Steve Palmquist Interview
Steve gives us an insight into the methods he uses for trading and what his trading day is like
How did it all start? (How did you get into trading?)
When I was in college I discovered that a savings account was a guaranteed loser after inflation for me, and a guaranteed winner for the bank. I was an electrical engineering major and was researching potential places to work when I graduated. I started following several technology companies, and watching their stock prices. I wondered what made good companies and what drove the stock prices so I began reading about investing. I found it interesting and investing became one of my life long passions.
How did you learn to trade? (Are you a self-taught trader or did another trader/mentor pass on valuable lessons to you?)
Like many traders I started out reading books and attending seminars. I found that most of the books provided a few examples of trades that worked but very little information on how often the trades worked, what type of market conditions they worked best in, or position sizing and money management. The breakthrough for me came when I started doing my own research and backtesting. I have found that the trick to trading is not to have a favourite strategy, but to have a tool box full of them and select the appropriate strategy for the current market conditions.
Which markets do you trade and how often?
I trade specific patterns, not specific stocks or markets. I trade these patterns wherever they occur because I have tested them and found them to be productive. I run a dozen scans on my data base every evening. These scans look through the stocks in my data base to find patterns of interest. The patterns are ones that I have backtested and found interesting to trade in the current market conditions. The number of trades I make depends on market conditions and may range from zero to more than ten a week. If the market is presenting me with good money making opportunities I take the trades, if not I pass.
What is your basic approach to analysing and trading the markets?
Successful traders adjust their trading style, trading system; holding period, exit strategy, etc based on the current market conditions. This is a process I refer to as ‘Market Adaptive Trading’. It is difficult to cover this entire subject in an interview, so I have posted an article on my website, www.daisydogger.com that readers can review.
Imagine that you hired a carpenter to build an addition to your house and he shows up in the rain dressed in shorts, and only brought a screwdriver. Most people would fire the guy. He isn’t prepared for the conditions, and lacks the tools for the job. Traders need to ‘dress for the weather’ by having multiple tools that have been carefully tested in different market conditions and know how to read the market and know when to use which tool. Trading with one system in all markets is like trying to build a home addition with just a screwdriver.
I focus on short term strategies and techniques when the market conditions indicate that that is the best approach. I focus on longer term strategies and techniques when the market tells me that is the best approach. I don’t trade by what I prefer, I trade based on what the market prefers.