Episode 58 ... Paul Singh (54:01)

Started trading in college
40 years old now
Went to law school in 1990s
Took $5,000 to $200,000 during dot com boom
Worst time to learn how to trade since you could just blindly buy and make money
$200,000 went to zero in the dot com bust
Blew up another $5,000 account a little later
Third attempt in 2004, 2005 with $5,000 ... things started to click, he got more serious
Have to persevere ... helps if you love it ... never give up
Working as a lawyer then
Commodities boom next to play ... recognized it from dot com boom experience
2011 started trading full time, stopped lawyering
Waited until he had enough money, patiently built a large stake, before he went full time
His wife works, she has a good job, they had a lot of savings, good safety net
Needed mid six figures as trading stake to be comfortable going full time
Biggest mistake people make is trying to trade without a proper trading stake
Don't give up your paycheck until you have built a significant trading stake
Can never be worried about daily expenses when you're trading
Take the amount you think you need to be comfortable trading full time and double it
Trading full time is boring, esp. swing trading (holding several days to several months)
Have to prevent yourself from "filling your day" by watching every tick
Swing trading all about after-hours homework, market hours just about executing the trade
Trading is more than stock picking
Three parts to trading:

Stock picking the least important part,
Risk management, which is fairly easy,
Trade management, which is the hard part

Risk management is understanding probability and risk versus reward
Trade management separates winning and losing traders -- the psychological game
Trade management is where you need to work really hard, controlling emotions
Lightbulb moment: doesn't matter what stock you pick, with proper risk and trade management, can be profitable
Has basket of 10 to 15 set-ups he trades regularly
Pays close attention to money flow across broad market and sectors
Doesn't have a favorite set-up
Whatever is working today is his favorite set-up, have to be adaptable
Set-ups stop working
Breakouts, breakout-pullbacks, moving averages, re-mounts -- fall in and out of usefulness
He exclusively trades stocks -- have to master one domain
Used to do options, futures, etc. but has dropped all that ... just stocks now
Hated to have to trade around the clock ... likes defined hours of stocks
Got interested in pre-market trading
The more experience you have, the fewer indicators you use
Experts learn to simplify, tune things out
New painters paint lots of lines ... not true of experienced painters
"Set it and forget it" -- don't micromanage positions
Don't watch every tick, don't switch up timeframes and see "new" things
Day trading gets his mind off his swing trading
Easier to part-time swing trade than full-time swing trade since mind occupied elsewhere
Taking a quick profit is human nature, hardwired, but the antithesis of good trading
You can't be a successful trader with 1:1 risk reward
First thing he does is a market analysis, looking for market leaders
Focuses on money flows across sectors
Builds watchlist of 50-150 stocks to stalk
Tries to narrow it down to 5-15 stocks in the evening or morning
Then writes a plan for each stock: entry range, stop range, target range -- in Evernote
Sizes positons based on those levels in advance
Doing position sizing in advance makes it so he has no anxiety, just pulls trigger given plan
Common mistake traders make is not taking into account the natural volatility of a stock
[They set their stops too tight]
Bad idea to place stops at obvious support and resistance, everyone is there ... it will be run
Take smaller position to be able to hold through stop gunning, then add once the stop gunning has passed
Used to look at ATR and volatility measures for stop placement, but now just eyeballs it
Pattern recognition comes after time, have to put in the hours
"John Tudor Jones" ;-)
His wife can't tell if he's had a winning or losing day [she must be an angel]
People have goals without a plan
Focus on one thing and master it
Gets up at 4AM (lives on west coast)
Does a detailed monthly review of his trades
www.bullsonwallstreet.com
themarketspeculator.blogspot.com
www.pauljsingh.com
Twitter: @PaulJSingh