Eric Wood Interview

Transcript

Cam: Hey, it's Cam from Investors Underground. Welcome to another trader interview. Today we have with us another well-known name in the trading community. He started off trading penny stocks, but ended up being one of the best intraday NASDAQ traders that I know. He's one of the top guys to follow in the Investors Underground momentum room, and it's been great to see him grow with us over the years. It's my pleasure to be able to sit down for around 20 minutes today. Elkwood66. How are you doing, Eric?

Eric Wood: I'm doing great.

Cam: Tell us a bit about your pre-trading life and also some of your early trading before finding Investors Underground.

Eric Wood: It actually starts way back to the dotcom time. I was self-employed, which I had been for the last 20 years. At that time, ’99 to ’02, I saw the market going nuts, etc. So, I dabbled a little bit. Made a little bit of money, but nothing to where I really knew what I was doing and was ready to sit down and do it full-time. I was involved in property investment, and that was going very well. I had a business partner who had just moved to my area in Florida. He went to Cornell. I had quite a bit of money saved up, and he suggested we go into that. I put it on the back burner for about six, seven years, and we were kicking ass and taking names in properties. We were really doing good. Around ’06, ’07, we weren't fools. We saw that things were really maxed out in property investment, and every guy we talked to on the street anyhow was flipping houses. They didn't really know what they were doing. It was getting very crowded, extremely crowded. I started dabbling with stocks again, a lot of penny stocks, some blue chips, some other things, and that was even part-time at that time.

I started buying some penny stocks and completely naïve, just loading the boat with a ton of them and going and playing golf all day and not worry about them crashing or anything, and ended up making a ton of money. In the process of that, I guess that was around ’07, ’08, I saw Tim Sykes was shorting a few of them. You get involved in this stock, you find out different things out there on message boards and stuff. I was out there with the rest of the naïve idiots just trying to figure it out. Through that, I met Tim and just started to get a little more knowledge. In that process I was like, Jesus Christ. I'm lucky as hell that I didn't lose it all with what I was doing. I was still dabbling in some blue chips, buying Ford and LVS and stuff like that during the crash in ’09, but at the time, I was really starting to school myself, getting to the point where I thought I could do it full-time. That was basically the beginning, and that then led me up to meeting Nate, etc., but that was the beginning of really wanting to go full-time right there.

Cam: How was it that you got started with Nate?

Eric Wood: I really got sold on the short process through Tim. Valueless, junk, pump and dumps, etc. The problem with that was I couldn't keep busy full-time. There just wasn't enough out there. I could come in and eyeball it all day and really learn the level, too, and learn charts and all that, but there wasn't enough to me to really get my blood flowing. I wanted to trade more. I wanted to learn small cap and NASDAQ. I'm following Nate on Twitter full-time. I've got a couple buddies in Tim’s room that are in Nate’s room, and I'm thinking to myself, that's it. That's it. Let me really broaden myself and learn his style. So, I went over. I think I called him one morning and said, man, I'm trying to get in. I haven’t paid or anything yet. Let me send you a check. Within two weeks of being in that room, I knew it. I knew that was it for me. I was ready to go. The guy was just amazing. That was the beginning of that.

Cam: Not everyone listening understands exactly what amazing means. What exactly was it that gave you that optimism so early in the room where you knew things were going to be great?

Eric Wood: It was as simple as this. He would put out his watch list at night. I'd go in there and really check it out, and I come to the market prepared to sell every day. Every day. So, if he had six great setups on his watch list that really fit my eye, I'm looking at it thinking this is gold. When I'm sitting over there in Tim’s room, and this no disrespect to Tim, I'm twiddling my thumbs all day without really seeing the big picture of how many plays are out there. When Nate put out the watch list, I'm looking at it every night. I come to the market prepared at 7:00 a.m. I make sure I have borrows. I make sure it's the style of play that I like, which was obviously short buys. Nate is just absolutely killing it. At that time, I think he was trading a little bit smaller, but I was watching the guy make $2,000 to $10,000 a week and staying very busy. In my opinion, a lot of other people say, he was over trading, but in my opinion, perfect trades. Nothing is perfect. There were losers involved, of course, but it was what I needed. I needed to get the blood flowing and to stay busy because I loved the job. I loved the work. When I was twiddling my thumbs, it was driving me crazy. It was just that I loved seeing how consistent he was every day, and I knew I could get to that level if I just rode his coattails.

Cam: So, at that stage, you were starting to experience some success. When did it click for you that you needed to start scaling with what you were doing and play with some bigger sizes?

Eric Wood: Let me say this before I answer that, and this is not to discourage anybody. I came to the game with a pretty healthy amount of cash. I had done pretty well for myself. When it came to scaling it, I was ready to throw the motherlode at it. I wasn't really afraid of that, but of course, I was still getting my feet wet. I guess the real answer to it is, when I come to a trade every day, I already know before I get in the trade if I'm going to be maxed at $3,000 short or 70,000 shares short. I already know that based on the dollar amount of the stock, the liquidity, obviously, whether it trades thick or thin, and how big the chart is. All of those things are important, but of course, in the beginning, you don’t want too many big losers that are going to scare you and tell you, I can't do this.

We've all been through that after years, even myself after six years. Ten times I've had to sit on the side of my bed and go, shit, I don't know if I can do this after a bad day, and that's all bullshit. The truth is, you know you can. You just handled the trade wrong. When it came to really scaling it and getting bigger for me, it's like everything else. It's a gradual process where if you make $5,000 in the trade and you just dabbled in it but you know you could have made $25,000 in it, I guess you sack up a little more each time until you get to the point where it's not so much about how much bank you have. It's about knowing and having conviction in the trade and not being afraid to be 60,000, 70,000 shares short of the $7 stock when you see the big chart.

Cam: When you talk about your style, you talk a lot about shorting, because there's where you started off. By the sounds of it, you're trading more of the NASDAQs rather than messing with penny stocks these days. Can you tell us a bit more about what you're looking for when shorting these NASDAQs?

Eric Wood: I'm looking for several things with the NASDAQ shorts. Obviously, just ridiculously overextended. Maybe a $2 stock runs to $10 in a matter of five or six days, and the back half of the run has been all squeezed. Obviously, a lot of BS PR type stuff that's run. Just stuff that's extremely ridiculously overextended. That's not to say they can't go higher, but some of them just need a good healthy pullback. Others, the valuation on the company is just absolutely absurd, like Plug. For the most part, I'm looking for overextended junk. Absolutely love the biotech when there's some phase two horseshit that comes out, and the company’s just forever and a day away from being successful. It's bought up and goes nuts, and those are golden. Without fail, in this market, we've got three, four, five plays like that every week, and one or two that are on major watch every day.

Cam: Why don’t you tell us about some of the highlights from your trading career?

Eric Wood: Highlights? Just recently, I made $97,000 in one day. VLVP, Plug, and Excel. All three shorted in the same day. Unfortunately, that followed a $65,000 day loser, which on that note, two years ago if I had a big $30,000, $40,000, $50,000 loser in one day, I'm kind of frozen the next day. I don’t want these losers anymore, but today I can say to myself, you cannot be afraid to attack it when the trend breaks. I'm not afraid to attack the same stock on the next day after a big loser. On that note, obviously, I'm doing everything I can to avoid the big losers now. I had my biggest year ever last year with three of my biggest losers in the same year, unfortunately. I'm getting much better at that. I feel like I could have easily made a $1 million last year without the losers. My strategy now on the big drawdowns and the big losers are, and I've really got it under control. If I climb into a stock and I'm upside down and I'm short, and that stock is running away from me, I refuse to add. Those big losers come from add, add, add, and thinking to yourself, I've just got to get the average up. Whether the stock’s broken trend or not, it's just absolutely silliness. Now, what I do is, I stop adding. I just put it on hold. I don’t necessarily bail on the trade. I'm pretty fucking stubborn. I can let a trade go pretty hard without adding if I'm pretty convicted thinking the top is near, but it's the add, add, add that will kill you. Right now, I've got that under control.

Cam: Tell us a bit about how you're adapting and continuing on your learning journey.

Eric Wood: My learning curve really never changes other than self-management. I'm very similar to Nate. I use the one-minute on the daily. I'm looking for pretty much the same he's looking for. I know how big the chart is, even though I'm really staring down that one-minute on the daily. The level two is psycho. Some other guys will tell you that level two can be a lot of noise. My personal opinion is, there is massive, massive information in the level two, and I can watch every plant and look at every bid-ask, everything, and stare at it for hours on end and not get bothered by it. I absolutely love it. I never really change my style as far as that goes. I'm on top of the one-minute. I'm on top of the level two. As far as adapting to different trades and stuff, that is my style. I don’t sway much from that. I've learned you treat a $65 stock like a $6.50 stock.

If a $6.50 stock can move to $7, then a $65 stock can sure as hell move to $70 based on float, obviously. You just have to be aware of all those factors and be prepared as far as adapting to things that change. That's my style, and I feel like I'm forever learning. I just can't really pinpoint how I'm forever learning. I just know I went from making $20,000 a month to making $50,000 a month or more. Having a $10,000, $20,000 day is almost commonplace now. Clearly, I'm adapting, I think, more disciplined than learning different strategies in the market. For me, it's about keeping the discipline, adding to a winner. As far as style, my style will probably never change. I would like the long more, but clearly I haven’t adapted to that yet.

Cam: You've been a member of Investors Underground for three or four years. What's so valuable about the room that made you stick around?

Eric Wood: Well, the value is as simple as this. The room is about support. You can have a guy step in there and been in there for two days and act confused, and he could send out six PMs, and all six people will give that guy positive feedback like they did to me in the beginning. If you have a question, there has to be some support or some sort of camaraderie about helping them get to the point where they're very successful. That's the benefit. The community itself is total, 100% support. On top of that, to trade next to some pros, wow. That's fantastic. Ozark, LX21, ECNC1. Where do you get the opportunity to work right next to the pro? That's key. That's very important. Of course, Nate, who I don’t mention, that's auto , but I just wanted to mention a few of those guys.

Cam: In terms of recording your trades on Profit.ly, I noticed that you stopped doing that some time ago. Why did you stop posting them?

Eric Wood: Well, I'll tell you this. What I do, I send Nate a screenshot every day of all my trades and verify with him. Nate knows exactly who I am, exactly what I do. I wanted some privacy. I'm a fairly humble, private person and this isn't to say that I'm not making that kind of money or I'm making more money than that. The bottom line is, I like a simple life. It just felt overwhelming to do that. Quite honestly, I put a lot of work into this business, and I've really enjoyed just taking time away from it as far as that end of it. To me, that end of it just seemed tedious. That's all, and I hope that's not offensive to anyone out there.

Cam: You've seen Nate’s DVD, Textbook Trading. What did you think about it?

Eric Wood: Wow. I bought the DVD from him thinking there's no way you get this amount of information for this money. I went through it, and I was so overwhelmed that he made it just so understandable. From the beginning to end, you can truly see if you watch the DVD and then watch him trade exactly what he's going after. The value of it knowing all the mistakes he went through is just, it's unbelievable. I've watched a lot of different stuff, but this one is bar none. It's so much more in-depth and beyond anything else I've ever looked at. If you're biased in any certain way or you have a certain trading style, you can add so much to your repertoire just by all the information that it gives you. It's amazing. For the money, it's just probably worth twentyfold. It’ll probably pay for itself in the first trade, quite frankly.

Cam: So, you missed the Investors Underground catchup in Vegas last year. We've got another one coming up early October from the 3rd to the 5th, which is in support of a charity cause that Nate is involved in called Traders for a Cause. There will be a few keynote speakers, dinners, lots of drinking. We're also thinking about playing some golf. Are we counting you in?

Eric Wood: I am so going to be there this year. We'll probably play a little golf and get drunk as hell. You know me. Me and you chat a little bit. For those people who don’t know, I am very good friends to the drinking community. I enjoy my life. This is the best part of trading and working for yourself. I go to the golf course three, four days a week at the club with my buddies, enjoy a few beers. We go out. My children are getting a little bit older, so the fact that I miss Vegas, shame on me. I'll be there next time, buddy.

Cam: Tell me this. What are your top tips to get your handicap under ten?

Eric Wood: What are my tips? Yeah, it's hard. Look, man. I can only say one thing to golfers that are struggling. It's all in your grip somewhere. Something’s wrong. If you have athletic ability, it can all be fixed in your grip. You can't fix it on your own. See your local pro, and more than anything, if you're going to play golf, make sure you have plenty of beer and have fun. That's the golden rule.

Cam: Cool. Well, is there anything else that you wanted to chat about today?

Eric Wood: No, not necessarily. I think for those who are watching this who are in IU chat, if you're in there already, you're in the right place. There's no question you're in the right place to learn the business. Expect a lot of growing. For those that are not in IU chat, wow. I don't know how you're not there if you're trading. We hit Citron. We hit all the hit pieces first before everybody. It's just a golden place to be for information and to be alongside some very, very successful people.

Cam: You've been seeing a lot of success in the markets, and you've been making some great dollars. What can we expect to see in the future from Elkwood66?

Eric Wood: Just the same growth as this point. Obviously, I'm reining in the losses. I'm really making the wins stronger. We'll adjust and see where the market goes, but right now, it's certainly headed towards seven figures this year, I hope. It's been a lot of fun. Nothing but growth.

Cam: I really appreciate your time. Thanks for sitting down with us today and giving people your time to help them understand what it means to be a super successful trader.

Eric Wood: Thanks so much, Cam.

Key Points

  • Eric started trading penny stocks and eventually discovered short selling
  • Eric eventually started trading NASDAQ's because they provided more opportunities
  • Come to the market prepared. If you plan on shorting a stock, make sure you have borrows.
  • Scaling up is about having conviction and hitting the gas on good trades
  • Look for overextended charts, "fluff" news, and overvaluations, when finding stocks to short
  • Learning to "control" losing trades helps you maximize profitability
  • There is a massive amount of info on Level 2 screens