Tim Bourquin from Trader Interviews is scheduled to interview me tonight via telephone. Several popular bloggers and many successful traders have been interviewed in the past so I am looking forward to the experience. Trader Interviews is produced by TNC New Media, Inc. TNC New Media produces online media, tradeshows and conferences worldwide for highly-targeted audiences.
I am assuming that the audio version of the interview will be available in the near future via their website and through iTunes (this is how I listen to their interviews; I download them to my iTouch via subscription).
Dave from StockTicker did an e-mail interview with me last March that you can view here. Not much has changed since then but everyone grows from year to year so I am anxious to see if I answer questions differently. Trading and investing is an evolving endeavor so I would not be surprised if my answers change over the years.
Below is the script of questions and answers from my interview last year:
StockTickr: Tell us a little about yourself, Chris.
Chris: My name is Chris Perruna and I am 29 years old. I currently reside in New Jersey with my wife but was born and raised in NY (still my favorite place). I graduated college with a degree in Architectural Engineering and went to work for a historic preservation firm in Manhattan. I started as an intern with the firm while still in college and worked on several high end projects around the corner from Wall Street. It wasn’t until I was about to graduate that I knew I wanted to work on Wall Street and trade the markets professionally (rather than personally). I even signed up and took the trips to the exchanges each year through my university’s business school. I currently consult for a fortune 500 big builder as an architect (listed on the NYSE) and trend trade for capital appreciation. I am a trend trader looking for gains of 25% or more and losses no larger than 10% (preferably smaller). Understand that this 10% loss is calculated into a position sizing spreadsheet that only risks a maximum of 1% of total capital. My foundation is rooted in CANSLIM philosophies but I developed my system with detailed position sizing calculations and money management rules from Dr. Van Tharp.
StockTickr: What do you like to do outside of trading?
Chris: My hobbies include poker on a competitive level, a men’s flag football league in the fall and a softball league in the spring. It drives my wife nuts but I like to compete in most things I do so sports, poker and the market feed that craving. I also enjoy traveling, attending professional baseball and football games and dining at great restaurants. Del Frisco’s (NYC) gets the nod here!
StockTickr: How did you get started trading stocks?
Chris: I open my first brokerage account as a sophomore in college and have not stopped trading since. I first gained an interest in trading from my father who owned restaurants and traded heavily in the 1970’s and 1980’s. I still trend trade heavily based on his 200-day moving average plays. I started tracking stocks when I was a teenager but didn’t become “obsessed” until college. I started college when the 1990’s market was starting to really boom and I benefited greatly over the first couple of years – it was all luck, pure luck.
StockTickr: Most traders have a horror story about losing their shirt when they first started trading. What’s yours?
Chris: My worst horror story was trading Extreme Networks. It moved from $50 to $100 on several occasions and I thought I was invincible. I placed an enormous amount of money into the stock in my senior year (about 80% of my account at the time) around $55. The stock quickly ran towards $70 and I loved every minute of it. Without getting into details, I learned the biggest lesson of my life and sold just above $15 per share. To make matters worse, I had money from both my mother and sister in the account.
StockTickr: What single lesson did you learn along the way that has helped you the most in your trading?
Chris: Cutting losses short is the biggest lesson any trader can learn. No one will learn this lesson until a blowup happens and a lot of money is lost. EXTR helped me learn this lesson quickly. It took me almost four years to learn the lesson because the late 1990’s masked my earlier mistakes.
StockTickr: Describe your style of trading. How long do you typically hold stocks?
Chris: I consider myself an intermediate term trader. I trade longer term trends. I can hold a position as long as a year or as short as one day. I will cut a loser in the first day of trading and can take a profit in as little as a week if it hits my target. My targets are based on risk-to-reward ratios. Once a target is reached, I set retracement stops that will allow the profits to grow without great risk. GRMN is a recent play that lasted less than two weeks because it reached the target and LVS is a great winner from last year that lasted more than nine months. My average trade lasts a couple months.
StockTickr: What’s your exit strategy for winning and losing trades?
Chris: I set a sell stop based on a position sizing algorithm that gets me out of a trade when it moves against me. I exit a trade in a shaky market as soon as it hits my target or nears my target. I sold GRMN just short of my $60 target last week but the payoff was still near 3:1 based on initial risk. MR is now above my target so I am looking for a reason to sell even though I like the stock long term. When a trade reaches a profit of 20% or greater (such as MR – a current holding), I will set retracement stops that allows room for growth but protects a large portion of the gains. Each position is slightly different but the basic rules are always the same.
StockTickr: What 3 books do you recommend traders read?
- How To Make Money In Stocks by William J. O’Neil
- Reminiscences of a Stock Operator by Edwin Lefèvre
- Trade Your Way to Financial Freedom by Van K. Tharp
StockTickr: What’s the most common but easily correctable mistake you see traders make?
Chris: Overtrading a position based on the size of their account. I did this for years but now, you will won’t see me trade a position that puts more than 1-2% of my account at risk. As my account continues to grow, I stay closer to 1% or less for total risk.
StockTickr: What are your 3 favorite blogs?
StockTickr: What broker do you use and why?
Chris: I have two brokerage accounts for trading: TD Ameritrade for trend trading (started here and never left) optionsXpress for options trading: The first firm to allow me to trade options as a young kid. Actually, I love the site and service I get from this broker even though I am not the best options trader around. I will need to look for a lower commission broker if and when I look to day trade.
StockTickr: What is your typical R value per trade? i.e . what % of your portfolio do you risk with each trade?
Chris: No more than 1%. Of my last seven positions, five of them have been placed at .005% (half of 1%) because I believe that the market is nearing a potential top.
StockTickr: What technical indicators could you not live without?
Chris: I keep it very simple:
- Moving averages (200-day m.a. is the most important). I also use the 10-day and 50-day.
- Volume (looking for accumulation and distribution)
- Point and Figure charts for support and resistance levels
StockTickr: How do you think the market has changed over the last several years? How have you adapted?
Chris: Holding through earnings has hurt more during the past two years than the prior few years. For example, I didn’t take the warning signal on TWLL a couple weeks back and was screwed the next morning. I took an 18% loss (2-R loss) on the huge gap-down which really pissed me off because I have been having an excellent year.
StockTickr: Do you recommend backtesting?
Chris: I never did but as I continue to develop new systems for shorter term trading, I am starting to back test. The easiest mistake to make is ignoring commissions and slippage for a shorter term system. Understanding the maximum string of losses is also very important in my opinion. You must know if the system you are testing can blow you out (risk of ruin). I am not there yet so backtesting is not a major component of my arsenal.
StockTickr: What advice can you offer traders who are just starting out?
Chris: Educate yourself and trade for real. Get your feet wet because virtual trading is BS. However, beginners need to understand that they can’t successfully trade small accounts the proper way. I may contradict myself with the last two statements but I am just telling a novice to learn how to trade (get familiar with terms and tools), start to understand their emotional feelings when real money is on the line and then grow their stake to trade properly.
StockTickr: How do you recommend traders find an edge that suits their personality?
Chris: If something feels comfortable then it probably fits your personality. I am comfortable trading longer term trends rather than day trading at this time. I will most likely never buy and hold because I am not comfortable with that strategy either. I tested a few strategies and found one I liked early on so I stuck with it because it worked. If it stops working, I will move on.
StockTickr: What do you like best about trading?
Chris: The money is always great but it’s the satisfaction of playing the game, the overall challenge. I also like the fact that I may one day be able to trade when and where I want while supporting a family on an excellent income stream. You can also say that I am obsessed with the market and I suppose that I will follow, trade and talk about the market until the day I die.
StockTickr: Thanks, Chris!
Chris: Thanks, Dave. I enjoyed it!
Click Here to view the original Interview.