It took Matt Choi more than four years of frustrating (and expensive) experimentation before he hit the right combination of investment philosophy, approach and mindset to succeed at being a trader.
It also took the good fortune of meeting and being mentored by the late George Fontanills, renowned for having been one of the most successful option traders, to put it all together. Today, Matt Choi is determined to return the favor by helping other traders find their own path to trading success.
Matt Choi is the founder of Certus Trading, an organization that, in addition to providing a wide range of courses focused on the technical and strategic aspects of trading, also emphasizes educating traders how to develop a winning trading style and mindset. The reality is that, as important as it is to have the knowledge and instincts to know when to buy, hold and sell, the mindset of the trader is ultimately the most important quality when it comes to achieving trading success. The importance of a trader’s psychological mindset is also something that Matt describes in more detail in a book entitled, The Winning Way, which he co-authored with motivational expert Brian Tracy.
“From my experience, mindset is crucial when it comes to trading success,” Matt mentions. “Of course, technical analysis and understanding the markets is vital. But, having a winning mindset allows you to execute your trading strategies free of doubt or hesitation – and that truly is important.”
Apart from developing a winning mindset, during Matt Choi’s path to trading success, he also learned what sort of trading style fit best with his personality and his life goals. For example, he learned that day trading wasn’t appropriate for his personality and that he did not he have the patience for position trading. Instead, through his work with Fontanills, Matt learned that his trading personality naturally dovetailed with swing trading within a narrow field of markets.
After nearly two decades of trading experience, Certus Trading’s Matt Choi discusses what inspired him to begin trading in the first place and transitioning from just being a trader to being a trader and educator, among other topics.
Trading is known for encompassing a certain amount of risk. How can traders figure out if trading is for them to begin with, and from there, how do they establish their trading personality and particular approach to trading?
Matt Choi: First of all, thanks for having me here. I believe with any career or profession, you need to be inspired by what you do. For example, I have friends who are scientists and they are relentless in their pursuit of new discoveries that can help the world. I also know a lot of engineers, and they really enjoy designing and perfecting products and processes. For traders, we have a passion for studying and understanding the markets, and of course a huge benefit for me is the mobile lifestyle that comes with it.
If you have a passion for the markets and you like the benefits that comes with trading, the next step is to find a way to become a good trader. The first thing to determine is your trading time frame. One option is to become day trader where you take advantage of micro-movements in the markets each day. If you are a person who likes to move quick and who doesn’t have a lot of patience, then day trading could be for you.
Or maybe you are more suitable to be a swing trader where you are in trades from a few days to a few months. While day trading requires you to be active every day during trading hours, swing trading follows the momentum and intermediate trends of the markets, and these trends typically last for weeks so there is no need to be active everyday. The key is to identify these swings, get in at the pivot points, and check on the trades once or twice a day.
If you have a full-time job, then you may want to consider position trading where you hold the trade for a few months to a few years. With high-frequency trading and the speed of how fast information travels today, buy and hold is not as effective as it used to be. However, if you can find the right growth stocks, they can accelerate into the stratosphere a lot faster then stocks used to be able to. Think about stocks like Apple, Tesla, and Amazon and how fast they’ve accelerated over the years. There are still a lot of long-term plays to be had.
So, the key is to be realistic with yourself and pick a style of trading that suits your personality and lifestyle. A lot of new traders make the mistake of picking something that really doesn’t suit them at all. For example, I met a surgeon a couple of years ago and he is in the operating room 3 days a week. He decided to try day trading on his days off, I think it was Wednesdays and Fridays, but it didn’t work for him. In his case, he tried to force day-trading into his super busy professional schedule and it backfired. We can’t make the markets to work for us only on Wednesdays and Fridays, it just doesn’t work that way. Long story short, I coached him into swing trading options, and he is a super smart man, and he doubled his account last year.
What inspired you initially to begin trading? From your experience, is there a right or wrong reason to start trading?
Matt Choi: It was really a multitude of experience that led me to trading. My late grandfather did very well trading stocks Hong Kong. When I was in grades 5 and 6, I was like 12 years old at the time, my school was finished by noon. My parents both worked so I didn’t have much to do in the afternoon. So after lunch, I would go with my grandpa to the Hong Kong stock exchange to settle his trades. I was a minor and couldn’t go inside, so I waited for him outside the exchange looking at those green monitors with numbers. Of course, I didn’t know they were stock quotes at the time. But during our bus rides to and from the exchange, he taught me how to how to pick stocks that would go up and how we can make money doing that. I vividly remember him telling me about HSBC. Back in the early 80s, people were becoming wealthy in Hong Kong and as a result a lot of small businesses have started. He said banks will benefit from this growth with new deposits and loans. Boy, was he ever right. He put every penny he had in the stock market over the years, and his return must have made like 5000 times his investment. He taught me to look for services that people needed, and to only buy the leaders in the industry. I sure learned a lot from him at a very young age and that awareness of the market stuck with me.
I didn’t seriously get into the markets until I was pursuing my MBA degree. I entered a few investment competitions and won a couple of them using the same principles that my grandpa taught me. It was a lot of fun and I really enjoyed the process of finding the right stocks to trade, and I think that’s why I am able to do well today, because I have the passion. So to answer your question, you got to trade because you have a passion for the markets. That’s the right reason. However, the wrong reason would be if you are only in it for quick money, it won’t work and it won’t be sustainable. I know it is cliché, but if you put the effort in to understand how the market works, be disciplined in your approach and risk management, then the money will come.
What do you believe are the riskiest types of trades? What are some of the most common mistakes traders make in trying to successfully execute these trades?
Matt Choi: There are two types of trades that are risky, and they are probably not what you think. The first type of risky trade is a trade with no plan, which is a mistake that most new traders make. They tend to do a ton of research analysis on, let’s say, a stock, before putting on the trade. However, they don’t have a plan of when to take profit if the stock moves in the right direction, and even worse they have no stop loss if the stock moves the wrong way. So when the stock moves against them, they are like deers in headlights and are paralyzed from taking action to cut losses, and in the end they lose a ton of money because of that. On the flip side, they don’t have profit targets and get greedy when the stock moves in the right direction. Then, when the stock turns around, they panic and end up leaving a lot of money on the table.
It is absolutely crucial to have a plan before getting into a trade. In fact, I don’t know any successful trader who trades without a plan. Period. I get into every single trade knowing exactly when I will take profit, and if I am wrong, when I will take a loss. There needs to be zero ambiguity with these rules so I can easily execute my plan each and every time.
The second type of risky trade are ones that are illiquid, which means they are difficult to get in and out of the position. For example, there are a lot of penny stocks that are pretty thin. So even when you’ve made money speculating, often times you can’t get out and end up not making any money. I trade a lot of options, and early in my trading days I made the mistake of trading options that had a wide bid-ask spread. So although on paper I made a lot of money with those positions, the spread was so wide that when I tried to exit a trade, the spread wiped out all the profits. I also see similarity with cryptocurrencies. Granted, it is still early in the game and perhaps it will be better as the market matures. But right now, it can take weeks to settle a crypto trade and some dealers can’t guarantee a settlement price until that time. The problem is, cryptos are so volatile right now that it can rise or drop 50% within a week. So the lack of speed and liquidity is a problem, and until that gets better, cryptos are not reliable trading instruments. That said, blockchain technology is a breakthrough and is here to stay, but that’s another story for another time.
So the lesson here is to have a trading plan all the time, and stick with highly traded instruments that are easy to get in and out of trades.
What was your experience like in transitioning from being simply a trader to running a trading education company at Certus Trading? What has been your most important takeaway from your experience in founding and leading Certus Trading?
Matt Choi: For me, it was a pretty natural transition from just trading for myself to helping others achieve success in their trading. I think it goes back to having the inspiration and a strong belief in what I do. As you know, I have a strong passion in the markets and have had great success trading. Over the years I’ve met a lot of new traders who are very smart and dedicated, but they struggled in finding consistency with their trading. After a while, I realized that the biggest reason why these folks haven’t been successful is because they lacked structure in their trading. They’d be trading stocks today, and then jump to commodities tomorrow. They’d get distracted listening to financial news networks, which often contradicts their own analysis. They didn’t have a plan and if they did have one they weren’t discipline enough to follow it. And as a result there is a lot of analysis paralysis going on, and they just can’t move forward with their trading.
My approach is to teach them rule-based trading. I teach traders how to find high probability trade setups using fixed parameters. What this means is that if the stock is showing A, B, and C, then it is a buy. Or if the stock is showing X, Y, Zs, then it is a sell. And the best part is, we can program the A, B, Cs, and the X, Y, Zs in trading platforms, and it literally takes seconds to identify trade opportunities based on a set of fixed criteria. With this rule-based approach, it takes away human emotions which often hinders our trading ability. It also makes finding trades super fast, which means I am not sitting in front of my computer all the time. I said earlier that I enjoy trading because of the mobile lifestyle it allows me to live, and rule-based trading is exactly how I am able to travel and spend time with my wife and my kid. So I try to teach traders how to achieve this kind of success under the Certus Trading umbrella.
I think my biggest blessing with Certus Trading is being able to help people improve on their financial situation. I quickly realized that each person’s dream and her definition of happiness is different. For me, my dream is to spend a lot of time with my family, and trading has allowed me to do that. I have a lot of students who are retired, and their goal is to make an extra four to five hundred bucks a month, and they are super happy to be consistently bringing in extra income each month. I have students who have made enough money to pay off their debts, to buy a yacht, and to pay for their children’s college tuition. I now truly realize that the word “success” is very subjective, and the biggest learning for me is being able to structure their trading plan according to their goals, which is the biggest reason why they have become successful traders. I am just very humbled when I open my emails in the morning, and in my inbox would be emails from my students sharing their success stories with me. That makes me smile, and it makes me even more driven to help more people achieve their dreams.