Alex Interview

Transcript

Cam: Hey, guys. It's Cam from Investors Underground. Welcome to another trader interview. Today, we have with us one of the young guns in the Investors Underground community. He started trading when he was 10 years old, and the last few years, he's really proven himself to be one to follow and keep an eye on for his fairly unique trading style and also his colorful language, which I'm sure we'll get to hear some of in this interview. We've been wanting to do a bit of a get-together for a little while now. I'm really happy to be able to welcome Alex, AT09. Thanks for being with us.

Alex: Thanks for having me, Cam. Looking forward to it.

Cam: For the people who are hearing your name for the first time, why don’t you introduce yourself and let us know the basics about you?

Alex: Sure. I'm Alex. I'm 22 years old. I've been trading for about three years now. I've been part of the Investors Underground community for two years, and I'm from New Jersey.

Cam: I guess the first question we always ask in these interviews is, how did you get started trading stocks? What sparked your interest? It's my understanding that your dad unknowingly sparked your interest in stocks. Tell us a bit about that.

Alex: Yeah. My dad was an entrepreneur at heart. He was always into making a business for himself. He ended up doing that in the ‘80s. He found some success. What ended up happening was, with some extra money that he had on the side, he would just do what anyone else did at that time, put it in the stock market. He really didn't know what he was doing. He just bought a blue chip at the time. Just waited for the price to go up. Didn't really do much research or anything like that, just sheer luck. I saw the money coming in from him, and planted the seed in the back of my head that if my dad did it with no education, what's stopping me from doing that in the future, too?

Cam: Your dad’s running a small business and dabbling with some stocks on the side. What happens next?

Alex: Business was starting to take a hit. Once things weren't as easy as they used to be, we all started to pick up the pieces and try to help as much as we could. That's where I got a job at Starbucks. I just wanted to make some more money to help support myself a little bit more, and that's where it all started.

Cam: So, you're writing down people’s names and making coffee. Where does stocks fit into all of this?

Alex: I would get back from work, and I'd just go on the Internet to online forums, online anything, Twitter. I ended up finding a penny stocking chatroom that said he turned X amount of money into a couple million dollars in a couple years. I said, screw it. Why not join the service? I'm a smart guy. I know I could probably do it, too. Long story short, I was the guy that was buying breakouts every single time, just “buy the breakout”. That's an easy strategy. Every single time I would buy the breakout, I would get dumped out. Before I knew it, that small account that I had got destroyed. I had to go back to work, and I was still daydreaming about how could I make this work? This whole concept is interesting to me. Using money to make more money. I had a pair of rims from my car that I got as a Christmas gift a couple years back. I said, I'm going to sell these rims and I'm going to put it into an account, and I'll going to take this a lot more seriously. I'm going to get away from this penny stocking chatroom. I'm going to join a real service. I'm going to learn how to actually trade instead of how to follow.

I took the $2,000 from my wheels and put it into an offshore account which got me away from pattern day trader rule and joined a new service that I found on Twitter. What ended up happening was, I discovered something called short selling, which is you make money when the stock goes down. At that time, that concept just blew my mind. I didn't know that something like that existed. I ended up watching some of these traders in chat like Eric or Derek or Phil. They would take short trades on stocks, and I'd think to myself, why are they shorting this specific stock? What is going on here? I'd send them some messages and try to understand a little bit more. What I ended up finding over time is that they were shorting these companies that really had no business being up. Through some more research, I found that shorting is something that I could see myself doing, maybe, because I'm the guy always buying the breakout. If I just doing the opposite of what I did before, I can make some money. What ended up happening was, the first ever short trade I made, I shorted 2,000 shares VGGL at $4. Within 15 minutes, the stock fell to $3.50. So, almost instantly I made $1,000. Since then, I was hooked to shorting.

Cam: You flipped your strategy and started seeing some early success with that. Was it just that easy? Tell us what happened next.

Alex: Like I said, after I shorted that VGGL, I was intoxicated by the feeling of just making money shorting. I messed up. I started to just short anything that was up. I had no real rules. I said, this is up 20% on the day. This is up 40% on the day. It's a short. I'm just going to short it. It's going to come back down eventually. What I quickly learned is, that's not how it works. The way I started to find consistency is, I started to look for those junk companies that people like Eric were playing, and trying to see, does this fit my criteria as a short? What ended up happening was, during the whole 2015, a bunch of these junk companies were just flying up for no reason at all. Some of these things were gapping 80, 90, 100 percent.

I guess I was in the right place at the right time that everything started to click. You get these ridiculous moves. Stocks that were trading at $2 were gapped to $4, run to $5, and then close the day back at $2. These companies were complete junk. As these plays happen over and over and over again, I said, what is holding me back from instead of using 500 shares to start using 1,000 shares? Seeing it happen over and over again gave me the confidence to push a little bit harder, and consistency came because I was being selective with my trades. I wasn’t just trying to short anything that was up 20% every day like before. I was trying to find something that fit my criteria, that fit my niche that was giving me profits in the beginning, and sticking to that.

Cam: Tell us a little bit about your criteria in terms of looking for these stocks.

Alex: I guess the best example is to talk about one of my recent trades that I had which is Dries. Basically, the thesis around that is that the company is complete dog shit. It has no reason to be up. The CEO is just giving more and more debt, debt, debt. Selling as much stock as humanly possible. Stocks like that, when you see something that is that toxic, that is something that catches my interest. When you see that they have 200,000,000 stock to sell or they have BS news that they're issuing a dividend when they're losing $80 million a quarter, something like that catches my interest. What ended up happening with Dries was, I started to scale in short for a swing trade based on the fact that they're probably going to do another offering sometime soon. It took about a week or two since their most recent offering to do another one. In the back of my mind, I said, the last time they had this deal, the stock went to $1 and reverse split.

What's the difference between the same thing happening over again? As soon as that next deal was announced, instead of just covering my position and being done with it, I said, I see this going to $1. I'm going to size in and I'm going to hold this because I know the end game. I've seen it happen so many times that I'd be a fool not to take advantage of this. After that deal was announced, the second deal, it went from $3.60, and to the date of this recording, it's at $1.29. I've been short that entire time, adding to my position. I still think that it's going to go down another $.30 to $1. So, I'm staying disciplined. I'm staying patient. When a play like this happens, you have to be completely focused and take advantage of it. I don’t care about the Snapchat IPO. I don’t care about Facebook moving. I just care that this stock is my niche, and if the liquidity is there, if the opportunity is there, I have to take advantage of it.

Cam: One thing that I think that you've really been good at doing is really having patience for the right plays, avoiding stuff that you should stay out of, and scaling up to some huge size where it feels like you know when the press hard, but you're not trying to force trades every day. Tell us a little bit about the whole patience and scaling and discipline in what you're doing.

Alex: Yeah. A little back story. When I started to find success, my account was near around $10,000. I started with a couple thousand, got it up to $10,000. My plan was basically, any time I got above $10,000, I would just wire the difference out to my bank account and just keep it in there. What I started to realize was, the more money I had in my bank account, the more I felt that I didn't need to make money through trading. It's a weird feeling because you think to yourself, I'm showing up every day to the market. I need to make money. The reality is that not every day do you have your niche plays come up. Having that money in your bank account, seeing that money in your bank account reaffirms that fact that, just be patient for your plays. When they do come, hit them harder. Basically, everyone usually think that to scale up your size, you just double your shares. If you're using 500, you use 1,000 shares.

If you're using 5,000, you use 10,000 next. What you have to realize is, that's not how it works. The more size that you're trading, the more selective you have to be with the stocks you're trading. For example, something like a Snapchat that's extraordinarily liquid, you could trade as much size as you want, but some low-float stock that only has a float of 2,000,000 shares, you can't really trade 100,000 shares of that. At the end of the day, you're going to be influencing the stock too much because of your size. What I usually tell people is, once you increase your size, there's no going back. Once you get a taste of how it feels to make more money than you did before, you just don’t want to go back. It's impossible. What I tell people is, make sure to grow your bank account like Nate told me. When the time is right, you'll know. You can't just force it upon yourself. You start to realize these little things like liquidity and being selective and not putting size on just shitty, no-volume stocks. It all comes with the territory, the experience. So, don’t be rushing into it.

Cam: Back in the early days, aside from Nate, tell us a little bit about who you were learning from and what you were doing to try and educate yourself.

Alex: Sure. Back when I first, first started with my first chatroom, I didn't really see anyone that was worth following. It was basically a party in that room. Everyone was talking. There was no real facts being thrown out. Everyone was just bullshitting around. It took me to join the IU community to find people that were actually legit, to find people that were making money doing this, and that were willing to help these newer traders. I guess my biggest influence at the time was obviously Eric and Phil. These two were basically trading what I considered my niche at the time, but very definitely ways. Eric was more day trading these things, whereas Phil was swing trading these things. Eric would make the quick money, be in and out, call it a day. Whereas Phil, he'd be the guy covering a week, two weeks, three weeks later when no one was looking at it.

Seeing the way these two different strategies worked got me interested to pick their brains a little bit more. When I first started trading, I never thought that me and Eric would be the friends that we are today. The reason for that is because now, we trade almost the same stocks every day. We have the same mentality on these stocks. We make a plan. When we see those opportunity days, we call each other up and we make a plan of attack, because we know how the other person thinks. We know how the other person trades. It's just interesting to think that two years ago, I was PMing this guy, asking questions like, why did you trade this stock? Why did you short this stock? Now, he's PMing me saying, are you in this? Are in in that?

Cam: It's a bit of case of the student becoming the teacher.

Alex: Almost.

Cam: How exactly does Nate fit into all of this?

Alex: Seeing Nate, the way he trades, is very different. Nate is like a multitasking machine. He could trade stocks. He could talk in chat. He could answer PMs. He could email, Tweet, and watch TV at the same time without hesitation. I don't know how the hell he does it, but he's just so good at that. The way Nate fits into everything is that if you have a question or if you have any sort of concern or any reason why some trade didn't work for you or he called out a trade in chat and you didn't understand why, if you message him, within a few minutes, he's going to get back to you. He's going to give you the help you need. You don’t get that type of one-on-one help from a successful trader everywhere you go.

That's not only with Nate. There's people like Cody, Emil, Eric, even Tim Grittani that I message on IU. He still responds. Everyone’s there. If you have a logical question, people are going to be there to help you. The thing with Nate is that if he sees that you're succeeding or if he sees that something is holding you back, for me when I first started and I started to have success, he made sure to say, wire out your money. He's going to be there to help you in the long run. He just at the end of the day, he wants to see other people succeed. He feels prideful when someone from his own community starts with nothing and has success through the teachings of people in that same community. Does that make sense?

Cam: Yeah, that really does make sense. I think that's the way that everyone likes to do things here. You've watched both of the Investors Underground courses, Textbook Trading and Tandem Trader. Tell us what you thought of them.

Alex: I've seen both the DVDs. I saw Textbook and Tandem. I saw Textbook and I said, this is good information. This is solid information, but I'm more of a visual learner. I had to see it happening real-time. I like to see it unfold. I saw Textbook twice, but I saw Tandem probably 10 or 15 times. The reason for that is because at that time I was struggling with how to scale into a trade. Seeing someone successful like Nate scale trades, what he did right, what he did wrong, real-time, really, really extraordinarily helped me out. I guess my favorite part of the Tandem Trader is that sometimes it just gets bone quiet. Dead silent. A lot of people can relate to that, because you're in your office all day just in pure silence, just watching the trade unfold. Seeing that happen real-time, seeing how he scales into a trade, seeing his commentary, seeing how real it is that it's just silent sometimes really, really helped me out. Even to this day, if I'm just bored on a weekend, I'm just going to put on Tandem just to increase my knowledge base a little more.

Cam: It's kind of interesting to hear that you watched it so many times. I guess the only person that's watched more than you is probably me, because I was the person who edited it and arranged it all and put it together for everyone. I probably watched it 30 to 40 times. By the end of that all, I was pretty tired of listening to Nate’s voice, but I noticed that my entries and exits were way sharper than before we had started the whole project. Kind of cool, the way that works. When was the first time you got to meet everyone? Tell us a bit about that.

Alex: The first time was Traders for a Cause in 2015. The only reason I went to Traders for a Cause that year is because I had my biggest trade ever then. I ended up making, it was $66,000 on CLTX short, which was one of those, again, massive, massive gapper plays at the time. All the stars aligned. I've done it so many times in the months before that when I saw this opportunity happen, I had to capitalize on it. I show up the market with a plan, nail that trade, and I told Nate about it. He's like, look, dude. You're 21 years old and you just made more money than what most people make in a year. You have to come to Vegas. It's only going to help you. Trust me, it's going to help you. I said, screw it. I made the money. Why not just give it a try? So, I was kind of nervous. I didn't know who to talk to, who to approach. I didn't really know anyone there, but what I have to emphasize is that you go there to learn. You go there to network, and you can't be someone in your shell. You can't be a turtle in your shell. You have to be outgoing, because you end up finding out that there are a lot of people in the same situation as you.

With that knowledge, going again in 2016 was by far the best vacation or best experience I've had in my life only because I got out of my comfort zone. I talked to everyone that I've never met. I talked to Eric for the first time. I talked to Phil for the first time. Me and Nikos became friends. I talked to Nate. There's a bunch of people that I just met, and we're friends now. We're actual friends and we talk all the time. Me and Eric talk all the time. Me and Nikos talk sometimes. It's just a great way to network. It's a great way to meet people, and it's a great way to understand how other people trade and to share strategies and to see what's working for them might also work for you. For example, seeing Craig trader talk, and his emphasis on stops gave me the idea to adjust that a little and stop half on high of the day, stop the other half if it keeps going. Seeing him talk or seeing someone like Phil talk saying that he just decreased his size on non-niche plays and it led to bigger profits at the end of the year, that stuff sticks to you better and you retain that knowledge better, and you wouldn't have that without going and experiencing that for yourself.

Cam: I agree completely. Vegas was a lot of fun. For a bit of time in 2016, you were working on a real estate/home renovation kind of project. What made you decide you wanted to try that out?

Alex: In the back of my head, I always thought the two biggest ways to build wealth are real estate and the stock market. That's something that I wanted to dip my feet in. Long story short, the market was slowing down in 2015 with small cap. I said, screw it. Let me try to flip a house just to get some more experience. From January to I think it was June, I went through the process of buying a foreclosed house, hiring a contractor, hiring subcontractors, picking out tiles, paint, flooring, kitchen appliances. I did all of that by myself, and the house sold. I made about $30,000 with everything said and done, but for working six months, that $30,000 equated to around $5,000 extra a month. It really wasn't that much money to me in my eyes.

I said, why am I wasting my time doing this? The whole time, I'm still thinking, I want small caps to come back. I love trading. I just want to do trading. It's funny because when I came back in July, the first month I came back, it was like riding a bike. Small caps were back in full force, and I actually made $100,000 that month. I just laughed to myself. I said, I made $100,00 in one month doing what I loved, and I was slaving away six months ago trying to make $30,000 on something that I didn't really like too much. It was eye-opening that trading is my passion. I should just continue full force while the iron is hot.

Cam: It's my understanding now that you're doing more position style trading rather than having a strict intraday time frame. Tell us a little bit more about your style and the way that you like to swing trade a little now as well.

Alex: In 2016, after I was done with the house, towards the end of the year my father’s business started to get traction again. He approached me and he said, look, I need help around the office. There's no one else that I trust more than you. I don’t want to hire anyone else. Come help me out. I need your help. I thought to myself, my dad’s always been there for me. He's always been my rock. It's my time to give back and help him out a little bit. I adjusted my strategy from “day trading” to a little bit more of swing ideas. Instead of taking a trade and starting in let's say 10:00 in the morning and being out before the market closes, I adjusted my strategy to be like, if I take this trade, I can't stare at the market 24/7 like I used to before. I have to help my dad out. So, it has to be something I'm okay with holding a few more days. That's how I've adjusted my strategy. The funny part is, I've been making more money swing trading than I was making day trading because I'm holding for those longer-term longer profits. It was kind of a blessing in disguise that I do part-time now. I didn't really realize that until recently that, I ran the numbers and started to see that I was making more percentage wise holding through swing trades than I was making day trading. It's funny how that works.

Cam: Yeah, it is interesting when you look at it from that perspective. Looking forward to the future, what can everyone expect to see from Alex, AT09?

Alex: I see myself, again, trying to be more the way Phil is trading now. The way Phil trades is that he waits for those ridiculously extended moves, like those ETRMs, the Dries. He's not as actively day trading as most people do. He waits for those big moves, and when the time comes, he's hitting it hard and he's being patient, like I was patient with this Dries trade. The way I want to adjust my strategy in the future is that, I don’t want to be stressed every day trying to make $1,000. I don’t want to be stressed trying to find the trade that's going to work for me in the morning. I don’t want to force something that's not there.

It's just funny because this Dries trade is the biggest trade I've ever had, and that's because it's when patience met discipline. I had a very specific idea on the trade, and I let my discipline push my patience to another level which led to these bigger profits. Going forward on these bigger moves, instead of just day trading them like I would, I'm going to hold like Phil does. I'm going to hold for weeks on end, as long as I have the borrow and save that mental energy, save that mental capital for when those opportunities come up, rather than waste it on stupid opportunities every day that aren't really A+ setups.

Cam: Cool. It sounds like a good plan. How can people get in contact with you if they want to hit you up and find out more?

Alex: Sure. The best way is just through chat. Shoot me a PM on the Investors Underground chatroom. Follow me on Twitter. What I do is, I do webinars. I do two webinars a month. Usually, the really good ones are the members-only ones. I explain my trades, my thesis for the week, and some trades I took and answer questions from other members to see what they're struggling with and how I can help them. There's always ways to reach me. Through chat, Twitter, webinars. I'm always available.

Cam: Well, Alex, it's been a real pleasure to be able to chat with you today. I'm sure everyone really appreciates you spending the time and filling us all in a little bit about your style and journey so far to get you here. You've really achieved a lot in such a short time, and I'm sure you're going to keep on crushing it and putting up those big numbers. Thanks again for your time.

Alex: Thanks again for the opportunity.

Key Points

  • Alex blew up his first account focusing on a "buy the breakout" strategy
  • Alex started a new $2000 account and switched short selling
  • Patience and selectiveness are key to maximizing profits
  • You don't have to trade every day
  • Scaling up is NOT as simple as increasing position sizes
  • You need criteria for ideal trades if you want to become consistent