Episode 158 ... Phil Goedeker (62:01)

During earnings season, small caps don't run
Wanted to make big money before his 30s, didn't want to do a lot of schooling
Only two routes: real estate and the stock market
Opened first brokerage account as sophomore in college with $3,000, lost it all
Studied everything he could, but couldn't find any consistency
Next summer's earnings of $3,000, lost it all during junior year
Didn't have patience to buy and hold
Finally discovered short selling as a senior in college
CAFE ("Host America") went from $5 to $15
He shorted as much as he could
CAFE was halted for a month, he was scared to death
CAFE opened at $5 from $15 and he made $15,000 [CAFE delisted in 2005]
Started shorting overhyped stocks exclusively during senior year
Turned $5,000 into $1,000,000 between August (2005?) and May (2006?)
He went all-in on every position he took, no rules, would just hope for the best
Graduated with an accounting degree, but knew he'd never be an accountant
Lost $500,000 by August (2006?) ... was "clueless"
Got scared, took $400,000 out, put it in the bank, kept $100,000 for his trading bankroll -- 22 years old
"Well hell"
Every month, whatever he made from the $100,000 trading stake, he'd put in the bank
Went next three to four years making half a million dollars a year -- 25 to 26 years old
Studied all the big winning stocks on a yearly, monthly, weekly basis -- till he was "blue in the face"
Drove a Hummer H2
He went through everything, every mistake, every high, every low
Never had another job other than day trading since sophomore year in college -- 13 or 14 years now
Wanted to make $30,000-$40,000 a month with his $100,000
Had one losing year in his late twenties when he strayed from his old style
Went back to his old style (shorting small caps) and went back to making big money
"Well hell"
Tried his best to eliminate his big losing trades, "cut his losses faster"
Increased position size on his golden setups and cut losses faster -- had even better years
Late 2017 had some golden setups: HMNY from $2 to $37; RIOT from sub-$10 to $46 -- "hype bubbles" [charts below]
Only plays from the short side
Momentum names are manipulated, low float (less than five million shares), press releases to pump them up
Cryptocurrencies are the same -- low float plus hype
Halt risk a major concern on these plays -- need to be cautious on the long side
Timing the shorts is difficult -- shorted 100,000 shares HMNY from $8.50, got out in high $9s -- took the loss
Starter size (5,000-10,000 shares) in positions -- goes against him, he takes the loss; goes with him, he adds
Never starts a short and looks to add higher ... never adds to a losing position
Day three of a parabolic move should be a winning entry, but who knows, it often isn't
He gets extremely aggravated entering the positon -- takes a lot of small losses
Pays a lot of attention to volume -- only looks at price, volume, and VWAP
Big drops on heavy volume is one of the main things he looks for
Bases his stops off the chart ... tries to find support and resistance levels on chart
Find your niche as a trader ... find out what you're good at
Parabolic set-ups are what he's good at ... puts all his money behind those trades
Timing the crash of these parabolics is the difficult part
So excited when he sees a parabolic set-up, he can't sleep at night
75-80% of his trading income comes from shorting the parabolic moves
Multi-day versus multi-week versus multi-month runners
The higher it goes, the more conviction he has, the larger his position size
Gotten lazy because he has two kids now
Every year, prints out charts of all the stocks that are the year's biggest low float winners, all "pockets of air"
Every single one of them has crashed
Adds to his winners as they collapse, "slamming that bid"
He might hold a winner for weeks on end
Only overnight risk he has is a Press Release
Mentions ETRM from 2016? [now delisted]
Mentions KBIO ... stock went from $2 to $10 or $12 then went to $40 [now OTC]
Seen a lot of traders blow up holding low float shorts overnight
Wait for the backside of the move, "backside" is after it has exhausted itself [no clear definition of "backside" given]
Slams the bid over and over and over again... he definitely moves the stock by doing this
95% of traders fail because they lose money [Ummm] ... they don't have their niche [OK]
Find out what you're good at and perfect it
Take it slow, take it in stages as you increase your position size
Has seven or eight brokers now, essential if you're short-biased
If you're long-biased, only need one broker
In order to short the stuff he's shorting, the broker has to have shares available [tell me about it]
Low float stocks -- most brokers don't have shares available
If one broker has the shares as easy to borrow, no need to look to his other brokers
Getting the locate is everything, without multiple brokers, you won't be able to play the low float parabolic game
Locate fees and fees for holding overnight vary from broker to broker
Locate fees and overnight fees are extremely high -- will take at least 10-15% of your gross profits
He was long GBTC, didn't realize it wasn't marginable, when it dropped he got a large margin call
He has traded beside other good traders who have blown up ... 5-, 10-, 15-year veterans who made one or two mistakes and they're gone
"You get stubborn and you're done"
Make sure you have a backup plan ... his is buying farmland in Missouri, then rents it to farmers
If he blew up tomorrow, he couldn't get a job because day trading is all he has ever done
He has owned a lot of rental properties and it's a "big pain in the butt," "nightmare tenants"
"Well hell"
Hired property managers to deal with tenants, then he had to manage the property managers (another nightmare)
Farmland, he can't touch the money, and it doesn't take away from his market focus
Farmland: zero stress, zero time, zero maintenance
"Thank you, sir."
Twitter: @Ozarktrades