My name is Vic Scherer. I am a swing and day trader of stocks and ETFs. Many know me as daytrend. Below, I share who I am, how I see things, and how I got here.
I graduated the University of Texas at Austin with a Bachelor of Science in Electrical Engineering in 1973. The majority of my engineering work was in chip and board-level hardware design and architecture, engineering management (hired ~25 engineers and managed up to 8 at a time), a brief stint in software development, and ultimately program management. My programs involved as many as 60 cross-functional contributors on various occasions. Out of college, I spent 3+ years at General Dynamics in Fort Worth, where I learned microprocessors and designed board-level hardware. I spent 3+ years at Motorola in Austin, part of the original 68000 design team. Then I headed to Tandem Computers in Austin, for the remainder of my engineering career. I was never terminated.
In the late 80s and 90s, while fully heads-down in engineering and not having any kind of integrated view of the stock market, I had some success as an investor and in managing stock options from my employer. Over time, my interest grew exponentially and I became obsessed with the philosophies in IBD CANSLIM and its methods. After plateauing at my employer, I nervously decided to leave my well-paying, apparently sustainable job to invest full time in 10/95.
Really, all I knew until 2000 were lessons from experiencing CANSLIM plus what I had read in a ton of conflicting and seemingly randomly selected market books (mostly from Wiley). In spare time, in ’96 I began to write a charting and screening program which I still use every day. I made every newbie mistake and generally got hurt, not rewarded, because no part of my recipe was trading with accepted risk. At one point, after returning from vacation while the market was powering higher and I had been away from charts, I bought heavily, and managed within a couple of weeks to lose the same amount my daughter eventually spent on a 4-year college degree. Another time, I damaged 3 accounts by taking a tip, my largest single loss at the time. The bull market did not make me a genius but it helped to survive what was to become a very tough but stimulating time.
During 2000, at times I was over-confident and still made newbie mistakes, but did not lose my ass. However, it was not until late 2000 that I embraced that I might have to short for a living and that the CANSLIM methods were not going to continue to serve… I must become a trader.
While I had read many books, the best ones of all were notebooks of charts I printed myself and poured over. I also subscribed to TradingMarkets.com and obsessively tried to grasp the in-the-moment perspectives of two great traders on that site. Second only to my self-prescribed chart studies, the most influential trading methods were those of Kevin Haggerty, in his Trading with the Generals course. While I do not use his methods, per se, I experienced them until I “got it” and was able to formulate my own methods and market sense.
Along the way, I squarely found the brick wall of “risk acceptance” so common to engineers. At a low point, I discovered a powerful book by Mark Douglas, Trading in the Zone. Pivotal… enough said.
My market view, and to some extent, my trading improved, and along the way I sought (and wrote programs for) a better view of breadth (the beginnings of Market Stats) and versatile relative strength among stocks (the basis for Persistence UP and DOWN Lists).
Eventually, trend trading on 3 timeframes, (daily, 30-minute, and 5-minute charts), from stocks screened for relative strength many ways, became my sweet spot, and I haven’t looked back except for a brief period in late 2008. It is probably obvious that I remain part quant, despite being fully engaged in the market. Trend trading requires specialized money management and an ongoing perspective of trend age. Most trades last 1-3 days, and size has a lot to do with perceived trend age and market state; I prefer to go in and out, and ideally trade around a core position, rather than build up a large core to hold.
I hate (totally f’in HATE) red in my position minder that exceeds risk I pre-accepted. Before I make any trade, I vividly envision writing a check for the entire amount I plan to risk, plus some. If I’m willing to do that, I’m in, otherwise, perhaps a smaller trade. After great experience, I realized that protection of psychology is truly Job #1.
Money is found in preparation; intraday charts are for timing or gathering evolved perspective, not for ping-pong trading. If I see a well-defined trend on 30-minute or larger timeframe, I pretty much never trade against. However, uncharted territory is to be flexible and open to trend changes. I do not trade at a level without seeing my move begin. In consolidations I will trade either direction or sit it out. Notice that none of my thinking is pattern-based. I view charts from the perspective of people with positions (long or short) in the stock and those looking to get in or out. What would compel them to act? What can a big guy or crowd of HFTs do to pile on and get something started? I’m always looking for that. On occasion, I might jump the gun for seconds or a few minutes… never because it’s touched a calculated level.
All my best ideas come in the early morning. I was an avid runner for 31 years, stopped only by injury. I have always journaled heavily, until recently in pencil. I do not read many trading books, these days, except to re-read classics. I get most of my news from twitter, blogs, and stocktwits.tv, not traditional TV. Hobbies are BBQ cooking and music (guitar).
Other most influential books are:
- Gary Mack’s Mind Gym. Competitive psychology from a sports perspective.
- Deepak Chopra’s Grow Younger, Live Longer 10 Steps to Reverse Aging. A very tough but profound read; nothing about markets. An understanding of Indian culture helps (which I do not have).
Why do I have a twitter or blog presence? Prior to my discovery of blogs and twitter, trading was an extraordinarily lonely business, and much of my input came from CNBC. I love the trading community on Twitter and StockTwits. I have always believed that we get out of something in relation to what we put into it. So, until/unless I encounter resistance, I will continue to “bring it” to the trading community. I follow the greatest traders and thinkers I can find (especially if market-oriented), and news sources.
While I interact with many traders, I do all of my own homework; and I believe there is no shortcut. I have a well-honed process for evaluating the market’s messages and for stock selection, something to possibly share on a later date. I do not take others’ trade recommendations unless they coincide with my findings… ever!
One, last, very important point: People ask why I don’t talk about my trades. Here’s why: I become distracted if someone has followed me into a trade. When I tweeted trades in 2008, this distraction too often resulted in my making a premature, overly conservative exit, and my outcome was damaged. Further, I firmly believe that inexperienced or ungrounded traders should not attempt to follow someone into a trade using any of the social networks. There are many reasons, but chief among them is that all social networks are materially delayed and unreliable. But also, most traders including myself rarely fully outline a trade plan on social networks. How can a follower know if it meets his/her psychological parameters if they learn about it 1-2 minutes after the original trader has entered? They can’t. So, I will not encourage that behavior. I will, quite often, indicate the stocks I’m stalking, and sometimes positions, but no one is helped by indicating prices or absolute sizes.
daytrend @ gmail dot com
Dr. Phil Pearlman of StockTwits interviewed me on11/23/2010 on Market Shrinkology. We covered my transition from engineering to risk-taking and also the formulation of the Persistence UP and DOWN Lists.