While I was in Las Vegas attending the Trader's Expo, I had the pleasure of sitting down with Harry Boxer founder of the The Technical Trader website. It was a pleasure to sit down with him and not only interview him, but also learn from him in the process, and I hope by reading the interview below, you'll be able to say the same.
Ryan: I’m here with Harry Boxer from TheTechTrader.com and, you’re a day trader, you do a little bit of swing trading also, you have a large following and I just want to get some of your insights on how you day trade and how you swing trade. So let me start by asking, how you got your start trading?
Harry Boxer: When I was a young kid, probably late teens, I went up to the Catskills where we stayed in a bungalow. We were staying with a stockbroker, and he got me interested in—showed me a little bit about charting. Back then there were no computer programs, he literally taught me how to draw charts by hand. And I literally built my charts day by day, until I had a history of time where the charts were useful for because charts aren’t useful unless you can see some history. That’s the purpose of charts; history and be able to project forth.
Then I started getting very interested and did some trading which was very successful. I used to cut classes in college and went to my broker’s office and watch the tape, stuff like that, you know what I mean?
So then I became a young struggling stockbroker in the late 60s, early 70s when the market was trading five million shares a day. Five million shares a day! That was it.
Ryan: I’ve read a lot of times people who did draw charts back in the day they learned a lot more from that. They learned how the chart “flowed” by drawing it out by hand.
Harry: That’s the thing with me. I’m a big proponent of pattern recognition. I look at time frames, I look at formations, and most of the time, what I’m looking for are continuation patterns, patterns that indicate that the trend that was before it, is going continue and create an opportunity for trading. You know, things like triangles, pendants, flags, stuff like that.
Ryan: And what’s your preferred trading strategy?
Harry Boxer: I like trading gaps. I like trading stocks that are gapping up on news, whether it be earnings or contracts or something that’s going to propel the stock instead of the “powers that be” trading it.
I look for early patterns, stocks that gap up, pullback, get quiet, don’t pullback too far, don’t break the opening gap support and then when they start to break out, preferably they take out the early high. Then you’ll start to churn higher all day.
And then my favorite pattern is the gap-up, short run, then settling to rising channel, so to speak.
Ryan: Sort of like a flag pattern?
Harry Boxer: Well, but it’s more of a rising channel, where each pullback is higher and then we got an up-channel. And when you see that kind of a pattern, basically, it means there’s no stops being broken because the stock continues to hold each low.
When at some point, whether it hits a target or it hits a point—and my targets are set up by three things: intra-day targets are set by intra-day patterns but I will also go back on 15-minute and daily charts and look at previous highs and lows, important resistance levels, moving averages and see where a logical resistance level is going to be and if that’s enough for me, I will use them, set that as a target for my traders and they’ll be out—like today, we had a few stocks that trended beautifully and brought 10% and 20% intra-day trade.
Ryan: How do you manage risk, and I know you just touched upon it there, but how do you manage risk in each trade?
Harry Boxer: Well, everyone says to me where should I put a stop loss? Should I do 5%, 8%—I don’t believe in percentage stop losses. I believe in ‘look at the trend, look at the previous lows, look at the moving averages and trend lines and channels’ and look where logical support should be for a stock. If it breaks that, you can set it a few cents below that.
I’m a big believer in trying not to get stopped out and then have the stock turn right around on you. Give yourself a little leeway but at the same time, if I have a big position in the stock, I will peel it off at certain intervals. When I talk to my traders in the morning I tell them where their initial and secondary targets will be. When it hits the initial targets, I usually take some off the table. When it hits the secondary target, I may take a quarter off or take it all off, or at that point take my stops to a point where it’s either going higher or I’m getting stopped out. Sometimes they just spike up. The last thing I do is if I see a stock that has risen-risen-risen, all of a sudden spikes and then you buy-up, I’ll sell it to them. Because it’s likely at that point it’s going to pullback, consolidate or retest.
Ryan: And are a lot of them under-ten-dollar stocks?
Harry Boxer: Well, it’s funny, I have subscribers that love stocks over $40 and $50 a share and other guys who want two-dollar stocks. I try to give them a little bit of both. Like today, I gave them stocks like Acme Packet (APKT) which went from $40.50 to $44.50. And we also had Fonar (FONR) which went from a $1.60 to a $1.85.
Harry Boxer: I believe in leverage, too, so when I buy a stock, I like stock trading between $5 and $10 bucks then I can buy 10 or 20,000 shares of them - then I can trade in and out of – pulling off five thousand at a time, that type of thing. That’s my biggest trades.
Ryan: What is the biggest loss when you think back in life?
Harry Boxer: Option trade. See, I’m a big believer that the best, most profitable option trades can be made on stocks that expire shortly because the premiums are so low that it is almost trading point for point with what the value of the stock is.
So my most profitable trades were when we had bought an OEX option within a day or two of expiring and it was under water but the market rallied and took it above water. So we went from pennies to like ten bucks. I did that a lot but I also lost money on option trades that just went against me so fast. This was 15 years ago when I wasn’t as smart as I am now in and I didn’t have any discipline in terms of trading. I remember that day distinctly because I lost about $25,000 on one option.
Ryan: Yeah, that’s never a fun day.
Harry Boxer: And I’ve never been close to losing that kind of money since because I’m never going to let myself get to deep in the hole. Here’s the thing, if you buy a stock, option or anything, it doesn’t work on the first, you know—actually, the first few minutes it doesn’t work you should be concerned. Within the first half hour or hour it’s not working, you should be out of the trade. I’m talking of day trades.
Same thing goes for swing trading. The first day to three days, if the stock doesn’t go in your favor, you probably should get out.
Ryan: What is the most important lesson in trading?
Harry Boxer: Preservation of capital.
Once you’re blown out you can’t trade another day. I had a couple trades yesterday that I peeled off half my position and made a nice trade. Then it came down on me quickly and I took a little loss. I put it back again, it went up and then it just kept going back and forth. I figured it out - I traded the stock about eight or nine times in one day and made $18.
And that’s rare for me. I was playing with tight stops that day. For example, there was one time where I had the stop loss at $6 and I paid $6.17, it stopped me out and then went to $6.40. Had I put it at $5.99, I wouldn’t have gotten stopped out.
Ryan: That’s always a frustrating thing when you look back on the trade and you’ll see a different support level and you’ll say to yourself “I should’ve used that as my support level and not the other.”
Harry Boxer: Well, I have a couple traders in my room that are constantly setting their stops too tight and they are getting whipsawed all the time and I have to have talks with them about it.
Ryan: I know from a personal standpoint I tend to probably be on the side of my stops probably being too tight at times.
Harry Boxer: Well, the point is that’s good and bad. You can always get stopped out and then go back in. That’s what I did yesterday. There was one stock I felt was going to be a big mover, but it just kept struggling. What I should’ve done is after I saw the stock struggle, instead of getting a little bit pigheaded I should have decided to just exit. And in another case, the stock went sharply against me, it rallied all the way back and sold it and then it closed way down from the level. Sometimes you got to react quickly. That’s the thing about people, they don’t react quickly, number one. Number two, they let their emotions run it.
Ryan: And the emotions, that’ll take you out of the game. That’ll kill your capital.
Harry Boxer: Well, my brother-in-law, God rest his soul, passed away at a young age but he taught me one thing. He said it takes a cast iron stomach and balls of steel.
Oh, and here’s another rule of thumb. Anytime you have a stock and it’s running, and you actually scream at the monitor, “Go, Baby!” – Absolutely, let’s put a sell on it that moment. It’s right at the top every time. When your stock is running like that, you should sell. When you get too excited, it’s time to sell.
Ryan: I totally agree with you on that. How do you trade in year like this year here, from a swing trading standpoint?
Harry Boxer: Best year I ever had. I just think the market has been…let’s just say…since July – Fantastic.
Ryan: I talked to a lot of people at this convention here where they’ve said “You know, it’s like every time I have a profit in my hand, the market reverses course on me.”
Harry Boxer: I used to be an intermediate term trader, then I was a short-term trader, then I went to swing trading and now I’m a staunch day-trader. I’m as staunch a day-trader as I am Republican.
Ryan: Republican as well!
The most important aspect of trading, and that might be a little bit of a overlap with some of what you’ve already talked about, but what comes to your mind first?
Harry Boxer: Most important thing about trading?
Harry Boxer: The most important thing about trading is to have a plan, know your exit points within minutes of entering the trade if not before and make sure you don’t make a trade without a stop but make sure it’s a stop that is based on reason and not percentages. Have a reason for what you do.
Ryan: Do you see yourself as a top-down trader or a bottom-up when you’re looking at stocks to get into?
Harry Boxer: I would say bottom-up. Meaning, I’m always looking for emerging trends.
Stocks that are broken, stocks that are consolidating bullishly…What I do is during the day, which you’re probably unaware of, every hour I have a 10- or 15-minute video session with my people where I literally go over my charts. They can see my charts, they can see me drawing lines, see what I’m doing, I’ll show them the data – If it gets above this level, then I’ll think about buying then I’ll put a buy on it.
Ryan: What do you do when, say, you’ve had about five or six straight losses
Harry Boxer: I don’t remember the last time I had that!
Step back and look at each trading and analyze—okay, ‘why did I make this trade?’, ‘why did I enter here’ and ‘why did I exit there?’ and you’ll find your reasons for your losses.
Every day, look at the charts. Look at that point in time you decided to buy and ask yourself “why did I buy it?”
Ryan: Trading journals are so important especially over time when you can look back and see how you progressed, what your shortcomings were and so forth.
I know there’s no concrete answer, but how do you determine where you take profits or what’s one of the best ways that you determine to take profit?
Harry Boxer: When you reach the targets, your initial or secondary targets, you should peel off a piece of your position. If you have four thousand shares or something and you have three targets, sell thirteen, fifteen hundred shares each time it reaches that level.
The other thing is you have to go back historically and look at the charts, see what buyer resistance was. You have to look at the move before you bought it, how far did it move already and how far is it likely to continue to move without a pullback or consolidation. That’s the problem, people watch, watch, watch then they jump on it, too, at the very tail end of the run, it’s all psychological. Yeah, they don’t want to miss the boat…but they also can’t pull the trigger.
Ryan: They think in their minds, it’s the safest point at that time.
Harry Boxer: It’s just the opposite. The most dangerous point of the reversal. But if you’re gonna do that, that’s when they don’t have the tight stops. It’s okay to go late on trend and hope it massages even higher ‘cause, you know, Jesse Livermore said, “Buy high and sell higher.”
Ryan: I’m going to give you a couple of quick phrases and just tell me what’s first on your mind.
Harry Boxer: Well, the word ‘loser’ came up.
But it’s beyond me how he’s in a position he is. It’s beyond me.
Ryan: Fundamental analysis.
Harry Boxer: Well it’s valuable to fundamental investors, I will tell you this, that when I am looking at a stock not intra-day, But for any kind of investment purposes beyond the day, I’ll always look at what the story is and usually read up on the company, what they’re doing. But I don’t wanna know because, as others will say, you’re better off if stocks are just numbers and you don’t even know the name of the company.
Just look at the chart, buy off the chart because the name of the company can make you fall in love. I don’t wanna fall in love with a stock.
By the way, the biggest losses I’ve ever taken in position plays were when I absolutely refused to sell a stock because the story was so good and it just kept going down, down, down.
Ryan: Jim Cramer.
Harry Boxer: He’s an intelligent man but the way he presents himself is a bumbling idiot. For him to be on TV and have a show like that is a crime because I think he led a lot of people astray and yet people continue to flock to him because he’s on CNBC.
Harry Boxer: I think it’s a program that, in the long run, will assist the economy in recovering but it may really help the short run. The long run’s gonna hurt a lot. I think it’s a mistake.
Ryan: Lead to inflation?
Harry Boxer: Well, more than that, I just think we’re mortgaging our kids’ futures, we’re devaluing the dollar, we’re just causing bigger problems for ourselves.
Harry Boxer: Computer?
Ryan: Or the stock.
Harry Boxer: A stock phenomenon. Great company, great products, great management, and superstar stock. I mean if the market keeps going up, Apple will be 500 but I think it’s going to split very soon. I may be wrong, but I think they’ll split two-to-one. Same thing with Netflix and stocks like that going out of control.
Ryan: The market in 2011.
Harry Boxer: Probably choppy and maybe lower.
Ryan: Buy and hold.
Harry Boxer: Don’t do it.
Ryan: I agree.
Well, I appreciate that. I appreciate you taking the time to sit down and allow me to ask you a few questions. It has been a pleasure.
Harry Boxer is an award-winning, widely syndicated technical analyst and author of The Technical Trader (www.thetechtrader.com), which features a real- time diary of Harry's minute-by-minute trades and market insights, plus annotated technical charts & stock picks, based on Harry's nearly 40 years experience as a Wall Street technical analyst.