The past few days I’ve introduced you to 2 of the 13 speakers at this year’s Vegas conference which is now just 3 weeks away and yes while the event is COMPLETELY SOLD OUT you can still attend with this live video conferencing package deal…here’s a HUGELY embarassing picture of one of them and this is the gorgeous female trader who turned $10k into $50k in one year!
Now it’s time to introduce you to the most volatile of all traders…not volatile in terms of account performance, attitude or lifestyle, but most volatile in terms of changing hairstyles, observe the American History X-like haircut ofand student chatroom moderator Michael Goode aka The :
After looking at those photos, for the few of you who still have the power of eyesight, check out $300,000+ in trading profits‘s not-so-volatile-but-very-beautiful graph of his
And remember the way I met Michael Goode is because he trashed me on his website and said I was full of shit! A position which he has since reversed given his phenomenal gains using my trading strategy 🙂
Here’s Michael’s great interview:
1. What’s your background?
I was studying cognitive psychology in graduate school when I got the investing bug (that soon turned into the trading bug). I left graduate school early and hoped to get into finance (this was in mid-2007). While I was trying to find a job I figured out how to short penny stocks (mostly pump & dumps) and I began making good money shorting and holding. After working for a friend’s startup business for 8 months I came across Tim Sykes and quit working to trade full-time.
2. Do you have any mentors or favorite books? What are the greatest lessons?
I have to thank William L. Telander, convicted securities fraudster and former CEO of US Wind Farming Inc. Without him I may not have gotten into trading pump & dumps. I inherited some money at the beginning of 2005 so I started to learn about investing. The first company I almost invested in was US Windfarming (traded on the Pink Sheets at the time). I then found out that CEO Telander had been convicted of securities fraud a decade earlier so I did not invest. Five months later the SEC sued the company and Telander (http://www.sec.gov/litigation/litreleases/lr19311.htm). This is how I first learned about pump & dumps.
Then I learned how to construct trading systems by using Portfolio123.com and I had some success with the quantitative trading systems I developed. A now-defunct Forbes column, Informer, helped to further teach me about pump and dumps, as did reading articles by Carol Remond of Dow Jones Newswires and David Baines of the Vancouver Sun. I taught myself fundamental analysis by reading all the classic investment books, like John Burr Williams’ “Theory of Investment Value” and Graham and Dodd’s “Security Analysis”. I also learned a lot from the other members of the Washington University in St. Louis Student Investment Fund (WUSIF – wusif.org) and fondly recall conversations about shorting worthless stocks such as Sulphco (formerly SUF on the Amex, trading near $3 at the time and now SLPH on the OTCBB trading under 1 cent).
In early 2008 I came across Tim Sykes, about whom I wrote my most popular blog post ever: (I should point out that my criticisms still stand as valid criticisms, although I have obviously changed my conclusion). I have since become a day-trader much like Tim. Since becoming Tim’s student I have also learned much from other traders (especially James Krieger) who has a similar background and approach to trading) and I have learned much about pumps from guru Nate Michaud.
3. What do you like to trade and why?
Most of my trades have been pure pump & dumps. They are so much easier to trade than real stocks because a paid promotion indicates that there is a large shareholder that cannot sell all the shares they wish to sell without artificially drawing new buyers to the stock. In other words, the stock is guaranteed to go down — the only question is when. Furthermore, when trading real companies I need to consider that the person on the other side of the trade could be a hedge fund or other trader that may know more about the company than I do and is likely smarter than I am. When short-selling pumps I am trading against someone who is stupid enough to buy a worthless company just because they got an email or a flyer in the mail touting the company’s prospects.
4. Lessons from your biggest win
My largest win was a fundamental / long-term short of Lighting Science Group (LSCG) — see the trade http://profit.ly/1MmNfA. I made $88,000, a 66% return, in just over a month. I can’t really say there are any lessons from this — it was a good trade but no better than plenty of other trades I have done with smaller size. And if you read on, you will see the problem with such a large trade.
5. Lessons from your biggest loss
My largest loss was over $84,000 (78%) on a long-term short of Maxlife Fund Corp. (MXFD) http://profit.ly/1MmNf0. I learned a few important lessons from this trade. First, I learned that it is important to never have a large position in an illiquid stock. Second, I learned that the one big risk to short-selling pumps for longer periods of time is the risk of a forced buy-in when my broker can no longer borrow shares for me to short. When I received a forced buy-in on MXFD I almost single-handedly caused a short-squeeze. The third lesson is that things change: after the failure of Lehman Brothers in early 2008 the SEC started to more strictly enforce Regulation SHO and it became much harder to find borrows to short stocks of all kinds. In reaction to this development I did much shorter-term trading.