Some Insights from a Trader on the Front Lines of the Stock Market

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Joseph Fahmy has over 16 years of trading experience during which he developed his investment strategy. Joe worked in New York City for a boutique research firm where he gained extensive knowledge of the technical analysis of stocks, market forecasting, and risk management. Joe completed his undergraduate work at Tufts University, receiving a B.A. in Economics and Religion in 1995. Outside of trading, Joe enjoys playing the drums, travel, and sports.

How do you first get into trading?

My father got me interested in trading back in the 1990’s. Back then, I was strictly a buy-and-hold investor. Basically, I had no sell rules and thought stocks went up forever. It wasn’t until I went to work on Wall Street and studied the market that I began to understand how stocks really work. That’s when I got rid of the buy-and-hold mentality and became a trader.

Describe your trading style.

I believe the market is healthy 2-3 times per year. Identify those healthy times and take advantage of them by aggressively trading the best stocks you can find. The rest of the time: raise cash, trade light positions, or simply sit out. I am mostly a swing trader. I hold positions anywhere from 2-3 days to 2-3 months. I try to identify potential big winning stocks (based on the historical studies) and trade them as effectively as possible during those healthy times.

What’s the most important tool  or resource you use for trading?

MarketSmith. It’s a great product that gives you all the information you need on one page.

Earnings, sales, relative strength, company description, next year’s earnings estimates, etc. Full disclosure: I have no affiliation with them. I pay for the product just like everyone else.

Tell us about your best and worst trade.

My best trade was trading Hansen Natural (now Monster Beverage) all the way up from 2003-2005. It just kept setting up and I traded it very well. My maximum loss is 7-10% and I take tons of losses. I just make sure my gains are larger than my losses to make up for being wrong. So, I don’t really have a “worst” trade. If I get stopped out, I stick to my sell discipline and move on.

What are the biggest mistakes you see struggling traders make?

Poor stock selection, not cutting losses and forcing trades in bad environments. I used to do the same. Like anything in life, the only way to get better is to work hard, do post analysis of your work, and make the proper adjustments.

Are there any lessons or concepts from other areas of your life that you have been able to apply to your trading?

Yes! Taking action and making decisions. I am a firm believer that you have to act and have conviction if you want to get anything done. This especially applies to trading where the ability to make a decision is very key. Too many traders “freeze up” when they should take massive action and overcome their fears.

Three best books on trading.

How To Make Money in Stocks (4th Edition), William O’Neil
How To Trade in Stocks, Jesse Livermore
The Battle for Investment Survival, Gerald Loeb

Tell us anything you want us to know.

I always tell people: “Do what works for you.” It’s such a shame that people argue over everything: religion, politics, sports teams, trading styles, favorite burger joints, and the list is endless. Rather than trying to force ideas down someone’s throat, it’s better to focus on your own life and let people “do what works for them.” The world would be a much happier place if people focused more on making progress in their OWN lives.

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Photo Credit:  Jeff Titcomb/Photographer's Choice/Getty Images 

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