In the air there seems to be a kind of electrical power, the sky is blue and the sun is shining more vividly than you are accustomed to. Even if the flat does not watch the see you understand quickly that see must be somewhere behind you. The Italian top trader Biagio Spinelli, living in Naples, Italy, won two times in a row the Top Trader Championship (+68% on a 3-months basis in 2004 and +532% on a 3-months basis in 2005). I spent one full day with him trying to catch the secrets, if any, of his astonishing gains. “You know – he said – I would not be able to explain how I trade because everything is so normal and natural to me, I do it again and again since 2001, that I would say that I am non aware about the real techniques I use”. This is only partly true since during the day I succeeded in spotting some interesting repeating patterns. The first one is to try to anticipate on individual stocks the index moves. When the market index drops there are is one large capitalization stock that lags behind. Biagio immediately sells it short and after a few seconds that stock drops too. Some ticks gain and then Biagio exit at the market. Since the countervalue is almost 100.000 euro some few ticks in gain means a 350 euro profit. Then another trading opportunity pops up: a stock gaps higher 5% and Biagio without any entry point calculation sells it short. The trade does not go in the right direction and Biagio pockets a 200 euro loss. Some minutes later the stock effectively drops heavily. “You see, sometimes I miss the trade because I am lazy and I sell just watching the book and without checking the chart. My entry points are 90% right, what I miss are good exit points”. And during the day this frank admission of his drawbacks proves true: the entry rarely is wrong but exists miss really big movements. “I would need to check the charts and exit the positions according to a trailing stop but almost always the book reading forces me to exit too much earlier”. But Biagio trades also the least liquid stocks and the best way to select the most promising ones is to check among those stocks that are in the upper end of the daily performance standing. “I trade part of my portfolio overnight and part intraday, trying to catch with the overnight portfolio the biggest lingering trends”. Another technique is to fade the book when a “wall” appears, that is when both a huge volume bid proposal or a huge volume ask proposal appears in the book. “Generally you need to interpret the book on the contrary of what looks like since institutional players are really skilled in manipulate it: so that if someone posts huge bid proposals means that he want to sell and often he will be also on the ask size column trying to push you to overcome him hitting directly the ask price”. Then another opportunity arises: an illiquid stock opens lower 20% and Biagio promptly buys it bringing home after half an hour another 500 euro. What strikes is that Biagio trades in a nicely furnitured flat with all his family around, that is with his 10 months old little girl crawling around him and mildly yelling. The wife quietly cares about her house activities, sometimes checking with indifference the profit line in the Biagio’s platform. At the end of the day Biagio reaps 5000 euro in profit after 82 trades. In conclusion I would say that you can find his techniques in every book about trading. What you will never find in a book will be his cold blood and his fast thinking mind. The loss of his young brother some years ago and other sad family misfortunes made Biagio aware that life is well beyond trading. “Money, like nails, always creep up after you cut them” repeats Biagio, letting you understanding that life does not.
Emilio Tomasini is Chief Editor of the Italian edition of TRADERS’ MAGAZINE (www.traders-mag.it), the leading monthly publication in Europe for trading and investment, and since 1999 he organizes the TRADERS’ CUP the most important real money European trading competition (www.traders-cup.it). His personal weekly free newsletter L’Indipendente di Borsa (www.indipendentediborsa.it) is one of the most reputable Italian financial media and counts more than 100.000 readers. His website in English is www.emiliotomasini.com