Get A Handle On Your Trading
Michael "Trader Mike" Seneadza: From Swing Trading To Daytrading
by Jayanthi Gopalakrishnan
Atlanta, GA-based independent stock trader Michael Seneadza received a bachelor of science degree in electrical engineering from Stanford University, but he started swing trading for a living in 1999 after working in the information systems industry for nine years. He launched his well-received blog at his website, TraderMike.net, in 2003, providing daily market commentary and education material. Last year, he pulled another switch, shifting from swing trading to daytrading. Technical Analysis of STOCKS & COMMODITIES Editor Jayanthi Gopalakrishnan interviewed Seneadza via email and phone in early May 2006.
If you have experience swing trading, then moving to daytrading isn't such a huge jump, since you're used to having several open positions.
Michael, how did you get started trading?
My initial exposure to the market was via an investment club that some college friends started back around 1992. A couple of years later, I opened my own account. Over time, I got more and more into the markets. Around 1997 a few things came together that really increased my interest in trading.
What were they?
At that time, I was consulting as a software developer for an energy trading company. Being in that environment really got me curious about trading. Also during 1997, I happened to read Trader Vic: Methods Of A Wall Street Master by Victor Sperandeo, and William O'Neil's How To Make Money In Stocks. Motivated by those two books, I wanted to learn all I could about trading. I bought about 10 more books and I began to read Gary B. Smith's column at TheStreet.com. The more I learned, the more I was convinced that I wanted to trade full time. In mid-1999 my project ended, and I decided that it was now or never to give trading full time a shot.
I understand you made the switch from position trading to daytrading. What prompted that?
Primarily to make my income more consistent. When I was swing trading, I'd have weeks when I just didn't make much money. I thought that with daytrading, my dry spells or drawdowns might last for days instead of weeks because I'd have more opportunities to trade.
I never imagined I'd ever be a daytrader. Just about everything I'd ever read about daytraders made them out to be scalpers and/or gunslingers. Scalping and being glued to a Level 2 display never appealed to me. Scalping just seemed like too much work for too little profit.
What changed your mind?
A few years ago, I started reading the website of a daytrader who made just a few trades per day (MaoXian.com). He traded off 30-minute charts and had a very simple system. What really got my attention was that he'd often catch huge moves that I'd just be watching because they didn't fit my swing trade setups. It became clear to me that his trading style was superior to mine.
What are some of the major differences between the two?
The obvious difference is that as a daytrader, I no longer hold stocks overnight. That can be a mixed blessing, though. When the market's trending, I'll miss out on a good number of continuation moves. Those missed moves can be frustrating, but there have been plenty of days when I was thrilled to be out of the stock I was trading the previous day. I really like the flexibility of starting each day in cash. I can switch between long and short at the drop of a hat. Or if I don't see any setups on a particular day, I can just walk away and go do something else without worrying about what the market's doing.
What may be the most significant difference for me is the increase in
buying power. What the Securities and Exchange Commission (SEC) calls "pattern
day traders" are given four times their equity in margin. Non-daytraders
only have margin equal to twice their equity. I rarely used margin overnight
when I was swing trading because I didn't want to risk stocks gapping against
me the next day. But with daytrading, I'm free to use all of my buying
power. Because of the position sizing method I now use, I can buy four
times as much stock as when I was swing trading but keep my risk the same
or less.
...Continued in the July 2006 issue of Technical Analysis of STOCKS & COMMODITIES
Excerpted from an article originally published in the July 2006 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2006, Technical Analysis, Inc.
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