Recently, Brice Wightman sat down and talked trading, among other things, with daytrader Don Miller.
Brice: How did you get involved in the stock market?
Don: About five years ago, I came across the notion that there seemed to be some profit opportunities buying and selling on a fairly short-term time basis. When I first started dabbling — I won’t even call it trading because it does the word “trading” a disservice — I realized, “Hey, this stuff is moving. How can I find out what’s really going on here and position myself to take advantage of those price swings?” Online trading was just starting to emerge. I hooked up with a couple of Internet firms that were fairly intensively involved in teaching traders and eventually got to a point where my trading was fairly consistently profitable. I was fortunate to be taught some very strong fundamentals right from the get-go, with respect to trade management and stops and that kind of thing.
Brice: How did you learn?
Don: I was part of an online teaching room at that time and did a lot of reading (Mark Douglas’ books really stand out). I’m one of these guys who just gets in and experiments with what works, what doesn’t work — getting beat up enough times to realize what doesn’t work. Ultimately, I was asked to co-run the room. I was making calls; I was known for reading opens; I got pretty good at it. Since then, I’ve been in another room, which I just left. In both cases, I was a volunteer teacher trying to pass on some of the trading skills and insights that I had developed early on and still continue to develop.
Brice: What are you doing now?
Don: I continue to trade my own account. Again, I recently stepped down volunteering at another site to focus on teaching and mentoring a small group where they have a direct line to me for six-and-a-half hours a day. I spend a lot of time in the after-hours trying to help them develop their skills. I’ve been at this now for about four years.
I have an accounting/finance background and had been in a corporate career for about 17 years when I started this. I had a flexible schedule so I could trade opens, and once I got good at it, realized the cash flow opportunity and could prove to myself that I could be successful, then I decided to make the switch to doing this full time. The one rough spot I’ve had — and the only drawdown month — I’ve had as a trader, was the month that I stopped doing this part-time and I started doing it full-time. I had access to the markets for eight hours a day and now needed to put bread on the table, and there were some stresses and breaking of trading rules going on — and I was teaching at the time, so it was kind of funny. I went through my own personal pain, and I had to realize that I had to focus back on the skill and not the income.
Brice: What is your approach to trading?
Don: It’s evolved fairly recently. For the longest time, I was a fairly heavy scalper, and what I will call an oscillation/reversal trader. I use the Nasdaq futures as an indicator for everything that I do. Entries and exits are all based on the futures — anticipating a reaction to the futures — whether they may be trending at the beginning and you can get in on the trend early, or whether it’s providing signals that it’s exhausting and about ready to turn. For the longest time, most of what I did was to look for reversals, and arguably I still do that. For a long time though, I was more of a scalper. The futures would be trending up, there would be some topping formations, they’d be about ready to turn — I could go short a stock like Juniper. As the futures would move down — and there’s often just a very subtle lag between the futures and the cash equities — I could profit quickly, you know, a quarter point, a half a point, three quarters of a point. There was that sort of rhythm.
Lately, with the change to decimalization, I’ve had to change my style a bit. I trade the QQQs a lot more any individual stocks now. The change to decimalization has really changed the rhythm of a lot of the stocks out there. It requires a different type of trading. It’s more purely chart-based, and you have to let time work to your advantage more so than you could in the scalping days. The QQQs move 1:1 with the futures because they just represent the cash value of the same futures index that I’m watching, so I’m in essence a futures trader, trading the QQQs, rather than trading equities. I’m largely looking for changes in trends, oscillations, trading ranges, shorting tops and buying bottoms and doing so in a way where my risk is fairly minimized through trade management.
Brice: What learning curve did you go through?
Don: The biggest adjustment is allowing time to work to my benefit. Looking for very strong chart formations. Finding a good signal and allowing it to work out. It’s really using time as an asset a lot more than I ever had before. I compensate for a little bit of the old scalping mentality by doing a lot of scaling in and out of my positions. Today we caught a nice pullback at the open and I went long. As it starts to move up, and as it’s getting to the first possible point of resistance, I’ll go ahead and lighten my load at that point and leave the rest of the shares in the trade to take advantage of whatever further momentum or trend may emerge at that point. That satisfies that scalping urge that is still in me.
Brice: Do you trade other stocks as well?
Don: Over the past month or so.