Tom Interview

Transcript

Cam: Hey. Welcome to this interview. We've got a very special guest with us today. I first talked to this guy in the Investors Underground chatroom. I was trading some Apple short at around $600 just for a day trade, and I saw that he posted that he was also short. So, I dropped him a PM and we had the same position. I wanted to see what he was looking for from it. He was looking for a couple of points of downside or something like that. I asked what size he was trading, and he said $6,000. Now, I had 100 shares short. My total position was $60,000. I thought, oh, $6,000 short? He's got 10 shares. I was thinking he was a little bit of a piker, and I asked if it was dollars or shares. He said it was shares. I pinged Nate a PM and I said, hey, is this guy legit? He said, he's totally legit. We stayed in the trade for about an hour, and we got four points of downside. I made a quick $400, and this gentleman was up, I guess, $24,000. Immediately, I knew it was someone who I had to learn things from, and he's turned out to be a very influential person in the development of my trading. He's also a super good guy. He's made tens of millions of dollars in the market. He's got a great family. I'm glad to be able to speak to you today. Tom, ECNC1.

Tom: Thanks for that polite introduction there.

Cam: Great. Tell us a little bit about your pre-trading life and I guess what got you interested in stocks.

Tom: Pre-trading, I went to college. I was originally going to go to law school. I was a political science major. Realized I was too lazy to continue onto graduate school, and I had some buddies working on Wall Street. It seemed like a good thing to do. I followed them. I was a retail broker for about seven years. At some point, I was real successful on the retail side as far as making money as a broker, and I hated every minute of the sales portion of it, but I love the trading aspect. Around ’97, I decided to give it a go on my own. Initially, I was just flipping IPOs and secondaries. So, it was all syndicate. I learned that aspect of the business when I was a broker. That was around ’96, ’97. I really started shorting stocks back in probably about ’98, is really when I really started shorting stocks. Obviously, there was a learning curve there. I got into some battles, some serious battles. That was the Internet bubble. Shorting some of those big names could be catastrophic.

Cam: How did you know that you were going to overcome these battles and end up trading full-time for yourself for a living?

Tom: It was a little bit scary. I was coming from making a salary to all of the sudden working for myself and if I didn't earn anything in the market, I had no money to pay the bills. I had a knack for it initially right away. I got into trouble a few times, learned my lessons, and vowed never to make the same mistakes again. I really capitalized on shorting third-tier stocks, small caps rather than, I realize that the bigger names like Amazon, you could be right and wrong at the same time and get blown up very easy. Where a lot of small cap names, I'd find something I liked that was up on air, some BS news announcement, and I would pile in size and sit with it and wait it out. I trade more position trading. Most of my trades I'll hold more of a day to a week to a month. I've held positions two or three months at a time. Ideally, I'd like to be out the same day, but it doesn't always work out that way.

Cam: To my understanding, I guess the style of trading that you're looking for is, you're looking for companies that don’t deserve their valuations for whatever reason. Maybe they're just running because there are other things in the sector that are running, but really, they're strapped for cash or they don’t make money or things like that. You're piling short and I guess wait until these guys have earnings plays or wait until the hype comes out of the market and then you're looking for covers? Could you tell us a little bit more about what you're looking for from these companies or what you're looking for from the trades?

Tom: The different things I look for, and each trade’s a little bit different, but I think you nailed a bunch of the reasons. Yeah, I look at companies that I think are strapped for cash that have a decent size float that are running up for no reason except for momentum. There's some BS PR announcement, and they're running up and the momentum players get in. I try to catch the backside of the momentum and catch the downside. I do trade long from time to time, but most of my success has been on the short side.

Cam: Could you tell us why you signed up for—I guess you've been trading for, what, 20 years? You've been super successful, but only recently, when I say recently, in the last handful of years you signed up for Investors Underground chatroom. Why did you sign up? What do you get the most from the chat?

Tom: I signed up initially just to see different ideas what people are trading. Maybe some things I'm missing. I like to see what the momentum players are buying and what people are shorting, but it gave me more idea of flow. Really, since joining up, my entries and exits have always been real sloppy. I've always been real successful, but Nate is razor sharp with his entries and exits. He's really helped me out and has really sharpened my returns by giving better entries and better exits. I could tell when something is bloated and is going to go down, but I'm always entering too early and exiting too early. I'm usually upside down for a bit of time before I'm right. He's really helped me with that aspect of my trading.

Cam: Cool. You mentioned you're a subscriber of Investors Underground. Do you subscribe to any other of the services out there? I know there's a bunch.

Tom: Yeah. I subscribe to two other services. To be honest, I don’t really use them. When my subscription expires, I won't renew them. I don’t even know my logon on one of them. Investors Underground is the only site that I use for trading.

Cam: Sure. You've watched Nate’s DVD, Textbook Setups. What did you think of it?

Tom: I think it's awesome. It really helped sharpen my trading. Nate’s a really bright guy. He makes a great living doing this. I think you'd be crazy not to buy it. One trade pays for the cost.

Cam: Okay, cool. What should be expect to see from the future from Tom ECNC1?

Tom: This is what I do every day. I've been doing it for, like you said, 20 years or so. I just want to continue my success and sharpen my skills. The market changes from day to day and year to year. So, you have to always change the way you trade. I think you’ll see more of the same.

Cam: Great. I really appreciate your time today. It's been a great insight into, I guess, where everyone wants to be from their trading. I really appreciate your time. Thanks very much.

Tom: Thanks.

Key Points

  • Tom was a retail broker for about seven years before becoming a trader
  • Tom started flipping IPOs before transitioning to short selling
  • Tom will hold positions anywhere from a few days to a few months
  • Tom looks for companies that are strapped for cash and have run up solely due to momentum trading
  • The market changes every day. You always need to work on sharpening your skills and refining your strategy.