Alex Sposito Interview

Transcript

Cam: Hey guys, it’s Cam from Investors Underground. It’s been a little while since our last interview here, but recently I had the chance to sit down with one of the up and coming traders in the I.U. community. He’s a young guy whose managed to get up to speed in a relatively short amount of time. Putting up numbers that have really caught the attention of some of the seasoned pros in the gang. It is really my pleasure to be able to chat with him today, Alex Sposito. Alex, for those who don’t know much about you, do you want to introduce yourself a little?

Alex: I would love to. My name is Alex Sposito, I’m 23 years old. I currently live in Greenwich, Connecticut and I’m a finance major at Auburn University.

Cam: Nice. It’s my understanding that you’re currently wrapping up your degree right now.

Alex: Yes, I am. I would say sadly studying, right now I have 15 more credits left in the Spring and then I’ll be officially done and able to focus 100% of my time and energy in trading.

Cam: Is it the finance degree that got you interested in stocks?

Alex: It’s because of stocks that I went into finance. In 2013-2014 stocks peaked my interest when I had an economics class and we had to pick a stock for extra credit. Basically, whoever picked the stock that yielded the highest return, we were able to get extra credit.

Cam: Right. So, which stock did you end up picking?

Alex: I picked Chipotle at the time because in high school me and my friends loved Chipotle. We used to go three to four times a week.

Cam: It seems to be the way lots of people who are new to the stock market pick the stocks that they want to get involved in, right?

Alex: Yeah, just simply because I liked the food. I didn’t really know much about stocks at that time. Everyone was kind of going with the original Apple and Amazon, which were probably great choices back then, if you look at the chart now. But, I kind of wanted something different.

Cam: Was anyone kind of deep diving into the stocks or doing any due diligence?

Alex: Yeah, no one was doing research. Everyone just picked something that they new the name of or brands.

Cam: Walk us through the first time you placed a trade.

Alex: I placed my first trade in 2015. I basically transferred to a different in August of 2015 and I was managing a long-distance relationship and I was little older getting to the school, so I didn’t have many friends at the time, I was just going to class and coming home. I wanted a hobby of some sort just to keep me busy. What drew me to trading was that I love video games, whether it be a console or computer games, I love to play video games. It’s probably, other than trading, one of the only true things that I’m addicted to. I kind of found trading to be like a video game. Watching the Level 2 and watching the charts go up and down. I kind of just saw this all and said, I can do this. I can beat this. I can make money doing this.

I kind of stumbled upon a guru who captivated my attention. I talked to my parents and they allowed me to open up an account at E-Trade and then I placed my first trade probably the end of August.

Cam: Tell us about the early months of your trading.

Alex: I’m not going to say the early months were rough, it was up down, up down, one day I’m up $50 to $100, the next day I’m down $50 to $100. There was zero consistency. I think I may have had a win streak of three days as my greatest win streak. I went very small in my trades like I said, risking $50 to $100 a trade. I was learning. I was using it all for learning experiences because I think learning is great in a paper trading account, but when you paper trade you have zero emotion in the game. You don’t have any true skin in the game. The first couple of trade I ever made my heart was racing, I was sweating. You don’t learn to control those emotions unless you just constantly trade day in, day out until you become kind of emotionless.

I was also chasing alerts. That stopped after a month and a half or two, but the initial alert got me. I would think, oh, I can get it at a good price, and I can sell too. But I realized quick that that wasn’t the future for me in trading, that’s not how you make genuine, consistent money following someone else’s play.

Cam: You were part of the other trading community for a few months, kind of chasing around alerts with very mixed results. It’s my understanding that you were searching around for something different and found Investors Underground, tell us a bit about your early days with us.

Alex: Getting started I was just kind of watching Nate a ton because as you know Nate is constantly posting in chat, the man doesn’t stop. He must be looking ten to fifteen stocks a day or so. He is always posting and he’s posting great things. I wasn’t trading probably 95% of the stuff he was talking about in chat, but I’d pull everything up and I would just see his thought process because it would be ignorant not to. Because as someone who is older and has had success in the field, you want to try and get into their mind. Understand why they’re making the moves they are, because clearly, they have worked.

In addition to Nate, Eric is someone I looked up to immediately. I thought Eric was just, pardon my language, was just a bad ass dude. When it came to trading, he has conviction like I’ve never seen before. When he thinks something is going to happen, he doesn’t talk the talk, he walks the walk. So, I’ve always looked up to Eric. I actually remember messaging Eric a couple of times and I would be extremely nervous because I didn’t want to seem dumb and embarrass myself in front of him. And now actually, here we are in 2018 and I talk to him on almost a daily basis, he’s probably one of my best friends.

Cam: It’s kind of crazy like that, right? Just for the record, when you got started with us, you went through both Textbook Trading and Tandem Trader coursework?

Alex: I did. I watched both of the videos and I thought they were very educational. I think it’s a mistake for anyone who hasn’t watched them, I think you’re at a huge disadvantage. For any new trader, I believe the value that you get out of those two surpasses months and months of just trading on your own.

Cam: Tell us a little bit about your trading style.

Alex: I like to trade momentum stocks. I try to avoid illiquid and long-term positions because patience isn’t my forte, I’ve come to accept that. A lot of my long-term trades do not work out. I try to every single day look to see what are the most actively traded stocks by volume and I like to trade those because I like to see what’s going on the Level 2 and I feel like I get the best read on what is going on when there’s a lot of volume being traded.

Cam: So, are you mostly longing or shorting these stocks? What’s the average amount of duration or time horizon for you in these trades?

Alex: I trade long and short. The time varies, I’d say typically I’m in a trade for ten to fifteen minutes. I like to take profits when I see them. I do end up missing out sometimes on a fair amount of more money, but I’ve had more plays come back on me and ending up going red with patience than I’ve had work for me. I trade long and short because I used to only trade short, but the matter of fact is you can make money doing both. And, sometimes a market is better to buying stocks, as we saw in October. October was one of the best months I’ve ever had, and the majority of my trades were all longs, even though I consider myself a short seller. I trade usually every single day from 9:30 to 10:30 and then 2:00 to 4:00.

Cam: When did you feel like you were making progress and getting some momentum behind what you were doing?

Alex: I had my first breakthroughs in mid-December to mid-January 2015-2016. It wasn’t until I really started analyzing my trades and figuring out what works for me and what doesn’t, it took me to do that to start becoming more consistent. And I realized that there was a certain setup that I always lost on and there was a certain setup that I won the majority of the time on. So, I started solely focusing on that one setup that I was consistently profitable. The only bad thing about that was that one setup did not happen every single day.

Cam: I’m trying to imagine how you were able to juggle study and trading at the same time.

Alex: It’s kind of difficult actually. My Financial Markets Institution teacher, I sit in the front row and I have my ETrade platform open and he knows I trade, I talked to him in the beginning of the semester saying, “Hey listen, during your class time is the market open. I need to be there for the market open, this is what I want to do in the future.” He was actually surprisingly okay with that. He said as long as I keep doing my homework and well on my exams he didn’t care. So, I kind of took the honest approach with my teachers to let them know that this is what I want to do in the future, and they respected that.

Cam: Has he ever asked you how much you’re making during the class?

Alex: Some days he’ll kind of mess with me and say, “How much is Alex up today guys? You want to take a guess?” Some of the times I’ll tell him, and he’ll be kind of shocked.

Cam: At what point did you start to feel this is something that you could do full-time for a living for yourself?

Alex: I got the feeling that I wanted to do it for a living very early on because of the excitement. I don’t believe there are many other excitements out there like trading. I remember my first two months of trading, every single trade I got into my heart would race, that’s not a good thing. Now, I’m calm and collected, but there was a thrill to it, and when you have a plan and it works to a tee, there’s no greater feeling. It was pretty early on that I knew I would love to do it for a living, but it wasn’t until June 2016 when I made $30,000 in a week out in Greece on the beach, that I said, “Oh, this is for me.”

Cam: $30,000 on the beach? That kind of sounds like you’re one of the poster boys for the glamorous lifestyle of a day trader.

Alex: No, that is a luxury. Day to day I’m at a college, I’m at off campus housing. I have basically a nice desk from Home Depot that’s on some milk cartons with a couple thousand-dollar trading system on it. So, it’s kind of a do-it-yourself desk with a nice setup on top.

Cam: Talk us though what a typical trade might look like for you.

Alex: A standard, typical trade for me—well today I’m pretty sure we traded the same stock—I traded APHA and my mindset on that was there was a great short sell presentation on this premarket. It was down 20 something percent, I think they’re a complete fraud. The presentation had me sold, but what I have learned over the years of trading, because I got humbled really quick, you cannot be too biased on any stock. No matter how trashed that stock is, no matter what kind of research you’ve done, you may be 100% correct, but that doesn’t mean that the stock can’t punish you, so I learned not to be too biased.

I had a feeling that it would be a good short into pops at open, so I took a position at 580, I took 5,000 shares short. Which as in hindsight it was way too much, because I really didn’t want to get into a 30,000-40,000-share position. I’m trying to actually trade smaller these upcoming weeks just because I’m so busy with studying for finals. I’m trying to go smaller. So, I got 5,000 at 580 and I got another 5,000 at 640 and 660. My risk was seven. Seven I would have cut it off, I would have been a little upset, but seven’s a big hole number and I thought maybe I would let it go over/under seven, see how seven holds, that was my plan. Once the stock went to 680 and 680 slammed it down, I think I added into the next pop risking off that 680 high. In hindsight, I don’t like shorting the front side of the move. I completely shorted the front side of the move.

Typically for me, if anyone pulls up the APHA chart you’ll see that the stock slammed from 680 down to 640, usually that bounce is the bounce I love to lay into to, then I risk that prior high of 680. For me that is a very high percentage trade and I don’t feel like I’m on the front side of the move, how I was just adding and kind of adding up. You tend to get into trouble with that. That was my plan, so I got my average up to 620, 630 and I said sub six washes where I’ll cover, I didn’t want to be too greedy.

Cam: Tell us about your favorite trade of all time.

Alex: My favorite trade had to be GE a couple of weeks ago. It was trading insane volume, meaning I could get in with as much size as I wanted, in and out pretty much in an instant. It put in a top and it looked incredibly heavy, so I sized in pretty huge only risking ten, fifteen cents. But it never stopped, it must have gone down a dollar. Now, I only captured thirty or forty cents of that move because I was out and about on mobile watching it. But that had to be one of my favorite trades because I honestly have never gone in with size like the way I did there, and it ended up working out.

Cam: I know you’re trading some pretty decent size right now, but I guess that wasn’t always the case. Talk us through the process of scaling up for you.

Alex: Well the process of scaling up, it was very slow and gradual honestly. I think it went from 50 to 100 a day to if I made 250 in a day, I was absolutely ecstatic. Then it became, I would say in March of 2016 after being with the Investors Underground for two months, I was probably making, I would say, probably 400 to 500 on a daily basis pretty consistently. I mean obviously I would have my down days, but my down days would be kind of the same as my up days, so it was not really setting me back, I wasn’t taking a big loss. I just slowly kept doing what I was doing, just not changing my trading strategy, sticking to the setups I liked, but just slowly putting in a little bit more money, a little bit more money, a little bit more money. So not ever changing my true risk in terms of percentage or cents wise, but just increasing the dollar amount, keeping that either twenty-five cent risk or fifty cent risk. I just slowly and gradually increased.

Cam: Now that you’re scaling up, I guess the stakes are way higher. Every time you’re on a trade you’re risking a small sized family car. How do you manage that risk on an emotional level and make sure that the numbers don’t affect your psyche?

Alex: I try not to look at it like that honestly. Realistically if I’m putting all of this into context which I need to try and look at the bigger picture more, I really do. Nowadays I’m at the point where—I was talking to Eric the other day—if I make anything less than $5,000 a day, I feel unsatisfied and I need to get out of that mindset immediately. Because if you’re green every day that’s awesome. I try not to look at my trades about how much is at stake. I like to look at my trades saying, how much will I make if I’m right? How much will I lose if I’m wrong? And how probably is it that I am right? Those factors all come into what kind of size I use because I how much I risk and it’s not an exact science.

But on GE, like I said, I was risking $15,000 to $20,000 on the trade, but I knew if I was right, it could be a $100,000 and it was. I didn’t capture all of it, I wish I did, but it ended up being about a $100,000 trade, I caught $30,000 to $40,000 of it. That’s how I view things. I try not to look at, oh this is on the line right now, because I feel like that will make me nervous and it will kind of alter my trade. Right now, obviously, I’m up a fair amount on the year. I don’t want to trade saying, “Oh, I’m up this much, so I can lose this much” but I do kind of like to leverage that when the trade is right.

I currently sized down just because I would like to end the year on a good note and realistically October was a month I’ve never seen before. You had AMD moving $2, $3 in a day. NVDA in the past week and a half, two weeks has moved $30.00, it went down to I believe the 40s and now it’s up into the mid-160s. The volatility we’re experiencing with the volume has allowed me to use great size. If you’re on the right side of these trades right now, they’re pretty much going in the same direction all day. I’m not being that patient, but it was a great time to use size and right now I’m not feeling as confident using that size, so I sized back down.

Cam: What’s one piece of advice that you wish you knew on day one?

Alex: I knew always have a max risk, I knew that, I was told that, Nate stresses that every single day. Every day he stresses that. I want to stress that too, you need to have a set risk. Don’t get me wrong, every single one of us is guilty of not sticking to the plan, we don’t cut a stock off and it comes back. We get out break even or we make money actually. But it only takes that one time to where you might not even have the chance to continue trading, so always have a set risk.

I think I’d like to tell newer traders and whatnot, don’t be afraid to keep using small size. I think using small size is great. I think it allows you to be more patient. I think it also gives you more satisfaction. When you start using bigger size and having some big winners, you don’t want to go back to the smaller days and whatnot, you just don’t. If I could do it all over, I kind of wish I didn’t use as much size as I did because I would like to be absolutely ecstatic to make $1,000 a day. It really is the small gains that add up, it’s not the big win, big loss, big win, big loss that adds up over time.

Cam: You know that totally makes sense. I was curious, what piece of advice might you give to aspiring or existing traders who are looking to take their game to the next level?

Alex: If you’re an existing trader and you want to take your game to the next level, I believe if you’re Investors Underground, you’re missing out. I think Investors Underground provides some of the best content out there, but in addition to that, I think you need a network. Be friendly with everyone. Chat with everyone. I find that my game has taken the next step due to the people I talk to. I am beyond grateful to you guys. It really is kind of like a family unit, everyone wants everyone to do well.

Cam: Given since you’ve been through, I guess, our coursework for the beginners and up to speed in a way that you’re making money on a consistent basis, what do you use the service for on a day-to-day?

Alex: Honestly, I use it for alerts a lot of the time. There’s a lot of amazing people like Stapes [ph] and others who post just very, very quick alerts on new news. I also use it to chat with some friends and bounce trade ideas off of these other guys because if what I’m seeing is not being seen by one of these other guys, I tend to rethink something. Usually we all kind of are one the same thought process when it comes to a lot of these stocks, we usually see a lot of the same things, and it’s really nice to enter a trade and also have kind of a confirmation with someone else saying, “Yeah, I can see that happening too.” It just reaffirms everything that you thought, and you’ve planned out too.

So, I use Investors Underground kind of just to chat with everyone and bounce trade ideas, see what alerts are going on, what new news is being posted. All of my trading buddies are 100% through Investors Underground. I’m friends with Josh, Nate, Eric, I talk to Cody, I talk to him more about cryptocurrencies because I’m totally into cryptocurrencies as well, and Cody is absolutely a phenom with that stuff.

Cam: So, short, medium and long term, what do you see in your trading future?

Alex: In May I graduate, so starting May I am going do this full-time, see how it goes for one or two years. This year I started back up in June and I’m currently up six figures this year, so I hope to bring that into next year as well. As long as I can be consistently profitable, I will do this for the rest of my life. I love the people I talk to, I love trading, I love that I can do it on my time, from anywhere I want, with my hours, I definitely plan on doing it full-time.

Cam: Awesome. That’s sounds about as good as it gets, right? How can people get in contact with you if they want to ask you a question or just say hi?

Alex: If you want to reach out to me, I respond 99% of the time, you can just find me at Investors Underground at, I believe it’s @spositoalex. S-p-o-s-i-t-o Alex. And it’s the same thing on Twitter, just look for Alex Sposito and then look for kind of a young douchey kid and that will be me. Just reach out. Twitter’s a hit or miss with me because sometimes it goes to that request a DM box and I won’t see that notification for a long time. But whether or trading or not, I’m always in Investors Underground chat room. Feel free to PM me and I would love to chat.

Cam: Well thanks for your time Alex. It was really cool to get to hear a little bit about your trading style. I know a lot of the Investors Underground members have been watching your success in the markets and keeping an eye on the stuff you’re trading in the chat room and really wanted to hear a little more about what you’ve been up to and how you approach the world of trading. Thanks again, I really appreciate your time on this.

Alex: Yeah, thank you very much for your time Cam, I hope you have a great day.

Key Points

  • You will never make consistent profits by following other trader's alerts. You need to strive for self-sufficiency.
  • Traders should avoid biases. You may be 100% right about a company (i.e. fraud, undervalued, etc.) and the stock can still humble you. Don't let your biases affect your trading.
  • The process of scaling up is slow and gradual. You need to see consistent results and then you can slowly start increasing size.
  • You need to have a maximum set risk to avoid potentially catastrophic situations (i.e. always cut losses at $5,000). No one likes taking losses, but this rule can protect you from taking even bigger losses that may jeopardize your trading career.
  • Small gains add up over time. If you look at most successful traders, their career P&L is built from small wins and small losses. It's not comprised of a few "home run" trades.
  • Start networking with other traders. Building a solid trading network can have a major impact on your trading. You can learn from others, share ideas, and build a support system.