Interview with a Trader: Inside the Mind of Momotrader

momo

His name is Jason, but he’s better known as “momo” or “momotrader” for the last 20 years on social websites and trading chatrooms. Momo has been an active trader since 1996 and professionally trades stocks, commodities and volatility.

He is one of the more actively followed live realtime traders on Twitter.  He holds a BS in Electrical Engineering, and currently resides in Denver, CO.  Most importantly, he lives for trading.  Loves it.

He’s an extremely gifted trader that has taken the time share some of his experiences, and provided me with a very insightful and detailed interview. Enjoy.

 

The Interview

What first influenced your interest in the stock market?

“Money management.  I was making good money in a Telecom career back in the early 90’s and needed a better way to make my money work for me.  Simple investing was never my focus and I’m too analytical and ambitious to just sit and watch mutual funds.  So I got a Datek account back in 1996 and started trading on the side.  Got hooked.  Matched my aggressive personality and analytical skillsets perfectly.  I also was an internet junkie before the web was around so I linked well with trading online.”

What methods/strategies have you pursued that have failed for you in the past as a trader?

“Playing news alerts or earnings plays – i.e. chasing momentum after the event occurs. Those trades are the hot scanner plays for small time scrappers.  They rarely work for me, and it’s a fools game if an online trader thinks they can outrun entries versus the algos or the insiders who have the trade long before you do. I soon realized that if you aren’t one of the first into the trade, you’re always chasing someone else’s tail.  That’s a losing formula.”

Who are influences/role models for you that are relevant to trading and why?

Paul Tudor Jones for trader mentality and grit. He shows the cutthroat, confident attitude a trader must have.  Stephen Bigalow for helping me learn simpler charting techniques that work.”

When/what was your “ah-ha” moment? What was the breakthrough?

“The 2nd time I had made AND lost a million bucks in the market. Yep, did it TWICE in my career before finally figuring it out.  Knew I had the talent.  What I lacked was the trading discipline.  Learning how to handle losers is 100 times more important than knowing how to find winners. Finally putting priority on that was my breakthrough.”

How would you best describe your trading style?

“My style varies based on the market. If you don’t adapt, you’re setting yourself up for failure.  As an example, before July 2015 I was almost strictly a small cap momentum trader (daytrades and swings).  I also traded volatility a lot.  Around August 2015, I clearly saw that the small cap momos were dying out slowly and real consistent beta was flowing into the commodity space with the global uncertainties starting to ramp.  Losing Fed fuel also was a big tell.  So I started trading ETFs almost exclusively.  For short term trades, ETFs are great.  They’re liquid, and you don’t fight contango or decay as much if you daytrade or trade 1-3 day swings. 

I consistently look for bottoming opportunities that have emerging pivot or breakout setups.  I prefer trades that are highly extended from their 8 day ema.   I also want serious beta or movement.  After all of my experiences, I can say confidently that I’m a very good trader.  I’m highly analytical, aggressive and have discipline… there is no reason why I shouldn’t have a high risk profile for every trade IF I’m confident in my method and I’m sitting right in front of a computer watching every tick.  I am not afraid to go big and trust my instincts or my methods.  Its critical to have that confidence when you trade.  More important than any trading style.”

What key rules do you apply to your own trading?

“Have stops on every trade and never waver from your decisions or levels if you’re in the trade.  Always be 100% confident in every trade you make.  If you lose any confidence during a trade, get out.  Immediately.  This is not a game of hope.  It’s a game of skill, grit and confidence.  Period.  Only trade what you are 100% committed to or GTFO.”

What do you look for in the stocks that you trade?

“Breakout oversold chart setups, higher beta, companies with a solid cash position and prefer stocks that have little to no chatter. Twitter is excellent for confirming that.  Lower floats are also useful if it’s a small to mid cap.  For ETFs, I want beta and liquidity.  You can really move big money in/out of those.”

What do you feel sets the great traders apart from the rest?

“Always adapting.  Great traders never assume that their methods can’t and shouldn’t change.  We continually learn and we adapt.  Times have changed since I started doing this 20 years ago. The algos have completely changed technical trading for me.  As an example, I used to use moving averages and technical indicators like MACD, OBV, Stochs, etc. all the time but no more.  They are almost useless in my opinion.  Or at least their usefulness has been completely degraded since human behavior has been so removed from the heavy price action from HFTs.  The “natural” elements we used to rely on technically are now overshadowed by emotionless computers.  Only three things matter to me now – Price, Volume and beta/volatility and maybe an 8 ema to help me see the trend.  That’s it.”

What can you tell readers about your risk management approach?

“I’d rather call it emotional management than risk management.  I am 100% confident in my methods.  I can tolerate the emotions of a big trade and I’ll take as much risk as I can to still be comfortable in a trade. Unlike so many traditional traders, I don’t use set max amounts per trade or some other mandatory nuance like that. Those who do are just using disciplined capital preservation methods and I get that, but I think there is risk in limiting potential too when you are too strict on trade amounts.  There has to be a balance. There are trade opportunities I come across that I know .. I fully know .. I have huge potential to make money.  The stars are all perfectly aligned. Everything I look for is there. So I’ll bet big if the liquidity can support the trade, and I can get out quickly if it fails. And even if it doesn’t work out (which is rare for those), I don’t lose sleep over it. It still was the right decision for me to push hard. Period.  Great traders are not trying to make perfect trades.  They try to make as perfect a decision as they can with the information they have in front of them. If you believe in your method and great opportunity arises, freaking get some balls and go for it.  That’s all any trader can wish for. Those singular perfect moments. That’s how real wealth happens. Push your chips in when the moment finally arrives or why do this mundane repetitive work every damn day?

What trading moments make you the most proud?

“Usually, it’s the trades I didn’t make.  The ones I could see so many traders running to and I knew from experience they’d fall flat. Pride comes from having experience and wisdom and then the solid decisions that follow. It’s a great feeling to know I can see the fools gold that others cant and I avoid it. Its more satisfying than some of my big wins. Adds to my confidence.”

The most upset?

“Like most traders, I’m most upset when I mistime my exits on a trade. Greed is the hardest vice to give up when trading. We see things that aren’t there and usually hold longer than we should. I don’t make that mistake as much as I used to.  My twitter followers who watch my posts closely probably see a common thread in many of my trades. I’m in a trade before most of the crowd but I’m usually out early before everyone too, and I miss the larger gains I “could” have had if it goes higher. Again, good trading is about good decisions, NOT being right.  I just starting employing a bird in the hand approach to my profit taking.  I’ve lost too many profits not using a finite exit strategy.  If I have a win and it reached my initial profit targets, I’m gone.  Let it run higher.  Don’t care.  I made my winning trade.”

What books, websites, or other resources would you recommend to those wanting to broaden their trading knowledge?

High Profit Candlestick Patterns – Stephen Bigalow … great book for the beginner trader who needs to simplify the noise. I can’t stress this enough… keep it simple. Learn certain patterns. Remove all of the others. Find a few that work for you and become the best at trading ONLY those patterns and those alone. Become the guru at that one or two type of setups and develop advanced, acute realtime scans to find these specific opportunities.”

A lot of traders plateau and have trouble evolving beyond this level. What advice can you give to them?

“Learn to adapt and ONLY trade what you believe are the highest probabilities for YOU to make money, and not someone else. More importantly, figure out what type of trading you AREN’T good at and just stop trading those types of trades. This is so important for new traders to learn. Just because you see traders on twitter or on CNBC making serious wins on certain types of trades, doesn’t mean you are suited for that style. For instance, I just never make money trading news events or earnings plays. The risk of being on the wrong side of the trade is higher, thus lowering my probabilities for success. I completely removed these type of trades. I never play them. Ever. I also stopped trading illiquid low float stocks, even if they have sector news that might move them. It’s about probabilities. Only play what gives YOU the best chance at success, not someone else.” 

Now that you have developed into a successful and profitable trader, what are you doing to better your skill?

“My development path isn’t the trading technique anymore.  I’ve got that down to a science and I’m lightning fast.  What I do now is try to enhance my macro analysis skills.  I want to better understand the nuances of algorithmic trading and currency manipulation and how that affects my trades.  I also watch overseas trading a lot.  It really helps understand the undercurrents in commodity trading and how that bleeds back into our markets.  The big crash is coming someday.  We all know this. I believe the crash will start overseas and be directly influenced by the algos.  I better be very VERY prepared to see that coming and heck I’ll say it .. while everyone else is losing 30% overnight in their IRAs,  I want to profit HUGE from it, not hide under a rock.  What good trader wouldn’t? So my focus now is broadening my ability to speculate and react to macro events and understanding how the algos trade.  Knowing both of those will be key going forward as we continue to modernize trading on a global scale and then inevitably be prepared for the bigger crisis that are coming down the road.”

For those who are just beginning to get their feet wet, what advice would you give or direction would you point them?

“Just don’t follow traders blindly into trades. Also, don’t pay for anyone’s trading services who will not teach you their methods, make you better, or help you to inevitably trade independently. If you cannot fully understand a trade yourself or if you cannot clearly present the reasons for making a trade some “expert” is giving you… just don’t make that trade. Learn as much as you can about trading before committing your money or I assure you it will cost you in many ways, and more than just financially. Building confidence in yourself early is key. As important as developing analytical trading skills.”

What would you like your “legacy” as a trader to be?

“When I started doing this back in 1996 – 20 years ago – I assure you, I never thought it would be possible to make a living doing online trading let alone retire doing this job but I will have proven it can be done. We early online traders in the mid 90s were mavericks. You’d say you were a daytrader and folks would look at you with those traditional optics and say condescendingly “Oh yeah, that’s just gambling,” or “That’s great. Transitional career eh?” I wasn’t some flash in the pan who got lucky during the dot com boom and called myself a good trader. I worked hard for this. Yes there were highs and lows in my career. There were times I wanted to throw in the towel and quit. God, many times. But I didn’t. I stuck it out because I believe this is the greatest job in the world, and I knew I would succeed at it. It just took some hard lessons to finally figure out how to do it. To me, personal pride of that achievement is more powerful than any legacy anyway. I’ll take that – as well as the great wealth that follows.”

 

I want to personally thank Jason for taking the time to share his thoughts on the above subjects with us. Very detailed, helpful and insightful. I’m sure his words will help many traders with their journey and these thoughts will be shared.

Follow on Twitter @momotrader

Free chatroom for experienced fulltime macro and options traders. Apply to join: Momotrader.com

If you would like to recommend a well respected and credible trader for TraderMentality to contact regarding an interview, email [email protected] or DM via twitter@tradermentality.

Momotrader

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