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3SOF: What's your age?
Lucas Scott: I am 32
3SOF: What's your real name?
Lucas Scott: My name's Dan Ruegg. «Lucas Scott» is a character on a bad WB show called One Tree Hill. I go by «Luke» on 3SoF. It's my trading alter ego.
3SOF: Where do you live?
Lucas Scott: Issaquah , WA (15 miles east of Seattle)
3SOF: How long have you been trading the stock market?
Lucas Scott: April 2003 is when I opened and funded my Ameritrade account. The stock market had captured my attention long before that, but I just hadn't ever had enough capital to get into it. During the '99 market boom I was stuck on the sideline. I wanted in but didn't have the money. It's a good thing though, because I remember two stocks I really wanted to buy were eToys and Infoseek, and both those stocks died when the bubble burst.
3SOF: What was your motivation/trigger to get in this business?
Lucas Scott: I finally had the capital to give it a go. At the time the Iraq war was just getting started and I thought that would be a catalyst for the economy after 3 years of a bear market. About a month after funding my account I joined a stock trading group run by a guy I'll call «Pizza.» It was in this group that I was introduced to technical analysis. I began reading books about the subject, got a Stockcharts account, and learned from the T/A gurus in the group. Eventually I had a falling out with Pizza, on account of he was a bit of a sanctimonious blowhard and I'm somewhat antagonistic towards that personality type, so I l got kicked out after five months LOL. It turned out to be for the best though. I moved on with about a dozen other exiled traders and we formed our own trading group for a while. And my equity curve went positive shortly after leaving and has been climbing ever since.
3SOF: What's your trading time frame?
Lucas Scott: My time frame is typically between a week and two months.
3SOF: Do you trade for a living, or do you have other activities?
Lucas Scott: I work full-time as an accountant at a company called aQuantive (ticker: AQNT). It's thanks to AQNT and its stock price appreciation that I had capital to invest/trade with. For most of my first two years there, AQNT traded below $2. A lot of my stock options were priced below $2 and I also bought a lot of shares through the employee stock purchase plan. AQNT has recently traded as high as $28! Trading is a part-time thing for me. I consider it half hobby and half second job. The west coast is the best place to be for a part-time trader because the market opens at 6:30 am and closes at 1 pm, which allows a part-timer like me to check his positions and watchlists and buy or sell before work, and to check back in during lunch hour when the market is closing. I wouldn't want to trade full-time because I think I'd end up lonely, obese and with a stomach full of ulcers. However, I'm hopeful that the supplemental income from trading will eventually allow me to work part-time, continue to trade part-time, and free up a chunk of my time for other endeavours.
3SOF: Do you practise any sports, or other leisure activities?
Lucas Scott: I play lots of softball in spring and summer and like to snowboard in the winter. My brother is a manager at a movie theatre, so I see a lot of free movies. btw here's my Top 5 list for '05 (in order of when I saw it): Wedding Crashers, Serenity, Harry Potter, Pride and Prejudice, (5th pick is TBD). I'm a big fan of NFL football.
3SOF: Tell us about your strategy on the markets.
Lucas Scott: I'm a T/A disciple. I'll look at fundamentals a little, but my analysis starts and ends with the chart. I typically put 5% of my capital into a trade.
3SOF: What's your favourite stock market book?
Lucas Scott: Stan Weinstein's «Secrets for Profiting in Bull and Bear Markets» and Alexander Elder's "Come Into My Trading Room"
3SOF: Congratulations on your stock pick, GTE gave you an impressive 78% performance, far ahead from the other players. Did you actually trade GTE on your real money portfolio?
Lucas Scott: At the start of the contest I was holding GTE and had an open limit order to sell if it were to hit the 200 dma at $2.80. I woke up the day after Thanksgiving to find it had blown through that level and gone over $3. I was bummed about having sold too early, but was consoled by the fact the big jump gave me a decisive lead in the contest.
3SOF: Tell us about your biggest gain since you start trading?
Lucas Scott: Actually it's been GTE, back when the stock traded on the OTC as GTEL. I went in very heavy last December at under a dime, and it hit a high of .36 two months later (this was before a 15:1 reverse split). I also had played it a year earlier (Dec 03-Jan 04) and at the time it was one of my biggest winners. Seems like every time I play GTE, good things happen. It's my lucky stock.
3SOF: And about your worst loss?
Lucas Scott: I have a big bagholder position in FMDAY. To those who subscribe to the theory «it's not a loss until you sell» I guess that wouldn't count. On paper at least, it's my worst loss. Still, I don't mind holding it and have no intention of selling it. Been holding FMDAY for a long time now. It's like an old shirt that's ripped and worn out, but you still wear it.
3SOF: How did you find 3stocksonfire.org?
Lucas Scott: Heard about it from some traders that I used to conference with daily via IM. While I still have the mic, I'd like to give a shout out to that group! — Metro, Dru, Andy, Lenka, Doc, Mezz, Neal, Butch, AussieTrader, Steve! Hope I didn't leave anyone out. They're a great group of traders. Guys, I haven't been nearly as active in the market as I was earlier in the year and I've been sleeping in a lot, hence I haven't been around on YM. If and when my intensity level returns, I hope I can come back!
3SOF: What would you say or recommend to someone that just started trading the markets?
Lucas Scott: «The goal of a beginner is to cover trading expenses and generate annual return on his account equal to one and a half times the current rate on T-bills.» (Alexander Elder) I think this is good advice because many traders start with irrational expectations of success. Beginners should temper their expectations and understand that, as with most things, there will be a learning curve. Beginners must be cautious not to get hyperactive and allow commissions to eat away their capital. A friend of mine started trading with about $4k. After a year he'd made $2k in trading profits. But he'd spent $4k in commissions (and he was using Scottrade, not a full service broker)! So at the end of his first year his capital had fallen 50%, from $4k to $2k, because he'd been hyperactive.
«Good traders keep good records…If you do not have good records, how can you measure your performance, rate your progress, and learn from your mistakes?» (Alexander Elder). I keep a spreadsheet to track all my trades (most people do this). I have another spreadsheet that I use to track my portfolio % return on a monthly basis, and to chart that return graphically against several benchmarks (i.e. the Nasdaq Composite, Russell 2000 Small Cap, a fictional index with a 2.5% monthly compounded growth rate). And in Stockcharts I keep annotated charts of all stocks I buy with comments about why I bought and why I sold. After I close a trade, I move the chart from my «Open Positions» chartlist to a Closed Positions chartlist. I review my Closed positions regularly to (a) see if a chart is shaping up for a reentry, and (b) to see if my buy/sell decisions were good in hindsight and try to learn something from my decisions
Finally, I would recommend a new trader subscribe to 3 Stocks on Fire immediately! :)
3SOF: Thanks a lot for this interview; I wish you luck on the next edition!
Lucas Scott: Thanks David and Frederick!
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