems and and you know deploy the systems but what are some of the techniques for someone that is maybe just doing it by themselves that are looking at chart patterns or trading off technicals or fundamentals yeah i mean i have this this whole framework for this but um really to kind of sum it all up it's it all stems the emotions all stem from risk taking on too much of it and not knowing where you're going to exit you know or when to enter or things like that and i find that sometimes with this stuff one of the one of the most common things that i see is people exiting trades or investments too early and they get impatient they get out because they can't handle it anymore it's gone too far against them or whatever it is you know and one of the things that i that i find to be the most helpful is you know when you move your stop up or you you know you basically your mental stop or your hard stop you move it up because you just can't take it going against you the first thing is zoom out because i see too many times people are way too zoomed in on price you know way too short of a time frame zoom out look at the bigger picture look at the daily chart what is the daily chart doing find the find the true areas where the trend is breaking have we broken those areas yet or not you know and then you may find oh no we haven't i i was too zoomed in you know we actually there's still plenty of room for this area uh i think that that's that's you know something to definitely try and the other thing is sometimes you have to sit on your hands and force yourself to let your stops get hit you know you have to force yourself to let price come against you without reacting as long as it's not like you know at your actual stop level but the problem with most people is they don't even let it get to their stock level they'll just move their stuff up and get out you know at the slightest sign of it going against them so sometimes you just got to sit on your hands and let that what let that stop do the work and either either it stops you out or guess what it reverses and and works to get yourself used to allowing yourself to respect your own rules because you're the one that made the rule up you're the one that said the stop loss right and if it keeps hitting then you need to reevaluate your rules and re-evaluate your strategy and say okay maybe i'm not maybe i'm i'm maybe i need to improve my technical analysis a little bit and understand where the true pivot points are where the true resistance or support is or you know whatever it is and and so i don't know that's just kind of a few things that that i find helps people is is just making sure that you actually allow your rules to play out so that you can decide from there okay i need to change this or that yeah it's uh it's it's like you were you were looking at my myself months ago you know or this this crypto run um if i throw that into the mix and and you know from a personal anecdote literally exactly what you said of of this market that just ran away to the upside and i mean i had a glorious thing happen which i think everybody that was invested did was just dumb luck but bitcoin you know 5 10 x 20 you know whatever the case is and all of a sudden it's this huge position and i find myself wanting to just get out at the slightest because it's too big now and like you say it's this it starts with position size and the fact that it got too big and now i'm trying to like watch every tick it is a balance act or it's something where you need to really get that plan in place i should be either selling some into strength or whatever the rebalance mechanism is it's probably the right answer yeah um and yeah i mean scaling is so helpful with the mental side scaling out profits yeah scaling in and scaling out i find to be one of the most impactful things to help with that yeah yeah i love it i mean it it it it just works on so many levels you get to realize some hard-earned gains and then you also get to sleep easier at night knowing you've you've locked in some gains and you still have that position that you can obviously benefit from if it continues to work higher so yeah that's um that's a really good tip there awesome where can people find you if they want to learn more about your work stay on top of everything you're up to where can they go yeah um so the podcast that i co-host with two others is wetalkmoney.com definitely check that out um and then shetalksfinance.com is my website and i basically teach a lot of personal finance uh stuff over on that side of things actually created a entire course to teach people how to do their own financial planning and kind of um learn how to manage their money like a professional so to speak so yeah that sounds great yeah i will put all those links in the show notes those are all great resources love the we talk money show i'm usually lurking in the comments so i'll have to harass you guys next time yeah now i'll know who you are so that'll be good awesome that's it folks all the notes and links from this episode can be found on our website at thetraderisk.com forward slash podcast thanks for tuning in and hope to see you in the next episode nikki thanks so much this was great thank you thank you for listening to smarter trading i hope you enjoyed this week's episode for all of the show notes links and call outs head on over to thetraderisc.com forward slash podcast if you enjoyed this episode please
leave us a rating and review on itunes smarter trading is hosted by me evan medeiros and produced by ashton alexander thanks for tuning in and we hope to see you in the next episode
2021-10-02 08:58
