Transcription
[Music]
In today's episode, I'm going to interview one of my All-Star students from Warrior Trading. His name is Jess. He's a day trader from New York who has earned his $1 million badge.
In today's episode, he's going to share with you some tips and tricks that you can implement in your own trading today. But I'm going to remind you, as always, you've heard me say this before: my results aren't typical and neither are his. He's done something really exceptional, but you're going to want to tune in because he's got a strategy that is very interesting. In fact, he pulled it right out of my playbook. He focuses on trading lower price stocks with news, squeezing up highly volatile stocks.
But, you know what's interesting about Jess? He likes to trade in not the typical account size that you might imagine. Let's go ahead and dive into this episode.
All right. First question: I have it on good authority that you like trading in small accounts, which I think for a lot of people doesn't make sense because you're a seven-figure trader. You've made all this money. Why is it that you are perpetually keeping yourself in a small account?
It's a really good question, and it's something that I had to find out the hard way. Um, when I got started, I was trading in larger accounts. Right? So, um, you know, they're well over the PDT. And, uh, just to kind of go to where I started at, it was, you know, I would have an account with like Etrade or, um, it would be Schwab or anything like that where the account would have maybe 25, 30, 40, whatever amount of dollars in it. And I would have four times leverage.
So, let's say the account has $100,000 in it; I would have $400,000 in buying power. The biggest issue with that was I would use $400,000 in buying power, okay? And I would get myself into a really, really kind of sticky situation, um, you know, just being way too aggressive.
Yeah, and so I actually found that one of my safe places would be using, you know, one of these offshore brokers with a $5,000 or $10,000 account. So I can still trade the same exact way that I like to trade, very aggressive, but my $10,000 account would have six times leverage, so I would have $60,000 in buying power, and that would be kind of like a sweet spot.
Now, let's say, you know, I just really messed up, right? What's my loss? I lose the account; I lose $5,000 or $10,000, whatever I have in the account. And what that does is it kind of keeps me safe. So, you know, when I'm on the right side of my trading, which more times than not I am, I can grow those small accounts, you know, to what would be considered like a large account, and then I could kind of just adjust it as I need to.
That's really interesting! I feel like, um, I've talked about this before—that sometimes people who are younger and don't have as much money, you know, they think that that's a disadvantage. That, "Oh, I wish I was, you know, in my 30s or 40s or whatever, 50s, and had $30,000, $40,000, $50,000 that I could just put into the market."
And I usually say, "Look, you know, having a lot of money is not necessarily a good thing." Because you set up a $225,000 account, now you've got four times leverage, $100,000 of buying power. And, you know, if you're not able to really be good at keeping the guard rails on and controlling yourself, next thing you know, you have a day where you're on like emotional hijack. You punch in an order for 10,000 shares of, you know, a $10 stock, and you're in for $100,000. All of a sudden, that stock, you know, just like it—it allows the potential to make a huge mistake.
And, you know, I mean, I think it's great that you can use a broker, four times leverage is nice, but the fact that you need that $25,000 minimum, it kind of gives you like a just a little bit more leverage than maybe is ideal. So for you, you're doing offshore, you've got six times leverage. And then, do you usually like, do you just grow the account, grow it, or do you pretty regularly like drop it back down?
Yeah, so that's, you know, I kind of depending on the market conditions, if the market's requiring, um, you know, me to have more leverage, I kind of just leave it in. If the market is slower, you know, I'll just slowly kind of build it up and I'll take some out, build it up, take some out. And, you know, I get this question all the time: is, you know, why don't I grow it to, you know, over the PDT and go to people call it a real broker? And it's just, you know, it's just always been my sweet spot. I feel comfortable.
Um, I've always liked being kind of like the underdog trader—like starting from the bottom and working up, because it really gives me that pressure to perform better rather than getting sloppy and, you know, taking these massive positions that I have no sense taking.
See, I think that actually is the thing. When you're the underdog and you have a small account, you're kind of like your back is right up against the ropes. You make one mistake, your account's back to zero, or, you know, you're basically, you can't trade until you add more money to the account. So now you kind of have this built-in, like resting period. You've got to wait a couple days, right? You've got to send more money over the account; they’ve got to credit your balance. And then that sort of sometimes is like that necessary resting period just to, like, slow down to not, you know, just stop that spiral because otherwise, what with a PDT, you know, $255,000 account, you just keep going and going and going until that account's gone.
Now you've lost $25,000. Blowing up an account, like whether it's $25,000 or $5,000, like blowing it up is the same experience, so might as well do it with a small account, right?
Exactly! And I actually learned it the hard way, you know. I would take this huge loss in my, you know, be like a larger account and I'm like, "Whoa!" Like, and I just kind of— I blank out, right? I just keep spiraling, spiraling, spiraling, and before you know I'm down a substantial amount that could have just been completely avoided.
All right. So let's take a step back. How did you get started? What made you get into trading?
All right, yeah. So this is kind of a long road. Um, you know, I started kind of when I was in my, I would say early 20s. You know, I started a business; I went to school part-time, um, graduated from, you know, just a basic college, two-year degree. And, uh, it took me forever.
Yeah, but, you know, I started my business; I didn't really know where I was headed, but I was like, "You know, I need to make some money. I want to make my own money." So I started my business just like kind of a lot of people do.
Uh, my business actually took off, and, um, it was doing really well. So that kind of stemmed into, "All right, now what else can I do? Let me find something else that gives me a little bit more freedom." Because, you know, I thought my business was going to allow me the freedom, but it really strapped me down. You know, I was working 5:00 a.m. to like 9:00 p.m. You know, and I was just going at it just trying to, you know, really build it up. And before you know it, you know, a few years flew by, I'm like, "Whoa! Like this is not how I want to live."
So, you know, I had the capital to fund a trading account. I saw a lot of, um, you know, traders online. I saw, uh, it was actually a pump mailer I got a long time—a really long time ago. Okay? And the stock went crazy high. And, you know, so that was something that showed me that there's potential. You know, I saw people posting these huge P&L. I'm like, "Whoa! This is amazing." Um, there's got to be someone that knows how to trade this stuff. You know, these stocks must do this all the time. And that's kind of when I set off.
Did you get one that was like actually in the mail, like a postcard or whatever?
Yeah, it was an actual—it was a true pump mailer. I think I have it somewhere still. And it was like glossy; it said, you know, "This stock is so undervalued, it's going to whatever dollar it was." I don’t remember exactly, and I actually believed it, right? So I actually believed it and I'm like sitting there. I'm like, "Oh cool! Let me, you know, let me see what this is about."
And, uh, you know, that’s kind of what really sparked my interest in trading because I was like, "Hey, you know, I don't have to buy inventory. I don't have to sell inventory. I don't have to warehouse all this stuff. I don't have to drive back and forth and, you know, deal with all this chaos of owning a business. I could just sit behind my computer and trade stocks."
You know, that sounds amazing.
Yeah, I mean comparatively, that's kind of the illusion with being a business owner. A lot of people become a business owner because they want to be independent, they want that freedom, they don't want a boss, you know, just looking over their shoulder constantly harping on them. So they open their own business and then the next thing you know they realize they were working 40 hours a week at the job, punching in, clocking in, clocking out, and now when it's your own business there's no days off, there's no breaks. You're working mornings, all through the day, you're working at night, you're working the weekends, and you're now putting in a lot more hours.
So it's kind of like a funny thing. It still feels like freedom though because the work that you put in you benefit from, right? It's not like you're helping someone else's dream come true, you're helping your own dream come true. But at the same time, as you get older you start thinking, "Man, how long am I going to do this?"
So, all right, so that's what kind of got you, like, sparked on trading. So then how did you find me? How did you find Warrior Trading?
Um, so I actually poked around. I was all over the place on the internet. I was like, "Someone's got to know about this stuff," and "I gotta find it," because actually when I started my business, I found out a guy, my friend of mine that I work with, he was in the kind of sector that I started my business in. He actually taught me, so I'm like, so instantly I'm like, "All right, someone can teach me about this; I gotta learn it."
And, you know, so I kind of searched all over the internet and that's kind of how I found my way to, uh, you.
Okay, so obviously I'm a momentum trader; I think everyone knows this very well. So, and of course, I already know your strategy, but for everyone tuning in, tell us about what your strategy is for trading the markets.
Well, it's, um, almost identical to how you trade. Uh, we're all trading just momentum stocks. Uh, we're looking for, you know, lower price stocks between $1 and $10, you know, sometimes the occasional $15 or $20 stock if they're moving. But it's really just, um, finding momentum in the market and trading technical patterns.
And, okay, the nice part—nice part about that is, you know, we can just sit and wait for these stocks to show up and then actively trade them.
So, for someone who's newer and doesn't maybe understand exactly kind of how the market works, what does your routine look like each morning in terms of like at your other job? You're doing inventory and looking at sales coming and everything else like that. So as a trader, what's your routine look like? What's your morning?
Well, now, it's, um, it's a little bit, uh, low-key. Now I can sit down, uh, you know, I open, obviously, I open my Warrior, um, you know, my scanners, charts, everything. Um, I look for news, uh, you know, stocks that are gapping up. I see why they're gapping up; I look at the float.
Um, and it’s actually really simple. It's pretty basic. You know, I just kind of look at what's going on in the market and see if I can find a momentum trend on one of these stocks that are already, you know, gapping up or have news.
So for those of you guys who are new or tuning in, gapping up is when a stock is opening higher than it closed the previous session. Generally, the only reason a stock is going to gap up overnight is because they put out some kind of news and usually companies put out news either in the pre-market session or after hours. Usually, the big companies like Facebook, Netflix, Amazon, they put out their earnings in the after-hour session.
Um, I guess a lot of those companies are on the West Coast; maybe that's part of the reason. But a lot of companies also put out news early in the morning or even overnight because we have all these companies that are like foreign companies listed on the US market.
So when we sit down—and what time do you usually sit down?
I usually sit down right around 7 a.m. Sometimes it changes depending on the market, you know, if we’re having these super early ones, you know. If stocks are moving or the market's hot, but more times than not, it’s like 7 a.m. Eastern time.
Okay, so you're sitting down at 7 a.m. and then you're able to pull up a scan, and that scan is showing you all of the stocks right now in the market, and it just sorts every single stock in the market by the ones that are up the most. And so then you look at those and you're like, "All right, why is the stock up 75%?" What are the things that you're looking at in those stocks?
Like, give me an example of a stock that might be on the scanner that you're going to be like, "I don't care about it," versus one that you're like, "Want to get focused on."
Yeah, so when I’m looking at stocks, it’s really just, um, I want to see why it's gapping, number one. Um, you know, pretty obvious, but I don't try to, you know, kind of fall in love with why it's gapping up because if it’s just me and my thoughts about the stock, it might not, you know, entirely make sense because I’ll say, "Well stock should go up," when it, you know, in reality it might go down.
You know, so what I'm actually looking for is, um, stocks gapping up with rate of change, right? So I want to see that high volume rate of change. I want to see a lot of traders in the stock. I want to see it moving fast, and that gives me the confidence to kind of jump in and join, you know, the party of, you know, those huge moves, right?
So, it's classic trend trading: buy high, sell higher. You hear those people sometimes, I've seen like the vanity plate like "Buy Low, Sell High." My vanity plate is "Buy High, Sell Higher." I don't—I don't have a vanity plate, but that's—as a momentum trader, intraday day trading, you can only buy so low.
I mean, if you have something that's up 75%, buying low is a relative term because it’s already up a lot. But when you're joining the party, so to speak, and you're jumping on this stock that's moving higher, you're not going to—I mean, you're just going to like buy at the high of day or you're going to wait for a pullback or sort of describe maybe like what is your favorite setup just in sort of visual terms and chart pattern.
So, yeah, my favorite setup is, uh, stocks going straight up, okay? You know, I could kind of just, you know, jump in. But aside from that—and, you know, a little bit of joking, I do like, you know, a really nice, you know, curl pattern, right? So I want to see the stock move up, okay? I want to see it pull back, right? I want to see a nice resting period, and then I want to see it kind of curl back and push up towards highs, you know, break the highs and keep moving.
Uh, the reason I like that so much is because it gives me a sound floor or a sound stopping area, uh, based on the pattern that I'm actually trading.
Right? Because, you know, a lot of times we see traders are like, "Well, I don't know where to buy," and the reason they don’t know where to buy is because it's so extended that there probably shouldn't be a place to be buying at that point.
Yeah, I see what you mean. So I like that pattern a lot too.
Um, when you wait for the curl, it kind of saves you the pressure of feeling like you need to jump in while it's spiking. Because when something is spiking up, like let's say one of the things that we trade a lot is breaking news.
So when we sit down at 7 a.m., we already have stocks that are on the scanners that had news earlier, but then anytime between 7 a.m. and the market opening at 9:30, there's an opportunity for other stocks to come out with brand new news that we haven't seen before. So usually they come out at the top or bottom of the hour, like 7, 7:30, 8, 8:30, and then that's usually it for pre-market news headlines.
So when you first get that spike up, a seasoned trader who’s really good at reading the tape in the level two can pull up the stock, pull up the chart, look at the level two, see the orders that are on the bid, the orders that are on the offer, watching the tape, and maybe see a moment of hesitation. The bid tightens up, and boom boom, they’re in at $3.50. Next thing you know, it’s $3.75, $4.00. They're out $0.50 of profit.
And I imagine you do that, right?
Yeah, that's—that would be my go-to, um, just because the fast moving, those super fast moving stocks to me tend to be easy, yeah? Because I can see that rate of change so fast and I get so aggressive as a trader that I can get in, get out within seconds, and I can be done.
That's the move, right?
Yeah, I don't have to sit and wait and, you know, let it set up and pull back because sometimes it could be boring, um, you know, just to be honest. But, you know, yeah, I like that kind of first really nice move higher. But the problem with that is in a colder market, what ends up often happening is you get that initial spike, and then it retraces the whole thing.
It could go all the way back down. You could have a stock that goes up 50% in two minutes, three minutes, five minutes, and then goes all the way back down to up zero on the day. And if you jumped in too fast and you got in too high, you get smoked.
So, like in the hot market, those straight-up moves, which we've been seeing quite a lot in just these last couple weeks, can pay really well. But when it's a little colder or you're just feeling like I need to be a little bit more cautious, maybe you've taken a loss recently, whatever, waiting for that curl pattern can be a safer because then what you have essentially is a stock that made that first spike and maybe you already traded it, whatever. Now it's pulling back and rather than dying and going all the way back to zero, it's holding up.
And that's when kind of the merit of the news sort of plays in. Where, well, what is this headline? Because sometimes you’ll see a headline where the news posted is like, you know, the company’s been issued like a patent or something, or they’ve applied for an application for a patent, which is like an application, it’s not even approval. And you’re like, "Yeah, this probably is news that’s not going to hold up."
Or the news is like the company's reported a 200% increase in year-over-year earnings. Like, "Well, shouldn’t that result in a 200% increase in the stock price?" Right? I mean that kind of would make sense if net profit—
So then it’s holding up, and then that’s where you get in for that curl, and you get that squeeze through the high. And usually in that perfect momentum pattern, volume is even higher as it makes its way through the high versus that initial spike because now more traders see that setup and are jumping into it.
So the curling pattern is one that you like a lot. Of course, going straight up is ideal, and that is ideal for me too because like that’s that breaking news trade where you’re sort of benefiting from the algo spike.
The way the algorithms sort of works with these orders, for those that are new, is all of a sudden when a stock has breaking news and all these orders come in, the algorithm and the market makers pull their orders. And so all of a sudden you see this really rapid move.
And I mean just this week, we saw a stock that literally went up 2,000% in one day—it's like almost unthinkable, from $3 a share to $60 a share in one day. But, you know, it can happen, so that’s the type of stuff that, you know, I suppose they say dreams are made of, right?
Yeah, exactly, yeah.
Okay, so then what tool do you use for finding these stocks that are moving?
Um, you know, when I got started, I had every tool imaginable. I had like a thousand dollars in just fees of subscriptions and everything like that. And it was just—it was a disaster. I really found that less is more. Um, I don't really use any tools other than, you know, the Warrior scanners, uh, you know, the gappers, news, all that stuff, and that's pretty much it. I use my broker as well for charts and level two.
Cool.
And what, so as part of your strategy, how much do you rely on using level two? Could you trade without it?
Oh, no, yeah. It's, um, you know, it's probably 90% of just reading level two based, you know, based on the price action of the stock.
Do you think you could trade without charts, just level two?
You know, a lot of times, uh, people have asked me that. They're like, "Hey, you know, would you rather have level two or charts?" And I'm like, "You know, I don't think I could."
I don't think I could either. I I think—I think you could. I do. Because think about the times we’ve traded IPOs and you have no chart. Basically you have no chart, right? Because the stock just IPO'd. You have like one candle. That’s it.
And you’re still able to trade green candle going straight up, right?
Yeah, so I feel like you could.
It’s kind of like a nuance when you’re trading, you know. You have eyes on level two, eyes on, you know, time and sales, and like half an eye on the chart. And it just becomes like the second nature of watching that stuff happen as it’s happening real time.
And then, kind of like muscle memory takes over; it’s like, "All right, when this happens, when this series of events happens, you know I’m buying." When this series of events happens, I'm selling. And it becomes this very fluent, um, kind of motion—trading is in a large part, uh, a career of pattern recognition, right?
Sort of recognizing this relationship where, like you said, this happens and this follows—both on candlestick charts but also on level two patterns. Do you find yourself sort of, like, how visual are you when you're looking at a chart? Are you visualizing sort of what you think is going to happen next?
Yeah, so let me put it this way. Um, the other night I was sleeping and, you know, a chart in my dream put in this red candle that went like— it just kept going, like, through the floor, just kept going. And I'm like, "How is this even possible?"
So that’s how visual I am.
Stock negative?
Yeah, it’s—I’m a very visual person. I don’t look at that big question of, you know, "What is your percent growth today?" You know, I don’t really look at any of that stuff. I'm mostly only trading the chart pattern. I don’t really look at the price as much as, you know, I probably should because if you overlay a stock chart that went 2,000% and another one that went 200%, I could almost guarantee those patterns are very similar.
So it's all about the pattern rather than, you know, um, trying to trade, you know, numbers and P&L and stuff like that.
Now, I got a question for you. I’ve noticed that a lot of people who are attracted to trading are people who are sort of independent thinkers, like, and you already sort of exhibit that because you’ve got your own business. You're like, "I don't want to go down that traditional path. I want to do things myself."
And one of the challenges with doing that with trading is that when you try to do it yourself, you end up spending a lot of time doing trial and error. So did you go through years of trial and error kind of trying to figure it out yourself before you tried to find a teacher? Did you kind of just—what did you do?
Yeah, so I—I did go—I went a couple years, um, um, just trying to figure it out, right? I was like, "Okay, you know, let me just buy." At the time, it was U Microvision or something, and, you know, looking back it was a really nice trade but kind of like those NV videos and stuff.
But, um, at the time they didn’t really do much, right? I would get in, get out, get in, and I’m like, "All right, this isn't, you know, it's not doing the thing where they go straight up. Like, what am I doing wrong?"
Yeah, and it was after like probably a year and a half I started to venture out and, um, you know, say, "All right, you know, maybe I should actually get an education”—versus, you know, um, watching YouTube videos and trying to make that my education.
Um, it was—and that was a big turning point for me: was a true getting an actual mentor, getting actual classes, getting, you know, getting so dialed in that I was like, "Whoa! Like this is a huge part of this is everything that I was missing from why it wasn't working."
Well, the thing is like if you watch like, I don't know, um, Jim Cramer or something like that, like, the stocks you hear about are these big board companies. You hear about Tesla and Apple and Facebook and whatever. Those are companies that people invest in and they buy and they hold.
And I know that Jim Cramer probably is, you know, gets a lot of people that are just going to buy for like a couple weeks and then try to like trade it but don't know really what they're doing. But then there’s this whole sort of sub-layer of stocks each day.
And, you know, if we looked at the scanners right now, we've got one stock up 77%, another one's up 200%, another's up 115%. These are lower price—all of them are under $5 a share. They're small cap stocks that in most cases have some type of news headline that was a big deal for that small company that created this opportunity.
Now this one stock that’s up 700%, it's actually got, I’ll put it on the chart here; it’s actually got 250 million shares of volume. So, you think about this—this stock is traded; almost by the end of the day it’ll probably be over a billion dollars worth of, you know, worth of shares trading hands.
It's actually more trade than many large cap stocks, but we never really hear about those and so it can be—it can be hard to kind of initially get connected with, you know, the community of traders who are—and even these opportunities because they're below the surface; they're not what you would see on the surface.
And similarly with getting connected with offshore brokers, because offshore brokers aren't allowed to advertise in the US. So, you know, Fidelity and Schwab and E-Trade, they all advertise all over the place, you know, TV, CNBC, everything else, radio. So you hear about them, you open an account with them, you're like, "Oh my gosh, I need $25,000" or "It’s a cash on the account but you can only trade once a day," which is fine.
But yeah, kind of getting connected with that community is important. Going back to kind of being independent, I’m curious, just out of curiosity, I'm thinking about my own experience here, but how did you do with school? Were you like, were you really good with school or was school kind of hard for you?
Well, um, so I actually—I actually started out in a Montessorri school when I was—when I was little.
Same with me!
Yeah!
So, uh, I then I went to public school and, um, after a while it was, you know, the stuff that happens in a public school is just not the best. So my mom actually pulled us out. My mom and dad pulled us out and said, "Hey, you know, we're going to homeschool you."
Wow!
Yeah, so I was actually, um, homeschooled half of my, uh, career in school.
So then from there, uh, my mom’s like, "Hey, you know, I want you to go just go to college for me, just for me." And I'm like, "All right, you know, I'll do it." And it was, um, so boring that I—it took forever. I was like, "I don't want to go. This is so ridiculous! Like, I’m not going to use it or anything like that."
And it's not that—I don’t want to—that I didn’t, um, like it or, or, you know, I didn’t like college; it was I knew I wasn't going to use it. Right? I don't want—I didn’t need this guy, you know, that—not to be harsh or anything—that drove like a Mazda Miata to school telling me how I should invest, you know, in a company or something like that.
Yeah, I was like, "Buddy, like I don't—we—I can’t relate." So, you know, I was on my own path of that I want to be my own person; I wanted to be my own growth.
What was the hardest part about trading for you? Even right now, now that you’ve, you know, turned the corner and you're consistent and profitable, what’s the hardest part?
Uh, the hardest part is a—a simple one. Uh, it's always been emotion, uh, emotional composure, emotional control. You know, when I started taking the classes and when I started actually learning pattern recognition I was like, "This is easy! You know anyone can do this!"
My daughter was actually out here this morning saying, "Oh, look that one's going up! Are you in that one?" And she doesn’t even know what I’m doing, and she, you know, she’s four years old.
So it just goes to show you that, you know, the pattern is the pattern. It’s the emotional composure that is extremely hard. Um, discipline, you know, not getting emotional when you're in a loss. Um, you know, knowing how to keep your composure when you're in a loss. And same thing when you hit like these big wins, you know, being present and, um, holding yourself together as a stock is going straight up and you have, you know, massive size—not panic selling because it's just because it's going up.
Um, it’s a huge, huge part of trading that a lot of people don't understand. I still fall victim to, you know, you know just slamming a stock and, you know, getting smoked or, you know, just out of anger or something like that. But, you know, I've—as I grow and as I get better and better and better, it just becomes much easier.
You once told me, um, that you don't recall having a specific light bulb went off or on, like a turning point, but it was your turning point was much more gradual. Can you talk about that a little bit more?
Yeah, so it was, um, you know, I would—I would take a loss. And, you know that whole rep the failure repetition thing; you know they call it insanity because you keep failing at the same thing.
But what I would do was I would make a mistake, and I’m like, "All right, don’t make that mistake," and then I would, you know, try and I’d pick myself back up, get back on the horse, make another mistake. I’m like, "All right, well there’s another mistake. Let me add that one to the, you know, the toolbox."
And I—I made every mistake there was to make and I couldn't make anymore because, you know, I made every one of them, and all I had to do now was not do those and do the right thing when I was trading.
So it gave me that kind of gradual sucking less, you know, not being such an idiot as is, you know, in my P&L curve. So that’s what kind of really didn’t give me that light bulb. You know, I see people all the time; I don't really believe in it—that light bulb moment.
"Oh, you know, I had this spark and now I’m a millionaire!" No, it was, um, it was just trial and error: try again, try again, try again, get back up, and making sure I was learning from those errors.
Yeah, that's a good one. Um, I think the challenge that I face is that I find myself repeating the same mistake. You know, it's like I've made all the mistakes in the book, but then I came back to the start again and I start doing them again because it's just so easy, um, in that moment to let emotion get the best of you.
And you feel frustrated, you feel annoyed, and next thing you know you're just smashing that buy button. It's almost like chasing kind of the feeling because the feeling that you have is usually like, "I'm angry! I'm just so frustrated!" And you think, "If I could just have a winner right now, all of that would be erased."
Like if you had a big enough winner, all of those bad feelings would be erased. And when you start chasing those emotions, you're not really trading the market and the market—because the market doesn't care how you feel, right?
You got to trade the pattern, and if you got a good pattern, you got a good chart, then you can do well. And maybe you're in an emotional state when you take the trade and it works; maybe you're—you know, maybe you're not and it works. But you got to trade kind of like what's right in front of you.
So how do you deal with the fact that, um, oftentimes there’s a disconnect between what some would argue is sort of the fundamental value of a company? Like people were arguing during GameStop, but they'll argue that on a lot of these low price stocks. They'll say, "The value of this company's not worth, you know, it's whatever, its new valuation based on being up 700% is, you know, that much higher of a market cap; it's not worth that," blah blah blah.
How do you kind of manage those two extremes, the fundamentals and then like the technicals?
So a big issue I have is buying something like Nvidia and Tesla and Amazon because I don't believe that those are worth, you know, $200, $500, $700, wherever they're at.
Um, so for me, it’s kind of like the same way I trade: it’s like that underdog. You know, this company is worth this, right? It's $2. They came out with something really cool.
Um, not that I, you know, believe wholeheartedly in these every stock should succeed and all this other stuff but to me it makes more sense for a $2 stock to go 700% than it does for, you know, Nvidia to go way up or Tesla or anything like that because these smaller companies don't have this huge infrastructure to fail; they have minimal.
So it makes a little bit easier for me to kind of justify.
What extent do you do research on? You know, do you do like homework at night? Like kind of like researching companies or reading balance sheets or earnings or anything?
Yeah, so I—you know, I used to really dig in, so I was looking at like CEO filings, like who's buying what, where, and all it did was fry me out. You know, I was seeing these filings while I was sleeping and I was fried; I was trying to be ahead of the market.
And as soon as I let go, right, the human emotion thing, as soon as I let go and just said, "You know what? Who cares? Just trade what is trending, what's working." And then, you know, show up every morning, trade what's trending and, you know, yeah you can see if they have news, but you don't have to dig into, you know, the actual financials or anything like that.
And it really kind of took so much weight off my shoulders that it just made it so much easier for me.
I like that. And I also feel like sometimes you can form a bias when you do a lot of that reading. You know, I remember hearing that like Warren Buffett went to bed reading like quarterly earning statements or something and I thought, "Oh, you know, if he does that maybe I should do that too. I want to be a—I don’t know, an investor, but you know, a trader."
But then you start reading about these companies, you're like, "Oh, this company sounds so great!" Well, they, of course, they're going to sound great; you know, they're writing—they wrote it themselves. They, you know, they want to sound good for investors, you know, potential shareholders.
So you start to get this—you can get this artificial kind of sense of confidence like, "Oh, this company is going places." And then next thing you know, that overrides you cutting your loss on it because now you're in the red, and you're like, "Well, but this company is going someplace."
And so I find that these two, uh, forms of analysis can really be at odds. Your fundamental analysis is is good for long-term investing where you want to hold for a long time and your technical analysis is good for capitalizing on short-term price action.
And Warren Buffett probably doesn't want to do a lot of technical analysis and we as active traders probably don't want to do a lot of fundamental analysis. And it's kind of nice to let yourself off the hook and say, "You know what? I really don't need to spend all night doing that kind of homework."
I would say maybe for someone who's new, if you wanted to do something at night, you could maybe replay the market on a simulator and rewatch the price action from earlier in the day.
You know, that would be something that is probably more valuable—watching the level two, watching how those technicals played out, you know, studying the charts, the patterns, and kind of, you know, analyzing your metrics.
But yeah, the fundamentals—probably not as important.
So tell us, how has your life changed since, you know, making this kind of money that you've made trading and now being able to, you know, more or less depend on the market for that income? You still have your business, but how have things changed?
Um, you know, it's—it’s not really new to me. Um, so nothing has actually really changed much because I found success, uh, kind of early on in my, my, you know, professional life, um, with business and everything like that.
And what this has done is it just kind of builds on that, right? So it's not just having a business, it's having a business and being a profitable day trader, right?
So it's—it's for anyone that has like a job, you know, it's not just having a job, quitting the job to be a day trader; it's you can have both, right? Maybe, you know, work around your hours and, you know, now you have this double income, right? And it's—it’s all about that self-growth.
Where a lot of people want to let go of one thing to grab to something else, right? "I can't quit my job to learn how to trade." Well, no, you shouldn’t have to. And for me it was just, "All right, you know, I have my business that’s running, it's making money. Let me get this trading thing going, and it’s running, and it’s making money."
So, you know, it's like, "All right! Now what else? What else can I do?" Right? Let me go buy property, let me go, you know, do something else. It just all—it does is it kind of fuels that growth of, you know, in your professional life and your personal life.
And I think that's what more people need to look at versus letting go of one thing, and, you know, attaching this label of "I am a day trader," or "I am a, you know, business owner" and getting into kind of that multiple stream of income.
You know, that's a really good point because, um, I've often said that I notice that sometimes I think the people who make the most money in the market are the people who need it the least.
And it’s infuriating if you're one of the people who feel like you really need money, which was kind of how I was when I got started. But when you’re in the place of scarcity and you're like, "I need this money," unfortunately it creates desperation. It creates a lot of pressure, and then all that feeds into the emotions that already come with trading, and it can set you up for failure if you're not prepared for it.
You know, on the other hand, you come in in—in a really fortunate position which you have to recognize. You already had income from your business, and so it was like anything I can make from trading is awesome. It’s like a bonus.
And if it doesn't work out, hey, you know I could probably handle that too because I’ve still got the business. And so then you might think, "Well, after you become really successful trading, I'm just going to give up the business."
Like, "That takes so much time," but then there's sort of that thought of like, "Well, if I give up the business then I'm 100% dependent on trading, and now I'm going to have this pressure from it."
And what if we have a slump? What if we got into a bear market? We all know the market goes up and down. Someone asked me just yesterday, "Ross, um, you know, how do you deal with the fact that you make so much money when the market's hot? What happens when it's cold?"
And I said, "I show up every single day of the year." So it's true! During a hot market, I’ll make more money; during a cold market, I can still make money, I just don’t make as much.
So my income can be more fluctuating based on market conditions which are out of my control, and you know what? That’s true with the business too. Your business income is going to fluctuate because the things are out of your control.
But the people that seem to do the best in trading are the ones who already have some type of established income or cash flow, and then trading is a secondary because then you're approaching trading just from this perspective of like anything it can add is awesome.
And I feel like that is really important. So, you know, you guys tuning in, any of you who are able to do that, you know, I think it's great. I think it’s really—that’s something you want to think about: where can you make that extra money?
What’s interesting about that is, you know, a lot of times everyone's like, you know, I’ll talk to people all the time like, "Well, I can’t do that." And I'm like, "Well, why not? You know, just do it at night! Do it—that’s what I used to do. I would do it at night. I would do it at 2 a.m."
You know, sometimes I'm out here at, you know, 2 a.m. doing, working on some other stuff when I have to. And it’s not that it doesn't—you know, money is out there, you just have to go get it.
All right? You know, so if you, you know, start a business or whatever it might be, um, you know, try to, you know, focus on just getting little bits of income here and there, and then it will build into something. Same with trading, right? Everyone's like, "Oh, I got to get in the market and, you know, I'm gonna trade the $100,000 account."
No! You know, you got to slow down. Make $50 bucks, make $20 bucks, make $10 bucks, right? Just sub—just get a little substantial kind of gain that will fuel your growth, right? We don’t start a business with a million dollars—at least not a small business, right?
You kind of just slowly grow it, build it up, you know, whatever it might be. If you’re selling cars, houses, you know, inventory of, you know, headphones.
Yeah, um, you know, it just takes time.
Yeah, I think that really is the best way to get started too is to start small because so many people, like you said, you know, and and I see this a lot with people that are older in their life because they have more disposable income or they just have more money.
So they'll be like, "Oh, I've got a $100,000 IRA account; I guess I'm just going to start trading in it." It’s like, "Whoa! You know, slow down!" That is—that’s like giving a 16-year-old a Ferrari. You're going to make mistakes.
I mean, every 16-year-old gets some bumps and scratches on the car. It's going to happen! That’s why you get a beater. You don't want to start with a six or seven-figure trading account; it's way too much risk for a beginner trader.
But unfortunately, you know, this kind of thing in the market, you know, you can—it’s free! So, you know, if you want to open that account and the broker wants you to trade in it because of course they make money the more you trade, and they give you that four times leverage, you know, you hear these horror stories where people got in over their head real quick.
And so, I mean that also kind of goes back to as a beginner, you know, even if you have— even if you're a millionaire as a beginner, fund an account with $5,000 and see if you can grow it, right? And if you can’t grow it then that by itself tells you you got to go back to the drawing board when it comes to strategy and risk management, stock selection.
If you can grow it, then grow it to $10,000, grow it to $15,000. By the time you grow it to $225,000, by that point you're going to have some experience under your belt, and now you've earned kind of the right to use that leverage, you know, or to go ahead and say, "You know what? I'm going to fund an offshore broker and, you know, try it that way."
I mean either way is good, but so tell me, for a beginner trader, what kind of words of wisdom would you share for someone who's sort of at the beginning of their journey?
Um, number one is, is start slow. You have to start slow, just building on what we were just talking about. Uh, number two is you have to have an education. You have to find a mentor. I started my business with a mentor; I started trading with a mentor.
Um, you know, I’m not going to—if I start a car dealership, I’m not just going to go, you know, buy a car and say, "Here’s my dealership." I’m gonna find someone who’s doing it right and find out how and why and what’s working for them.
And, you know, I think it’s super important, right? I wanted to trade stocks, and so I had to go out and find someone that was doing it exactly the way I wanted and what was actually interesting to me was, you know, I found someone that was not flashy, right? That was appealing to me, right?
I live out in the countryside; there’s, you know, thousands of acres around me of farms and apple orchards. I wanted to find, um, you know, someone that was doing it the way I wanted to see it, right? And that was really important to me, right?
There’s, you know, a lot of value in that. So finding a mentor based on what I was looking for was super important, right? So, you know, it was—make $200 a day back when we started—back when I started with you, you know, it was like $200 a day or something like that!
Yeah!
And to me that was—that was amazing! I was like, "Look at this guy! He’s making $200 out of, you know, out of thin air! This is so cool!"
Yeah! So that was—that was what was really appealing to me. And that $200 a day, you know, number that came from when I was getting started, you know, living in rural Vermont, and, you know, during the Great Recession we had this terrible economy. I couldn’t get a regular job!
I mean I could minimum wage, but I thought, "You know, if I was doing $200 a day, I mean $200 a day—that’s $1,100 a week! That’s $50,000 a year!"
Now my friends up in Vermont who were working minimum wage jobs, I mean some of them were, you know, painting houses or working at a diner or something like that; they’re making minimum wage. Maybe some of them are getting tips, whatever.
Some of them are getting paid under the table in cash, but they’re not making $50,000 a year! There’s no—none! None of them—not even close—$25,000, $30,000 maybe!
So it’s like if I could do this—now granted, you know, you pay some tax on your trading profits; it’s not under the table the way working at a diner might be. But the fact that you could trade for maybe an hour, two hours a day, pull that profit out, and then you got the whole rest of the day to do what you want—work on another business—it’s like that’s pretty amazing.
So, you know, I think—I think when I think about trading, I sort of, you know, I'm in this position where I’ve met so many traders over the years. I can kind of narrow down that I really think there are two primary causes of failure in trading.
The first is people come into the market and they don't have a strategy. So this happened during the doom bubble; it happened during the pandemic. People come into the market and they buy stuff—Tesla, GameStop, whatever—it goes up and they're like, "I'm rich! I'm smart!"
And they get an artificial sense of confidence; they think they know what they're doing. But they're benefiting from a bull market, and there's nothing wrong with benefiting from a bull market, but there is something wrong with having that overconfidence run out, and then you start losing.
And especially if you adjusted your lifestyle to the money you were making, which was probably more beginner’s luck than anything else, and now you're like, "I got to pay my $4,000 monthly Lamborghini lease payment and I'm not making money trading anymore!"
This is a real problem I’ve got myself into. That causes failure.
So people that come in with no strategy ultimately little beginners luck sometimes if they came in at the right time, but it runs out—and then they’re gone. Then the second group of people, they have a strategy but they lack the discipline to follow the rules.
We'll talk about that in a second, but in order to find the strategy, you have to find someone that you can learn from. And I've got this book here that this monitor just under this monitor called “The Intelligent Investor” by Benjamin Graham. It's, um, it's the forward is by Warren Buffett and it’s about value investing.
I've got a couple other books on value investing here. This is one by Peter Lynch.
Um, and in any case, I remember reading these books over the years—um, most of them fairly early on in my endeavor to trade and invest. And I, I thought I was like, "Well how the heck am I going to do this with a thousand bucks?"
You know?
And I realized that, you know, learning about how Warren Buffett invests or how Peter Lynch invests is not super relatable to me. I mean it’s interesting, but I'm just not at that level. I mean how many years would it take me to double a $1,000 account investing in sort of the Warren Buffett style? Probably, I mean, if I got lucky maybe two or three years and that would be achieving some impressive performance.
So I kind of realized that if I want to grow a $1,000 or $2,000 account, well, I’m not going to do it with their strategy. In fact, I’d be better off probably buying a lawnmower and going with and mowing a bunch of lawns for, you know, a couple hundred dollars a day.
Then I would be investing that money, and I'd see better growth if I actually work for it. You know, then you kind of think, "Well, all right, but who else is out there?"
And you realize there are some people out there that are trading, uh, perhaps with account sizes that are more similar to what you're going to have and perhaps a strategy that relates to you.
Now I sometimes will see traders who maybe started kind of like me, but then pretty quickly they move up to trading, you know, with two, three, four, five million accounts, and all of a sudden they're so big that that’s not really relatable anymore either.
So with their teaching, you know they might have $500,000 drawdowns and it’s like as a beginner trader, I can't afford that. So it's like you gotta find someone who’s got—and it does, look if it's me, it's me; if it's someone else, it's someone else; it doesn’t matter. You guys choose who is right for you, but you got to find someone who's got a risk tolerance that lines up with you, whose account size more or less kind of mirrors or is similar to what you kind of think you could achieve, who are trading types of stocks that you can understand, a strategy you can understand.
Let's say Jess, you were going to open a coffee shop. If you’re going to open a coffee shop, what's the right way to do it?
Well, I’d probably just drive through Starbucks, get my coffee, and then go home and trade stocks.
But okay, all right, all right. Okay, well, the second—the next best way may be to get a job at Starbucks, learn as much as you can behind the scenes—a covert operation, right? Try to understand what’s their business model; what’s their niche? You know, how are they running this business?
Yeah!
Yeah, I would find out what's missing, what people are looking for. And, you know, I’d find some little pocket that was needed, right? I would find someone somewhere that was doing something that I wanted to do and, or that someone was looking for. Replicate that!
If someone’s already got this niche—like let's say up in Brattleboro there’s this nice coffee shop called Mocha Joe's, and they've been around for decades. So it's like, "All right, what is it that's allowed this shop to be around for that long when other coffee shops come and go?"
So you figure, is it the location? Is it the menu? Is it the prices? And you study that, and you—and that becomes your kind of case study.
And then you try to—you try to essentially—you take that strategy and you try to implement it. And I think that’s what we’re doing with trading is like in a sense what you want to get from someone is a business plan. Like this is how to trade; this is where to get in, where to get out.
And then it doesn’t mean it’s going to work for you, but it sure is a better starting point than starting from nothing, starting from scratch, right?
Yeah, exactly.
So what gave you the confidence to take the risk of even starting your own business or trading in the first place? Why didn’t you just go the traditional route of, you know, getting a regular job?
I— I come from a self-employed family, so that was kind of like the spark of it. I knew, um, you know, I knew what working would do for myself. You know, working hard and, you know, it pays for nice vacations, it pays for good family stuff.
When I started out, you know, I was—I wanted a lime green Lamborghini and a penthouse in Miami.
Wow!
And then met my wife and, you know, things changed, but I still, you know, stayed on track of wanting to be able to, uh, provide for my family, right? I wanted to say, "Hey, you know, we can go on vacation, and I’m actually leaving for pretty soon and not have to worry about nothing, right? I want to go, I want to eat, I want to, you know, have fun with my kids."
You know, I, at the time, I didn’t even have kids. I was like, "You know, I don’t want to be away from them when I do have kids. I want to be able to send them off to school, I want to be able to pick them up from school."
Um, and now that that kind of is evolving into reality, it's a huge—it’s been a huge moment for me. You know, all that work and dedication to get to that point kind of unfolds.
So I think that, you know, when people are looking for, you know, where do I start, what do I do? You just have to start, right? You have to start somewhere.
Yeah!
And then you have to start with your best foot forward. A lot of people, you know, a lot of traders I see, they’re like, "Well, you know, I’m in a Discord." And I’m like, "What the heck are you doing there? You know, these people are unreliable. You don’t even know who they are."
Right? We—you know, all like the meetup that we had was a couple years ago, right? They're all now my friends, all these big profitable traders, and it's because they're all real people, you know, doing the same thing that, you know, we're doing. They have the same type of lifestyle, you know? They just want to provide for their family and be happy, and that was a huge, huge turning point for me and, and kind of, um, the evolution of my life.
So that's kind of why I—I didn't go for that traditional way, right? I didn't want to be strapped down. I didn’t want some guy telling me—or some girl saying, "Hey, you know, you're sick, you still got to come in, and you know, have to go to work and stuff like that."
Now, if it’s your own job, you come in even if you’re sick because it’s like, "Well, I got the sniffles but I can still sit here in my chair, and I could probably maybe even make some money."
I traded the whole week that—I remember had COVID. I had COVID and honestly, I traded pretty well.
I started thinking maybe it was a performance enhancer. I was like, "Maybe I should get COVID a little more often."
The fever, the fever kind of—it fuels those chart patterns up for—I think it sure does!
Um, you know, there's a—there's a quote I don't know if you've heard it by Jim Carrey. I think he was doing like a commencement speech or something, but he's talking about what he learned from his father.
And he said, "What I learned from my father," he said, "My father could have been a great comedian, but he didn't want to take the risk, so he took the path that was tried and true."
And I think I understand that. Maybe he—he still, he failed at that—maybe he got laid off or the economy or something. And so he said the lesson I learned from my father was that you could fail doing something that you don’t even want to do, so you might as well take the risk of doing something you really love.
Exactly!
And you know, that’s a huge point because everyone is so—everyone fails before they even start just because they fail mentally. They're like, "Oh, I can't do it, I won't do it, I I already failed; I can't." And then they walk away!
Like, at least try and then fail. Who cares, right? If you're not even going to try it, what’s the point? Try it; fail, and then move on.
So, um, yeah, I believe—I believe in that because I think the whole process of life in—in general is trial, error, failure, right?
Yep!
And getting up and moving on. If you've enjoyed this interview with Jess and you're curious about the strategy that Jess and I trade every single day, I will put a link—it'll be pinned at the top of the comments and in the description where you can learn more about the strategy.
You could watch my free intro to day trading course, or you can check out a two-week trial and be a member of the community at Warrior Trading and trade side by side with me and Jess and the rest of the members at Warrior Trading.
As always, if you've enjoyed this episode, I hope you hit that thumbs up! I hope you subscribe to the channel, and I'll remind you trading is risky. Our results are not typical, so please manage your risk, take it slow, and always practice in a simulator before you put real money on the line.
We'll see you for the next episode real soon.
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