Thomas Light is a highly regarded technical analyst who has built a wealth of expertise in Price Behaviour Analysis. He fell in love with short term trading after his first job in an asset management company. Back testing every weekend as a young professional, Thomas then honed his skills with the help of his mentors and his experience on the trading floor with real life traders. Bringing him a step closer to lessen the gap between theory and real life.
Thomas trades both Stocks and Currencies for his company at Faraday’s.
In this episode, Thomas shares:
- Why the number of open positions you have is not important
- The one time of day he avoids trading
- Why good routines are key to success
- The right balance between Technical analysis and Fundamentals
- His winning strategy for Swing Trading
- Don’t focus on the number of open positions but rather focus on your rules and your exposure
- More screen time, back testing are the foundations of a trader
- There are 3 essentials to succeed as a retail trader. 1.) Find a trading style that suits you. 2.) Find a strategy within that trading style that has a natural edge in the market. 3.) Developing a routine in which will enable you to apply those strategies consistently.
- Having discipline is important. Creating routines and following it
- Be Persistent. Trading thru tough times and the drawdowns is how you’re going to progress as a trader
- Use less indicators and focus on price. Most indicators are lagging. Price tells you a lot at the moment
- For fundamentals on stocks, focus on bank’s policy statements and earnings releases. It will help you get a general idea of what is happening in the market
- 70% technicals, 30% fundamentals is a good balance
- Focus on the process
- Your trading journal is the best book you could read about trading
- He uses the daily charts and confirms the direction on the weekly charts when trading stocks
- He uses the hourly chart to trade and correlates it with the daily chart to confirm when trading currencies
- He trades both stocks and currencies namely FTSE 100 on stocks, major currency pairs and G7 crosses. Always looking for the most volatile pairs
- Usually trades during market openings and avoids trading during lunch hours. Prepares data and analysis before the market opens. At the end of the trading day, he makes some detailed analysis of the day to prepare for the next trading day
- His main strategy is short term swing trading. A great strategy for piggy back riding on the “big players” in the market.
- Use the daily and weekly charts as our higher timeframes
- Start by looking at a stock that has a bullish reaction to a trading update or earnings update. A bullish reaction is defined by its Average True Range (ATR). If a stock has an average true range greater than 150% of its move on a day of earnings, then it certainly catches our attention
- Check the integrity of the move making sure that the market is not over extended and is not fighting against a massive higher timeframe downtrend.
- Make sure that when it’s breaking out, its breaking out from a solid base
- Buy that stock on the next period of mean reversion. It could be the next pullback or consolidation. If it’s a pullback, the entry trigger is a close above the previous sessions high
- If it’s a consolidation, the entry would be an inside day
- Stops are placed one and half times the ATR of the stock. Just make sure you are using stop placements relative to the stocks volatility
- Trade management, once the trade hits one times risk, move the stop to breakeven. That’s entry plus trading cost (spread)
- Takes profits are twice his risk