Transcription
Markets, speculation, and risk. This is the Chat with Traders podcast, hosted by Aaron Field.
What's good, my friends? Welcome to yet another episode of Chat with Traders. This is number 212. Now, my guest is someone who several listeners have requested and also the person who Stan Gluesman made reference to in the previous episode. It's Swedish swing trader Christian Kulamagi. Christian's been trading the U.S. equity market full-time since 2011, and although he got off to a rocky start, he's arrived at a very rare level of trading success. I guess you could say Christian is a member of the eight-figure club, having realized tens of millions in trading profits, which is only more impressive given the fact that he's a self-funded independent trader. Well, trader-gamer—I know Christian thinks of it more as a video game nowadays.
So, things we talk about: To start with, we go back to 2011 and discuss Christian's beginnings, which includes his origins as a day trader. From there, we get into how he evolved into a swing trader, how he discovered and researched profitable setups, and then we do a deep dive into one of his setups, a breakout strategy. Last of all, links to everything mentioned and referenced throughout this episode can be found in the show notes at chatwithtraders.com/212. All right, here we go, ladies and gents. My guest, Christian Kulamagi.
Christian, I wanted to ask you first thing, uh, when did you actually start trading? What year was it?
It was uh, in 2011.
Okay. I started investing in 2010.
Okay. And when you started trading, did you go like straight into it full-time, or was it just sort of a bit of a, a side hustle?
It was uh, I, I went into it full-time pretty much uh, from the beginning. It was um, just um, I was uh, in the final months of my uh, like getting my degree in biomedical laboratory science, and then I got into this trading thing, and uh, it completely took over. I, I just focused 100% on that, so I kind of just dropped out of school just in the end uh, to focus on the trading thing. So yeah, you could say I went all in.
Oh, so you didn't even finish your degree?
No.
Oh wow. Okay, that's, that's a real commitment. Did you have a part-time job or anything like that at the time?
Yes, I actually have a, I was working as a security guard, like a mall cop or something similar, um, as uh, yeah, some part-time while I was studying. So I had uh, options in case the trading stuff wouldn't work out. So I had, you know, security net, you know, I could, you know, just finish my degree, or I could, you know, do the security guard work.
Yeah, you had a little bit of income as some support?
Yes.
So how much money did you start out trading with?
About 5,000 US dollars was my first attempt.
That was your first attempt?
Okay. So I presume there was probably multiple attempts then?
Yes. In the first couple of years, I blew up three or four times, and I started with the first time I started with 5,000, and the other times I had like three, three, four thousand US dollars, something similar.
How long did it take you to blow up each of those accounts? Like, were they each short-lived, or was it just kind of uh, small losses over time, just slowly grinding away at your account?
Yeah, so the first time, it's kind of funny, I actually paper traded for a week or two because, you know, I read around that everyone said you should paper trade in the beginning, so I paper traded, and I doubled that at my paper trading account in uh, in two weeks, and then I started uh, trading with real money, and I was like, yeah, I'm gonna be rich. This is like May 2011. And I, I was thinking, hey, I'll be rich uh, by fall. Uh, what happened in reality, I lost most of that money in the first two months. Then I went back to my security guard uh, job and for six months or so, saved up money, started again with a few thousand, three thousand maybe, blew up again, and uh, a few months to six months of intervals, and it actually the first one was the shortest, but every time I blew up, I learned something new, I improved a little bit, and it took a longer, longer between the times to blew up.
Did it rattle your confidence when you were losing this money?
Oh, yes. Absolutely. Absolutely. It was a horrible experience. That was my life savings at that time. I was maybe 21 years old, and I had saved up for, you know, three years.
So as I understand it today, you're, you're mostly a swing trader, if not entirely a swing trader, but when you first got started, you were day trading. So I'm just curious to hear a little bit about what was your experience like when you were day trading.
I got into day trading because the people I found on the internet, on social media, they were mostly day traders, so that's what I did too, and that I didn't really know there was any other types of trading, and so I thought trading was day trading. And in the beginning, I really didn't have any method or a system or anything. I had no idea. I just followed what other people did that I perceived to be good at trading, but I really had no con, like I didn't really know what else in the beginning, what a stop loss was. I didn't know position sizing. I just went all in on all trades, and I didn't know anything about like trailing stops or like profit taking and what to expect from a certain setup. As I, in the beginning, I really didn't know anything. I just did things randomly, and it was obviously very stressful and scary.
Were you trading the U.S. market right from the get-go, or did you experiment on your local market there?
Yes, I did start with the U.S. markets. I, I realized early that's that's where the uh, that's where the action is, so I never actually bothered with a Swedish stock market um, at all when it comes to trading. I just focused completely on the U.S. markets. That's where, that's my trading software and all of that. It was just U.S. markets only. I didn't even bother getting anything for the Swedish stock market.
Okay. So what point did you begin gravitating towards swing trading?
It took, if it was uh, maybe a couple of years after it became profitable, or maybe a year after I became profitable, in 2013, about two years, exactly two years after I started trading, I realized I looked at a lot of stocks, I looked at charts, and I actually went through all this uh, stocks in the U.S. markets, and I realized that the big moves take months, weeks and months and years to play out. Day trading is, you know, it's, it's really hard to catch like a hundred percent move or fifty percent move unless you're lucky and get into one of these micro, small-cap high-flyers really early and you know that have to double on the day, but it's, it's very hard to catch those. So I realized I, I, and I also found other people on social media that were actually swing trading, so I learned about swing trading, and I also read some books where that talked about swing and position trading, which is a little bit longer-term swing trading. So that's how I gravitated into it. I realized it's has better risk-reward, and you're not fighting near your entry all the time. In day trading, you're always near your entry most of the time, but in swing trading, if you get a really, if you catch a big one, you know it's gonna be the stock is gonna be above your stop for a long, long time. You don't have to worry about it. You don't have to constantly look at, look at the stock and monitor it. I realized that it's also much more scalable. Like back then I still had a very small account, but I, I realized it that, you know, if my accounts would grow, it's easier with a with a bigger account because in day trading, especially the types of stocks they traded, mostly micro and not micro-caps, norm, yeah, micro-cap studs, micro and small caps, they weren't many of them weren't super liquid, and even I had some issues with liquidity and slippage and some stocks they traded. So that's also something I, I realized kind of early that gravitated into swing trading. But the process took a couple of years before I went from a 95% day trading to 95% swing trading. It wasn't an overnight thing. It took, it took, it took time, one step at a time. It was very uncomfortable um, in the beginning holding stuff overnight because I had been brainwashed with that, oh, holding stocks overnight is very dangerous, you can't control your risk, but it's, it's not true. You can control your risk. It's called position sizing, and also if you check out if you check the like the earning states and if you if it happens to be like a biotech company, make sure there's no pending data or FDA decisions. You know, it's not that dangerous. The iterating is much more hazardous, I would say.
Okay. It's interesting that, well, from the sounds of it, that you did actually start to see some consistency and some profitability uh, day trading before you actually did make that switch across to, or eventually switch across to swing trading.
Absolutely. I, I, I, I probably made my first million mostly day trading.
All right. Yeah, yeah. But everything after that has mostly been swing trading. So yeah, yeah, absolutely. I was profitable uh, consistently profitable for uh, for a couple of years before I went uh, mostly swing trading. Obviously, it was a hybrid approach for a while there in between.
Okay. That really is quite interesting actually. I mean, if you've made a million dollars day trading and then, but you still see bigger opportunities in swing trading, you know, when you did make that first million dollars, how did your mindset towards trading change? Like, did you, did you envision that you would go on as you have done today to make tens of millions of dollars? Like, did you see that as like sort of your, your trajectory now? Like, you knew that was coming. It was now just a matter of time, or did you still have some doubts about how big you could get as a trader?
Yes. In the early years when I um, in the first few years after I started making money, I, it was still like I, it was still at times hard to believe it since the first two years when I was mostly losing money, it was such a horrible experience. Like, I got scars for life. I was constantly depressed, and, and when I started consistently make money, it felt like unreal. It's like, is this really happening? Like, I can actually make a living off of this? Is it just pure luck? But after a while, I realized like, okay, no, I mean, it's the same, I'm what I'm pretty much doing, I'm just trading the same patterns that occur over and over again, and if I can, you know, find the same patterns that applies to swing trading, I, I can, I can scale it up. And uh, me and the, the way I saw it was I would make the same amount of money but with less effort because day trading is really a lot of effort. But the way I didn't maybe really see it scaling up [Music] as like, it wasn't really my first priority. What I wanted to do was like make the same amount of money but with less, less effort uh, because I was really, I was getting tired of sitting like, you know, from open to the close in front of the computer looking for trades when I saw some other people who were swing trading who were mostly doing their entries maybe first hour of the day and then it was just monitoring their positions the rest of the time. They really didn't do much the rest of the day, or they, and uh, yeah, so that's really what I was after, like I'm, I'm a lazy person, so what can I say?
Gotcha. I'd like to know a bit about when you did kind of make that, that transition across to more of a swing trader [Music], like how did you seek out, how did you discover the setups that you were going to trade? Like, what was that process like? The, I'm talking about the research and the studying here to find the sort of patterns that you would go after.
Yeah, so the setup ideas I got from, from a guy, a stock picker, that's where I got the setup idea, and I also read a book by William O'Neil, How to Make Money in Stocks, uh, and that's where I really got these setup ideas that these, you know, stocks move in the same patterns as they have done for a hundred years. So what I did, I, I went into my uh, charting software and pretty much went through every single U.S. stock, and I looked for those specific patterns that I had uh, stumbled upon thanks to the book and that this guy stopped me. And I realized, wow, I mean, it's the same patterns, like nothing is different. It's to say it was the same patterns in the early 1900s and even late 1800s. It was the same patterns in the 50s, same patterns in the 80s, in the 90s, and it's the same patterns now. That was maybe what, could it be maybe 2015 or something. So I realized, wow, this is, if I learned this, if I really mastered this, these setups, like this one setup which is a just breakout setup and the variations of those of that setup, I, I can really, wow, like it felt like I had stumbled upon a gold mine really.
And how did you begin to build confidence in those setups?
It was a combination of studying the patterns. What I did, I built a database in Evernote, which is pretty much a note-taking software. I took screenshots of all the setups, before, after uh, both on the daily and like the intraday time frames, just to look at how, what, what how does a good setup look like at the start of the move or before the move when it starts breaking out and like a few weeks, a few months after, like how does it, how does it act. Um, and I looked at all these variations, and that's how I built the confidence, and I started uh, trading the setup myself too, and I saw some success, and, and it felt like I was always improving. I was always learning a new variation or, you know, something, something new. So that's really how I built the confidence. It really, like I say on my stream too, like everyone should do it. Whatever setup, if you stumble upon a setup and you want to trade it, like backtest it, like, like look through, like look through hundreds if not thousands of examples of that setup and build a database and go through that database once in a while uh, just scroll through it. That's how you memorize this. It's so, it's all about pattern recognition really. Trading is all about pattern recognition, and you can, it could be just purely technical, and you can also combine it with fundamentals, like I do. I also look at theme, what's the theme, what's the earnings, revenues, I look at the news overall, like what's driving, what what's driving the stock. So I found some similarities there too. It's the same things that have worked for a 100 years really. That's how you build the confidence. That's how you do it. There's no other way.
Well, let's go into this a lot further. I'd love to do a deep dive on this particular strategy. I mean, as I understand it, I think there's, there's kind of three different setups which are your main types of plays nowadays. Um, I mean, we, we could go through and we could talk a little bit about each of those setups, but I think it would be most beneficial just to pick on this one particular setup and go, and go deep on that. So before we do, just summarize for me the objective of this strategy. Like, what is the goal here? What is it trying to achieve?
Yeah, so the simplest of the uh, three methods I use is, it's just a breakout on the on the daily, daily time, time frame. You really don't need any intraday to look at the intraday time frame for that. I usually do, I use the 60-minute charts too, just to get a little bit of a zoomed-in view. If you look at the stock, like any stock that say doubles or triples or quadruples or whatever period of months or years, it's pretty much the same patterns. You have a leg higher, obviously not every stock moves like this, there is, but, but a lot of them do. They, they move like stairs. Okay, so let's say you, you have a stock or a stair with say 10, 10 steps. Okay, let's looks like something, it's like any stock that's gone up for three, four years, so you have a leg higher, and then it usually goes sideways or pullbacks, pulls back, and uh, many times what happens is the volatility contracts, like it gets tighter, and then you have the next step higher, and the same thing happens, goes sideways or pulls back, and it gets uh, like builds a range where volatility, ideally not always, but the volatility usually, like the range gets tighter [Music]. So our goal is to identify that, those stair steps and buy it just as it is about to break out uh, into the next uh, into the next step. Obviously, you can have different time frames on these uh, things. You can, you know, hold them for maybe three to five days or, and just settle into strength, or you can try to hold for bigger moves uh, like even try to hold through the next several steps uh, and maybe use the moving averages, like I do, the 10 and 20-day moving averages, trailing stops, and try to go for a bigger move uh, do fewer trades that way um, or do more trades by just buying breakouts and selling after three, the day three or five because that's how they, that's how stocks move. They move in momentum bursts as uh, this guy stopped me where I learned to set up from, and you, you know, and I verified it myself. This is really how stocks move. If you identify the right, right stocks obviously, like abs, like momentum is a big thing. The stronger the stock, the better, which is counterintuitive for many people, but that, that's true uh, like the stocks that make the biggest moves are usually that keep doing the biggest moves, and I'm talking about like real stocks that go like, like mid and large caps mainly uh, not these like pump stocks that are really, really popular right now, these like micro, small caps that go up on total hype and make a 200% move in a day. That's not really the types I, I trade, even though if I still was a day trader, those are the stocks I would trade because those are the ones are the biggest intraday range, but just to clarify that that's not really uh, what I, what I do anymore. Uh, I look for stocks that have look like, like this, like when I talk about the first leg higher, those moves are usually several weeks and sometimes even several months, and there's obviously many variations of that, but that's uh, that's how stocks move pretty much. Like you can look at any stock, look at Tesla, that's a perfect, perfect stair-step platter, and look at, look at Nio, like just take some big flyers, big, you know, some of the leading stocks recently, look at something like Apple over the years or Google. Obviously, those are maybe a bit slower type of movers, but it's the same patterns. Just you can choose to, we what uh, how fast of a move of a stock you want to trade, and obviously you want to be in the fastest-moving stocks.
What do you typically do? Do you hold for that uh, kind of initial burst of momentum and sell after a few days post-breakout, or do you generally try and ride it through a few steps as you describe?
Yes, I do, it depends on the stock, like if there is um, like if a stock has a run-up into a catalyst like an earnings or or anything, a presentation, um, if it's a very hot stock in a very hot sector, um, I usually, I like my core uh, belief, like I want to hold stocks for as long as possible. I really don't want to sell them until I absolutely have to or feel like it'll feel like I have to for any, any type of reason, uh, but I usually sell some like the first move higher. If you buy a successful breakout, that's the most like, that, that's uh, the most predictable part of the move. So what I usually, I always sell some into that first burst uh, to lock in a little bit of profits. Maybe I sell 20 or 25, or it can vary a lot uh, just lock in some profits, and, and uh, now I can, now it's a stress-free trade pretty much, even if it would stop me out, I, I would still, worst-case scenario, break even or maybe even make money depending on how much I move the stop higher. But sometimes if it's an earnings or just a few days away and I still buy it because it looks really good, um, I, and if I don't have a big profit padding, I really don't like to hold all my positions into earnings, sorting to any type of catalyst. I just sell it. I don't want to risk it, like, you know, things could go anyway. You never know, and uh, yeah, I just want to control my risk as much as possible. I don't really like to gamble over, over earnings, for example, if I really don't have a big profit padding already. Right.
Um, now you briefly touched on stock selection there. I just like to go into that a little more. Um, you said you mostly trade these, these larger caps, um, how do you scan and how do you identify the stocks? Like, what exactly are you looking for in a company?
Yes, so I scan for uh, I also like uh, like I said, I mostly take large caps nowadays, but uh, just a few years ago, I traded a lot of when my accounts were much smaller, I traded a lot of mid caps and small caps too. I'm just forced to trade the large caps nowadays because they are the most liquid, um, but it's the same, it applies to any uh, market cap stock really. So what I scan for is the strongest stocks with a certain uh, with a certain liquidity, like I use a 150 million dollar cut-off, but just like two years ago, I had, I think I had like a 20 million dollar, dollar volume cut-off on my scans, and what I do, I scan for the strongest stocks, the strongest two percent of stocks in different time frames, like the one-month, three-month, six-month, 12-month, and 18-month time frames to cat, to find all the biggest movers over these time frames. Like I said before, it's the biggest move uh, movers, the strongest stocks that make, keep on making the biggest moves. So that, that's how I find those, the most liquid stocks that I can find that are that are the strongest.
In an ideal scenario, like what criteria do you want checked off before you actually get into the market? Like, before you hit that buy button, what exactly do you want to see?
Yes, so obviously, I want the big absolute momentum and also a big relative momentum towards other, other stocks. It has to be a very, very strong stock um, over any time frame. Let's say a stock has trip, sorry, doubled over the past three months. Yeah, so, so that's like, that's a lot of momentum in a stock. So what I want to see is, like it's very hard to describe this um, like it's, it's very intuitive. You can't really scan for this, like I always, you know, people, I always ask if you could like scan for these patterns, and I always say just scan for the strongest moving stocks. The patterns you have to learn yourself, but like linearity, like how orderly is the pullback or the sideways consolidation after the previous leg higher in the stock. It's very hard to describe it, but what I usually want to see is, let's, let's say I've stopped doubles in three months, and then it pulls back, maybe it retraces a third of its move, and usually when stocks pull back like these momentum stocks, they pull back to the 10 and the 20-day moving averages, and I want to see how they act around those moving averages. What I want to see is they start building, like either they bounce directly off the moving average, let's say the 20-day, or if it starts building higher lows above the 20-day and then just getting like the short gets tighter over the next few weeks or the next few months.
Uh, that that's that's called linearity. Um, like people post, like on my stream, people post setups all the time, like, "Do you think this is a good setup, or or is that a good setup?" And like, and this is this is the hard part, like identifying a good setup, like a really good setup versus something that's random and mediocre. Because that's also going to reflect on your results. If you trade the random setups, your results are going to be random too. You want to find really fun, the outlier stocks. Like you also want to see if did it, does it have relative strength. Like the best um time to trade this breakout method is after a pullback in the markets. You want to see the stocks that held up the most, that had big moves previously and held up the most.
And if you mastered this setup, if you trade this setup, like coming out of a small correction or a, like say a 5, 10, 15 correction in the overall indices, that's almost like free money for this type of setup. Because if you can identify these stocks that held up the most during the correction, that maybe went down initially in the correction, but after as the correction went on, these stocks stopped going down and actually maybe started building higher lows, and that's that's telling you something. If you have a stock that's gone up a lot and then it stops going down when the market goes down, you know the stock is trying to tell you something. Um, and that that's that's what leading stocks do. Like every bull market, this is obviously I'm gonna talk more about it later, you obviously need uh uh up trending or sideways market to trade this method. Um, you have leading stocks, like leading stocks and stocks that go up the most and are the most liquid, and those are really the stocks you want to trade. Um, and they are they're mostly mid and large caps, but even a small cap can be a leading stock. Uh, and those are really the stocks that they they don't go down when the market goes down. It's like you try to push uh uh like uh like a tennis ball underwater, it just pops back up. And that that's really, those are the type of stocks you want to find when trading this method.
I know another thing which you like to look for, because you kind of said it a little earlier, and I think I may have read this on your Twitter, this isn't a word-for-word quote, but it was something to the extent of, "You don't want to be blindly trading momentum and chart patterns; you also want to see or have a fundamental angle to the trade as well." Um, would you mind explaining that a little more? Yes. Now, to clarify, you can make a just trading of momentum and shock patterns, you can make a very good living, but I think if you can combine some type of fundamentals, because at the end of the day there are some type of fundamentals that drive these stocks. Like the fundamentals are fuel, and momentum is like what happens after the fuel. If like, so if you can identify what the fuel is, many times, like if you go back, like like I did study the biggest winning stocks, most of the time uh for big big moves, multi-year moves, it's usually fundamental related. Like you can clearly identify the fundamentals. It may have a lot of like big earnings and or revenue growth. Uh, so that's something that's, if you can find the fastest growing stocks and combined with this method, you will have a big edge. A lot of stocks don't have any earnings or revenue at all; they're more like story stocks, concept stocks. And right now we see a lot of these types of stocks. It could they they could be anything, like battery related, anything uh like battery metal related, like lithium stocks are really hot right now. And a lot of these stocks have very little or no earnings right now, but if you know what the driver is, we know we know that obviously like electric cars are a very big thing, and electrification is a big thing, and that's that's a piece of fundamentals you can add. If you if you know what these stocks are, like the group, and you you trade those stocks, you know these uh these these uh patterns and these stocks, you will have a big edge versus trading something that's like super random, just random stock you don't even know what it is. Like I I think if you can identify these groups that are hot, they may be hot because of earnings and revenue growth, big earnings and revenue growth, or they could be hot because of something else, for example, like this lithium and battery stocks that most most of them are really like concept and storage stocks. They many of them don't even have a product. Like this QS is a battery stock in the US markets, and they they don't they won't have any revenue for at least five years, but they have this exciting battery technology. And that's something identified early, like, "Wow, like I read up on it, I knew all these electric car stocks were super hot, and other battery related things were hot, so I kept track of this thing." And once I saw it getting a lot of momentum and volume, and I ended identified my type of setup on it, like I I did some decent size on it, and that gave me conviction versus, let's say I would have traded it and I didn't know what it was. "Oh, what a nice uh momentum stock with a perfect little flag breakup." I wouldn't have done as much size on it, and I also tried to hold it for longer. So I I think like if I would take the fundamentals out of my trading, my profitability would drop a lot. So like fundamentals can they they they do play a big role, at least for me personally. I it it helps me give a conviction; it's really what it comes down to.
Now, when you get into these positions, are you timing your entries intraday? Like how are you, how do you approach that part? How do you actually get into the market? I buy everything at once, uh very aggressively. I would add I'm a very aggressive trader with entries and exits. That causes some problems with the size I trade because I I create these big weeks even on some pretty liquid stocks, just because I'm so aggressive with my interest exits. But that's how I trade. Like I don't want to bother with, you know, use spending several minutes getting into a stock, trying to get in between the bid and ask and get these uh ECN rebates and like I don't I don't bother with that. I just want to get in and out in a few seconds. And that yeah, and I I just with a breakout method I just buy everything at once, and then I scale out. I usually scale some into strength, and then I use a like a trailing stop; it's usually a 10 or 20 day moving average for the rest. Okay. And if the trade doesn't go your way for whatever reason, I guess here we're sort of moving on a little bit to risk and sizing. If the trade doesn't go your way, where are you going to stop out of the day? So what I do is I I buy the opening range highs, and the opening range highs is when the stock takes out uh obviously it has to be a breakout first. Um, so it's not like like so the opening range size could be the first one minute on the one-minute candle, five-minute candle, or or the 60-minute candle. So whatever, like let's say a stock uh breaks a range, it happens to be on the first one-minute candle, so I wait for that one first minute candle to uh finish, and then I brought uh by when it takes out the highs for the day, and then I use the low, sorry, day as my stop. And it goes for the 5 and the 60 minute candles also. Sometimes, let's say a stock breaks, it breaks the first one minute opening range highs, but it may not be a breakout, it may not still be in a range, and then it keeps on going, and maybe it goes up another three, five percent or something, uh and then it's obvious that it's a breakout, then I made by the five minute breakout instead, because that's when a breakout happens. So those are really like very simple entries and exits; it's just a one minute, first minute range, the five minute range, and 60 minute range, and the stop is always at lowest of the day. Sorry, would you mind just clarifying that a little bit? Are you looking for a breakout on the the one minute, five minute, or 60 minute? Okay, so okay, yeah. So the breakout has to be obvious on the daily chart, but let's say a stock is in a range, like you are watching stock like for for a potential breakout, and it opens up, let's say it opens up break even, and then it goes up a few percent um on the first one minute, on the first one minute candle. So the first one minute candle finalizes, but this is a stock may still be inside of that range, and you're talking about the range on the daily chart? Yes, exactly. Exactly. It's not a breakout on a daily chart yet, so you don't know it's going to break out, right? So you're not going to buy that first one minute candle because it looks just another day inside of a range. Like I buy breakouts; I don't anticipate them. I don't like I I buy them as they break out. Um, so to make it like to simplify it, like I I mostly buy uh like when it's when it's obvious it's starting to break out, just as it's starting to break out, preferably. Many times I also buy when it's obvious it's already breaking out, and I wish I was in from earlier, but I used this like opening range highs, the one minute, five minutes, 60 minute like candles, and the lows of that those candles too to manage my stop.
Okay, so even though you're a swing trader, there are often times when you'll buy the breakout, so you know, presumably the high of the day at that point, um and then you may also get stopped out within the same day. Does that happen quite frequently? Oh yeah, it can happen. You know, sometimes I buy something and I'm I get stopped at two minutes later. That happens all the time, especially if you use like the first one minute opening range highs. The failure rate is a bit higher, actually much higher versus the five minute and 60 minute, but uh the pros are that you get in earlier on the ones that work. So there's pros and cons, uh but but yeah, yeah, it happens all the time. Like my win rate last year, and I had insane returns last year, was only about 35, and the year before, 2019, it was 25. So yeah, you you have to get used to get stopped out a lot, and sometimes within many times the same day, and many times within a few minutes. That's the name of the game; that's that's really yeah, that's how it is. Let's say you do get stopped out on a particular name, are you, I mean, I presume you don't take that off your your radar all together; you you re-watch that for or you continue watching that for a re-entry? Yeah, absolutely. If it's a good-looking, like it happens a lot that they, especially when I buy the first one-minute opening range highs, when it breaks out on the first one minute, uh the like I said, it just said the failure it is a bit higher on the one minute breakouts, and what happens a lot of times is, you know, I get stopped out and just few minutes later the stock takes out the highs again. So you know, I get back in, it takes it it takes out the highs. So yeah, it happens a lot. I can I can buy stock, it stopped out and re-buy it, you know, within a few minutes. Uh, sometimes, no, it doesn't happen that often, but you know, it happens. So and you can't you can't hesitate. If it's a good setup, you gotta you gotta get it back in, even if it means you have to re-buy it higher, but that's that's just yeah, that's how it is. But you also have to, you know, I'm also very aggressive, and you know, if I get stopped out, I get stopped out. I don't I don't think I just get out. I've seen I I've seen too many scenarios, you know, when things just keep going uh lower and uh you know, you hesitate, and now suddenly your stop is twice as big as it would have been, and now it's three times as big, and it's just you know, free supplemental power, not overthink things. I just get in, and I just get out.
So how do you manage your positions? Let's say you've bought a breakout; it's successfully moving higher. How do you manage it going forward? Like I know you use uh trailing stops; you've spoken a little bit about um taking partial profits into strength, which is great, but what about the stop management? Yes. So initially my stop is always low, low sodium day, uh and once the moving averages, the 10 and the 20, uh the moving averages, it depends on the stock, the faster moving stops are you stocks I moved uh I used the 10 day, and the slow we're moving once I use the 20 day, and sometimes I, you know, it depends, it depends really um on a lot of things, but once the moving averages start to catch up, I also start to trail. Let's say I've decided I'm going to use 10-day on a certain stock, and once it starts moving higher, like the 10-day catches up to my initial stops and moves higher, then I start moving in my stop uh with the 10-day. So what I do, I wait for the first close, like I have one absolute stop where I like, okay, I get out no matter what, and the trailing stop is for like if it violates it intraday, I'm not worried. Um, I only wait for the close, like let's say um if it's like 10, 15 minutes before they close, and it's kind of obvious it's gonna close below that moving average, that's when I close the rest of my position, but intraday violations are very common, and that that's something that got me all the time previously when I was still learning and experimenting with this method, like as soon as the price uh like undercut the the moving average, my trailing stop, I I just closed it, and then the stock just went straight up from there and closed green on the day. Like it it it touched the moving average or undercut it a bit, and then it just rebounded. And yeah, so very important, wait for the close um for that trailing stop, and then you also have that stop where you're like, "I'm gonna get out no matter what." Do you ever add to a winning position? Only if there's a good setup. I don't, that just because something is, you know, going my way, like I said, I just, you know, buy everything at once. I know some people who trade similar setups than this, like breakout type of setups, uh like Dan Sanger, uh I'm sure you heard about him, like he that's that's also a guy that trades these types of setups. I learned a lot from, like I know he scales in, he buys like fifty percent and thirty percent and twenty percent uh as the stock goes higher. So there's many different ways to do it. I I really don't, I only do it if if I'm in for a longer move. I use maybe the 20-day moving average, which is a bit slower, and the stock builds the next uh step. Let's say I've been in a stock for a month or two already, and uh it has a new a new setup develops, and uh you know that I would buy it, and I would treat it as a new a new position, even though I'm already in it. So those ads, let's say I double my position in the stock, that that new position I I treat it as a new trade with the same with the same rules for that new uh like I used like a described earlier. So it's a new trade, and the position I had earlier, I treated that trade separately, if that makes sense.
That does make perfect sense. I'm following. Okay, I have some questions just around swing trading in general. When you're swing trading, you're you know, you're holding numerous positions for weeks and even months at a time sometimes, uh you're much more susceptible to moves of the broader market. How do you deal with that? Yes. Um, absolutely. So it helps getting into at times where the market already had a correction. Like for example, uh early November uh last year, uh the Nasdaq had been uh in a correction for a couple of months, uh it had a correction, bounced a little bit, had an another leg lower, and uh there were a lot of stocks that that other leg lowered, they were just holding, they were just screaming at me, they wanted to go higher. So that that's that's the best time to uh buy these things. And usually when you had a correction, multi-month correction, it usually takes a few months before you get another pullback in the markets, um unless obviously on a bear market. My point is you want to get in the stocks that show relative strength to the market, that are stronger than the overall market, and that really helps holding through these these corrections. You you know, corrections always happen, uh and it really helps you, and these stocks, you know, if you buy the stocks that already proven they're stronger than the market and shown relative strength, they're gonna keep showing that relative strength usually uh for uh for some more time. Uh, but yes, this is a this is a very, the market overall market is very important for this type of trading, uh like all this like breakouts, you know, they don't exist in a in a falling market. Like even if you happen to get one, just you know, don't don't touch it; it's gonna fail most likely. Uh, so it's very important also to study when this type of trading works and when it doesn't. And in up trending and sideways markets, this type of trading works really really well, and down trading markets, not so much. Um, that's that's when it's time to sit in cash, do less, and uh do trade with smaller size if you're trading this particular type of setup. So the market where market is super super important to be aware of, um at least the market sentiment, um like you don't have to look at day-to-day moves in the markets. Like I rarely do; I I most of the time I don't know if the market is up or down on a day. I just look at my the stocks on my watch list and my scans and my portfolio, and that and they're usually not telling the same story. Sometimes the markets like the Nasdaq can be down on a day, and everything in my portfolio is green, and sometimes the market is up on the day, and everything my portfolio is red. So when I say be very aware of the market, I'm talking more about the overall sentiment and the trend of the market, and that's also something you kind I have to learn with experience; it's not something you really read into a book. You just have to go through it through a few cycles; you have to see a few set ups; you have to see a few crazy bull runs; you have to see a few sideways shopping markets to really understand these uh relationships. It takes time.
Yeah, yeah, because I mean that's going to be one of the most frustrating things as a swing trader to have, you know, what you think is a great position on, it's been going well, and then all of a sudden there's a few bad days in the the broader market, and um you know, you get stopped out purely as a just for neither reason than the market's coming off. But as you said, like if you're in stocks which are generally stronger than the market, that's that's less of an issue. You know, on a portfolio level, do you limit the number of open positions you have at any one time? I don't really have a limit. Uh, what usually happens coming off a correction, um like all the methods I trade, I I usually don't uh trade much when the market is a correction, but let's look at an example like last year with a Kobe sell-off that lasted about four weeks in from like mid mid February to mid March, if I remember correctly. So I so when the market bottomed uh mid-March, I think it was, I really didn't have a lot of things going on in my portfolio; I may have had a few positions here and there. So and then the market started this big big big bull market that started from from that point, and I was a little bit late to it; I really didn't believe the bounce at first, but then I started seeing this enormous amount of setup, so I got into them. I I went from a couple of positions to seven positions to 15 positions. And what happens when the market is on a multi-month run uh usually is I end up with a lot of positions because I take some partial profits and some and then I roll that money into new positions, new breakouts, and I can end up with, you know, 20, 25, and I've had 30 positions sometimes actually. So far every time I ended up with 30 positions, it happened three times in the past 12 months, every time in the next few days the market pulled uh you know, started uh like a multi-week or month multi-month pullback or sideways consolidation. So that's a really good proprietary indicator I have. So yeah, no, I really don't have an upper limit, but I have a I've had 30 positions a few times, but ideally I try to keep it between 15, 20. After 20 it starts getting a little bit hard to keep track of them all, but again, like I said before, in swing trading, and especially when I have a lot of positions, it means they are all working very well. Some some of my positions may be up hundred percent, two hundred percent, even if it's some some of these uh crazier smaller caps, like right now the uh crypto related stocks that make big big moves. I've I had a I have a few double doubles in my portfolio right now, and when they're up that much and already you know you sold some uh to lock in profits, the partial positions, you really don't even have to look at them. You can look at you can look at them, you know, a couple of times per day, like you don't have to monitor them, and that's that's uh that's the good part about swing trading if you you know, and you have this uh bull runs. Yeah, it's it's a low effort type of trading. You also have obvious have to put in a lot of effort at first to learn all of these things, um these patterns, the fundamental drivers of the stocks, the overall market. It takes many years to put it together, but once you get it, it's a fairly low effort type of trading. You don't have to fanatically look for trades and uh you know, constantly getting not get out of stuff like you have in day trading.
As you just said, you've got a couple positions in your portfolio there which are up 100 to 200. It made me think I should ask you earlier, you said that your win rate was around about 34 uh last year. What's kind of the the the ratio, obviously it varies greatly here, but what's that you know, you yeah, your ratio of we're talking average win to average loss. You know, that's a very good question, and I have no idea. I I I gave up uh doing doing that type of stuff many years ago, like looking at the micro stuff in my trading. Um, I I really don't have an idea. I I get I get that question a lot on my stream too, and I I really only know my win rate because so many people kept asking me about it, so I went back to my journal and looked it up. And I think I think if you get the big stuff right, you don't have to worry about the little stuff. And yeah, I I yeah, I I honestly I don't know. Okay. No, I appreciate the transparency. Let me ask you this question then; I might phrase it a little differently. You know, come the end of the year, if you look back at the majority of your gains, do they come from just a few big winners? Like you know, I can't think of what the name of it is, but it's kind of like that 80 20 rule. Like do you find that? Absolutely. Oh yeah, yeah, yeah. It's so all about the small losses and big winners, and there's maybe, you know, I don't again, I
I don't have any data on that, but I know intuitively there's a few, few big winners that's where most of my money comes from. Most of the other stuff, they kind of break even, but maybe 10 to 20 of my trades—that's where, maybe not 10, but definitely like maybe 20 of my trades—that's where all my money comes from. Uh, really, uh, the big ones. And those are like, I, I've said it also in my stream a lot, like I'm a home run trader. I don't—I know a lot of traders, they try to make, you know, go for a higher win rate and try to make money on more trades, uh, but you know, that's that's the style I've chosen; it works for me. Like, try to catch the big ones and, uh, have a very high, uh, or actually a very low win rate. Have a very, very low win rate. So most of my trades, uh, just, you know, even themselves out, and then go for that. I again, I don't have any numbers, but maybe that 20 or 15 percent of the trades that really, that's that's where the money is for me. Yeah, low win rate, high payoff.
Yeah, Christian, I'd like to ask you just a couple, I guess more general questions about you as a trader, even at your level. What challenges do you still deal with on a daily basis?
I've gotten a rid of a lot of challenges over the years, but the things I still struggle with are, I would say, overtrading, because I do—I'm a little bit addicted to trading. Um, I'm not gonna lie, I, I do, I do like, I do like to trade even when I know I shouldn't, uh, so that does take that, uh, you know, that that's something that takes a chunk of my returns every year. And also patience, uh, is something like, I, I'm like, I know I should use the 10 and the 20-day moving averages, um, as my trailing stop. So many times when a stock just goes straight up, and especially it's been an issue the past, uh, 12 months or so, or 11 months since we've had this big, big great bull market after the code sell-off, like the moves are insane. Like everything is supercharged versus earlier years, versus, you know, the eight previous years I had been trading before that, or nine. Um, and it's kind of been hard to adapt to those. Like everything just keeps going up and up, and what I do is I just, you know, I'm like, "Oh, [ __ ] [ __ ] it, this stock is up so much; it can't go higher." Uh, like, for example, I had to straighten NVX, which is one of these vaccine stocks. I, it went up, I think it doubled or so in two weeks, and I'm like, "This, it's not gonna go higher," so I just sold the position. It got, it started getting a bit stretched from the 10-day moving averages average, which I was intending to use as my trailing stop, and at first the stocks actually went lower after I sold it, and a few weeks later it doubled again, and now I was like, "Okay, um, yeah," like overriding these, like I try to override these moving averages trailing stops, like outsmart them, but I just can't do it. Like, like, but no, I, I wish I was a robot that just followed the method 100%; I just can't. My entries are so good; like I'm so good at the entries, but my exits are just so bad. I just can't follow my own rules, and it's, it's costing me money. In the past, you know, this great bull market we've had, it's just, yeah, that's, yeah, it's kind of annoying. But the issue is, I guess sometimes it, it pays off to override those rules, and then sometimes not so much. Yeah, but most of the time it doesn't pay to overwrite those rules. Um, I, I would say again, I don't have an exact data, but just intuitively three-quarters of the time it doesn't pay. So the logical thing to do would be to not override my own sell rules, but I still keep doing it. And the people in my chat, they're gonna make fun of me because they know, like, "Hey, Christian just sold because, uh, he thought it was overextended; let's buy it; it's probably gonna double again," you know. So, right. So those are my two biggest struggles: overriding my sell rules and overtrading. I never—like I know a lot of people have problems with taking, taking their losses, like they, they have very hard times scaling out when they get stopped out; they, they just hope it comes back. That's something that's an issue I never really had. I only remember a few times in my career that I've done it, just, and I got really burnt a few times, and after that, really, I've never had an issue taking, taking losses. And I know that's a big issue a lot of people have, and people also write to me on Twitter and ask me about it all the time. Those are my, my struggles still, those two.
In what ways has your attitude to risk changed as your buying power has, you know, obviously massively increased over the last few years?
Yeah, so something I have done really like, I, I, I've done successfully is I've managed to scale my trading up massively. Like if I double my account, my risk and my size will double also. It's, there's a lag there, but it's usually a few months, but it will eventually double too. So I'm always bringing my, my, my, my risk and my size up. In relative, it's in relative terms and percentage terms, it all stays the same, the position sizes and the percentage risk relative relation to the account. But I know a lot of people, they just take money out of their accounts all the time to put it away and other stuff, but I've never done that. I've always, I only take out money when I really have to, like to pay living expenses or to pay taxes. And other than that, I just use the, the account to grow my account all the time. And I also, I, I should mention I use margin quite a bit, um, and I only, I only use it when things are going well, when I deserve the use margin. I think margin is something you have to deserve; it's not a privilege. Just because it's there doesn't mean you should use it. Unfortunately, a lot of people do use it, and they use it the wrong way. They start using margin when things are not—they may use in margin when things are not going well, but that's not how you do it. You have to gain some ground, let's say every year, but no matter where you reset this, but let's say in the beginning of the year, if, if you, if you, if you do, if you do well, that's when you start using some margin, uh, because if things are going well, you should, you should push those periods, and then there are periods you shouldn't, uh, trade a margin at all, and maybe you shouldn't even be trading at all. So this taking, it's, it's all very relative, this, um, risk approach I have. Oh, my attitude risk, yeah, I think it has matured. Um, I was a bit more reckless in the beginning, like, like I said before, I went all in, um, on all stocks because I didn't know better. And but that was also when I was much—I had a much smaller account. Like I wouldn't be able to trade—you, I mean, if you have a small account and want to do swing trading, obviously you can't be holding 15, 20 positions like I do. Uh, it's maybe smarter to hold fewer positions, um, but again, like position sizing, I realized, yeah, especially when you kind of hold things overnight, you can't have everything in two or three stocks; you gotta diversify a bit more because I've seen too many stocks up and down 50 percent, and it's just not worth it. So, and also the margin-related things. When I first got a margin account in the beginning, I traded with Swedish brokers, these U.S. markets with Swedish brokers; there was no margin there. And I opened U.S. accounts, and then suddenly I could use margin. I really didn't know how to handle that, like, "Oh my god, I'm an insane amount of buying power; let's use it," um, but I got burned a few times, and you know, I kind of matured, and I realized like you kind of can't trade that way; you kind of, you kind of have to deserve the risk, um, and also even if you're not using any leverage or margin in your trading, which is fine, you can have incredible returns never using any type of leverage. I just like to, you know, spice it up a little bit when things are going well, um, because you know, again, I studied from history; I know that bull runs again last for a long, long time, and you, you wanna, you really want to capitalize it if you, if you're a swing trader, because as a swing trader, you, you know, you gotta sit, think mostly in cash for long, long time, so periods too. So you, you got to make the fun more fun while it lasts.
Last question for you: Why do you think your level of trading success is so rare? Obviously everyone sets out with the ultimate dream of, uh, making as much money as you have from the markets, but very few are able to achieve it, um, and you know, from what you've described here and your strategy, it all sounds fairly simple, not to discredit any of the hard work you've put in, but no, you know, why do you think so few make it to the big time?
I'm glad you—I'm actually very glad to set it that it all—it's very simple, because it is. I'm always trying to take things away. I think there's an inverse correlation between the amount of indicators and profitability, for example. Um, I think people focus a lot on the wrong things. Instead of, they look at a lot of indicators instead of focusing on a price and what's really, really moving a stock and how the stock is moving. Like I really focus on the—it's just purely a price a lot and try to listen to what the market, what the stocks are trying to tell me. Uh, a lot of people, uh, they just focus on a lot on other people's opinions; they, they may be watching CNBC, and they, you know, there's maybe some bear porn going on, or you know, some, uh, hedge fund manager that's panicking on CNBC, and you know, that, that's gonna affect you, right? And what, what, and that's gonna affect your trading too, like, "Oh wow, the professionals are really scared; maybe I should be too scared too," and vice versa. And I, I think if you can tune all of it out, everyone's opinions out, like even, even the billionaires, the hedge fund managers, what I realized over the years, they're like, they had, they are wrong a lot too, but they have to say they use—they, they do it the same way, like I do: when they're wrong, they lose small, and when they're right, they win big. So I really can't pay attention to all any of opinions; just focus on what the market is doing, focus on what the leading stocks are doing, or whatever method you trade, like just focus on how is that method working? Is it working well, or is it not working at all? Are there setups? Are there no setups? That's really what you should pay attention to; that's, that's one big part. I see a lot of even successful traders struggle with; they, these, this other opinions do snuck in instead of just listening purely on the market. And also, I think also just purely education. I think a lot of people, even some pretty decent successful traders, I think they would do even better if they really went back and looked at thousands of examples of the, of that, oh, that setup they trade or the setups they trade and really nail down all the variations of those and look at it, look at also maybe the overall market, like what was the overall market doing when there were a lot of setups and when there when, when that setup worked really well versus what was the market doing when there weren't any setups and the setups weren't working any well. I think that, that's gonna improve your edge by, by significant margin, looking at all these variations. Um, and then there's also the leverage part; you can either hurt yourself or you can supercharge your returns, uh, by using leverage, but you gotta do it the right way, um, uh, and also scaling your trading; that's also something like I've seen, there's a—I know, I know a lot of traders that say pretty much trade the same size they've been trading for 10 years; they trade the same setup, like they mastered their setup; they really know what they're doing, but they haven't been able to scale their trading, and that's also a big thing that I think sets me apart from I see a lot, a lot of traders too, and that's how you really can make a return, especially in the crazy bull market we've had in the past year. Like it's gonna make a difference of you making 100 versus making 900; it's, you know, scaling it up as account as your account grows. Um, it's not going to happen instantly, like if you double your account, uh, let's say in a month, uh, I know that's a maybe—no, that's unrealistic, maybe, even though you can't do it, especially if you're a day trader and use like a margin, um, but you know, let's say double your account in a certain time frame, like eventually your size should double to your size and your risk. And I, I see a lot of people too, they just, they, they can't, they can't, like they can't push it, like, um, obviously every time you size it up and you take that first big loss after you sized your trading up, it all, it hurts, but you also, you always have to think in percentage terms. Like I always cringe when people—also another reason to never pay attention to any type of financial media—like I always cringe when they, when they talk about points, "Oh, the Dow is up to a thousand points." It's such a useless thing to say; it doesn't really, you know, there's no context at all, like why don't you just say percent, because one percent is always one percent, no matter if what if the Dow is at 5000 or at 50,000, right? But a thousand points, like a thousand points meant a very different thing five years ago versus today. Um, so always thinking in your trading too in percentage terms, like think about percentage risk, like, "Oh, I'm going to take a percentage return," oh, sorry, a risk on this trade, and the, and since my accounts have grown a lot, that percentage risk is going to be higher than it was, say, a few weeks ago, but it was always thinking percentages. I think that's a very useful exercise that may take your training to another level instead of maybe thinking about points, um, it's just, you know, instead of thinking about like points or in, in dollar terms, like absolute dollar terms, like let's say you risk a thousand bucks usually on your trades, but your accounts have doubled, and you're scared to take, and you're scared to even risk 1500 bucks, but actually in percentage terms, if your accounts have doubled, you should be risking 2000 bucks. So maybe get used to that 1500 bucks risk first, and then you push it to that 2000 bucks risk, just as an example. So those are the three or four things I think that may improve most traders', uh, returns, um, the, you know, three, four concepts that really, really help.
Yeah, very wise. I love that. Actually, one more question; I lied. I promise this is the last one. Since you've seen this type of success that you've had in trading, how has your life changed?
Not much, really. [Music] Like I used to, like in my earlier years, like between 2013 when I started my Evernote project, or 2014, I started just, you know, just saving articles, like I started, um, like I started everything trading related. I read a lot of books; I read a lot of articles; I studied a lot of these successful traders, like Dan Sanger. Like I studied everything he had written, this all his newsletters back to the 90s; I read through them; I looked at the patterns he was looking for. So I spent a lot of time on, on especially on the weekends, like studying, like I tried to absorb everything; I looked at every single angle, every single method. I don't know how many thousands, probably 10,000 hours plus that I've spent just doing studying, uh, over the years. And now I feel like I, I, I don't do that as much anymore because there's just not much new ones; it's the same patterns; it's the same concepts, and I feel like I have a pretty good grasp, grasp of these things, and I don't have to spend this much, as much time doing like just studying, um, like I do it, uh, but not as much. So you asked me when, uh, when we started this call what I did yesterday, since yesterday was a day off in the markets, and I spent the whole day playing computer games. That's how my life has changed. I went from studying everything market related to doing things that I enjoy doing on my days off.
Okay, well, that's a pretty simple answer.
Yeah, more free time on the weekends and, uh, more time for video games. Absolutely, more social life and more, more, uh, time spending on hobbies.
Okay. Okay. Well, Christian, it's been an absolute pleasure speaking with you, and I greatly appreciate your time. For anyone who's listening who might want to, uh, find out more about yourself, uh, where's the best place to go? You know, Twitter, etc.?
Yeah, you can pretty much go to any of my social media, but Twitter, um, there's also a link in the, in, in my bio where you get to my blog, and you can read up on, uh, you know, there's a, you know, blog posts about me and my methods, my setups, and also my Twitch stream, um, where I stream, uh, every market day. I should usually stream the first hour and a half or so; you can see me trade real time; I talk about the setups; you can ask me questions, um, and, uh, yeah, close to Twitter and Twitch.
Okay. And what's the link for your blog, because I think for anyone who's, you know, listened this far through the podcast, it would probably be a good idea for them to actually, uh, put some visuals to, you know, some of the things we've been speaking about here, and, and those are definitely on your blog. What's the link?
Yeah, it's, uh, chartsandstories.com.
Okay. And your Twitter handle is, uh, @TheCallerMaggie Q-U-L-L-A-M-A-G-G-I-E, and that's also the handle my Twitch handle and my YouTube handle.
Okay, excellent. Uh, and folks listening, those links can also be found at chatwithtraders.com 2 1 2, as this is episode 212. Christian, once again, very much appreciate it. Thanks a lot for doing the podcast. Let's chat soon.
Thank you very much. I'm very grateful, uh, that you asked me to be here, and I'm very happy.
Thank you so much, Aaron.
My pleasure. You've reached the end of this episode of Chat with Traders, but rest assured there are more episodes loaded with real market insight and zero hype on the way soon. So to stay updated with each great new release, subscribe to the podcast and iTunes, and we'd love it if you leave a rating and review. We'll catch you next time on Chat with Traders. [Music]