Interview with a Trader: Inside the Mind of Tom Wrigley
His name is Tom Wrigley, or as most have come to know him “@WrigleyTom.” Tom is an Evans Scholar recipient, which enabled his undergrad study at Northern Illinois University. He now holds an MBA from Lake Forest Graduate School of Mgmt.
Tom has a significant background in Finance/Investments with tenures at 3 major financial institutions and 1 boutique firm. He holds more than 15 years of experience trading, while being dedicated as a full-time trader as of 2008. His trading style of choice is 2/3 swing and 1/3 scalp trades.
When he isn’t swimming in market numbers and information, Tom enjoys golfing, barbequing, wise-guy movies, live music, Chicago Fests & travel. He was born and raised in Chicago, which is where he still resides today.
Tom took some time from his busy schedule to answer some questions for me:
What first influenced your interest in the stock market?
“I always loved to analyze & learn the nuances of companies that I was familiar with (ala Peter Lynch). I was drawn to the competitive nature of trading while learning the art & science behind it.
Last but not least, the very idea of being able to profit from my due diligence launched me on my journey.”
What methods/strategies have you pursued that have failed for you in the past as a trader?
“Penny stocks – I found that most offered limited information and insufficient resources for research and material information. I quickly discovered the realities of outsized risk/reward and large drawdowns became the norm.”
Who are influences/role models for you that are relevant to trading and why?
“William O’Neil – His CAN SLIM strategy taught me to identify winners before it was reflected in stock price.
Jesse Livermore – Taught me trading is dynamic, but a majority of the rules are constant. Also expanded my trading skillset in shorting stocks.
Paul Tudor Jones – Integrated a lot of his style into my existing trading style as it related to humble mindset, forward thinking, mitigating risk, and technical analysis.”
When/what was your “ah-ha” moment? What was the breakthrough?
“When I discovered there is a low percentage tied to a perfectly timed trade. I quit trying to pick the top/bottom of individual stocks, as well as the market, as a whole. Discovering this, translated to trend trading, extending gains while minimizing losses, and learning the undercurrents of price movement.”
How would you best describe your trading style?
“⅔ Swing Trader, ⅓ Scalp Trader.
Ultimately, I try to build core positions in stocks and trade around my core while building capital. If I scalp trade, it is usually not in the “flavor of the day,” as it is most likely a crowded trade being influenced by capital in multiples of mine. This set-up usually translates into unfamiliar territory, where I am disadvantaged and prone to breaking my trading rules. More times than not, when I stray, it ends with “lesson learned” and the accompanying capital loss.
My Edge = Discipline – Stubbornness.
And, I believe I am always in the early innings of a perpetual learning curve.”
What key rules do you apply to your own trading?
“Technical indicators play a big role in my style of trade. If I am late to an idea, I exercise patience in waiting for a better setup. If I am early to an idea, but the setup is there, I usually scale in.
When the trade starts to work, I let price guide me in adding to my position. If I am wrong on a trade, I systematically exit and move on while learning from my mistake.”
What do you look for in the stocks that you trade?
“I tend to trade fundamentally sound companies utilizing a bottom up approach. From there, I rely on technical analysis to guide me in when to add, scale back, hold, or exit the trade.
Again, price is the predominant variable. I favor volatility in the stocks I trade, but I also keep a mental score card on how my stocks are correlated to the general market.”
What do you feel sets the great traders apart from the rest?
“Great Traders …
– Break bad habits quickly.
– Learn & graduate from mistakes.
– Respect their style, strengths, and weaknesses.
– Keep a calendar & also a journal.
– Manage their ego, emotions & feelings.
– and, always remember that the market owes them nothing.“
What can you tell readers about your risk management approach?
“For me, risk management starts before a trade is put on. My exit strategy is formulated before execution of the original trade. I don’t have hard percentages of what I am willing to lose or intend to gain. Instead, I know my parameter ranges from experience and let price dictate the triggers. If price works against my trade and I conclude that my trade was a mistake, my goal is to exit the trade with minimal losses.
I consciously try not to revisit a specific trade idea until something material has changed and/or I am emotionally detached from the original idea. Also, I tend to favor mental stop losses, especially in today’s machine dominated trading environment.”
What trading moments make you the most proud?
“Any profitable trade is a good one, but I tend to enjoy the contrarian trades the most. I’m a firm believer in thinking outside the box, and capitalizing on the herd mentality. When I first began trading, it was chasing what the crowd was trading. After some experience and a reset, I learned that multiples can be earned on the same dollar that the herd is fighting for, by doing the opposite, at the right time and price.
An example of this is when I bought Facebook, at $26, for my Dad. While the crowd spent their days calling it the next Myspace and thinking up new hoodie jokes, I did the due diligence and realized its power and potential. I’m proud to say my Dad still holds his original position. And even though he denied my efforts to add along the way, we did compromise and he agreed he cannot sell a share unless I give him the green light.”
The most upset?
“When I beat myself up over a bad trade/missed opportunity and let it affect my next trade. I try to combat this by owning my mistakes and keeping my confidence in check. One helpful association I try to practice is trading can be like golf – I try not to carry my baggage to the next trade/hole. When I do, I find it handicaps my decisions.
My goal is to start each trade/hole fresh, without clutter, and learn to improve my results through discipline & refinement.”
What books, websites, or other resources would you recommend to those wanting to broaden their trading knowledge?
“Information is everything in trading. Start with a shotgun approach, and funnel down into a rifle approach that feeds into your personal strengths and trading style.
A few recommended books –
How to Make Money in Stocks: A Winning System in Good Times and Bad – William O’Neil
Trading in the Zone: Master the Market with Confidence, Discipline and a Winning Attitude – Mark Douglas
Reminiscences of a Stock Operator – Edwin Lefèvre
Technical Analysis Using Multiple Timeframes – Brian Shannon
The Art and Science of Technical Analysis: Market Structure, Price Action and Trading Strategies – Adam Grimes
Trade Like a Stock Market Wizard: How to Achieve Super Performance in Stocks in Any Market – Mark Minervini
What advice can you offer readers regarding position sizing?
“Scaling in/out of positions is an elite skill. Today’s fast moving world of instant gratification combined with an all-or-none approach doesn’t help matters. If a trader can master the systematic process of scaling in/out, it may open the door to capturing more gains, reducing risk, while minimizing losses.
However, every trader is different. A trader should always balance their position size as it correlates to their individual risk profile. This is especially relevant in front of events such as earnings, FDA/PDUFA dates, conferences/analysts/investor days, quiet period/lock-up dates, etc. There is also headline risk and geopolitical risk which can be harder to identify, but should be accounted for when managing size.
Personally, I often maintain/trade concentrated positions because it fits my risk profile. When my position size exceeds my risk parameters, I make adjustments in the form of reducing size and/or hedging positions to account for the concentrated risk.”
A lot of traders plateau and have trouble evolving beyond this level. What advice can you give to them?
“Trading involves a methodological balance of compounded knowledge and constant refinement. Even the most successful traders (similar to successful athletes) will experience slumps or periods of underperformance. It’s how you respond to these periods that will get you back on track. There is no one size fits all. Radical change is rarely the fix.
When I feel my trading is subpar, I go back to the basics. I try to identify where my trading and performance took a wrong turn and what were the causes/effects. Once I have identified what lead me astray, I respect the fact that I screwed up and I own it. A trader needs to realize that he/she should always be learning, tweaking, adapting to change. The moment you stop growing as a trader, is the moment you’ve capped your potential.”
Now that you have developed into a successful and profitable trader, what are you doing to better your skill?
“I analyze the “why” [i.e. the process] vs. the “what” [i.e. $, % gained/loss]. Understanding the “why” behind a good/bad trade means I can replicate/not repeat my success/failure when it’s time to put on my next trade. The “what” [stock name, gain/loss] is simply a byproduct of my process.
To clarify, think of it in terms of the proverb, “teach a man to fish and you can feed him for a lifetime”. Understanding the process that went into a trade strengthens my competency while minimizing emotion. And, if the trade was simply dumb luck (gain/loss), then I call it that, and move on. Ultimately, with each trade, I try to utilize my skillset, exercise discipline, and learn/grow from the success/failure.”
Any habits or methods that you use that others might think is unorthodox?
“There are always exceptions to the rule.
Normally, I try to stay away from trading pre-market/after-market. Normally, I will not trade in the first half-hour/hour of the trading day. Normally, trading a known event (such as earnings, court rulings, FDA/PDUFA dates, etc.) is a no-no for me.
With that said, many of my most successful trades, have come from breaking my general rules. But, I do not put on these trades blindly. In each case, seldom as they may be, I usually do so for good reason and with measured risk. Measured risk can be captured in the form of an option strategy, adjustment to normal position size, and/or time allocated for the trade to play out. Again, these are special situations vs. my normal trading profile, in which I feel reward outweighs risk.
The flipside to breaking my general rules is that it can cost me in the form of realized losses, opportunity cost, denting my confidence, etc. So, as with any trade, I take note of what I did correctly/incorrectly, and analyze how it contributed to my trade decision. Success or Failure, I learn/grow from the experience, and I try not to make a habit of staying from my style/risk profile.
For those who are just beginning to get their feet wet, what advice would you give or direction would you point them?
“First, make sure you have the proper resources (i.e. capital, technology, support from those close to you, hunger, stamina, knowledge, desire, discipline, etc).
- Start with paper trades, develop a style, learn your strengths/weaknesses, and build confidence. When you are ready to trade, start small (go for singles, not home-runs), and continually refine your process.
- Realize there is a learning curve & shortcuts can be costly.
- Do not force a trade. Chasing rarely pays off — There will always be another opportunity.
- Humbleness opens the door to longevity.
- Omit Hope, Wish, Luck (along with any other passiveness) from your strategy. I’ve even eliminated them from my trading vocabulary. You can even throw into the mix, the word “Interesting” [empty word] … again, back to the “Why” – Why is it interesting?!
- Support opinions with facts – i.e. “xyz is going to $25” [crystal ball approach] … Why?! — “I think xyz can possibly trade to $25 because it’s a measured move” OR “I think xyz can possibly trade to $25 because it’s implied volatility suggests it, off a positive earnings surprise”. Again, adjust the way you think, and reflect your thinking in the way you trade.
- Avoid groupthink & realize everyone’s profile is different – Do not compromise your system.
- Stay clear of illiquidity & cheer volatility.
- Remember to pay yourself – realized gains can vanish quickly.
- If you’re waiting for the perfect setup and/or macro environment to trade – You will never make a trade.
- Keep a positive mindset & never get emotionally attached to a trade …”
Any advice for those traders who are already successful?
“Artificial Intelligence & Social Trading Platforms are a couple trends that aren’t going away any time soon. Successful traders know their environment and adjust accordingly.
Also, I have yet to meet a trader that hasn’t experienced a major misstep – a successful trader never forgets those humbling experiences and keeps his/her ego in check knowing missteps will happen again. They embrace material things, worth their time … while not participating in the noise and games that clutter their focus.”
What would you like your “legacy” as a trader to be?
“In a world where “takers” seem to outnumber “givers” – I like to think of myself as a “giver”. When it comes to trading, my modus operandi is it’s Traders vs. The Market (not Trader vs. Trader).
My goals include maximizing my P&L, growing my skillset, and adding to my knowledge bank each and every day… while still being thankful I partake in the greatest “job” ever that I cannot wait to jump into, day in and day out.
As I learn and grow, I find joy in giving back … by sharing and trying to help my peers. I like to be genuine, grateful, respectful, helpful, transparent, engaging, while passing information and generating ideas for peers to potentially capitalize on (or pass on) – all without an agenda or bias. When I receive positive feedback from fellow traders on how I helped in some way, made a difference, or sparked a positive catalyst in their day – there’s no greater reward.”
I want to personally thank Tom for taking the time to share his thoughts on the above subjects with us. I’m sure his words will inspire many, in many different ways. Great insights here to apply to numerous styles of trading.
Follow on Twitter @WrigleyTom