Interview with a Trader: Inside the Mind of SunriseTrader
Many of you already know of “Sunrise.” Some of you are close to this trader (in a social media interaction sort of way.) Both on StockTwits and Twitter, each of us are given the task of describing ourselves using only 140 characters or less. When reading these descriptions, one will often find out two things about people: The first being how they want the public to perceive them, and the second being what is most important in their lives. @SunriseTrader is summed up as so:
“Trader trading the trend. Trade in a state of grace. Family, friends, laughter, health and time to play are important to me. Living life in alignment with ‘what is.'”
Sunrise is a trader who wants to shorten the learning curve for new traders, which is what gravitated me toward the possibility of requesting this interview. The knowledge already shared with so many is vast, and continues to expand. Sunrise shows kindness, composure, and what seems like emotionless trading and strategy, while helping many along the way.
Sunrise took some time to answer some questions for me. Some of the information below comes from chapter (21) Sunrise wrote in The StockTwits Edge Book, which was published in 2011.
What first influenced your interest in the stock market?
“My interest in the stock market began when I was in High School, at a time when life was easy. I was a better than average student, I participated in sports and liked earning money. I worked at a couple of part time jobs during those years. When most kids my age were spending their money on junk food and games, I got a kick out of watching my savings account grow and eventually buying stocks. I no longer own shares of my first purchase, but I will always remember buying them and how that experience led to many more stock market transactions and the road to where I am now.
Prior to 2005, I had always been an investor with an occasional trade thrown in when time allowed. I held my positions into earnings reports and checked my investments once a quarter when statements arrived in the mail. I would read an article, hear a tip or buy a product, and decide I wanted to own the company that was involved. Some were hits and some were misses. I often added new positions to the mix. I rarely sold a position. Not the best money management, but at the time I had the ‘buy & hold’ mentality. Like many, I saw my investments rise and fall with the market whims.
I switched from a buy & hold investor to a short term trader because I think with few exceptions, gone are the days when a person can buy a stock and rest assured it will pay for their future. What is the leader today will soon become an old horse put out to pasture, with little price movement down the road. A person only has to look at some of the leading names during the late 1990’s to early 2000’s to understand this thought. The dividend story of our grandparents seems to be more of a lost era and closed chapter then a way to pay monthly overhead. With reduced fees and the ease of the internet, self-directed investment and trading was becoming main stream, and I wanted to be a part of it.
My personal definition of a trader is ‘someone who holds on to stocks for a short period of time, from minutes to no longer than one quarterly earnings report, to just before another quarterly earnings report or essentially 80-90 days at most. In 2005, I became a trader. My approach and method changed from that time on.
I began using technical analysis as my primary way to trade the stock market. I read countless books, attended seminars, watched numerous videos on the internet and listened to radio shows hosted by traders and stock market gurus. I was a sponge absorbing anything and everything stock market related to help me with my quest to become a successful trader.
During the first few years, my goal was to conserve capital and learn to trade well. I put no pressure on myself to make money. The only self-imposed pressure came from not losing money. The goal was preservation of financial and emotional capital. I am pleased to share with you that I achieved my goal and actually made some coin. Most importantly, it was during this time that I started to track my progress using a notebook to journal and an excel spreadsheet to easily calculate and track profit/loss.
As my skill level developed, and I became more confident in my trades, my goal changed to one of consistently taking profits out of the market on a timely basis no matter the size. I looked for singles and doubles, small hits. I also continued the goal of financial and emotional capital preservation.
By my 3rd year of trading, the systems I had in place to track my progress began to pay off. This information told me the obvious amount made or lost and percent made or lost. What it also told me was the information that helped me to better my trading plan. It told me the reason I bought and sold, using charts and explanations of my thought process before, during and after the trade. The real ‘pot of gold’ was the knowledge gained by studying my own journal. I had made numerous trades for numerous reasons and varied outcomes. I was then able to take the information and clearly see my strengths and weaknesses.”
What methods/strategies have you pursued that have failed for you in the past as a trader?
“Trying to combine a lot of fundamental principles with technical analysis, and using Elliott Waves. Neither worked for me.”
Who are influences/role models for you that are relevant to trading and why?
“I hesitate at mentioning names as I have many that have helped me become a better trader and person. You know who you are and I thank you.”
When/what was your “ah-ha” moment? What was the breakthrough?
“My ‘ah-ha’ moment came when I found my edge and all the trading techniques I had learned started to come together. You can’t teach ‘seat time’. Each trader has to achieve it on their own. The moment in time when I had enough ‘seat time’ and confidence in my method and style was my breakthrough.”
How would you best describe your trading style?
“I am a swing trader who will day trade when the market dictates.”
What key rules do you apply to your own trading?
Plan every trade prior to entry.
Identify the pattern/reason to take the trade with the belief that higher probability of one thing is like to happen over the other.
Define the risk. Define the potential reward.
Define the line in the sand stop.
Calculate position size. Know what % of my account I am risking.
Know the next earnings date.
Once in the trade NO noise. Come to the trading table from a place of calm. Trade in a state of grace. Be at peace with the outcome.”
It’s well known that you review indices, sectors, and individual names regularly. What can you tell traders about your reasoning behind this? What benefits or edges have you created for yourself by doing so?
“To start you need to remember that there is only one side to the stock market… not the bull side or the bear side, just the right side. The market is not your enemy and can only be your friend after you determine the ‘right side’.
For me…to find the right side starts with the indices charts showing support and resistance points on various time frames. I use charts of the S&P 500, NASDAQ Composite and the Russell 2000 Small Cap Index. In my opinion, a successful trader must keep this information in their minds at all times. When I have an understanding of the big picture, the market indices, I can begin to drill down to the smaller picture. I personally like to look at sector charts before looking at any individual charts as this quickly reduces the list to the best potential setups. Often individual charts look very much like the sector chart. My final step is to look at individual charts of the leading names within the sector.
I look at information giving market sentiment such as the CBOE put/call ratio and the weekly investor’s intelligence survey. I look for overbought or oversold conditions using the McClellan Oscillator and RSI readings. I look at the market internals many times during the trading day. I always keep an economic calendar on my computer screen. I religiously check earnings dates either using an inclusive website or individual stock holdings investor relations webpage
Always keep in mind that the goal is to stay on the ‘right side’ of the market and ahead of the masses.
The market doesn’t care about you. The market doesn’t care if you make or lose money. The market has no emotion, only we the players have the emotion and we must learn to keep it in check. Whatever message is sent out at any given moment in time is all that should be thought about by traders. Think about the signal provided and nothing more. Try not to be fearful or greedy. Trade the given signal this way you can trade appropriately.
Tune out the noise and use your eyes. Play the pattern you see with no bias, no pre-determined thesis and no outside influence. No one knows what is next for the stock market.”
What do you look for in the stocks that you trade?
“Average daily volume must be highly liquid. Chart patterns in a base. If day trading, I use short intraday time frames. If swing trading, I use daily first, 60/65 minute for entry and exit, and review the weekly/monthly charts for more levels beyond what the daily may show.
I have many favorite setups or technical chart patterns that I like to look for and use. I prefer to trade stocks that are leaders in their respective sectors. I like stocks that break to new highs early in a market uptrend because they often become leaders. I like patterns that base and continue, base and continue. Examples include but are not limited to: continuation flags, continuation pennants, high and tight flags, channel and triangle setups in a bullish trend that have touched the top of their base at least 3 times and begin to base around the 50ma. Wash, Rinse, Repeat.”
What do you feel sets the great traders apart from the rest?
“They trust in their process. They keep things simple and once they find a system that works for them they wash, rinse, and repeat over and over again. Think big, plan carefully and execute perfectly.”
What can you tell readers about your risk management approach? What advice can you offer readers regarding position sizing?
“I am amazed at how new traders only think about the money they will/can make vs thinking about how much they can lose trading. Your #1 job is risk management/money management. If you take the time to learn money management, you will be ahead of 90+% of new traders in my opinion.
You need to ask yourself and plan with this primary questions in your mind each time you place a trade:
– How many continuous losing trades can my account handle?
– How much am I willing to risk?
– What is my risk vs my potential reward?
Now for some more math, you start with an account of $10,000 and you want to buy a stock that is trading at $50 per share. How many shares can you buy? Hint: it is not 200 shares. First, you need to decide how much per share you are willing to risk. Let’s say you settle on $10, really? $10 x 200 shares = a loss of $2k or 20% of your account. Do this just a few times and you will see an account balance of ZERO.
To find out how many shares you can buy, you must calculate using a % of your total account. Traders who are successful will often risk up to 2% of their total account on each trade. 2% of 10K = $200 dollars. You now decide, based on your stop, what the risk per share will be. For this example, your stop is $2 below the purchase price. You are willing to risk a total of $200 (2% of your total capital)/a stop of $2 means you can buy 100 shares. If your stop was $5 you could buy 40 shares. You may find that your risk tolerance is greater than 2%, maybe for you it is 5%. I implore you to do the math based on your personal risk tolerance.
I can tell you that trading takes time to learn, there is no holy grail and no perfect system. If you can spend time on learning a system, gaining an edge and perfecting money management/risk management you will be miles ahead in your trading career.”
What trading moments make you the most proud?
“When I nail an entry. Staying one step ahead of the masses.”
The most upset?
“Negative self-talk if I miss a trade.”
“Shoulda, woulda, coulda are a drain on emotional capital. Be occupied by now and next.” ~SunriseTrader
What books, websites, or other resources would you recommend to those wanting to broaden their trading knowledge?
“Never stop learning. A lot of knowledge is available for free, but don’t be afraid to pay for higher learning.
For technical analysis:
Any book written by Thomas Bulkowski – Getting Started in Chart Patterns, Encyclopedia of Candlestick Charts, Trading Basics: Evolution of a Trader, Swing and Day Trading: Evolution of a Trader, and Fundamental Analysis and Position Trading are just a few of his titles.
Brian Shannon’s book Technical Analysis Using Multiple Timeframes.
I’m sure once this interview is published, I will remember many more.
No book will teach you it all. Glean what you can and move on toward your goal of finding your style and time frame that works for you.”
A lot of traders plateau and have trouble evolving beyond this level. What advice can you give to them?
“We all loose and make trades that go against us. All traders (if they are honest with themselves) have been there, done that. When this happens you must pull away from the market, take a breath and start anew. That might mean a few moments to a few days. Remember, cash is a position.
Go back to the basics, do your homework and trade very light. You can also do what I like to call ‘batting practice’ and paper trade. You must be patient, with yourself and mostly with the market. Let the market and the charts come to you. They will if you wait for the setups and have a plan.
Stick with what you know works and drop what doesn’t. Be slow to add to your tried and true way of trading. Work at making the good days great. Expand your knowledge.”
Now that you have developed into a successful and profitable trader, what are you doing to better your skill?
“Keep learning. I will always challenge myself to reach the next level.”
Any habits or methods that you use that others might think is unorthodox?
“Attitude and kindness.”
For those who are just beginning to get their feet wet, what advice would you give or direction would you point them?
“Small losses and quick losses are the best losses. What is important to remember, and I have learned from my experience, is not to lose the mental capital. If you sit there with a losing trade it erodes your mental capital and in the end has a far greater impact on your trading. I have learned to cut my loosing trades quickly and move on. It is said that an education doesn’t come cheap. I paid for mine and want you to spare yourself the expense. Don’t cling to the need to be right mentality. Make your plan and stick with it. Be occupied by now and next.
Keep a simple trading journal, spreadsheets and charts. Mine help me to stay accountable. I use it for self-coaching and research. A review from time to time lets me evaluate past trades. What went right, what went wrong, what type of chart setup was used, stops, how profits were taken etc. In the end it helps me hone my skills and develop future trading plans.
I could tell you of more struggles and more victories but the bottom line is my journal, spreadsheet and charts have all taught me the very thing many expert traders have taught me. Keep things simple. Trade in the direction of the trend. Price comes first. Patience is a must. Cash is a position. Have discipline and be open to all possibilities.”
Any advice for those traders who are already successful?
“Don’t break your trading rules. Know that the trading environment changes and evolves, change and evolve with it.
The market is always right. The market doesn’t care what you think, hope or want. Don’t get greedy or complacent.
Stay with what you know to be true. Help others and in so doing you grow.”
What would you like your “legacy” as a trader to be?
“Remember without our health none of this matters. Be safe, be well.”
I want to personally thank Sunrise for taking the time to share thoughts on the above subjects.
Follow on Twitter @SunriseTrader