The Making Of A Daytrader, Part I
Todd Gordon is a successful daytrader who trades for a living. We
discovered Todd when he became a frequent contributor to
TradersWire Interactive. Later we found out that he had been taught and
mentored by David Floyd.
In this three-part series, “The Making Of A Daytrader,” Todd will share
with you how he entered the business and how his mentor David Floyd was
instrumental in helping Todd become successful during one of the
most difficult daytrading environments in history.
Click here for
Part 2.
I am often asked how it came about that I became a daytrader. To make a long
story short, I became interested in the markets in high school while working in
the bag room at the local country club. I would chit chat with a few of the
members who I especially liked about a variety of subjects, but the majority of
the time the conversations ended up being about the markets. Add in a high
school class, where I headed a team that managed a real stock portfolio on a day-to-day basis, and the rest is history, as they say. I was hooked.
I continued to manage a portfolio in a different class at St. Lawrence
University in upstate New York, while trading for my own account as well, often
at the expense of my class attendance! By the time the second half of my senior
year rolled around and it was time to begin my job search, I had absolutely no
doubt as to what I wanted to do — be an equity trader. How to go about it and
where to do it were the only variables to be weighed.
After getting my resume
together, I sent it to proprietary trading offices in New York, New Jersey,
Connecticut and San Diego, California. San Diego turned out to be the choice
that would change my life, as a few days later I received a phone call from
David Floyd. I met with
him, my interview went well, and it turned out they had a spot in his office for
me. After taking my Series 7 SEC
licensing exam, I was on my way.
David is an ideal teacher for new traders. His approach is fundamental,
structured, rigid and disciplined, yet is easy enough to understand within the
first week of trading in his office. He does not bother getting into the myriad
of technical analysis techniques available or the latest and greatest systems
out there, which I will elaborate on in the subsequent two parts of this series. His
technique, which he has named HVT (for High Velocity Trading), is so
straightforward and comprehensive that on the first day a person is able to sit
and observe market action while calling out trades on paper.
Of course, David
spends time going over the criteria for an acceptable trade, so the new trader
knows exactly what it is he or she should be looking for. Things move fast, for
on the second day the trainee will be making real trades with a cap on share size, so as not to get in too much over their head while learning the
ropes.
David Floyd (standing
on the right) mentors Todd as they trade in the
offices of Aspen Trading.
This is how I started being trained by David, making trades in lots of 100
shares, based partly on my own judgment and partly on what David happened to be
doing. Trading with David and being able to observe him in action was a key
element, if not the most pivotal part, of my development as a trader. I firmly
believe that if you associate yourself with a circle of people of very high
caliber, they tend you pull you up to their level. It did not take me long to
recognize that I was sitting next to a consistently profitable trader who had
been in this business for years. While it would not be true to say I hung on
David’s every move on every trade, it would be safe to say that for at least the
first few months I has one eye on my screen and one on his.
One of the important things I gleaned in those first nervous months is what I
believe has allowed me to produce consistent profitable results. What is the
key? It was learning to know when to be in the market and when not to be. When I
started getting trained, at first I used David as my secondary indicator. When
he entered or exited a trade, I took a hard look at what the situation was at
that point in time and “took the temperature of the market.” I found out
however, that most of the time when he was exiting a profitable trade, I was just
looking to get in it! I was late in the game by waiting for what we call the
“ultimate confirmation.”
What I learned is that to play the breakout, you must be ready to get in when
the signal comes and not try to get on board after the majority of the move has
played out. What that does is cause you to buy at tops and sell at bottoms,
resulting in a string of losing trades and a big hit to your equity curve. This
is an area of my trading I am constantly
working to this day. Only after you spend month after month watching the market, do you develop the ability to take the market’s temperature and have enough
conviction to place a trade and have the confidence that it will work out, and
work out within the time frame of a few seconds to a few minutes. When you
develop this feel, you can have the conviction to put on a large sized position
right off the bat.
Trying to maximize profit, minimize losses
David does this every time. To him, if the trade is worth taking on for 500
shares, it is worth taking on for 5,000. He has helped me realize that if I have
any doubt about the probability of a trade, it is better to sit on the sidelines
and wait, rather than forcing a trade. Learning to wait has saved me from
several losses, and has resulted in a greater number of winners as I waited for
a trade with a greater likelihood of succeeding.
Finding a short-term setup that
has the juice to move several points in a few minutes only gives you so many
opportunities in a given day. Working with David has allowed me to see that one
cannot impose their will on the market, and if your force trades or look for
setups that just are not there, you are not going to last long in this business.
Next time, I will go into more detail as to the guts of my training with
David, overcoming my fears, and getting down to business of doing what I wanted
to do — make a living as an equity trader.
Todd
Click here for
Part 2.
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