Interview with Tom (@The_MadStork)

This interview was the result of a phone call between Tom and I in early November 2018. Tom is a full time private investor since the end of 2016 and is often vocal about spoofs and dodgy shares. He has happily agreed to share his experiences in the markets so that we can benefit.

Please tell us about yourself Tom and how you got started.

So, I started trading AIM on 2013 but I’d saved up for a house deposit through work and had already invested in blue chips in 2011. It was only when I saw one of the related stocks on Google finance that had shot up when I was checking BP, I saw a related stock had moved up 60%, so I wondered what was going on. That’s how I became aware of AIM and I got incredibly lucky to start with. The first share I bought was Mariana Resources, now probably defunct. I did do some research, but I didn’t understand AIM. I didn’t understand the spreads, and how little trades caused big moves. I also didn’t understand how if someone was telling you to “Buy! Buy! Buy!” on the bulletin boards you probably shouldn’t buy…

Fortunately though, it worked out quite well. I started with one crucial thing that I was aware of, and that was that most of these shares are fundamentally shit and they end up going back down again. So, I did have that in my mind that I need to take profit.

That’s quite rare, because most people end up believing that this share is the best thing since sliced bread!

Exactly, and that’s the number one thing that has been priority. It’s caused me a lot of times to miss out on things, but the number one thing to remember is that it is always take profit and never fall in love with a story. I have missed out on big gains sometimes, and the old ten bagger, but I’m usually able to take profit and protect capital, which has protected me from huge losses (usually). It hasn’t always worked, but usually it does.

I think you don’t need to hit every share to make big gains; sometimes it’s one or two moves a quarter that can really drive your portfolio, and you need to be able to protect your capital because you need it to play. It’s good that you had knew that they were shite from the start and had a healthy mindset towards risk from the start, as most people pile in, get excited, and lose their money. And then they either quit or learn.

I guess naturally I’ve always been a bit skeptical and cynical about things; I tend to not believe things without evidence, so I guess for me it was about not always catching the big moves but always taking some profit out in the move. It’s my number one tip for not going broke on AIM.

Mad Stork’s number one tip on for not going broke on AIM: Always take profit. What was it that got you into the stock market when you invested in blue chips?

I’d been invested in the market for a few years since 2011, mainly because of interest rates and how they were rock bottom. I wanted a return, so I was buying FTSE stocks. I knew the stock market was risky and did do a bit of research and found some shares that had always paid dividends, even during the Financial Crisis, and I went into those.

Mainly dividend payers like Vodafone?

Vodafone, BP, RDSB [Royal Dutch Shell] – ‘never sell Shell’ they say.

They do indeed. Never cut its dividend since 1945.

Yeah, and so I was in the market but also getting a bit bored, probably because I was actively managing it. Clearly, if I’d just sat there and not looked at it I’d probably still be there today, because it’s only from looking at individual shares that I became aware of AIM.

That sort of goes against the advice of buy your shares and do nothing as most investors tend to overtrade, but for you it worked out well. It’s funny that we think the blue chips are the ‘safe stocks’ but yet they don’t do much and when something goes wrong they tank. At least with crappy AIM shares you know they can tank but they can also go up! Everyone else would disagree I’m sure but AIM can be a different world. There’ll be a lot of people who buy these blue chips and never get into the more speculative stuff where you can really make a lot of money [and lose a lot of money]. What were your experiences of the 2008 crash and Bitcoin?

Well, I started investing in the market in 2011 and AIM in 2013, but I was around for Bitcoin! I’ve never bought or sold any cryptocurrency. In hindsight, I should’ve seen the bubble forming, but my own opinion was that – and still is – that crypto, especially Bitcoin, is worthless and stupid. But I think the key to avoiding bubbles is having experience on AIM where you can get huge bubbles in shares! Even when you know that the shares are fundamentally worthless.

In crypto there’s obviously a huge bubble and the fact that 99% of coins are worthless, and Bitcoin especially worthless, but that doesn’t mean you can’t make money. It’s easy to say in hindsight though.

Yes, you’re right – I’ve said to my Dad before how come he missed the entire tech bubble despite working with computers, and I’ve managed to miss the most speculative bubble of all time. No doubt my kids, when I eventually have them, will be asking me “how you come you didn’t make any money in Bitcoin?”

But at least you can say “I didn’t read a post on Facebook when Bitcoin was 20,000 dollars and bought in then”!

Yes, that’s also true. And there are plenty of those I bet, most of whom will never admit it. What was your scariest day on the stock market, and how did that feel for you?

There’s been a couple this year, when the FTSE has tanked 3%. It happened back in February, and again a couple of weeks ago, and you know that market makers are going to mark things down, especially if the Dow has come off significantly overnight and Asia follows, then the FTSE is going to open 2% down, and then the market makers on AIM, especially on shit stocks, are trying to induce panic sells.

It must be really fun being a market maker just knowing you’re making easy money rinsing people.

Well, I don’t think that’s actually what they want, because on panic days volume tends to be lower, and market makers make their money on volume. They almost always, at least nowadays, won’t speculate. They won’t ever take positions themselves, but obviously on a day where they think there might be panic they will defend themselves. There’re obviously a lot of myths and misunderstandings of what market makers actually do by private investors on AIM, but clearly they want to make money, and the way they do that is through volume and buying and selling and taking the spread, and they don’t engage in speculative behaviour.

I’ve always wondered about it, because obviously if you’re gapping something down, you’re making a massive profit on buying back shares you sold the night before, and you can shake people. For them, it doesn’t matter who they’re buying and selling off. If they’re buying something for 10p from someone and then they sell it to someone at 12p that’s a 20% turn. Obviously, they’re all supposed to be competing hence the spreads get narrower during volume but I think sometimes they must make good money on the spreads.

Obviously if they can widen the spread and not get outcompeted by another market maker then yes it’s in their advantage to do so, because they want to make money, but I think they do this from volume and spread rather than taking risks nowadays.

It doesn’t make sense for them to do so, no. I’ve even heard they know what RNSs are coming before they do, and obviously some people believe in market maker codes.

That’s bullshit.

I think so too – people tend to remember the one time the code ‘worked’ and not the thousands of times it didn’t. Survivorship bias. So what has been the absolute scariest day on the stock market for you?

There’s been a few times when I’ve been holding a lot of stock, but I guess the one day where I lost the most as a percentage of my portfolio, which was probably late 2015 where my total portfolio total value was £300,000, and I was holding £100,000 of Paragon [Paragon Entertainment, EPIC: PEL]. Which, for anyone not familiar, was about a £5 million market cap company, the usual daily volume at that time was £10,000-15,000, so I was holding 5 to 10x the average daily volume of that stock. There’d been all sorts of rumours about what they were going to announce, they’d had their trading updates and stuff, and as it turned out the rumours were wildly optimistic.

Funny how that always happens, isn’t it?

It is. It’s very strange.

Not funny that you lost of course, but funny how every rumour never seems to match reality.

Well you know, lesson pretty much learned. So I had £100,000 worth of stock, the RNS came out at 7 o’ clock, and I looked at it… And I thought “Shit, this is going to be really bad”. And you know the worst thing about getting an RNS at 7 o’ clock is you can’t do anything, you’re sat there, you read it, you know you’re going to take a huge loss as soon as the market opens and there’s nothing you can do about it, so you sit there panicking for an hour, completely unable to do anything.

So what did you actually do?

Well, I assumed I was going to lose about 30%, about £30,000, which was about 10% of my portfolio in about 15 minutes. That’s what I thought was going to happen, which was pretty bad, but I didn’t panic in the end. Well, I did panic initially, but I calmed down, and was kind of thinking “OK, what do we think is going to happen, where is the buying going to come in, can we trade out of it or offload as many as possible into the inevitable bounce?” And as it turned out I lost about 20%, so £20,000 in about 15 minutes, and I did manage to reduce my position considerably, and then it did pick back up a bit after the initial drop and I was able to get out to much more comfortable level of exposure.

That level of exposure, the level of risk in one share, I don’t know what I was thinking, especially in a tiny share, it is is just crazy. And I know people that do actually do that sort of thing now, and have made a lot of money off it, but that’s something I’ll never do again. I’ll never go absolute max more than 10% of my portfolio in one stock, and I certainly won’t go above 1-2x the average daily volume. There is a lot of money to be made in shit small cap stocks, they can move very, very quickly..

But only if you’ve got the money.

But by the same token if you’re stuck in an illiquid share with bad news then you’re shafted. I don’t know about you but losing 10% say, feels a lot worse than gaining 10% feels good.

Yeah it’s been proven, Kahnemann and Taversky did a study on loss aversion and found losing feels twice as strong as winning the same amount. What encouraged you to take such a big position in Paragon?

I made a cardinal error, which is one that I will never make again, which is that I got quite friendly with the CEO. And you know it’s the job of the CEO to sell the company and get investors excited about it. The problem is on AIM, especially in the really shit end, they’re going to be talking about the business, and they’ll all say “we want to build a real business, this is how we’re going to do it and this is what’s going to happen, and this is what the potential is”, and they’ll all say that.

A lot of them are pretty good speakers, so quite persuasive. If you’re in regular contact with a CEO he’s always going to be bullish all the time, and you think “Well he’s the CEO, he must know something”. But 100% of AIM CEOs are bullish, and 95% of all AIM companies, at the least the small stuff, are shit.

So 100% are bullish, and 95% are bullshit.

Exactly, and people do like getting in touch with the board.

What do you think about that?

Well if you’re asking a question, a specific question about the business, then that’s one thing, but if you’re just having a chat and you’re in contact, and you’re believing 100% what they’re saying then you’re setting yourself up for disaster.

I think it can be helpful if you’re aware of the biases.

Absolutely.

And some people like it and it can be helpful if you have a material position, sometimes an advantage, but we’ve all made that mistake of believing a CEO. You have to be aware that they are all salesmen at the end of the day; most of these companies are growth companies which inevitably means more cash, so they need to sell it. It seems to genuinely be common mistakes that people make, such as taking too big a position, or they do become friendly with management. You could probably give these to someone starting in the stock market, and then they’ll do them anyway, I know I certainly did some. I think you have to make the mistakes yourself.

I agree. I’ve had five years on AIM, I know the market pretty well, and I still make loads of mistakes all the time, and I know they’re mistakes and I still make them!

Well, unless you’re a robot or you fully automate everything then there will always be discretion, and where there can be discretion there can be error. We all make mistakes, but the key is to keep the mistakes small and don’t make them too often, and you’ll make money.

I think what I’d say, if I look back on all my trades, more than half of them are losing trades, but if I look back at my big positions, and I haven’t done any analysis but it must be true because I’ve done well, I’d say at least 75% of my big positions do end up paying off, because those are the ones where I’ve sat down and looked at the story, the entry price, made sure I’ve got a good entry, made sure the company has money and has a proper catalyst that the market is going to respond to it. I sit on it until it starts delivering, and when it does start delivering I start selling and taking profit.

That makes sense. What was your best day on the stock market?

I think the biggest single intraday profit I’ve had was when Serica Energy (EPIC: SQZ) came back from suspension and immediately doubled. I guess I already knew that was going to happen though so the day when it eventually happened it wasn’t really a surprise, but because of the amount I had and I very fortunately bought more just before it suspended.

However, I don’t tend to have huge unexpected gains because of my style. I won’t have huge positions that have shot up by a lot and where I haven’t just been selling out. You can obviously get 100-200% intraday moves, but you can’t really get the size, and even if I was holding in size I’d definitely be selling. If it did I definitely would’ve been taking profit on the way up.

Any other days of note?

Serica was the best intraday profit, the best share I ever had though cumulatively from when I bought and sold average, was EVRH [EPIC: EVRH].

Ah, of course, we both did quite well on that one.

I think quite a few people did on the way up; I took the placing.

What price was the placing?

Around 1.7p.

I think my first buy was around 3p, so nearly 100% up from you.

Yeah, well obviously I sold some around 3p..

I probably bought your shares!

.. but that was one where I thought the story was really good though so I didn’t do what I would normally would do, which is completely sell out at that much up. I scaled out and ended up selling my last shares at 8p, I think. Also I had warrants from the placing which I exercised at 10p and those were priced at 1.85p or something. So in total that was a huge amount. That by itself would’ve paid for all of my cumulative losing trades.

Those sort of stories where a tech stock does something potentially new and exciting, investors don’t really understand the tech but they know it’s good, like the future, that combined with management that are either willing to ramp it or put out RNSs with big names that everyone has heard of, which is what happened with EVRH, if you can combine those then those are the best stories to get in at, if you can get in early, before they collapse.

Yes, I absolutely agree. I did it from 3p to 14p, which was an absolutely brilliant start to the year, along with a few others at that time. What’s been the craziest fraud?

Definitely CloudTag [EPIC: CTAG]. CloudTag was just crazy.

That was the stock that started it all for me, best share ever. Had loads at 3p, I kept selling in bits and it kept going up.

Well, I never bought any but I started going short at 11p, because it was £50 million market cap and they had nothing, but then it kept going up and it was a bit brown trousers time because if you spread bet short then you’re just losing money hand over first, you might get margin called, but I was so convinced it was a fraud that I kept adding to my short as it kept going up. I ended up making £20,000 which was the biggest I’ve ever made on a short. Actually no, that was UK Oil & Gas [EPIC: UKOG].

The thing with CloudTag was that I got so involved, and this was a mistake, an absolute mistake. I really got involved in trying to say “Look guys, why have we got people putting in their life savings into this when it’s obviously a fraud”. However, as it always happens, when you’ve got a share that’s ten bagged and people are convinced it’s going to be the next Apple or whatever, when you start saying it’s shit, people are never happy about that. And they weren’t.

Yeah, you get abuse but then when it eventually comes to fruition nobody is every around to apologise. I remember when I bought MySquar [EPIC: MYSQ] a while back I said I’d bought some for a trade and that it was junk, got some abuse, but today it’s suspended because of their financial position.

Well actually, I did have a fairly civil conversation with a guy, I won’t mention his name, about why it was a fraud but he actually DMed me to apologise, which I thought was nice of him but completely unnecessary. But I know I was right because I made money and I know a lot of people, ordinary people, lost a load of money, some of them lost hundreds of thousands [of pounds], which is horrible.

That’s pretty scary.

Well that’s the thing yeah, it’s good to be right, I like being right but at the same time these frauds do end up costing people a lot of money.

It got up to £100 million market cap at one point.

It was crazy. There was another guy, [name removed], who was Ramper-In-Chief, and was also some sort of sociopath, threatening peoples’ children on Twitter and stuff.

Yeah, I won’t put his name on the interview just in case he comes and hunts us down.

Well I don’t mind naming him because he’s a total bastard.

Well I do, I like my life!

But even remembering it now it makes me angry. But that’s a mistake. It’s a mistake to get so caught up and involved with things. I should’ve just shorted it, done nothing, and thought “Oh look, it’s gone bust, I’ve made money”, and left it. Solely as a trade, as a strictly business method, but I did end up getting emotionally involved which is a huge mistake, which often people do when they’re long on some of these companies and they get emotionally attached, and they make bad decisions because of it.

Yes definitely, some of the shares we’ve spoken about shorting before I wouldn’t dream of revealing because it’s just unnecessary abuse and distractions – it’s much easier to just get on with it. But I think that is the single biggest reason why people lose money, they get too emotional, they stick to that point of view, they search the tweets on twitter, confirmation bias, and seek others to tell them they’re right.

Yeah, we always want to be right, we want to be told with positive affirmation, and be convinced that we’ve made the right decision, and this is why I don’t find individual share groups that useful, because obviously everyone in there owns the stock and is a bull.

And if you’re not a bull you get kicked out!

Hopefully, people are a bit more willing than perhaps they once were to listen to the other side, but clearly bearish views are not welcomed in these groups and what happens is you get stuck in an echo chamber where everything is great and nothing can go wrong, and you look at it objectively from the outside and you think “What’s going on!” This makes no sense and this is crazy – something like CloudTag, obviously anyone objectively looking at it would think “It’s a £100 million market cap company and they haven’t even got a product”.

To be honest, I think some of them didn’t even know what a market cap was! I actually got removed from the CloudTag chat because I asked a few questions as the product was delayed thrice, and I got booted! I think that was pretty good for me as it made me realise that it’s insanity and it’s all a bubble. It’s not unlikely that the person that removed me ended up stuck in a confirmation bias loop and ended up losing money.

Well, we had things like cash shells that trading at massive multiples of cash. It doesn’t happen anymore as cash shells are now banned from AIM, but there was period a couple years ago with cash shells trading at crazy valuations. All of them ended up collapsing and losing a load of money.

Objectively, you look at a cash shell and it hasn’t got anything other than the listing and some spiv management and it’s trading at 10x cash and that’s just bonkers. But if you’re in a group and you’re following people on Twitter where everyone is saying “It’s going to the moon” then it becomes really difficult to think “Hang on, maybe I should sell, maybe I am being a bit foolish here”.

There’s always another RNS coming though, isn’t there? Where it’s going to gap up and runaway, or lock you out – there’s always a carrot dangling.

That was exactly what happened to me with Paragon. I was in the group and we were in touch with the CEO, there was going to be huge news, and people bought in anticipation, and it just ended up being a big disaster. It’s happened to me more than once actually, I’ve convinced myself good things were going to happen even though objectively it’s not likely to.

Outside, you’d be thinking “What are you doing”. But I’ve made those mistakes and it has cost me a lot of money. Fortunately they’ve not been fatal mistakes, but some people do make these fatal mistakes where they end up putting 50% of their portfolio into shares that are objectively shit, and they end up paying for it. They either go bust totally or lose a life changing amount of money.

Do you think it’s greed that makes people do that-

Absolutely.

–or stupidity? Or both?

It’s human nature to want more, to want to take shortcuts, and the main reason these shares go up even though they are fundamentally worthless is speculation. Short term speculation from PIs, where everyone is looking for a quick turn on their money. If you see a share that’s moving everyone wants to jump on and get quick gains and that’s what creates spikes. That’s what drives shares up, but at the same time that’s always what creates exaggerated moves down, when news comes that’s not good, or news doesn’t come, or people just get bored, so I don’t think it’s all greed.

Obviously, a lot of it can be explained by greed, but it’s not necessarily stupidity, more a lack of experience and a lack of objectivity, which I suffer from myself all the time. Fortunately, I have got better at that and I did start off with the assumption that all AIM shares are shit, and that’s kept me in good stead.

I think that’s really helpful, one thing you said to me when I first started was that “It’s not about whether the share is shit or not, but whether it will make you money”.

Exactly, shitty shares can have the biggest moves. It’s all about timing, well if you bought CloudTag at 3p like you did, then you made money.

I always wanted to frame the product but I never got one.

Or African Potash, another fraud. It spiked from .3p, which I did buy, I did buy at .35p or something and sold because it wasn’t moving. Then it went to 3p and ten bagged, then I shorted it, closed my short when they released an RNS that turned out to be a lie, and so I lost money on the long and the short, but I was right both times!

That is very annoying I imagine. What’s the worst thing that you’ve see happen to someone else? Don’t need to go into too much detail on the person but what could they have done to prevent it?

I don’t know these people personally but I have had DM conversations with people who have lost their life savings, and I guess it’s always been guys, so they’ve not told their wife, and just been asking “What do I do?” So, I guess that specific situation hasn’t happened more than a couple of times but I’ve seen people post on bulletin boards, Twitter, DM groups, who have lost life changing sums of money very quickly which is what can happen on AIM, and which is why not overexposing is so important. Not putting yourself at risk of those sort of losses.

The majority of people and investors on AIM are not professional, and they’re not full time traders or employed by brokers or banks or funds; they’re just ordinary people who are dabbling with their savings, if things do go horribly wrong the individual consequences can be devastating. I see a lot of people trading on leverage too on AIM shit which is bonkers; I would never ever trade AIM on leverage. It makes sense if you know what you’re doing and your capital is low then I guess it does make sense if you’ve got an edge, but I see so many people punting on margin which is absolutely crazy because you can end up in a serious amount of trouble so quickly.

Especially if you’re a forced seller your selling pushes the price down even further. Did you ever think about giving up?

The first year I was trading on AIM I was trading with about £25,000 and by the end of summer 2014, so after a year, I was up to about £250,000.

Bloody hell!

I made over £200,000 yeah, but the thing is I had a strategy that had worked out well then. I’d buy oil shares well in advance of the drills and just ride the anticipation up and sell out before any results. That was the main thing I did and it worked out really well and I thought I was invincible, like the next Warren Buffet, completely confident of my own abilities. And as you may remember the summer of 2014 was the peak of the oil market and over the autumn of 2014 the oil price went from over about $100 to $50 in the space of about six to eight weeks, and I had bought Falklands Oil and Gas, which was going to be taking part in a drill campaign along with a few other companies.

I bought in August 2014 and the drill campaign was January 2015, the price was stable, they had loads of cash, I thought there was no way possible that I could lose. I wasn’t looking for huge gains, but I was thinking 50-75% gains on £150,000 is a lot of money, and I thought the risk was negligible. I thought the drill campaign was definitely happening, they had loads of money, price stable for ages… Nothing could go wrong. And then the oil price collapsed. I was convinced that it didn’t really matter about the oil price because the catalyst was still there, and I had a few other oil shares too that had a catalyst. But the entire oil market was dying in the autumn of 2014. In about six to eight weeks I lost over £100,000, a few grand every day for about six weeks.

That must’ve been horrible.

It was absolutely – it was not good. I ended up giving up and selling my oil shares almost right at the bottom. So I bought Falklands at around 25p and my target was 40p-42p, and I sold at 17p, which was the bottom, and then almost immediately afterwards it shot up as people started buying in for the drill campaign! The oil price stabilised again, and it got to 42p! I was devastated, I rung up my parents and was in tears over the phone, and I’d completely lost my confidence. I had all these visions for being able to trade full time and a life of luxury, and all of that had just kind of gone!

Yeah, that sounds really tough.

Yeah, I was gonna give up then. But then actually although I was incredibly frustrated to see the price go up, I thought my original strategy had worked fine and there wasn’t anything wrong with it. I just didn’t take into account the wider market, and so although I was considering giving up and I’d sold pretty much all of my AIM shares and came off Twitter, I thought “I’ve still got over £100,000 left, which is a lot more than I started with”, and then I thought about it for a while and as long as I made a few alterations I thought that I should be OK.

Fortunately since then, since I lost 50% of my portfolio in six weeks, there have been ups and downs but generally the trajectory has mostly been up, and I don’t think I’ve lost 10% from a peak since then. Obviously with Paragon and Anglo African [EPIC: AAOG] have been hits, but mostly my shares have done pretty well and since that horrible time when I was on the verge of quitting it’s mostly been up since then.

I think if you manage your risk you can make money in any market as long as you protect your downside. Even though you sold at the bottom you did sell eventually, and some people would’ve just held on and it could’ve tanked even further down. For example there are probably some people who bought Crawshaw [CRAW] at 60-70p, then held on through all the profit warnings, to 20, 10p, 5p, and now zero. They’ve lost all of their money and more if they averaged down, because they couldn’t admit they were wrong or manage their risk.

You often hear people say “I can’t sell now because I’m down too much, I can’t take the loss”, and I get that, it’s loss aversion and sunk cost, and I find it difficult as well, but the way to think about is to ask “Would I buy the share now at the moment?” and if the answer is no then sell.

That’s a great way to think, and we’ve all held onto losers, but it becomes silly, and the funny thing is once you sell you immediately feel better, it’s like the curse has been lifted.

Yes, absolutely.

It’s a spell.

Especially if it’s been dropping a while constantly you become afraid to check it because it’s going down, it’s such a weight, but as you say once you’ve sold you do feel better.

What else do you think makes a successful stock trader/investor?

Some of the things I’ve mentioned like don’t overexpose, don’t get too chummy with management, don’t join private Twitter groups and just read bulletin boards. It’s important to try to expose yourself to bearish opinions too not just bullish. Learning how to read a balance sheet is helpful too, with a lot of these AIM companies most of these balance sheets, and if there is an income statement then the income statement too, are irrelevant up to a point, and it’s an important point, but checking current assets and also current liabilities and payables. So learning only the absolute basics of a balance sheet will tell you whether you’re buying something that has no cash or is about to run out of cash, which you should avoid.

What do you think has made you successful?

The key things for me is 1) being cynical, taking profit, not believing [the story], and 2) being able to control emotion, control greed, control fear, and I struggle with that but I’m a lot better than I was. As soon as soon as you can look at things objectively and not be too emotional, because no one is going to be completely unemotional, but the more unemotional and objective you are then the more likely you are to make money.

How much do you think your life has changed by participating in the stock market?

My life? Beyond all recognition, because when I started I was doing a full time job and now I’m a full time trader.

It’s the best job ever – I think we actually went full time around the same time.

Autumn 2013 I started investing in AIM and did it full time working and trading for two and a half years, then part time from early 2016 for six months.

Any regrets?

No, because for me it’s worked out really well and hopefully I won’t have to work a full time job ever again, and especially when you get to the point where you don’t have to constantly trade and be at the screen to make money. I can take several weeks off sometimes because I have limit orders set up and don’t have to worry. I don’t think I could ever not check the news in the morning, or not have news alerts on my phone. But if I wanted to, and I have done, I can just spend a week, or two weeks, literally doing nothing but checking news in the morning and having news alerts.

I did that last week when I went to New York, and it was my best week of the year. So maybe I should go away more often!

Being a full time trader can be incredibly stressful, especially if your capital can’t withstand a big loss, and also if you need to make money for living expenses, but once you get to the point where you have a big cash buffer, it’s great. I didn’t want to go full time before I had that big cash buffer, and I didn’t want that pressure of having to make this amount of money in this amount of time, and if you’re full time and you do have that pressure then clearly it can be very stressful. But once you get to that point where you do get to that level.. it’s great!

I’m not at that level yet, but I’m sure I will be in the fullness of time. I wish I could go back to 2017, as if I knew then what I knew now, I think I’d have done several times better. But those incredibly bullish times will come around again, I’m sure.

Well if you had the amount of capital that I’ve got, you’d be making so much more money than I’m making, because I’ve got good ideas, but I’m absolutely terrible at the detail and technicals, and I’m constantly making stupid small trades that I shouldn’t be making. I definitely do not optimise what I’m doing, whereas objectively you’re a better trader than I am, it’s just that I’ve had a series of fortunate events where I’ve learned some lessons but it hasn’t cost me my whole portfolio, and I’ve been able to keep going and had some big luck, and now I’ve ended up with a lot of capital, but I certainly wouldn’t say I’m the best trader.

Well, thank you very much, that’s kind of you to say. Though I would say you’re very good; you helped me quite a lot when I started. You manage your risk, you have a strategy that works consistently, which is what matters. I generate quite a lot of ideas, but that’s because I spend hours every night going through charts, actively seeking out stocks making highs, lows, volume. So really, for the amount of time invested into my strategy, it should be generating high alpha, because if it’s not, what’s the point?

If anyone can manage their risk, they don’t need to be a great trader, because that’s what trading is really. It’s about risking 1 to make 1.5 or 2, and getting in that risk / reward scenario where you stand a high probability of making more than what you stand to lose. If you can do that, then you’re a trader. It doesn’t matter how many times anyone trades, or how big they trade, if it works for them. I read before in the Market Wizards series, one trader will literally trade only four or five times a year. To me, that’s insane, but he’s only comfortable with trading really the best setups.

That sounds mental!

He says he’s only waiting for setups where he thinks he can’t lose, then goes balls deep.

But surely if he goes balls deep then eventually one time he’ll fuck up and be wiped out?

That’s what I think, the one time you don’t expect it.

I was very fortunate that when I was massively overcommited to one share, where I had 50% to 75% of my portfolio in, that it worked out both times. If it hadn’t have done, then I wouldn’t be sitting here!

I think we have to take calculated risks, but never too much that we risk wipe-out.

Absolutely, I would never do that again. If I was back there again, with the same amount of capital, with the same shares, knowing what I know now, there’s absolutely no way I would take that risk!

Yes, I won’t be doing that either. Going back to work is too much of a risk for me to take. Tom, it’s been a pleasure to speak to you. I think some of what you’ve said will be really helpful for new traders, thank you very much.

No problem, it was a good chat.