We’re lucky here at Sang Lucci and WallStJesus.com to have a number of truly incredible, veteran traders join us on a daily basis in the Steamroom. As part of our celebration leading up to the launch of the next live session of the Sang Lucci Master Course, we decided to ask a few of them some of your most common questions.
Each one of these guys – Ronchero, Silverfin, DennyCrane, and Optiontr8er – has been through the Sang Lucci system in some capacity, whether that means taking the Master Course or learning as a part of our community for years on end. Regardless of how they’ve arrived at where they are, we’re grateful they’re down to pay it forward by sharing some of what they’ve learned. We hope you are too!
What’s the most important tool for you when it comes to precisely timing your trades?
Ronchero: No such thing as precise for me, I just want the meat in the middle. However, for me I use a combination of my own rules: Tape, flow (for sentiment, regardless of direction), and a few light technicals, (8, 50, 100, 200 sma), or a visible flat line area of support/resistance that you can easily see over a 12 month period when glancing at a daily chart. It sounds like a lot going on, but once practiced, it becomes a buy or sell signal.
This works for my style. I’m a hybrid trader… it won’t resonate with everyone. I day trade, as well as hold longer-term positions, collecting premium against them, while capturing upside capital appreciation. Yes, I am a therapists’ dream.
DennyCrane: Chart set up, news or info from the Steamroom (either sweeps or Lucci’s tape commentary), and what I know about how the stock moves. That’s pretty much it.
Silverfin: I like to use VWAP and a tool called Trade-O-Meter for intraday trades. For swings I use the 20 and 8 ema. I obviously use Tape, because I learned from Lucci.
Optiontr8er: For me it’s a combination of some technical analysis (a pattern break and/or a support/resistance break) and interpreting the options flow.
Where do you feel like you have a legitimate, sustainable edge?
Ronchero: TAPE-n-FLOW, and mental ability to let a loser go. I’m solid when it comes to long-term swings (3-12 months). I am still working day trades effectiveness and shorter-term swings. Knowing when not to take a trade is a huge edge. Better to sit, which is difficult, than to get chopped up.
I learned how to read tape, and use the flow, from Lucci. I picked it up over a 4-6 month period, but I practiced every day, all the time, attending every Master Course over the 4-6 month period, and applying it to the stocks I like. I picked up something new, however subtle, every time I logged on and listened.
DennyCrane: My chart reading and knowledge of many stocks/companies including fundamentals. Being little older than most in Steamroom, I’ve got years of watching markets and developing my own strategy such as bounce plays off tankers on solid companies.
Silverfin: I think my edge comes from only trading a small basket of stocks and learning how they react. It took me a while to figure that out. Edge is so subjective…what I think is my edge, would not be someone else’s.
Optiontr8er: As briefly mentioned above, I use a combination of very select technical patterns and indicators along with properly interpreting options order flow. My ideal trade in my active non-retirement account is about 36 hours to give you some perspective. It took me about 2 years to fully learn what aspects of the technicals that I wanted to use in my system and which to ignore. On the options flow side, it probably took me about 4-6 months to learn how to interpret the flow in a way I could reliably count on and integrate into my trading system.
What’s the biggest source of stress for you in your trading these days?
Ronchero: Besides my sons, it’s managing a winner with size. Nothing pisses me off more than cutting off a winner early. When I’m sized up and unwinding, I am looking for clues from the MM. If I chip off 10 contracts, and they get sucked up immediately, with confirming tape, I know I have more room to run up.
If a MM knows I’m there and unwinding, it becomes a knife fight. If I am the only one sized up in a name, the MM knows I’m there, and he is going to make me sweat for profits. I try to avoid this, but sometimes I can’t help but dance with the pretty girl that catches my eye!
This is why I like liquidity in bigger names. I can hide there.
Dealing with the stress of trading is difficult, and is a constant work in progress. I am emotional, and channeling the Jedi-qwan shit is a struggle for me. I try to understand what the black and white facts are, and accept them. Then I try to apply the facts to mouse clicks. Make money, so what? Lose money, so what? Keep it moving, I know I’m gonna be profitable overall. The losers will kill you. Let them go, and your mind will lose 90% of the weight it carries. Then you can make better decisions, and profit.
DennyCrane: My biggest source of stress are fades… they’re just brutal when holding swings on options. Trying improve this area but always too far out-of-the-money it seems, need more work on this!
Silverfin: The speed of the markets the past few months. It’s the fastest I’ve seen in a while. Very tough to swing in these conditions. I have cut position size and have been focusing on SPY and SPX, both ways.
Optiontr8er: My biggest stress or worry is on trades I have either missed or sold too soon. For me, the problem has truly never been finding great trades, but instead having the conviction to get in heavy or hold all the way through to my target. The best way I have found to mitigate my stress is in keeping a consistent morning premarket routine, making sure to create a fun lifestyle outside of trading to give proper life-balance and perspective. At least for me, my least stressful trading comes from times I have great work/life balance.
When you’re trading at the top of your game, what are the things you find yourself doing?
Ronchero: It’s difficult to describe; I’m not fighting. Every move seems effortless. I’m clicking the mouse with no thought of P&L, or fear of contract size… it’s just the tape in front of me, the ebb and flow of a run-up, head fake to shake out nervous hands, run back up, sell a little for profit, rinse repeat. Hours go by like minutes.
During the most recent pullback, I was in a zone (my hedge on SPY, DIA, QQQ helped a lot), and traded 600 JPM puts with no idea I had just ripped off that many contracts in a day. That is what I am trying to do every day. It’s difficult to channel that shit. When it shows up, you just know its there, and you go Obi Won Kenobi on it.
Silverfin: When things are going well, I will let the winners ride. That is where the big percentage wins come for me. Lately, I have been more of the hit and run trader. In and out quickly, both sides…more of a grind. The gains are much smaller, but without a stop or an exit, winners turn to losers really quickly.
Optiontr8er: Its really 100% mental mindset…My best trading periods come when I keep my mind clear of other life thoughts, focused only on the market, and finding trades that fit my system and ignoring the rest. My morning routine is critical for my trading success as it sets up everything for the day mentally. I trade best when I’ve been disciplined to follow that routine consistently.
Talk about the role of bias in your trading… how do you differentiate between having a plan, an opinion, and a bias?
Ronchero: Bias is simply my idea or my opinion. I know from experience, my opinion means absolutely ZERO. I trade what the market gives me, and I hedge my opinion. I’m ready at any moment to admit I’m wrong, flip the position, and go the other way. Lucci does it better than any of us, and I learned to detach myself from a day trade by watching him in action.
Silverfin: Right now, you can’t come into each day with too much bias…I’ve done it and I usually get smoked. You have to commit to what you see versus what you think, and that is not easy.
Optiontr8er: For me, its pretty easy to decipher the difference. The only truth is price. For 99% of profitable moves either direction or even a reversal, price gives a signal.
What’s the most important thing to understand about learning to trade in bigger size?
Ronchero: Do not average down. Losers add to losers, getting stuck holding way more size than they wanted because they convince themselves that averaging down is going to pay.
Tape-n-Flow will tell you if a “feeler” trade is correct. Tape allows me to see buyers, or sellers, start to line up. That is my clue to add a second leg.
This is when I add the majority of my size. If there is a third leg, I add a little more. Then, I am looking to take profits. Of course the other gauges on my dashboard (mentioned above) need to line up for me to have the confidence to add. I know I will miss out sometimes, and I know I will be wrong sometimes, and that’s ok.
Silverfin: I still believe in taking 1/2 off quickly. But when I take bigger size, I do tend to watch the P&L to closely. I need to work on that. P&L sometimes leads to emotional decisions. But we are humans, not robots.
Optiontr8er: Well, on the mental side, with bigger sizing, it’s even more important that you not look at your intraday P&L as the larger swings can negatively influence your trading decisions. On the technical side, when it comes to trading bigger options size, you really have to understand the liquidity of the option you are trading.
How do you decide to listen to someone else’s advice about trading vs. not engaging with the noise?
Ronchero: I always listen. The Steamroom is full of talented, and insightful traders. However, if it doesn’t fit my criteria, I pass. There’s always another bus. I have watched Lucci, Maz, Crane, Silverfin, Lilly, Mj, Mikep, JC, rickjay, bigjay, etc, have a big ole victory lap while I did not get to participate, and its ok. I’m happy for them, because they keep coming back with their insights, and it adds to my education. I might not trade the same way, and because I know a little about them, and more about myself, I know when I can participate, or not.
Silverfin: I try to stick to my basket for the most part. I love input and new ideas, and I’m always trying to learn. Everyone has a system, an opinion..but you have to stick to your guns.
Optiontr8er: This question is a bit more difficult. Undoubtedly, to find the best advice you have to keep your ears open to a certain extent and will, therefore, hear some noise. I think the best advice I can offer on this topic is that if you already have a profitable trading niche, then 100% ignore ALL noise during the trading day. You can always review and search out some other opinions and strategies every quarter or so but its critical to not jump around from day to day or even week to week. Now on the other hand, if you do not yet have a profitable trading system/niche, then I would recommend experimenting/testing some strategies or other’s advice with very, very small size for couple months to see what fits your natural style. There are a lot of bad apples on Twitter but there are a lot of great traders and resources to help you find your niche.
What role does technical analysis play in your trading? How would you describe its limitations?
Ronchero: Technical analysis is only important to me because it is important to other traders. For example, a lot of hedge funds use the 50 sma as an area to buy or sell, so I pay attention to those areas. The same hedge funds will dump at the 200 sma. So I pay attention. But I do not bet on it, I do not trade on it, unless the tape tells me to. Because they are important areas to traders with more money than me, I know I can size up or down ahead of them based on the tape. It is a HUGE advantage and puts phat profit in my favor regardless of direction when it lines up.
Outside of those basics, I don’t like to go too deep. Do I really need to know the nuances of Elliott wave, Fibonacci retracement, Bollinger bands, pivot-points? No. I know what they are, and how they work, but the deeper it gets, the less its used, and the more f’ed up in the head I become. Too much clutter.
KISS (keep it simple, stupid) works for me. I like profits. Let the others sound smarter at the party, I’m the one going on vacation next week!
Silverfin: I use TA…love the 8 and the 20ema. But everything has limitations. Around news, sentiment, earnings…charts go out the window for the most part.
Optiontr8er: I realize that technical analysis isn’t popular with Sang Lucci, but I have found it to be incredibly useful when kept in its proper place as only a portion of my trading system and not the entirety of it.
You have to realize ANYTHING can happen, and that technical analysis nor any other trading tools are foolproof. Through years of experience, I have narrowed down my technical analysis to look for very select setups that I have seen to work over time.
Sometimes what makes us better traders doesn’t serve us in the real world, and vice versa. Do you have an example of a belief that serves you in your personal life but hurts you in the market?
Ronchero: Very difficult to answer. When I’m trading, I can’t afford to have empathy, or think in nice terms. I’m looking to take something from someone, and they are looking to take something from me. When I leave my desk, I have to revert to my easy going self.
I’m happy and easy going until someone gets belligerent, or takes exception to me being in a happy mood. I have to monitor my response to them, because if my trader/competitor comes out, I will put someone in tears, or be in a fist fight very quickly.
Silverfin: I am competitive, trading is competitive. But when you have a “never quit” attitude it will kill you in trading. You need to give up on positions and take losses. It sucks, but it’s part of the game. It doesn’t make you a quitter or a loser, it keeps you alive and on to the next trade.
Optiontr8er: Two beliefs come to mind that serve me well in life but not trading… One, is caring deeply for other people and their well being. In this business, if you see an opportunity (and sometimes a weak trader) you really have to take advantage of it. (Does the casino give concern for the blackjack player who has lost their life savings? Not at all, as the player knew the rules and agreed to play the game.)
The second belief relates to emotions; outside of trading, I really enjoy experiencing the full range of human emotion, but with this business, you really have to leave all your emotions at the door. I can’t tell you the amount of money I lost early on in my trading career by letting emotions affect my trading…even after a big financial win, it’s so important to not immediately celebrate as any arrogance can immediately lead to big drawdowns. This market has a way of humbling us all.
What is the biggest misconception about what it takes to trade successfully on a long-term basis?
Ronchero: Most people are conditioned to believe that you cannot outperform the market, the daily up and downs are simply noise to be avoided. Only pros have an edge, and its best to just leave it to them.
These are the same people that freak the fuck out when the market dips 10%, get duped into selling some shit off, (usually, a winner) wait for the all clear, only to buy back most of the way up. We need these people. I am happy to take their money. Let them keep their misconceptions, please.
DennyCrane: The biggest misconception is that its easy work. Stocks are much easier to trade vs. options, in my humble opinion. Options are a whole different animal but when it works nothing’s better. I’ve paid my dues and I’m still a work in progress.
Silverfin: The biggest misconception of what it takes? Mental, mental, mental…no one can master it, but you have to constantly work on it. When it gets methodical, and you don’t get too excited on wins, and down on yourself on losses, you are getting somewhere. But it is never that easy.
Optiontr8er: People need to realize that especially in the options market, you really do better when you don’t care. I always recommend new option traders only start with 100% money they consider to be lost already. Understand that only 15% of traders truly make it; you can’t follow the heard in this game. You have to find your niche and then exploit that for all its worth.
What about the most under-discussed part of what it takes?
Ronchero: How much effort, work, frustration, tears, and sacrifice, is required, regardless of how smart you are. Being humble and having an, “I’m gonna f%*^ you up”attitude at the same time, having technical skill and artistry at the same time, these things are really, really difficult to do consistently.
One does not simply get out of bed in the morning, and magically trade their way to millions without having survived several battles against the army of the dead.
The the “I told you so’s, turns out you weren’t as smart as you thought, where the fuck did our money go, and I fucking hate you”, conversations have to be managed delicately. Most people I know, simply do not have the stomach for it.
Optiontr8er: Conviction and straight up guts… and also NO EGO… know when you are wrong and get out quickly. I always say great traders care more about making money than “being right.”
If you’re trying to get to the level that these traders have worked so hard to achieve, look no further than the Sang Lucci Master Course.
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