San [not his real name]is a prodigy of trading discipline; a close friend of mine.
I am talking about a trader whose average trade size is about $50 -$200 thousand PER trade PER stock...[when market conditions permit].
He keeps his trades exposure strictly to intraday basis. This discipline of trading is commonly known as proprietary trading. This man is not a market trader but more appropriately, a market warrior.
I decided to seek his suggestions on creating important features for a trading software which I have been working on since early Feb this year , [supposedly targeted to be released its beta version soon..]
30 mins later, we were at his favourite hotel lobby. I got my laptop and most importantly, 34 questions to help me design a powerful trader's tool. That was probably the most formal meeting we ever had together. And here, thankfully, with his gracious permission, on the condition that his name is not mentioned, I have got all of it jotted in a hurry..his answers to my 34 questions for sharing.
Here's the raw version totally uncensored, from someone who is so consistent at trading that he made only a net loss of a month's trading since he started as a prop trader some ten years ago..
34 Q& A
1) What are the signs or ‘indicators’ you look out for to know if the market is turning? Which is the most important thing to look at for change of direction?
i) Refer to same sector or related stocks and index stock too because index comes down and drag other counters[stock] down
ii) Regional market indices and futures. Hangseng, shanghai Nikkei [ observed ; all must be up]
iii) I will square and observe when I sense changes [danger].
2) While trading, when other regional market takes a turn, does it affect your decision on your trade?
a) Yes but depend on severity
3) Which market do you think has the most impact on day trading?
a) All is important expecially when its drastic
b) Will sell first and find out what happen
4) When is the best time to enter the market? what are the indicators or signs you look out for in this aspect?
a) Check all market indices ok
b) Check number gainers vs losers changes
c) Identify the sector
d) Check the stock volume
e) Must time have to go ahead and try out
f) Use markers to see if there is fund buying
g) Sometimes markers can be tricky
5) What are the signs you look out for to spot a trade opportunity?
a) Look at top volume
b) Look out for stocks that have volume increase over few sessions gradually but price increase minimal. Chances are it will start to move aggressive later
c) Breakouts
d) Don’t be the one at the top of mount everest
6) Do you believe in technical analysis? If yes, what is the first thing you look out for on a chart? What is the most important to you technically on the chart?
a) Looking for breakouts of range
b) Hardly use
7) What can a chart tell you about a stock?
a) At low or high at this point of reference
b) Is it a breakout
8) If no, why?
a) Believe in sentiment is more important
b) Sentiment is king. It rules over all other aspect even when the charts show strong potential.
c) Sentiment is gauged by indices, volume, gainers, news like contract
d) I will spot out for stocks of same sector and trade
9) Do you believe in fundamentals? Is it important to consider fundamentals when intraday trading?
a) Not necessary.50 times p/e also never mind. Ride the momentum
10) What is the most important thing about intraday trading skills?
a) Guts.
b) on sentiment reading
c) Cut loss is most important and discipline. If you win one bid, you lose only one too.
11) What is the steps order you take when you are getting yourself ready for action?
a) Look at index
b) Look at gainers
c) Look at volume
d) Look at sector
e) First 15 mins observe
f) If wrong cut! And find the next one
g) I go for 2 bids but most of the time one bid
12) Is the volume of market transactions important criteria to enter the market? i.e if the volume is low, you would avoid trading even when there is a stock that appears to have potential.
a) If the overall market volume is too small but a small handful of stocks are moving, its difficult to trade as everyone is focus on those few stocks. It becomes too competitive. Even if I trade, the amount is small.
13) What are the few important criteria you look out for before you decide you would like to trade the market on a day?
a) As above
14) When is the best time to take profit?
a) When I can lock my profit and be happy
15) How long do you think a trader should hold his position?
a) As short as possible – intra day. Overnight position is risky -911 [referring to Sept 11] win 80 thousands become lose 150 thousands
16) What are your cut loss criteria? When do you cut your losses?
a) When I take all the sellers and the sellers keep coming out.
b) I will then use a marker to see if it’s the same seller
c) It could be different brokers from the same house selling and buying. Therefore it becomes confusing
d) But sometimes after I cut, the stock really moves
17) In your opinion, is intraday trading good? Or is it better to hold overnight?
a) Intraday is better. Less risk. Use quantity to make more since small margin
18) How many days do you advice to keep a position open?
a) Intraday. As short as possible
19) What is your opinion about shorting market as a trading strategy?
a) Seldom short.
b) Actually short is better
c) Don’t short because you don’t believe it will go up
d) Short counters that people think has fallen a lot
e) Short when sentiment and market condition is really bad
20) Do you short the market? when do you do so? How often as compared to going long?
a) Yes but seldom. As above
21) What do you think would help you better know the market directions or momentum?
a) No comments
22) Which type of stocks are the easiest or more preferred target? Example? why?
a) I rotate stock and adapt
b) Stocks that move are my preference. None in particular
23) Which type of stocks do you avoid trading? example? why?
a) Avoid operated [ he meant stocks controlled by 'syndicate']
b) Low volume. No sign of buying activities
24) Which are the initial signs of stocks that would attract you to take a closer look or put it on your monitor list?
a) Top volume again. But those that become top volume only suddenly. Those that on top volume too long I don’t like
25) What is the most important mentality a trader should hold in order to be successful or profitable?
a) Cut loss [look how many experts are saying this same old thing about trading...]
26) What is the costliest mistake you have done on trading that you now make sure you would never commit it again?
a) Don’t be too greedy and overconfident. Even when the futures look good. Things can change
27) What is the platform that you are using now? which features or functions do you find useful or important? Which is most useful to you?
a) Shareinvestors.com. Queue quotes. The orders inside the queue. How the queue was built up.
28) Which platform would you recommend? What is good about it?
a) Good. The queue breakdown that I can see inside
29) If there was a software that could assist you in your trading, what would you like the computer to help you do to enhance your competitiveness?
a) I want the speed and if I want to see the fundamentals I just click. One click to see all the things
b) I want to see
i) Fundamentals
ii) Technical, bottom or toppish
30) What is trading to you? Psychology warfare?
a) Like a computer game.
b) I need a very clear mind. Enough sleep and physically healthy. Nothing should be bothering you.
31) When a stock is ‘poised’ to move, will it move regardless of your participation [i was referring to his aggressive buying/selling]
a) You can be caught by an operator.
b) Cut half and keep half if caught by operator.
c) I usually move to another counter because time is money to me.
32) Once you are in position, what are the things that you constantly look out for?
a) Regional indices
b) Related stocks and stocks of same sector
c) Check if there is a stock that falls suddenly
33) In your own words, what is stock market to you?
a) …..
34) How many good trading opportunities do you think arise on average per year?
a) 35% of the year good
b) 65% is boring
c) Beginning of year is better because fund buying
d) Bad when year end fund book close
Hope that this open dialogue will provide you some insights into the mindsets of a true stock market warrior.
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