Admittedly, I’ve always kind of looked at stock trading as a glorified form of gambling. And to be sure, there are risks involved.
To replace her day job salary, the MIT grad set herself a goal of making $300 a day.
By trading stocks before school started and during her lunch break, she was hitting that goal in about a year.
Tune in to hear:
- Teri’s trading criteria
- Her advice for new traders
- Why small players like you and me may have an advantage over billion-dollar hedge funds and Wall Street quants
- Where and how you can get started trading today
Pros and Cons of Trading vs Long-Term Investing?
I was always taught to be a long-term investor. And lately, I’ve had a lot of fun building up what I call my “cash flow” portfolio. Over the last few years, these dividend stocks have turned into a pretty healthy passive income stream.
But Teri has a different approach. “Buy and hold” can definitely pay off in the long-run, but what if you need money now?
Teri was working as an assistant principal at an elementary school, and she wanted an exit strategy.
“It just wasn’t fulfilling anymore, I was stressed all the time….If I could just make $300 a day, I could replace my income,” Teri told me.
Teri had some experience trading. She had done some as a side hustle in college, and also did an internship at Morgan Stanley on Wall Street. So, she knew the basics.
“I knew that it could work,” she said. “I knew that I could make money from it.”
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Here were some of her recommendations for people getting started.
1. Build Your “Watch List”
One of the first things Teri teaches her students is how to pick the right companies to invest in.
Teri said this is vital to being successful as a trader. It takes time to get better at judging what makes a good or a bad company, but she did share some tips.
Pick Companies that are Doing Well
First off, she said a lot of people looking to start investing with a small budget tend to look for low-cost stocks like penny stocks.
Teri said it’s better to look for companies that are doing well to lower your risk, even if the investment is higher. She uses charts to track trends over time, calculate the Average True Range (ATR) of their stock, and some more metrics.
Pick Companies that Move at Least $1 a Day
She also said it’s important to look for companies whose stocks move at least a dollar a day to capitalize on short-term trades. For example, Teri said Amazon’s stock moves can move up to $100 a day. So, you’d only need 3 shares to meet a daily goal of $300.
Over the last 10 years, she’s built up a watchlist of about 30 companies. So, she’s been with these same companies for the long-haul, but continually makes short trades in and out taking advantage of stock price fluctuations.
Follow the Metrics (Not Your Heart)
Another tip Teri shared is not to lead with your heart. Don’t invest in companies because you like their products or the company itself. Always work off of factual figures and invest in healthy companies.
2. Separate News from Underlying Value
Back in December 2018 the market dropped around 20%. This was the perfect time to buy stocks, then sell them when the price bounced back up.
If you had just bought and held your stocks from that crash back in 2018, you’d be up now too.
However, buying and selling in smaller trades as prices fluctuate can be more profitable.
How do “Black Swan” Events … Like the Coronavirus Impact Stock Trading?
Black Swan events are unpredictable events that potentially have severe consequences. The coronavirus is a perfect example of this, and it’s something that affects stock trading.
Teri said she’s still investing in companies during the pandemic, and it’s a good time to invest in companies that will come out of the pandemic stronger.
Companies that are directly affected, such as travel companies, are high risk. They may have to change their business model going forward and it could take a while for them to recover.
Teri said some companies are not directly impacted by the virus but are still seeing a drop in their stock, such as Adobe and Roku. These are companies that are safer investments and are likely to see their stocks rise when things are back to “normal.”
3. Use Charts to Price Each Trade
Teri uses charts to track stock prices for a company and predict their future movements.
She shared that her methods had earned her a big win with Tesla, making $83,000 in a day. Teri said she was able to do this using charts to predict when the best time to buy and sell shares were.
To summarize this, Teri explained it as follows:
She uses charts to look for what’s known in trading as “candlestick patterns.” These are movements on a chart that resemble the shape of a candlestick, usually representing a large movement in price due to banks buying or selling a large number of shares.
Teri was able to see that the last time Tesla shares reached a certain price, the banks made a large investment and the price went up. So, she bought some stocks in Tesla and waited for that moment.
It’s similar to the principle of supply and demand in economics. When stocks drop to a certain level, there is an increase in demand and the price is pushed up. Likewise, when the price reaches a certain high, demand tapers off and the price is pushed down.
Trading Brokerage Platform
Teri said she uses broker and software called TradeStation, and this is the platform she recommends for her students.
4. Manage Risk Using a Reward to Risk Ratio
Risk is a big factor when making trades. Teri said she teaches her students how to apply what she calls a “Reward to risk ratio” when making trades.
She recommends her students use a 3:1 ratio.
What this means is that the potential reward of a trade is 3 times higher than the risk involved. She’s also able to limit the risk because on TradeStation you can input a stop amount to protect you from losing a certain amount.
Using this strategy, you only have to be right 25% of the time to break even.
5. Grow Your Account 1% a Day
The amount a person has to invest isn’t the important thing. What Teri encourages her students to always try to do is make 1% of their cash account each day.
This means, if you have $10,000 to start with, you should aim to make $100 per day trading. Teri called this “very doable.”
That 1% snowballs quickly. It equates to around a 20% return per month, which would mean doubling your initial account in 5 months.
Of course, consistency is key, as is learning how to make the right moves.
How Can an Individual Compete Against AI and Wall Street?
Teri has been trading for 10 years, and admitted for the first 6 years she spent most of that time losing.
It wasn’t until she took some classes, figured out a system, and applied her learning to what she had been doing that she really started winning.
That was when she said to herself, “Oh, this is what’s going on.”
She says the key is to “Go with the big banks. Do the buying with them, and the selling with them.” That’s what makes her strategy work.
Another important thing is to keep a calm head. Teri said we have a natural tendency to panic when prices drop and think about selling. But that’s when banks are likely to start buying which will drive the price back up.
How Long Did It Take to Reach Your Stock Trading Goal?
Once Teri really committed to trading stocks to replace her day job income, it took about a year to reach that $300 a day goal. In fairness, there were several years of practice and education prior to that!
Teri said it’s not the learning that takes the most time when it comes to making money trading. Her students can go through her course and learn her system in 8 weeks or less; it’s practicing that takes the time.
Once you understand how to trade, it takes time to get familiar with spotting trends, understanding how markets change over the year, and so on.
Teri said it usually takes people about a year to hit their initial goals too.
How Much Time Does Trading Stocks Take?
When Teri still worked her day job as an assistant principal she would “book meetings with herself” to get some time alone in her office to do her trading.
She would take:
- 30 minutes to set up trades before trading opened for the day at 8:30. (She’s in Central time)
- Another 30 minutes at lunchtime to check her trades
- One final check when trading was closing at 3pm in the afternoon
Teri would then spend an hour in the evening looking at the charts for the 30 companies on her watchlist. So, she was able to meet her $300 a day goal while working full-time with about 1-2 hours a day.
Teri is a world traveler and had planned to alternate between working a month then traveling a month this year. But those plans changed due to global travel restrictions.
So instead, she’s really excited about the Million Dollars a Day movement she’s working on with her students. The goal is to have 1000 of her students making $1,000 a day, for a total impact of $1,000,000 a day.
A number of her students have already hit the $1,000 a day mark, so she’s getting closer to that goal all the time.
Teri’s #1 Tip for Side Hustle Nation
Links and Resources from this Episode
- Skillshare – Get two months of unlimited access to 25,000+ Skillshare courses free!
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