Transcription
This is a stock trading reality podcast, episode six. Within two weeks, that two thousand dollar investment was now about twenty thousand. But what did I not do? I never sold a single share.
This is the stock trading reality podcast where you get to see the realistic side of a trader's journey. Get inspired and stay motivated by everyday, normal people who are currently on their journey to trading success. And this is your host, who didn't learn how to ride a bike until age 12. Play trader, and you know what? I was in the best shape of my life. Unfortunately, that is a true fact, and it's very funny now that I look back because at age 12, pretty much everybody can ride a bike. But there was me, always having to jog alongside my friends. From basically any age when people really start to learn how to ride bikes, I would literally have to jog alongside people as they—you know, as kids say—"You want to go ride bikes on this day and age?" I think it's more like, "Hey, you want to go play a video game of riding bikes?" But back in my day, it was, "Hey, let's go ride our bikes outside." But for me, yeah, that sounds fun, but I'm just going to have to jog next to you. So, um, the con was, you know, I didn't know how to ride a bike, but the pro was I was in pretty good shape back in the days, just uh, because of my own stupidity. I did try once, but then I like had a massive wipeout, and I had like a Rambo wound across my chest. So that kind of scared me away from it. But I finally, eventually, just taught myself. I don't think my dad wanted to be out there pushing me along, his 12-year-old son, alongside the side of his bike. So, um, yeah, embarrassing, but it brings to the point of, you know, it's never too late to get started in this business. Maybe you're, you know, a little bit later on in years and thinking about, "I'd like to get into trading; I'd like to learn how to do this." Hey, come on in, the water is nice. It's never too late to get started, and it's nothing that uh, you're never too old to start to learn, you know, how the business—how trading works as a whole. So keep that in mind, and you know, maybe my embarrassing fact can offer some inspiration to get you into trading or at least dig a little bit further into it.
Chess, how old were you when you learned how to ride a bike?
At 12 years old, I was ramping over kids like you with a big, you know, a ramp and a helmet and getting 10 feet of air, you know, going over cars and stuff. But yeah, I was young when I started riding a bike. I was like probably five or six. I had like a little Teenage Mutant Ninja Turtles bike, and I still have it at my parents' house. And they kind of kept stopping—stop lying. You know, you still ride it out there in California?
I do still ride it out with the little Teenage Mutant Ninja Turtle, with, you know, a five-inch wheel or whatever, super tired. You have a little like basket on the front?
I did not have a basket on the front. It did have training wheels at one point, but no, it was just a super bright green uh, little bike with the—what is it—the coaster brakes where you push backward on it. And all I did is my dad used to scold me because I would always skid around and thought I was in the movies and I was a super action hero guy. So I would go through tires like it was nobody's business. So I didn't have any concept of cost at that point. But uh, yeah, it's the equivalent of doing burnouts on a car all the time. That's what I used to do as a kid.
Yeah, I remember uh, with me and my friends, I—we, on along the action movie thinking we're like movie stars after I did learn how to ride a bike. I don't know why we'd do it, but we'd find some good soft grass. So I mean, we tested the grass—okay, this is soft ground—and we'd ride as fast as we could, and then we'd slam on our brakes, so we would—cannot pull ourselves over the handlebars. And you wonder why you have Rambo scars across your chest?
Yeah, I mean, I couldn't count to 10 for the next three years, and I could never figure out why—can't I count to 10 anymore? But you know, finally, I was able to get back up to that high number. Uh, but yeah, nothing like thinking your action hero as a kid. So nice little stuff here; I'm liking this introductory segment because I always learn a little bit more about you, Chess. So um, and everything just how I had it pictured you in Southern California riding around on a Teenage Mutant Ninja Turtle bike. So just basket on the front?
Yeah.
Is that where you keep your mind shares?
Yeah. So that is where I keep my mind shares. They're great; they fit perfectly in that basket up there.
Nice, nice. Well, we're gonna bring on our guests today, and this is someone who is a member of the inner circle. And real quickly, I've had a couple emails saying, "Uh, hey, why are you only talking with people from your group? What's up with that?" Um, and the reason is just—I've talked about this in episode one, but I want to quickly recap as for the new people—I understand maybe haven't listened to it—but the quick history on the podcast is my original idea was I was just going to use it for uh, ClayTrader University students, which is one of the training programs I offer. And that way, I could just interview people, we could learn about their stories, and you know, inspire one another, and you know, just from, you know, the community. But then the more I thought, you know, I can still inspire people from the the university program, but if I can inspire some other people that are outside of it, you know, why not make this public? So that's why it's just people from the chat room and people from the university program because that's what it was originally intended uh, and like I said, I think it gives the most realistic view uh, or possible, and it's a good way to inspire other people and motivate other people because a lot of people, especially with the feedback now that this is episode number six, uh, you know, the feedback has come in, and a lot of people can relate. So there's a quick little history. So back on note here, we are talking with another member, Derek Chanault. Did I get that right, Derek?
You did excellent. Excellent.
And he goes by Hokies in the chat room. So he is, for all you Virginia Tech fans out there, um, you'll definitely want to listen closely here. So welcome to the show, Hokies. And I'm glad to have you.
Well, thank you guys for inviting me on, and uh, look forward to talking with you.
Yeah, we're gonna have a good time. Uh, like I said, just laid-back environment here, and we'll see where the wind takes us. But we're gonna start at the beginning. So what were you doing before? Because I know you are trading full-time, uh, but where were you in the world before you even knew what the stock market was? And then what kind of brought your attention to the stock market? And finally, what made you finally decide, "You know what? I want to give this stock market thing a go," not necessarily full-time, but just at least start to put some money into it?
Well, I graduated from college in 2004, mechanical engineering, and I spent the next 10 years at a manufacturing facility working as a process engineer/maintenance manager of the facility. And it was about December of 2013 when I decided to uh, get into the markets. So what led me to the markets was basically an investment perspective for one. I was tired of sitting around looking at my savings in the bank making like three dollars and 58 cents of interest every year. Um, two, I thought I had—hey, let's be fair—that's more than penny stock investors make.
Sure. Yeah.
As I was soon to find out. So secondly, I also thought I had a great idea for what would be a great place to invest my money. A little back story on this: I probably started smoking when I was about 14, 15 years old and uh, had tried to quit several times without much success. And then about 2010, one of my buddies introduced me to an electronic cigarette or vaporizer. And after about a week of using this, I quit smoking. And I think I was the first person at my job that that used this. And within about two or three years, there were about two dozen people that had quit smoking using electronic cigarettes. So I'm like, "You know, there's got to be a way to capitalize on this and make some money off of it." So I started doing some research and saying, "Hey, are there any public companies out there that are in the e-cigarette or vaporizer business?" And of course, you had your your big tobacco companies who had their foray into it, but uh, that's not exactly what I was looking for. So kept doing some research on Google, and I ran across a few penny stocks that were in the vaporizing business. So I opened up a TD Ameritrade account and with about five thousand dollars, and I picked two of these companies, and I put about four thousand into them—about two grand into each one—and said, "Hey, these are going to be long-term investments." And of course, immediately I was intrigued by by watching, you know, the value of my money go up and down and and whatever it may be. But again, I wasn't really trading at that point. I said, "Hey, I'm just going to park this money here and see what happens." But as I continue to do research on these companies, that led me to like Investors Hub, ihub message boards, and I was into it about a month, and this was about January of 2014, and I think we all remember what was starting to get hot about that time, which was the uh, the marijuana penny stocks. So I took that ex—that thousand dollars that I had left in my account that weren't in the vaporizing companies—and started—I said, "You know, I must try trading a little bit in these marijuana companies." And sure enough, you know, I made a few trades. It was making quite a bit of profit in, but I was happy with, you know, 30, 40, 50 profit. I would enter; I would exit. But then the greed started getting to me because I was—I would keep watching these stocks, and I would see ones that I sold for 30, 40, 50 profit go up another thousand percent. I said, "You know, maybe I'm just not being patient enough here. Maybe I need to put some in and and just let it ride for a while." I started doing that. I still had rules. Um, my next rule was, "Well, okay, if I double my money, I'll sell half my position." And I did that for a little while, and but yet that greed just kept, you know, it could have been—I made a thousand dollars; it could have been two thousand dollars if I had just held on. And uh, so you can imagine where this is going. I I started getting in deeper and deeper and holding longer and longer, and and at first it was working out really well, and and then I really found the stock that I thought was just going to make me rich, and for a while it did, on paper. And I think we all probably remember this one from last year; it was SPLI, which is now VPOR, but it was right in my wheelhouse; it was a vaporizing company. It just reverse-merged, you know, just gone public. You know, I'm drinking the Kool-Aid; I'm ordering their products, using my vaporizers. I'm like, "This stuff is great; this thing is going to be bigger than Philip Morris here in a few years." And so to give you my story on SPLI, I started watching this thing when it was about half a penny, and I remember wanting to buy about 400,000 shares of it then, but at the time I didn't have any funds clear. So my wife and I made the decision, "Hey, we're going to take our tax refund this year, and and I'm going to invest it in this company because it's going to be the next big thing." So by the time I got my tax refund and it cleared TD Ameritrade or whatever it was, up from half a penny to about four cent. So irregardless of the fact that it already ran a thousand percent of from where I started watching it, I went ahead and put a couple thousand dollars into it. And within two weeks, that two thousand dollar investment was now about twenty thousand.
So you—you timed the—I mean, which—which makes sense because during the the marijuana stocks when those things were booming, you timed that pretty well. But what did I not do? I never sold a single share.
Well, that brings me back to a point I want to readdress that is pretty uh, pretty typical, but I think very revealing is I—and I wrote this down—you had a rule that you developed. And so, hey, good for you; you had a rule. You got to give some credit where credit's due. But the rule you said was the stock had to double first, and then you would sell half your position. So in other words, before you were going to take any profits at all, you needed at least 100—did I—did I hear that rule right? Is that what your quote-unquote strategy was at that point, one of your risk management protocols?
Well, yeah, like I said at the beginning, I was happy taking 20, 30, 40 profit, you know, I was—I would sell my entire position once I had that much. And again, I wasn't using charts or anything; it was just basically, "Okay, I'm up this dollar amount; I'm gonna sell my position." But like I said, I saw these things keep running, and I was like, "Well, it doesn't seem like anything for these things to double, so I'll just wait till it doubles and sell half my position." So yeah, you're—you're—you're pretty much right.
Yeah, it's fascinating from a psychological perspective. Just—that's the pathway of greed right there. You're being very uh, you know, realistic. You know, penny stocks—yeah, if you play the right ones, 20, 30 percent—not unrealistic at all. But then all of a sudden, you know, our good friend Mr. Hindsight started to step in, and "Hey, Derek, look at this. Hey, Derek, look at this." And then all of a sudden, "Hit—let me introduce you to my buddy Greed," and now all of a sudden you got the new rule of, "Okay, first I'm going to wait for it to move 100 percent." Think about that: you're gonna wait for it to move 100, and then I'll sell half. Um, you know, a a very smooth way, you know, Greed is a slick—a slick person, uh, you know, he can really weasel his way in uh, quite quickly.
In Chess, I mean, what—what's your uh, what's your experience with Mr. Greed? He goes, "Hey, Derek, you know what? Look good in that garage—a Lamborghini. You can hang on to these for longer." But yeah.
Yep. Yeah, you can put an Apache on the roof after you install the helipad. But uh, yeah, I mean, you just—that's the story is—first off, there's a few things I want to come back to. First off, you're an engineer by degree, so you understand, you know, processes and things like that, and I always think that's intriguing because um, that's something I was always interested in, and I think that's why we kind of see that a lot in kind of the trading sphere as far as people like that. And you—you know, like Clay said, kudos to you for developing at least one rule as far as, you know, how to manage it, obviously. Um, it's always interesting though when you kind of find early success, and I think a lot of it—just like you—you know, the early success in my opinion always is tied to the greed. You know, greed—I think is suppressed, especially if you started off and had a string of losers. Um, but those who, you know, always seem to find the early success, and kind of—it's not so much easy money, but you know, you were in the right place at the right time. Um, but then yeah, you know, the the greed voice will, you know, slide into your mentality and just kind of, you know, manifest itself, and you will just now start making every mistake, you know, in the book, just because you don't know better at that time. Um, but yeah, you know, it—I always think it's amazing when you hear, you know, you turn that into twenty thousand dollars, and you didn't sell a single share. It's just um, you know, and I've—I've been there too. I'm completely guilty of that stuff. But I also think it's—go ahead.
I said absolutely. Um, you know, I was up a thousand percent from my entry and never sold a single share, and I'll tell you why: I was on ihub; I was listening to the pumpers. Um, you had the Wolf out there pumping at that time, and it was just uh, it was just pure and simple greed. I thought it was going to a dollar a share. That's where I would say, you know, I might sell some shares at a dollar. I mean, it was—it was legitimate—just pure and simple greed. I was thinking that 20 grand could be 50 grand in a couple more—or yeah, 50 grand in a couple more weeks. So yeah, I really—I really got bit by the greed. And to finish the story off with my SPLI trade, um, it started dropping, and I ca—keep thinking it's coming back; it's going to come back; it's going to come back. And then I finally sold out on capitulation day, and I think I sold it six cent. So my twenty thousand dollar profit turned into about six hundred dollars.
Wow. So if my math's right, there's a a nineteen thousand four hundred dollar swing against you, correct? And uh, what was going through your mind during the pullback? I mean, I know you said, "Well, it's gotta come back; it's gotta come back." What—what were there people out there on the message board saying, "Hey, buy the dip; strong hands?" I mean, what exactly—
Exactly. And I'd seen it before. I remember one time on its way up, you know, about the time it hit 20 cent, it pulled back down to about 12 in a matter of a few—probably about 15 minutes—and it rebounded right back up. And I was just keep—you know, I just kept telling myself, "This is—it's gonna come back up; this thing's eventually gonna be worth, you know, a dollar a share or whatever it was." I'd—in the back of my mind, I knew I was involved in a pump and dump, but I wasn't—I wasn't smart enough to to take action and do anything about it.
So you pretty much—you know, it's not uncommon by any means at all that at the point you were kind of pushed to your absolute limit was—you know, you sold the bottom. You know, you didn't buy the top by any means, but you sold the bottom. And that's just—like I said—that's psychology at work, especially when it comes into trading now. So I'm guessing after the SPLI trade, what—you know, what kind of—what was that—what—what did you need to happen was it that trade to kind of push you into kind of realizing that, you know, maybe you need to kind of figure out a better strategy or, you know, what—what was it that kind of led you to um, you know, invest more of your time and kind of get more educated in trading?
That was probably the beginning of it. I mean, I I surely did more stupid stuff with penny stocks in the uh, even after that debacle. Um, I think FROZ was another good one where I was up probably triple on it—never sold a share—but then this time I made the mistake of actually buying more on the way down.
Oh yeah.
So I turned what was a pretty nice winner into a pretty big loss. And uh, this just kept continuing to happen, you know, that that luck I'd had at the beginning ran out, and I realized that, "Hey, I really didn't have any skill; it was all luck." I know Clay, you've mentioned that, you know, a a a blind squirrel or whatever could have made money during that time, and you're absolutely right. I mean, it was just a bubble in the penny stock world, especially in the marijuana stocks at that point in time. Yeah, I was just lucky enough to get caught up in it; it wasn't any skill; it wasn't uh, anything I was doing; I was just getting lucky. And I finally came to that realization.
Yeah, you were definitely just riding the bubble, as were so many other people. And I've made reference to this before, but it's the same thing with real estate back before that whole thing boomed. It was literally, "Let's go out to California; you buy a house; you sit on it; you don't even have to fix it up; you just wait six months, and then you know, you sell your money. Hey, look, I'm a real estate investor." And uh, you know, everybody knows how that turned out. So very common—you're not alone. I'm just curious, so you lost the the on SPLI, then you did some other, you know, stupid things with uh, F-O-R-Z—you said FROZ—in your mind, what happened psychologically for you not only to repeat the process but actually make it worse, like you said, by buying more shares? What was going on in your mind? How did you justify making it worse on yourself when you were lit—reliving through, you know, an exact same situation? I mean, hindsight, I would have probably done the same thing, but it's—you know, what was going on in your mind?
Again, I think it just had—listening to the pumpers and the and the people on ihub and just getting uh, believing in the companies, you know, I I was—I had no experience with these companies. I didn't know that they were all scams, obviously, until I took your penny stock survival guide course, and uh, you know, I felt like such an idiot out—going through that—I'm realizing, you know, I did everything completely wrong. You know, I believe that these were real companies with real potential that, you know, could make it big one day, and and obviously that's not the case, or they wouldn't be uh, trading on the OTC.
So you're—you're now kind of thinking, "All right, like Chess kind of touched on—something's just not right." So what was your step from that point forward when you know, "Okay, something's got to change"? How did you change things? What was your next uh, course of action?
Well, you know, I followed you on uh, on ihub and Twitter and and watched your daily videos you would do of the popular penny stocks, and you know, I started looking at the charts a little bit more closely, and I'd kind of map out the levels that uh, that you would map out in your videos, and and I'd watch how they performed. And sure enough, you know, it would seem like the levels you mapped out would act as a as a supporter of resistance, and I'm like, "Hey, what does this guy know that that I don't? You know, it seems like he's got kind of the magic formula on where you should buy them or at least good areas where you should buy and sell these things." And uh, you know, that's what led me to to your chat room, and uh, I think it was about a year ago I joined up and and started my journey or my process of of learning how to how to actually trade and not just uh, like you said, riding a bubble.
Right, right. So I'm curious because I want to start to establish just now and even for future, but just so to keep things realistic, you know, this—this is not some sort of hidden sales pitch—"Hey, come join my room because it's gonna fix everything." That's usually not how it works for people. So you join the room, and I'm assuming you just didn't all of a sudden have massive success, right? That's it. There's a lot more to trading than just joining somebody's chat room service, right? I mean, is that a safe assumption on my part here?
It is, and you're absolutely correct. I really didn't know how the alerts were working um, at the time I joined. Um, I foolishly, couple times, just you know, bought stocks based on the alert that was made in the chat.
Room without understanding why or what the context of the alert was. And uh, and again, I just continued to bleed money in my accounts and just not having any success. And that’s when I decided to to start checking out your courses and started with uh, robotic trading. And then that’s when it the the flickers of the light bulb started to come on, and I started to understand a little bit better, okay, how this game works.
Yeah, so that that kind of is a similar story to my own in the sense that, you know, once I kind of started digging into technical analysis, um, what you come to realize really quickly is that you’re now reading kind of the emotion of the market. Whereas before, you know, you get excited when it goes up, and you get scared when it goes down, now you know you’re starting to understand technical levels, you know, and you kind of you’re building out your tool belt. And you know, with that, you know, with the addition of knowledge, um, I’m still a firm believer in analysis paralysis, but you know, as you kind of build knowledge though, you gain more confidence. Did that kind of happen with you after you had started to um, you know, be able to read the charts better?
Oh, absolutely. Um, you know, I was still struggling because I was still in the penny stock market at the time, and it was the beginning of summer, and we all know what happens in the penny stock market uh, during the summer time: the liquidity dries up, the volume dries up, um, and and again, I think that was a large part of my struggles during the summer. And eventually, I was like, you know, I got to get away from this, again, just continuing to hemorrhage money out of my my penny stock accounts that I started with. And I was like, you know, I gotta, if I want to do this for real, I need to trade real stocks, and I need to find a way to do that. And that’s when uh, that’s when things really turned around is when I got out of the penny stocks and and moved on to the uh, to the big boards.
Now, when you say big boards, you don’t you don’t necessarily mean you weren’t going and trading, you know, Netflix at four hundred dollars a share and uh, Price Line at a thousand dollars a share. What kind of big board stocks were you looking at?
I think my first one was PLUG, and that was that was what probably like sub five dollars at that time.
Yeah, I think it was around four or five bucks at the time.
Yeah, great. So that’s that’s a good good point because a lot of people, especially if you’re coming from the world of penny stocks, you think, oh, big boards, I don’t have any money to trade Apple, you know, I don’t have any money to trade uh, Tesla or Amazon, all these, and they automatically your mind defaults to like the highest share price stocks that you can think of. But there’s plenty of stocks out there that are you know, below five dollars, you know, below ten dollars with good liquidity, good volume. And as uh, you know, Hokies was just saying, you know, that’s what really hampered them with the penny stocks, especially come summer, is the lower amount of volume. So all right, you’re getting a big board stocks, and then you know, what’s the biggest thing you noticed uh, difference wise from wow, big board stocks compared to a penny stock in terms of just actual trading?
Well, just what you just mentioned: the liquidity. The the liquidity allowed the charts to play out smoother and more like you described in the in the courses I was taking. Um, it was just smoother price action and easier to to follow. And again, I guess it was just the liquidity, it was just the like I said, the the price action moved a lot like you would expect it to.
So dare I say it was more predictable?
Exactly. That’s that’s the word I was looking for there. Yeah, a little bit more predictable. And and that’s uh, that’s the power of, you know, when you have stocks with all sorts of volume. Uh, Derek uses a perfect word: smooth. It’s just more smooth. Are you telling me that there’s more, you know, uh, order and balance in a stock like Amazon versus, you know, a PLUG or a VPORT? Is that what you’re telling me?
I don’t believe you. Go trade them chess, and then report back your findings next episode.
Okay, okay. I will do that. I’ll I’ll throw my whole account in it.
Uh, yeah, throw your whole account and then report back, and uh, let’s get a status check on your situation. So so kind of moving further though, regarding kind of your trading journey at this point, um, talk about how you know, how how were those initial losses, you know, how did they make you feel? How did you kind of manage those initial losses versus, you know, how how does a loss kind of look look now, and you know, if you were trading today, what was the loss kind of feel like then? So kind of touch back from early in your trading, you know, how did you deal with losses to kind of now, what does that kind of feel for you?
Well, I hate to admit this, but early on, I never wanted to take a loss, you know, I would just keep holding and holding and holding, generally until it got to the point where, okay, this is just way too much money that I’ve lost, and I’ll sell it. And of course, usually sell right at the bottom right before it bounces back up. That’s generally the way it works. But yeah, I mean, I I hate it to take a loss. I think that’s one of the I think that’s the for me the toughest part about trading is I think we’re conditioned our entire lives, you know, through school and on a job, whatever it may be, not to be wrong. And one of the biggest things I’ve learned with trading is you’ve got to accept that you’re going to be wrong sometimes. And I yeah, I couldn’t… it’s completely backwards based on kind of every single thing you’ve been taught, like the kind of the examples I always use was in school, you know, you’re either right or you’re wrong for an answer. And you know, you never naturally want to be wrong. And in this game, it’s so much different that you know, you need to kind of learn to be wrong quickly and you know, readjust your plan and you know, that be fluid with the market because the market’s ever changing.
Exactly. In school, you know, it was you got to get a 95, 100 on this test. Well, the stock market, you’re never going to be 95 or 100 right. Um, you know, it’s just not gonna happen. I would say probably the best traders out there, what, maybe sixty, seventy percent, something like that.
Wait a second, I saw some guy out there who uses a spreadsheet to track his trades, and he says he’s right 95 of the time. Are you saying that guy’s probably not right with his spreadsheet?
Is Ches… I mean, I I don’t know this one. He has a spreadsheet; it says he’s 90… not right 95% of the time. I mean, I I was going to go throw all my money in one of his picks. Is that a good idea, you guys do you think?
I think he’s pulling the wool over somebody’s eyes.
Yeah, my spreadsheet says I have a couple of Apache mortgages and things like that all in here, but you know, spreadsheets can be misleading, especially when I can change the numbers that are on it.
Yeah, I was going to say I have a yacht payment on the spreadsheet that uh… I’m sure… I’m sure he’s trying to find the yacht, but the numbers on the spreadsheet say I have a yacht, but they haven’t quite connected those dots.
All right, Derek, now I want to kind of jump ahead just a little bit uh, to what you’re doing right now. And the one thing I like about the chatroom is that people after every day come post their winners and losers. It’s just a nice little transparency thing. It’s a good way to uh, you know, offer support to the people that maybe had somewhat of a rough day. But Derek always posts two numbers; he always has one for his day trading account and one for his swing trading account. And I find this very interesting because a lot of times uh, you know, I get emails or questions from people, you know, I’m still determining if I want to be a day trader or swing trader. And I think the thought process is very commonplace out there. Well, you either have to be a day trader, you have to be a swing trader, but you in fact, Derek, are both. So how does, you know, how did you arrive to that kind of conclusion for your business model of saying, you know what, I want to do swing trading and day trading, and then you know, kind of how do you manage all that?
Well, the the swing trading came about because I thought it would be a good way to apply a lot of the principles and knowledge that I learned in uh, in taking the CTU courses, particularly the risk versus reward trading. Um, that that’s really where it all seemed to kind of click for me because even with, you know, the robotic trading and everything else, you can have a lot of knowledge about charts in general and indicators, but if you don’t know where is a logical place to buy, where’s a logical place to sell, how to scale out of a position, and where to put your stop loss, it doesn’t seem to matter. Um, before I took that course, I was really still still struggling. Um, yeah, I would have some winners, but my losers were generally bigger than my winners, and so I was continuing to lose money over time. And a lot of that was because of those reasons I just mentioned; I didn’t know I didn’t know how to properly manage the trade as far as what my risk versus reward was. That was my biggest problem. So taking that course, I thought it was, you know, a swing trading would be a great way to apply the knowledge from that course on daily chart time frames, um, and just see how it went. And and the results have really been exceptional since I began doing that at the beginning of the year. I think I completed the RVR course in December, and I have not had a losing month in my swing trade account since then. Every month has been green from that point forward. And that’s because now I know how to make a plan when I enter a trade, you know, whether it’s a swing trade or day trade, but really with a swing trade, the reason I think I gravitate towards that more and and having more success swing trading would be because I’m able to take the emotions of having a loser out of my swing trading. And I’m able to do that by, you know, when I’m scanning charts at night and I find a setup I like, I’ll just go on to, you know, Ameritrade site or Thinkorswim, and I’ll set up my conditional orders, and it’s done. Either I’m gonna get filled, great, and it’s gonna go down and hit my stop, and I’m gonna take a small loss, or it’s gonna go up and hit my profit target. And if it hits my profit target, then I start the the process all over again and set up another profit target and readjust my stop loss.
Yeah, that’s really cool, man. Chaz, why don’t you uh, for the listeners that maybe aren’t uh, too informed on what a conditional order is, why don’t you uh, wrap or summarize that for the new people?
So conditional orders are ones you can kind of set up in advance in the sense that say I’m willing to buy a stock, it’s you know, say if Apple drops to 125, I want to buy it. I will put in the system that when Apple reaches 125, I want to buy x amount of shares. And then at the same time, I want to sell them if they get to 126, or I want to stop out and close my position if we get down to say 120, 450. So that that is all set up in advance. Once the order triggers, essentially your orders for both your stop loss or where you want to bail out of the trade if you’re wrong, and also your profit targets are all set. You literally have to do nothing; it’s all kind of set up on the back end for you after you kind of set up how, you know, the parameters you want. But you can literally set these orders, and some people do and can leave them for weeks, if not, you know, months sometimes, depending on how long term of a trader you are. And I mean, you could go on vacation for a week, set up your orders before vacation, and you don’t even need to check on them at all. You know, it’s either going to hit your profit target, like, you know, Derek said, or it’s going to stop you out. But you know, you have to be able to obviously kind of discern that by, you know, figuring out what is a good, like, like Derek said, what is a good place to buy, what is a good place to scale, you know, these logical areas. And I think a lot of traders, you know, the turning point really, in my opinion, and I’m going to stick to this, and I’m sure it’ll be a recurring theme, is that once traders realize that you are in the business of managing risk versus you were in the business of, you know, finding hot plays and hot stock picks, I think that’s what really turns a lot of people around. And you know, Derek, I’m kind of just breaking out of my break-even phase here, but that was, you know, I just came to the realization, it took me a while, even after being hit in the head with it so many times, that you know, you need to, you know, you’re in the job of managing your downside because that’s what you can control. I can control what I’m you know, what I’m able to lose. And yeah, I think it’s going to be a recurring theme of the podcast, Clay, that you know, people really kind of once they kind of understand how to manage their risk, that that really turns them around.
Yeah, it’s one of those things from, if I’m putting on my business marketing hat and I want to bring in a bunch of customers, am I going to talk about, hey, come here and let’s learn how to manage risk, or am I going to say, hey, come here, get hot stock picks, and let’s make a bunch of money?
Well, yeah, I think one sounds a little bit better than the other, but in reality, like Ches was saying and like what Derek has echoed, we’re not in this business to make money; we’re in this business to manage risk. But the byproduct of managing risk is going to be, like Derek said, green month, green month, green month. Now, sure, there’s going to be red days, but over time, if you’re concerned about managing risk and not making money, the whole making money thing is going to take care of itself.
So Derek, what are some of your favorite indicators out there? I mean, do you have any kind of bread-and-butter ones that you like to go to?
Well, I’ll be honest with you guys, I’m not a real big fan of indicators. I like volume, price action, and patterns and moving averages, and that’s about all I use.
Actually, Derek, I love that answer. There’s too many thought processes out there that you have to use this indicator and you got to use this combination of indicator, but so many times people forget that the two indicators, the two primary indicators, are simply price action, which can be summarized very nicely with candlesticks, and then volume. Everything outside of that is just kind of noise. Now, I’m not saying it’s worthless or anything like that, but way too many times, and I’m, you know, I’m raising my hand right now, I went on the quest for the holy grail. Well, I just need to find this indicator that works with this one, and then I gotta stand on my head, and then I gotta do this, and then I throw on this indicator at the end, and it’s gonna give me a very profitable strategy.
Go ahead, go ahead.
What I was gonna say, what led me to that conclusion about indicators was the fact that I just suffered paralysis by over analysis with all the indicators. I found that I cannot execute a trade quickly enough when I have all these things to look at. When I’m looking at RSI and MACD, is this a MACD divergence? Is this RSI divergence? Uh, the money flow, I just… it was too much, um, and you were you would never find a setup where everything lined up perfectly. So uh, for better or worse, I just decided to scrap all my indicators completely and, like I said, just go with the moving averages and the uh, the patterns and the volume and the price action and go from there.
No, that’s awesome, man. Well, I want to talk uh, about your strengths, strengths and weaknesses here, but I’m actually going to steal one of your strengths because I I’m just curious. Uh, Derek, uh, let me just take a step back. Part of ClayTrading University is their live webinars, and uh, you know, the live webinars, people can show up and participate, I ask questions, and it’s just, you know, live feedback. Uh, you can participate or just sit back, regardless. One of Derek’s greatest strengths, and this is just the reality, trading is hard work; you need to put in the time, you need to put in the effort. And I can’t remember a webinar that Derek has not been on and is not participating in, and it’s been amazing to see the progress of when I ask questions and I get an answer from Derek from, you know, way back when until now. I mean, he just any question I ask, he nails out of the park. So Derek, for sure, one of your strengths are just you have a work ethic; you put in the time, you put in the effort. And just to give people some reality, you know, how many hours, how much time do you think you’ve spent in kind of the the preparing, the studying phase? Because a lot of people think, hey, I sign up, get rich quick, and then we’re going to make a bunch of money. So you know, what what kind of time do you put in? Because this is definitely a strength, and uh, you know, just shed some light on this.
Well, I’ll put it to you this way: when I was at my full-time job and and one of the reasons I left was the hours I was putting in, I was putting in probably on average 12 hours a day, sometimes 14. And uh, my wife now makes the comment that you work harder now than you ever did when you’re working at your full-time job. But it’s something I’m passionate about; it’s something I want to do for the rest of my life. So to me, it’s not really work, you know, it’s something that I’m sure you can relate with with trading and teaching that it’s something you enjoy doing. So if you find something you love, you never have to work a day in your life, right?
Absolutely.
Well said. So to you, it’s not work; you just enjoy doing it. But but seriously, like when you do your homework, uh, one of the common questions is what kind of rituals or routines do you have? What kind of… tell us a little bit more about that.
Um, every night I’m running scans. Um, one of my favorite scans is one we got on the Thinkorswim that goes back from your robotic trading; it’s just a bull mode scan, basically, uh, you know, finding stocks that are in a bullish overall context. And uh, I think one of our other members actually came up with a scan for it in Thinkorswim, so I use that and just pour through those charts every night. Also use Finviz, as you recommend in the uh, in the courses, with the certain parameters that you recommend to find setups that I like. But yeah, I do that every night, so I’m ready for the next day. And when I come across a stock I like, like I said, I go into to TDA and I set my order up, and what happens happens.
So so I hope that people are really kind of, you know, our listeners are getting this, you know, that this is being conveyed clearly is that you put in the time, first off, to kind of learn about trading, kind of learn how to understand uh, you know, the price action and volume. Um, you’ll obviously set up your your risk tolerances, and you know, you put in the time to not only learn that, but you also put in the time to kind of scan the markets, set your plays up. You know, it’s not this is not a, you know, one-stop shop overnight; you’re going to be hugely successful. This this takes time to kind of build upon, and you know, obviously our goal is traders to only get better and better with more experience and kind of uh, you know, finding where our strongest suit is. But um, so obviously, I’m sure this question is going to be, you know, summed up very quickly. I’m assuming your Hokies alias is uh, just based on uh, your your love for your college.
That it is.
Awesome, awesome. But um, now there’s the other part that you probably don’t know about is it’s Hokiez28.
Oh, I did not know that. We learned something new every day.
I’m a huge Camaro fan; my first car was a 94 Z28, so uh, that’s where that comes from.
Very nice, very nice. Well, I like this question just because I think it really summarizes things. So if you’re not aware, Ches does have a time machine, so if he lent this to you and you could go back in time when you first were getting started and getting serious with it, um, you know, what what sort of advice would you tell you and your wife? Because I think that’s pretty cool, you were including her within this whole thought process of things. So what sort of advice would you tell yourself and your wife if you could go back into time?
Um, obviously to get educated before you start just throwing money around in the markets, you know, hard-earned money with no knowledge or no clue what you’re doing. And to also not be greedy. So put in hard work, don’t be greedy.
I like that; summarize very, very nicely.
Well, it’s time for some fun questions, so are you are you prepared for this?
Well, now this is officially the hot seat now. So question number one is my favorite question: What is your favorite movie?
Favorite movie? Let’s go by genre there. If it’s an action movie, I’d have to say Training Day.
That’s a good one, Denzel Washington.
Have you seen that one, Ches?
I have seen that.
Hey, all right. Have you seen Legends of the Fall yet?
No, it’s on my queue though.
Move it up, move it up. So next uh, what uh, what’s your favorite meal? What’s your favorite type of food?
Um, I’d have to go pizza. I could never turn down pizza.
So like what’s on your pizza?
Uh, meat lovers.
Nice, nice. That’s what my wife likes too. So what is your favorite dessert?
A plain old vanilla milkshake.
Really? But nothing in it at all?
No, just a good old vanilla milkshake. If you can find a good place that makes milkshakes…
Yeah, that’s that’s pretty much all you need.
I like that. Um, what is uh, your favorite song or band?
Um, this is a tuffy. Britney Spears… no, no, but I’ve got some type… I’ve got two genres that I like, and they’re pretty much diametrically opposed, and that would be rap and country. So um, favorite rapper, I think you gotta go with all-time great of Tupac, so I’ll go with that. Uh, country, I’m a big Eric Church fan.
Can you please not use words such as diametric? I mean, that almost blew up my head. That that’s a complicated word. I can tell somebody’s somebody’s an engineer around here. Diametric, that’s got more syllables than I can count to.
I should have probably never been riding, throwing myself over the handlebars on my bike. But if you could go anywhere, and maybe I guess if you’ve even been there before, where would you travel to?
Well, I thought about this one, and this is interesting because I’m actually my wife and I are going on a trip next week to somewhere we’ve never been, and we’ve always wanted to go to, and we’re coming out to visit Ches and uh, the great land of uh, L.A.
So oh, so you’re gonna become a surfer boy?
No, we’re just gonna check out Disneyland and Hollywood and, you know, do all the touristy things out there.
So now are you sleeping on Ches’s couch?
I don’t believe so. You’ll…
Have to share it with the crazy dog and the crazy cat, so I probably recommend against that. But um, so so what do you do for fun, uh, you know, outside of trading and kind of uh bettering yourself in that sense? What do you what kind of hobbies do you have?
Well, when I'm not watching my Hokies whip up on the Buckeyes—hey, I like that game; you offered us motivation—that was uh, I was I was wondering if you're going to bring that up or not, but well played, sir, well played. So when I'm not doing that, obviously I'm a huge college football fan, college basketball fan. Uh, probably the sport I'm most passionate about though would probably be NASCAR. I'm a huge NASCAR fan. My dad took me to my first race in Martinsville when I was about five years old, and I've been hooked ever since. So and that's what also got me into my love of fast cars and things like that. I also like to read and, you know, play video games. I don't do so much of that anymore as I used to, but every once in a while.
What's the last book you read? Uh, the diametric properties of isotope something other—I think it was the Divergent series—was probably the last last books I read.
Nice, nice. And then uh, two more questions. If you could meet one person, dead or alive, who would you want to meet? Um, I'll have to go with my childhood hero on this one. I'd like to say Dale Earnhardt.
Nice, nice. Very cool. That would make sense since you're a NASCAR person.
And then finally, three words: if you were said, hey, you know what, give me three words of what you think it takes or what would describe a successful trader? First and foremost, discipline. I know other people have answered with that in previous podcasts, but I think that that is the number one thing that you have to have for to be a successful trader. Also patience. I I think sometimes I'm a little too impatient and don't let my trades work out as I planned if they don't do it within a certain amount of time. And then you look back later and you see that your your plan ultimately was did go your way. And educated: you've got to have the education to to know what you're doing. Um, if you go into this blind, you're going to end up losing all your money. There's there's no doubt about it. There are people out there just waiting to take your money in the market every day.
Yep, I couldn't agree more. But uh, Derek, it's been an absolute pleasure having you on. We really, you know, it's awesome to hear these stories and, you know, every single week, and I think it's just great to kind of learn more about the kind of community that uh that we kind of keep. But um, now where can where can people find you if they want to reach out and speak to you on Twitter or Facebook or in the inner circle chat?
Yeah, I'm on I'm on Twitter at Hokeyz28. Um, I'm on there probably more than I'm on any other social media, so yeah, feel free to look me up on there and add me. And I'm always posting charts and setups for swing ideas as well. So and that's what we've come to know. So to just echo, chess, thanks a lot, Derek. I know we took you away from some of the trading action today, but I appreciate you taking time out of your day to uh sit here with us.
Well, uh, once again, appreciate you guys inviting me on, and I really enjoyed it, and uh, hopefully my story can motivate others not to make the same mistakes that I've made, and uh, yeah, had a good time.
Good, good. I'm very confident, Will. And just to echo that again, like I said, this business, you got to put in the time, you got to put in the sweat, back, witty, and I kind of just dawned on me, but if you don't like the stock market, if you don't like learning, if you don't like having to put an effort, then it's going to be effort, and it's just going to feel like another job. So make sure you actually enjoy this stuff because it will take your money if you don't enjoy it, because if you don't enjoy it, you're not going to put in the required time necessary. So kind of a little final thought there that just popped into my head, but yeah, if you don't like the stock market, don't even try to be a trader because it's going to be too much work for you. You want to be in Derek's spot where it's not work, so you just put in the time and effort, and you know you can learn and progress as a trader. So you know, there's my little final two cents. Anyways, thank you for everybody for joining us. If you're listening to this on our site, please click one of those share buttons. Little clicks like that do go a long way, and also leave comments on the show notes page, give us feedback. I, Derek, I will direct him to it, so if you have any more questions for him, I'm sure he'd be willing to uh, you know, answer anything you may have. And then if you're listening to this on iTunes or one of the other platforms, please do leave a review for us. Again, little things like that really do help us out and let us know that this podcast is helping to motivate and inspire you and just give you a good perspective into the realistic side of trading. So again, thank you everybody for listening, and we'll be back for episode seven. Have a good one, everybody. This has been the Stock Trading Reality Podcast. Thanks for taking the time to hang out. To learn more about Clay and the Clay Trader community, including the trading team, premium training, and more, visit claytrader.com.