"Interview with an OTCBB Daytrader"
otcbbnn.com
By Michelle DeMeritt
Published by OTCBB News Network
Main stream media is notorious for trouncing Daytraders. The
speculation persists that a daytrader couldn't make it in the
current environment, with the broader markets in such decline.
However, it is my opinion that the daytrading in the current
markets volatility provides a safe haven. It is the buy and hold
investors whom have been punished, and punished severely.
An earnings warning, which there have been many over the
past few months, can cut your stock price in half. . On the
other hand, a daytrader rarely holds a stock overnight,
eliminating the exposure to such risk. OTCBB issues haven't
proved to be any different; they too have been in sharp decline
since the highs of 2000. Commonly, daytrades are defined as a
position in a stock for a few minutes to a few hours, depending
on your patience/tolerance level.
One popular and successful daytrader of the OTCBB is
TinEar. He has successfully daytraded his way through the
recent run-down of the market, he can be seen in action at
Internetplays.com.
Michelle: Can you explain your style of trading in the OTCBB
venue?
TinEar: I'm not sure I have a style other than an eclectic
approach to recognizing the many opportunities within the
OTCBB market. I never invest, I only trade. I skim a few cents
here and there from moving stocks without regard to
beginnings and ends of rallies other than on "big story" stocks. I
take advantage of bounce plays when available. I play the
news quite often - jumping in and out of stocks that have
promising news stories released during the trading day. I never,
ever "fall in love" with a stock or company's story. I've been
described as having an "equal opportunity" dislike of all
OTCBB companies and yet I find more opportunities for
profits there than any other market segment.
Michelle: We recently experienced an OTCBB rally of sorts.
The rally seems to have faded. Do expect another upturn in the
OTCBB?
TinEar: Faded? Not at all - at least not from the perspective
available from my daily analysis of the OTCBB. For instance,
today (1/31/01), I heard lots of comments about a "dead"
market but that simply wasn't the case. There were lots of
opportunities to anyone willing to read the daily OTCBB news,
to analyze the market movers (up and down) during market
hours, to read all the newsletter touts learning the focus of other
traders and to simply just work the entire trading day. Want a
simple example available to everyone today? We all knew
NRES has a forward split on the table for 2/2 and we know
most split issues trade up in the day or two before the event. I
bought a position in this little stock a minute before the close
yesterday (1/30) at .023 and watched it close today at .03.
Who among OTCBB traders wasn't aware of this opportunity?
So every 100,000 shares for an investment of $2300 returned
$700 today. Get rich? No, but certainly not bad and within the
means of all traders. Just screening for OTCBB stocks today
with a minimum of 100,000 share volume, there were 25
stocks returning 30% or better gains. For instance, ILRN had
news of a $1.35 buyout that opened today at .625 and closed
at 1.1875 (98% gain); CDCM with over 400,000 share
volume traded up 264% today. The point is simply that these
gains are out there every single day. You MUST pay the piper
for the tools necessary to find these stocks. (This is a subject
for another time perhaps.) Most of all, you've got to learn to
work hard all day, every day if you're going to be successful at
trading. So many traders simply wait for someone to lead them
to success. It won't happen that way.
Michelle: How does your style of trading change from an
extremely depressed market, such as the one from May '00 -
December '00, to the short-lived rally experienced in January?
TinEar: Not very much to be truthful. In all markets
throughout he year, there are moving stocks. Certainly, during
the winter months, there are many more opportunities for
simultaneous trades where you may have many positions open
at once but your workload never really changes. However,
during rally times there are many more "bounce" plays available
though which is the single easiest play in the market. Everyone
has heard the stories of market maker
"walk downs" of a stock's price. The market makers not only
"walk" the price down, they give a very clear signal when they
intend to reverse the price back to an upward direction - a
very easy profit situation. Again though, you must have the
tools and some simple training to know how to take advantage
of these plays. Other than bounce plays, I find very little
difference in my methodology throughout the year.
Michelle: I have seen you discuss MM (Market Maker)
movement when watching/trading stocks. Can you explain to
us what exactly you look for, either to enter or exit a trade?
TinEar: Not very easily Michelle. Learning to read a Level II
market maker positioning screen does take some experience
and I believe it would take visual examples to do justice to an
explanation. You are really watching a dance being
choreographed in front of you. Simply learning which way the
market makers are "stacked" is the easiest and first lesson to
learn but there are many other subtleties, which come into play.
Recognizing if there is a controlling market maker for a stock
that leads the others is one example that comes immediately to
mind. Learning some simple forms of signaling done by market
makers will occasionally be seen and must be recognized.
Knowing how to recognize turns in price movement is critical
but not easily explained. Perhaps the most important aspect is
being able to follow and meld information from both the Level
II market maker screen and the time/sales screen (a listing of all
trades showing time, price, quantity) and learning to use both to
guide your entry or exit timing.
Michelle: How do you determine the lead MM of a particular
stock?
TinEar: It's a bit difficult to describe how to pick the lead
market maker in a stock issue but you can generally notice one
of them driving the price with his actions in taking the inside bid
or ask position. He will move the price where he wants it.
Especially when it seems that one market maker is acting at
odds with the buying/selling, you can bet he has an agenda.
Michelle: A very common complaint among traders is the
executions by individual brokers. However, this rarely seems to
be a problem for you. Do you have any idea why?
TinEar: I think so. First, it seems to NOT be a problem for me
perhaps because I rarely get upset and squawk when I don't
get an order filled to buy into a stock. It's all part of the
expected trading scenario. Secondly, I am usually into a stock
in the early stages of a rally, which makes it much easier to
climb aboard than it is after the whole trading community is
made aware of the situation. When selling, it's experience that
usually tells me when to exit at a time the sale will be
consummated rather easily and near to the top. As you know,
once many traders decide to exit a stock simultaneously, some
get the good prices and some get the shaft. I don't always get
in at the bottom or out at the top but I concentrate my efforts at
making the trade when it is sufficiently rewarding and easy to
execute both sides of the transaction. I am usually very near the
first one out of a stock before the downturn becomes readily
apparent. You will never go broke by locking in profits - no
matter their size - and you should never be embarrassed to do
so no matter how much guff you receive from other traders. It's
your money. Protect it.
Michelle: What is the best advice you can give someone
looking to become, or already involved in day trading the
OTCBB?
TinEar: It sounds overly simplistic but it's this: work hard at it.
Although trading is fun to most of us, it's also a job. Good
work habits produce a big payoff. That sounds very much like
a cliché but it's also the basis for success just as it is in any
other job. I have no special talents other than the ability and
motivation to work very hard learning to trade stocks. I hate
having to read perhaps 500 business news stories a day to find
one or two nuggets but I do it. I hate to have to follow every
tick of dozens and dozens of stocks until my eyes get blurry
when I'd really like to be kibitzing with other traders - but I do
it. I hate having to constantly run market scans for leaders and
laggers and check all the stocks on both ends of the lists - but I
do it. The same goes for the other 100 things I'm doing during
the trading day to learn where the opportunities in the market
are - but I do those too. And every day ends with me tired.
But I'm also successful. |
