Anka Metcalf is a professional trader from Detroit, Michigan who has been trading US Equities, Forex and Futures since 2004. Anka has over 10 years of investment banking experience and is now the founder and CEO of TradeOutLoud.com which is a private boutique Equity, Forex and Futures trading education service. She also runs a small hedge fund for a group of high net worth individuals as well as a trade alert service. In 2014, 78% of her trades were profitable returning 38% on her total portfolio. And outside of trading Anka is a keen traveler and enjoys nature and exotic beaches.
In the show Anka shared with us:
- Why she now prefers Swing Trading to Day Trading
- How trading chat rooms can negatively affect your trading
- The most important thing you should do before opening a trading account
- Her secret to picking winning trades
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Biggest retail trader mistake
Chasing trades, poor entries, risk management and money management.
Cam Hawkins: This is your chance to share more about you personally, and give the listeners more detail about your trading. What you’re trading, how you’re trading it and the kind of results you see?
- “Trading is one of my passions and one of my hobbies, and with all these devices like iPad’s, trading follows me on my travels and is really my lifestyle. Besides trading, I really enjoy the beach. I’m kind of a beach person. I like fresh air, hiking, movies and travelling of course.”
- “I’ve shared some of my background with you and I’ve been a professional independent trader for about 11 years now and before that I had over a decade of investment banking experience. I’m also certified from numerous financial institutions from Europe and the US, because I’m originally from Europe. I run a hedge fund for high net worth clients and a signalling service which is basically a carbon copy of what I’m doing in my fund. I started trading equities (US stocks) and then diversified into futures and Forex. I do have an emphasis on equities more than anything else but I do love to trade currencies and futures when the opportunity is there. When I talk about futures, I’m trading futures indices so I try to narrow my focus in this area.”
- “As a style of trader, I’m trying to retire as a day trader. Although when I started trading I started as a day trader, and now I’m easing off day and focusing more on swing trading as it gives me more liberty and freedom to do whatever I like for the rest of the day. So right now, I’m trading less than when I first started trading and with better results than what I had with day trading. You know the saying “less is more”, I see the exact same thing, so trading less is actually making me more because you’re only focusing on 5-7 trades per week and you’re focusing on managing those trades versus micro managing throughout the day. So your energy goes more toward larger time frames like daily, weekly and monthly and the outcome is even better than when I was day trading. If I wasn’t running my fund I’d probably trade only 10-15 minutes a day.”
- “When I was day trading I had 34-36% return per year on average versus now where I tend to do more than 40-50% and if I incorporate futures and Forex in the same bucket as equities, for my fund I average over 50%. So if you start an account with $20,000 at the end of the year you have $30,000.”
Cam Hawkins: Go back in time now and tell us what first attracted you to trading and talk us through that very first trade you took?
- “When I first started trading market stocks, like Cisco, I remember when I first started day trading as a full time job the prices on those were about $10, $15, $7. There was a stock back then called Java, and I remember stocks like this were not as aggressive as the Apples and Googles that had really rapid move. Moving slower they gave you a chance to see what you were doing and have the patience to trail it and wait for the right setup to develop. I still trade these stocks to this very day and even swing trade them.”
- “I’d been in investment banking and the investment industry for a long time. So thought, “Why not do it on my own? Why not carbon copy what I was doing for an institution for myself?”. When you take it on yourself you have many more fears than you would have trading a professional account, because it’s your money and savings. I started with all my savings and put it into a trading account and that’s how I started. It’s nerve wracking knowing that you’re actually trading your money.”
- “I think my first trade was a loser. When you first start out you have a rush of emotions and you basically forget everything that you’ve learnt because it’s your account, your life on the line and your living. So I think it was definitely a loser. Probably the first 2 or 3 were losers. But soon after that things changed and I was very very lucky I had a 6 month winning streak right off the bat when I first started trading as a professional trader.”
Cam Hawkins: Let’s go back to a dark time in your trading career, a point where you hit rock bottom, a trade that kept you awake for a week, an account that you blew in a matter of days or even minutes. We want to hear that story.
- “As I said, my first 6 months gave me a lot of confidence and you think you can conquer everything. So I upped my buying power. What happened was, I started to listen into what other traders were doing in chat rooms. I found something out in one of the chat rooms where they were talking about some news trading which looked interesting to me, so I saw the opportunity to make a quick penny there. I thought, instead on looking for trades and scanning for trades I could just subscribe to this news room and cherry pick some of these really strong stocks. Well, things went down from there. For the next 4 months, everything I had made in the prior 6 months was gone. I remember times when I had to get up in the morning, because you have to treat it as a business, it’s like going to work. As a day trader you have to be there in front of the computer for the first 1-2 hours of trading. I remember I didn’t really want to get up, I felt like crying and believe it or not, I did cry. I thought something has got to change. And change is not good in trading. Whenever you find a strategy or method, whatever it is you have to stick to it. If that strategy (complicated or not) is making you money then you really should stick to that particular strategy and not waste your time looking for another strategy. There really is no holy grail. So, the bottom line is find one strategy. Find something that works for you. And from my experience you don’t need multiple strategies, so if you know how to trade gaps or if you know how to trade trends, counter trends or brake outs stick to that strategy. It focuses you and funnels your attention in one direction and that’s what you need as a trader. Simplify things to the minimum.”
Cam Hawkins: Right, let’s flip this 180 now. Can you talk us through that specific time when everything fell into place. Your big “ah-ha” moment. That point in time you started to become a successful trader – What did you do differently? Who did you learn from? That sort of story…
- “After the 4 tragic months, I had to go back to simplicity and trade in the zone. So, I isolated myself from the chat rooms and any kind of noise that surrounded me and revised my trading plan. I listened to my instincts and soon after success came immediately.”
- “The charts can be a little confusing at first but after you’ve been trading for 2-3 years you become accustomed to the markets and how everything moves. When I first started trading institutionally I remember one of my mentors told me “You’re going to need at least 3 years to get used to the markets”. I was like, “No I’m not, I’m going to learn it right away. I already know how to do it.”. That guy was right. I have to tell you, you need to spend a lot of time in front of the computer before you achieve consistency. Even it you don’t trade, you need to watch the markets. I mean those 10,000 hours of pursuing one thing – you have to do it, you have to sit there and success will come really really fast if you devote your time to it.”
Cam Hawkins: Do you think it’s an advantage or necessity to have a big financial institution or brokerage background to become a successful trader?
- “I think you’re better off when you start, not having a financial background. A good example is one of my students who is a doctor. He’s one of the best traders ever. I have another client who is from a brokerage firm and he’s having a lot of trouble with share sizing. It’s a totally different element. But when you’re coming and saying “I want to learn how to trade”, you have the advantage because you’re picking that domain and if you’re very lucky to learn from someone who has been doing it for a while and has a good track record. And you have to make sure that the person you learn from has proof of their track record.”
- “Charting is a must, the simpler the better. There’s one thing to remember, the only non lagging indicator is price. Price action is all they need to focus on. Most of the traders back in the day were focusing on fundamentals and now it’s more technically oriented.”
Cam Hawkins: How long did it take you to go from trading newbie to consistently profitable trader?
- “10-12 months”
Cam Hawkins: What’s your mental approach to trading and what special techniques do you use to keep your emotions in check?
- “The only way to keep your emotions in check is to have a very good and thorough trading plan. It has to be on a piece of paper right in front of you for the first 2-3 years of trading.”
Cam Hawkins: Do you have a success quote you can share; one that resonates with you personally?
- “In order to succeed your desire for success should be greater than your fear of failure.” – Bill Cosby
Cam Hawkins: What’s your recommended “must read” trading book?
- “I started with ‘Reminiscences of a Stock Operator’, by Edwin Lefevre. Another would be ‘Day Trading Online’ by Toni Turner.”
Cam Hawkins: What are your views on automated trading systems, e.g. trading robots?
- “You need to develop your own trading system. Traders need to embrace automatic trading but not embrace as in – I’m going to buy this EA [Expert advisor] and this is going to do so and so for myself. The only people who are making money with those EA’s are the people that are selling them. Because if they had the perfect system they would trade it themselves, right. They wouldn’t need to sell them. So, basically, what you need to learn from these high frequency trading computers is how to automate your trading. They’re successful because they have one strategy. They buy here they sell there. So, that’s what you need to do. Embrace what they know and you should develop your own trading system that is as unique as you and your style and just purse that.”
Cam Hawkins: What trading related internet resource, like bloomberg.com, do you always use?
- “I use CNBC.com”
Cam Hawkins: What your preferred trading strategy?
- “I love to trade break outs. Breakouts have been working fantastically well within the last 2-3 years. I also love to trade gaps and buy/sell pockets that are at high interest areas such as support or minor support, minor resistance, major resistance.”
Cam Hawkins: If you could leave our listeners with one piece of advice what would it be?
- “Do not open a trading account first. First invest in your education because you’re going to be so tempted to trade first and learn as you go.”
Cam Hawkins: What’s the biggest mistake most retail traders make?
- “Chasing trades, poor entries, risk management and money management.”
Cam Hawkins: What’s your preferred trading platform and why?
- “thinkorswim from TD Ameritrade because I can trade Stocks, Forex and Futures all in one place.”
Cam Hawkins: Question 11. What does your typical trading day look like?
- “First thing I do is listen to or read the news off CNBC.com and prepare of the day. Although the market opens 9:30 my trading starts at about 8am. First, I go through all the upgrades/downgrades, all the stocks that are in the news because they are most likely to move on that day. Especially in earnings season. I scan for gaps, stocks that are gaping up or down. Select my watch list and at 9:30 I’m ready to go with the strategy and I have my focus on 1-2 trades at maximum for the open.”
Cam Hawkins: We’d like you to help us find a high probability entry point for our trading system. We already have a market to focus on (namely the S&P500), and we’re looking for specific standard indicators, candlestick formations, market events, those sorts of things… So Anka, to help us pinpoint high probability setups for our trading system what “3 golden nuggets” can you share with us today?
- “I don’t use Bollinger Bands. All I use on my chart is the 20 period moving average and the 200 period moving average for the daily chart. And because I’m a swing trader I’m going to refer to the daily chart here. And I use volume. Again, price action is my most valuable indicator. So, No. 1, I focus on all the time frames, from 1 minute to monthly. Here’s the secret, I focus on all these time frames regardless of if you’re a day trader or swing trader because you need to know what’s happening on all of them at the same time. And you need to correlate them. Remember the higher time frames are going to always dictate whatever is happening on the smaller time frames. Always trade in the direction of the daily, weekly and monthly chart and not against it. So, for example, if you’re trading the 5 minute chart, make sure it’s in sync with the hourly and daily chart because if you have an hourly buy and 5 minute sell, that 5 minute sell is not going to work. So make sure everything moves in the same direction. Especially the higher time frames.”
- “Make sure you have patience to wait for the pullbacks to these support areas if you’re looking for a long position.”
- “So remember, pullbacks into the 20 period moving average on high volume.”
- “I love tight consolidations that happen, where there are base strong consolidations for a long period of time which basically suggests that investors and traders are not ready to step away from those stocks. “
Cam Hawkins: Before we wrap up what’s the best way for traders to get hold of you?
- “Facebook.com/tradeoutloud or via Tiwtter.com/AnkaMetcalf or you can just send me an email on info at tradeoutloud.com.”