Derrick Interview

Transcript

Cam: Hey, it’s Cam from Investors Underground. Welcome to another trader interview. It’s been a while since we had somebody on for this section so I thought we’d get a very special guest to hang out with today. He started trading six years ago when he was 17 years-old, and in a very short amount of time, he’s proven to be one of the young guns to follow in the trading world. He made around $700,000 in 2014, and is a moderator and key contributor in the Investor’s Underground Chat Room. It’s my pleasure to be able to chat with him for around 20 minutes today, Derrick Leon. How are you doing, Derrick?

Derrick: Hey, Cam, I’m doing great.

Cam: So, tell us something about yourself, pre-trading life.

Derrick: Pre-trading life, I was a nerd. I was the guy in the classroom who wasn’t really extroverted, I was more introverted. I kept to myself most of the time. Kept to my studies, my education. I didn’t really know what I wanted to do with my life. Everybody in high school had this plan, you know, I going to go to college, I want to be a nurse, I’m going to be the next NFL pick. I didn’t really know what I wanted to do with myself. I knew my dad was a businessman and I wanted to pursue something to that extent, but I didn’t exactly know what.

My parents ended up filing for divorce in my sophomore year, and it took a big toll on me, the divorce took a big toll on me, you know. I ended up dropping out of high school. I went to my habits, I started playing computer games nonstop, just to get away from everything. My dad was okay with me not going to school. He didn’t really care. I was 17 at the time. I was watching TV one night and came across a commercial. It was e-Trade with the talking babies. I got interested in it, so I called my uncle and I asked him a couple of questions about the stock market. That’s when I got my first gist of trading.

Cam: What did you do next?

Derrick: Well, you know, I researched a lot about it. I did my research and I saw some gurus, saw some people who would make a couple of hundred dollars a day, and I said, “Wow. You can make two or three hundred dollars a day?” I’m sitting there just thinking, that’s a lot of money, I want to get started. I opened an e-Trade account and a Guardian account. I looked up some services, found a guru in penny stocks, and that’s where I had my first start and my first trade. It was in that newsletter.

Cam: How exactly did that turn out for you?

Derrick: I paid my market tuition with that first newsletter. I ended up learning a lot of mistakes that I did. I was a sheep, I chased the trades that the guru would go on. Obviously, most of these stocks were low quote stocks, so you end up chasing at a bigger price, and I got burned. I got burned, so I took a step back. I had to stop trading for a little bit, and decided I actually needed to learn how to trade, how to make my entries and my exits, because I can’t keep chasing stocks.

Cam: Your first experience with trading sounded like a pretty negative one. What take-aways did you have from that, and what was your next plan of attack?

Derrick: I refunded my account with e-Trade again, and started it back up with ten or fifteen thousand dollars, I don’t remember the exact amount. I told myself no more chasing, pick your entries, pick your exits yourself. Don’t rely on others to do that for you. I started doing that and Awesome Penny Stocks rolled around, Penny Pick rolled around, and the Best Damn Penny Stocks rolled around, as well. So, I started picking my own trades. I took my own trades in that. I didn’t really pay attention to the guru, I was talking to people and learning how to get better. I had a good solid run on the penny stocks, and that was the start of something. That was a taste of what trading could actually become in my future.

Cam: Penny stocks gave you a first kind of glimpse of the trading world and what was possible. But if my memory serves me correct, it was round about that time that the SEC and FINRA halted a whole bunch of sketchy stocks and pretty much destroyed the penny stock and OTC market. Was it around that time that you sought out new strategies and, at the same time, met Nate?

Derrick: I funded an account with Short Trader and decided to learn what shorting stocks was. I talked to a few people who were in that chat room at the time who were shorting stocks. So, I was finished with a stock, I thought they had a overextended move, and someone in the chat room said, “Nate thinks this grinds in and squeezes out more. He thinks it’s a short squeeze.” I asked the person, “Who’s Nate?” and he said, “He runs this service.” I checked out his service, I talked to people and they had some pretty good reviews on him.

At the time, Nate was pretty small, and I decided to join his service after that trade. It was a learning experience, for sure. The chat room I was in, compared to Nate’s chat room, was a whole different level. Nate’s chat room was pure professional business, and the other one was let’s have drinks, let’s party because we just made some money. People would actually go talk about random stuff in the other chat room. I liked Nate’s chat room better because he kept it more professional. So, that’s where I learned.

Cam: What was your strategy coming into the Investors Underground community?

Derrick: My previous newsletter, I had the experience, no chasing, no taking positions that you’re unfamiliar with, so, that’s the approach I took to Investors Live, when I started in his service. There’s a lot of great information being posted in there and traders are taking different trades all the time. The approach that I took was, learn who the top dogs are in that room, learn from them. Watch their commentary in chat. Watch what they do. Watch their entries, watch their exits. I would ask myself, why are they taking this position? Versus asking the person why are they taking this position. I had that drive to learn, so I would ask myself the question. I would repeat the question, why are they taking this position? And eventually I would find the answer.

Cam: So basically, you’re watching all the top guys in the Investors Underground community closely, what they were trading, what they were looking for, how they were entering and exiting positions, and you started to formulate your own ideas?

Derrick: Oh yes, definitely. I developed my own strategy picking ideas from this person and that person, and mingled a lot of those strategies together, and that’s what made me the trader I am today.

Cam: So, tell us a little bit about your strategy, then.

Derrick: I’m going to talk about my longs. What I like to see in a long position is a stock that’s had some sort of PR, some sort of news, some sort of filing that causes the stock price to go up. And I’m paying attention to how much people are shorting it versus, you know, how big the float is. If I can determine a first move breakout, if it actually holds, I’ll actually look for longs, because I know shorts mean negative news, the stock is going right back where it came from. That’s one of my favorite type of plays, is looking for the short squeezes, which stocks are making the higher lows, which stocks are heavily shorted, what stocks have news, is there a manipulation behind the stock. That’s the type of news I’m looking for on longs. Those are one of my favorite type of plays.

Cam: That’s pretty interesting. So, it’s like, the first move is created by the news, and maybe some foolish shorts get involved at that stage, then the second move is created by smart longs coming in, and the first set of those shorts cover, and they really propel the stock to that next level, and the top’s sort of formed when foolish longs enter while the smart longs take their profits and smart shorts start in, and the stock ends up coming back to earth. Sounds like that’s kind of what you’re looking for from your long strategy. Is it also what you’re looking for from your short strategy as well?

Derrick: When I realize the chart is overextended, once the longs have been exhausted and the shorts are exhausted, I start trying to look for trades I could swing. I’ve been getting more into it, and I’ve nailed some big ones, like CUBA, ADXS and GENE That’s what I’m looking for, overextended news with companies where they’re looting shares, where they’re selling at a price, who have some sort of offering, or a secondary that’s coming, and that’s the type of moves I’m looking for.

Cam: So, thinking back to the time when you were struggling with your trading and blowing up a couple of accounts, did you ever think that trading wasn’t for you?

Derrick: Oh yes, there’s been plenty of times. I ask myself that a lot. I actually just recently asked myself that question on NBRM. I ended up losing $100,000 in one day and I asked myself is day trading really for me? The psychological part of trading—I’ve doubted myself almost at every turn, every time I have a loss, and I just stuck to it. I persevered. My dad always told me if I stuck my mind in something to see it through, see it done. And that’s exactly what I did with trading. I’m not going to lie, there’s some days in there I cursed trading, and decided trading wasn’t for me, and I’ve wished I never crossed paths with trading because there’s some rough patches in my life where trading did bite me in the ass.

Cam: Since you started having success, what was driving you? What were you measuring yourself by? Just the dollars stacking in your account?

Derrick: It was more than just making money. Day trading is fun, the money part is fun. But I like the challenge, I guess. I like the challenge of being able to stick with something. It’s always been about the challenge for me, whether or not I can make it. The money comes and it’s fun, don’t get me wrong, but it’s always been about me pushing myself to another level, on a personal development level. Trading was that tool that challenged me, and it challenged me to a level that I’ve never been pushed to. You know, blowing my accounts, barely having any money to survive on, and I decided to persevere and get it done.

Cam: So, as the Derrick that you are now, if you had a time machine and you could go back and give Derrick Junior some advice, what would it be?

Derrick: I would tell myself, stop averaging down on positions, or averaging up and letting trades go against you, invest in your education, and study more. That’s what I would tell myself. Because back then I was stubborn. I had to take bigger losses. The biggest thing I would tell myself is invest in your education, because that’s always important. You know, you’re investing in your own business.

Cam: Where do you think people should get started?

Derrick: To be honest, with some sort of service with credibility behind it. I wish that Nate's DVD had come out sooner. That would have saved me a couple of headaches. That helped me read charts a lot better, see what stocks are actually moving, and why they’re moving or they aren’t moving. That ought to see the second DVD, too, as well. That definitely changed my trading career around. That’s one key factor is those DVDs. Video lessons as well. I think that’s helped my trading, because we can recap at the end of the day. So definitely find some way to invest in your education, something that’s going to help you and you know it’s going to help you.

Cam: Enough about Nate for a little while. Who are the other guys in the community who have helped you through the process of your trading?

Derrick: Well, let me tell you one thing. There’s been two traders that have been with me since the start of Investors Underground, Elkwood, and that’s Eric Wood, he was only a year in there, or two years in. He was around when I only had $5,000 to my name, and I always asked him for advice and he gave me what advice he could, or what he saw in the stock chart. He’s been with me since day 1. I will always respect him for that. I always looked up to him. I always looked up to what he did, because there would be days when he would make multiple five figures. I’d be like, wow, I really want to get to that level, so he’s been one of my biggest inspirations, is Eric. Another trader that helped me along the way, too, was another guy. His name was Tanner, Freeflow. He helped me with technical analysis and what he saw. Another person that has helped change my career path has been Phil. I’ve been watching his calls, watching his entries and his exits, and they’re always on point. He’s another mentor that still helps me out, to this day. I always ask him for advice, too, and he gives it to me. There’s another guy. Obviously, my top five traders in IU Investors Live would be Freeflow, Crawfish, Phil, and Eric and Sandro.

Cam: Pretty cool to have a place where you can get the right network of people who support you, and you support them back. So, anyway, a totally phenomenal year in 2014 for you. Have you had to kind of pinch yourself to see if it’s really real?

Derrick: Yes, I’ve had to pinch myself. It is kind of Cloud 9 stuff, so I have to get back on Earth sometimes. I’ll have emails, you know, this is why I have email set up, because people ask me questions all the time. I hear people, hear their stories and how they’re struggling, it keeps me in check, keeps me in line from taking bigger losses, I guess. Because you know the journey here, I could always be back at where I started, if I take a big loss.

Cam: Now that you’re kind of crushing the markets, has that kind of changed you as a person? Do you compare yourself with friends working 9 to 5, or people you went to high school with?

Derrick: I knew I never wanted the 9 to 5 job. I knew that wasn’t for me, slave myself to a corporation or anything like that. Has trading changed me as a person? It has. I’m not going to lie. I don’t compare myself to people I grew up with. They’re doing their own thing, I’m doing my own thing. I think it would be pretty bad to compare myself to others. It’s made me realize, I think I’ve always been a person with a good heart, so it’s given me even a bigger heart to help other people out. I told myself I want to help out my mom a little bit more, because she’s struggling. I help her out, I help my grandma. I help out several family members that are currently in need of help. It has changed me. Not in a bad way, but more in a good way.

Obviously, there’s some issues that I have to work on. I am young. Sometimes I get a little bit of an ego going there, but it’s something I’m working on, something I’m developing. Personal development.

Cam: I’ve noticed recently on Twitter that you’ve been attracting some attention from people who don’t exactly like what you’re doing. Why do you think that is, and what would you say to them?

Derrick: You talking about my haters? Yes, I’ve developed more haters, or more people who are trolling me. I think it’s because they see this high school kid—I eventually did graduate, but I dropped out and I have no college education. It pisses them off. They went to college to get a good education, to work and make a decent living, and here they see a 23-year-old kid that didn’t go to college, has no education, has poor grammar skills. It really messes with their mind. You know, first, trying to judge, look at yourself and ask yourself what can you change about your personality to make you a more successful person.

Cam: How are you going to keep learning and continuing to grow as a trader?

Derrick: By doing the same thing that I’ve done the past two years. Looking at other people’s calls and looking at what they see. The stock market’s a never ending, learning game. The day you’ve decided you’ve learned enough is the day you’re going to fail. The stock market’s always adjusting, strategies need to be changed. I plan keep on learning, keeping myself humble, and readjust my strategies. You have to readjust your strategies every two or three months to beat the market. That’s my plan.

There’s a lot of young guys out there who want to make trading their career. If you want trading, I’m speaking directly to you guys. If you really want trading, you’re going to go through ups and downs. You’re going to go through the learning curve. But it’s up to you whether you stay in the game, whether you cut your losses or not. Obviously, I’m pretty young, I’m only 23, and if I have one thing to say to you guys, challenge the status quo. Don’t go slave your souls to corporations. Don’t go work 9 to 5 because you only have one life. Trading has definitely given me that tool to challenge the status quo. I want to live my life now, while I’m young. I want to be what I want with who I want whenever I want. And that’s what I have to say to you guys.

Cam: We’ve got an even younger member in the Investors Underground community, Nikkos, who’s only 20 years old, and made himself over $300,000 in 2014. Do you guys catch up much and talk strategy together? Is it cool to see another young gun succeeding in the market as well?

Derrick: Well, yes, it’s awesome to see Nikkos do what he’s doing. It’s great seeing what he’s done so far in trading. The kid makes a lot of money. He made six figures before the age of 20. That’s something that not many people do. Nikkos is someone that definitely everyone should be paying attention to, because he is the next million-dollar kid.

Cam: Crazy fact about Nikkos. He also made $112,000 in the month of February 2015 alone. Maybe you guys will be racing to that million-dollar mark together. I guess hitting that million-dollar figure is a big goal in your trading right now.

Derrick: Oh yes, it’s been a big goal for me for quite some time. I would always tell myself I’d make a million dollars before the age of 24. I think I’ll definitely hit it by October 8th. October 8th, I hit 24 years old.

Cam: Since members are reaching out to you in the Investors Underground community, what kind of questions do you like versus the questions that you don’t really like?

Derrick: The questions I don’t like is questions that Google can answer and Wikipedia can answer. If you ask me that type of question, you’re wasting my time and wasting your time. I like high quality questions from people who put effort into trading, who put effort into studying. From the type of question you ask, I almost guarantee you that I can tell what type of trader you are. So, if you ask me a question about if you should be in a position or if you should not be in a position, ask me what I think because you’re underwater, I don’t think you should be in a position at all because you shouldn’t be asking me those questions. What if, potentially I see a trend. “Hey Derrick, I see highs and lows in this trade, what do you see?” I want to respond to that question. I would tell you what I see and what I would love to see happen. If I see resistance points, “Hey Derrick, I see resistance points and they’re at $17, $18 a share,” I’m going to tell you I see resistance points too. Just ask me a high-quality question. Don’t ask me a question that Google can answer.

Cam: So, what can we expect to see in the future from Derrick Leon?

Derrick: What you can expect to see from me is I’ll be more consistent, bringing my trading to a less stressful level. Just being a more consistent trader, knocking out the home runs every once in a while, but batting for singles. Because that’s what I want to do. I want to live a low stress, stress-free life. And trading can be stressful at times. We choose whether we make it stressful or whether we make it easy. That’s what I want to do. I think you’re going to see a more relaxed Derrick in the unit.

Cam: Well, I really appreciate your time today. It’s been a great insight into the story of a young trader who’s come up through the ranks at a very early age. I really wish you the best in your future trades and success in the future. Thanks again.

Derrick: Thanks again, Cam. I appreciate your time, as well.

Key Points

  • Derrick made about $700,000 in trading profits in 2014
  • Derrick failed with a few strategies before discovering short selling
  • Derrick had a drive to learn and studied the strategies of top traders at IU
  • Derrick looks for overextended charts to swing short
  • You have to readjust your strategies every 2-3 months to beat the market
  • If you reach out to successful traders, ask questions that cannot be Googled