Welcome back to the second episode of Beyond the PDT, in which we had the pleasure of interviewing Tyson Muse, a professional trader based out of Arizona. In this episode, Tyson told us about his journey, how he got where he is today, as well as advice to new traders and moderately experienced alike who are working towards a consistent trading career to help get beyond the PDT! Listen to the full episode:
How Did Tyson Get Started?
Tyson got started at a young age after learning about the markets from his father, who invested in large-cap stocks for a long-term return. Through here, Tyson began to dabble in day-trading and trading on a more short-term basis. He began by finding a mentor in the options market, but after watching his mentor take a one-million-dollar loss during the 2008 market crash, he decided that the options market may not be for him.
When deciding to start swing-trading equities, ranging from mid-caps, large-caps, and even small small-caps when the opportunity arose, he started with a small account. Like many traders, he blew up a few of his small accounts, but then once he found consistency with his small $4,000 account, he added in another $50,000 to his account to take larger position sizes. After finding this consistency, he has not turned back and has continued to grow and use trading as one of his sources of income ever since.
Tyson’s Trading Mentality:
Let’s be honest, everyone wants to hit the next home run with their small account – the trade that will turn their $3,000 account to $25,000 overnight so they can finally get over the PDT. However, trading with this mentality is what causes many people to blow up because when trying to get these astronomical returns, risk is generally thrown out the door which is what leads to some pretty massive losses, of which can be detrimental to any small account.
Hence, Tyson has a very simple trading philosophy – work for 1% every day. This 1% applies to your trading account, and the goal should be to grow your account be one percent every single day. Through the power of compounding, this would turn a $10,000 account into a $121,000 account by the end of the year. Assuming the trader loses 1% a day, this would bring the account down to $800 by the end of the year. So, assuming a trader is able to stay consistent, that would be the potential of a $111,000 gain.
Tyson’s theory is that when he is up over 1% on his account, he sells a portion of his position to lock in his gains. He will sell the rest of his position ideally at a higher price. To Matt and I, this idea of 1% a day is more than just a solid guideline for growing your account, but if followed, it also helps to avoid FOMO. Say that one day you place a trade resulting in 5% growth on your account – this could technically mean you could take the next 4 trading days off. The idea here is that you should really only be trading the best setups (which we should all strive to do anyways) as opposed to taking debatable trades to try and make a few bucks. At his very core, like most experienced traders, Tyson is big on trading discipline and believes this is what will help traders finally get over that hump of consistency.
Tyson’s Trading Strategy:
Generally speaking, Tyson is a swing-trader as has been mentioned. With that said, he has a unique style of trading that is heavily reliant on news. He views news as his fuel for his car – without that fuel, the car (stock) is not going to move. From here, he uses technical analysis for entries and stop losses.
Regarding his strategy, he uses this news to find stocks that day-traders are going to trade on the day that it gaps up. As many know, these low-float gappers are heavily traded in the morning and sometimes throughout the day, and then within the next few days after short sellers come in and volatility is lost, the price settles back down to a normal price. This is when Tyson strikes so long as the news justifies it. Ideally, the stock will bounce back after falling because the news is great and the main reason for the price fall was because of the initial spike in volatility. From here, Tyson will enter his swing position and sell as it either grinds back up, or sometimes will sell into another spike as day-traders start heavily trading it again.
Again, this is another great way to avoid FOMO on the first day, as there is a very good chance the stock will drop relatively rapidly. Instead of getting dumped on, Tyson’s idea is that with good enough news, the best time to buy is when the initial wave of day traders forget about it, and others start buying it based on the news.
Tyson’s Thoughts on the PDT:
Very much like many traders we have talked to, Tyson does not think that the PDT is a good idea at all. While there are instances in which it disables overtrading, there are other times where it does not allow traders to get out of a losing position because they would break the PDT. Furthermore, it encourages traders to use offshore brokers, of which offer larger leverage than a new trader should usually be using, as well as heavy commissions.
Overall, it appears evident that Tyson thinks that the PDT is more of a hinderance on new traders, particularly because of the fact that it does not allow traders to cut losses, than it is beneficial.
Through this interview with Tyson, it is obvious that discipline is one of the most important aspects of trading for him. While there are strategies that he has and setups he looks for, none of them would work without proper trading discipline. Unfortunately, this is one of the hardest aspects of trading to learn, but with hard work and time, it is possible. Make sure you check out Episode 001 – Introducing the PDT!