We discover what makes great traders tick! My ?10 Trading Questions With?? guest this week is Malcolm Stacey, formerly one of the BBC?s top investigative reporters and author of Share Attack, 80 Great Tips to Survive and Thrive as a Trader.
1. What is it about trading that gets you up and motivated in the morning?
Ever since the Big Bang of 1987, when it became possible to trade without a broker?s interference, I?ve been obsessed with making money from shares.
So nothing motivates me more than greed, which I find very hard to resist every day. So that is what motivates me. Rather sad, don?t you think?
2. How did you first get involved with the financial markets?
All my working life I?ve been an investigative journalist, nearly all of it with the BBC. During this work I met many of the really top traders and tycoons. It was obvious these were all very wealthy people. This helped me enormously in plucking up the courage to get started.
I had enormous beginner?s luck. This helped to keep me going and stay with share trading for so long.
3. What was the turning point that really propelled you towards trading success?
Every day I checked the Financial Times to see how my portfolio was doing. This was in the days before you could check your holding on a computer screen. When the day came that I realised my shares were making twice as much money as my day job, I jacked in my full-time occupation and became a day trader.
The techno boom, which sadly finished at the turn of the century, really made me think that shares could make you rich. And they did. But then the techno crash came. Yet I was still not put off, because they I became motivated to get all the money back. Shares are remarkably resilient, so that was not that hard a job.
4. What are your personal trading goals?
To double my present share value every two years. To keep my losses down .It?s not your successes that count in the end, but curbing your losses.
5. What trading mistake have you learned the most from?
Many pros will tell you that they have too often sold a share too early. In my case, my biggest fault is selling too late. I too optimistically wait for rallies, most of which never come.
Still, I am getting better over the years and so selling too late has become my biggest teacher, though I still don?t always heed the lesson.
6. What are the main trading strategies and markets that you trade?
I split my portfolio into two halves. I trade the big Footsie giants, mostly for a feeling of security ( not always justified) and to bag the dividends. The other half is devoted to chancy penny shares. This is a nice balance of high risk and not-so-big risk.
I like penny shares because I can have 9 out of ten failures and still make a profit with the one stock that really takes off.
I trade hardly any mid cap shares, because I consider them (probably wrongly) to be boring.
I never short shares. Pessimism isn?t in my nature and I feel sorry for company employees in a failing venture.
7. What 1-3 trading books should every trader read?
My own three books, of course, Armchair Tycoon, Poolside Tycoon and the one just out, Share Attack. This is because I?m the only share writer I know who puts the great lessons of share trading into simple language. But I would say that, wouldn?t I?
Seriously, most share books try to blind you with silence. It?s a vast subject, but it?s not as hard to understand as many books seem to make it.
8. If you had 1 minute with someone who wants to learn trading, what would you say?
Ride your winners and dump your losers.
The trend is your friend.
Don?t try to do the opposite of the herd.
Sell when you think a share has jumped a lot. Don?t wait for it to do even better. They often fizzle out after a large leap.
9. What separates the average from the very best traders?
A combination of careful research and imagination. A top trader beats the rush by working out what is likely to happen in the future, not necessarily what has happened in the past.
Follow the rule of Burt Lancaster as the Crimson Pirate ?Never believe what you hear and only believe half of what you see?.
10. How do you ensure your trading will continue to be successful in the future?
I maintain a mix of ?safer shares? with more speculative stocks. I don?t spare the ?sell? button is a share drops 10% on your buying price.
I trust my gut instincts, but then I can afford to as I?ve been blogging and writing on shares for 20 years ? and you pick up lots of stuff subconsciously in that time.
Bonus Question: If you were not a trader, what would you do?
Being a professional armchair trader doesn?t take all your time. So if I weren?t so lazy, I would write novels. I?ve been working on ?another Da Vinci Code? for six years, but can?t be bothered to finish the final stage.