Josh Cherniack: Interview on Investors Underground Notes - Learning Through Experience
A Review of Josh Cherniack's Interview on Investors Underground
These are summarized notes from Josh Cherniack’s interview on Investors Underground. Below I have categorized my notes into a few main topics. Hope you enjoy it!
Trading Methodology:
Uses swing and day trading
When 10&20SMAs are strong and upward, he will swing trade
If the price is trending below the SMAs he will use intraday trading to grow cashflow as opposed to risking a lot overnight
Constantly monitoring sectors to see which are the strongest and weakest
If you are solely focusing on swing trading, a market like 2022 would have lost money, therefore you need to be nimble and flexible with your approaches
Can get stopped out 2-4 times in the beginning before a winning entry occurs
Prefers larger cap stocks over smaller cap stocks b/c of Black Swan Events that will occur more frequently in the small-cap space
Helps to also smoothen out his equity curve
Trader Psychology:
When trading poorly, it can be incredibly hard to compartmentalize trading and your personal life when your trading performance is lacking or you are underperforming
Cutting losses and riding winners - You really don't understand what that truly means until you do it!
Every stock has its own personality and ranges (ie. %ADR) so it’s up to the trader to understand when to cut losses and when to let your position run
It should always come back to, does the trade prove or disprove your initial hypothesis.
These maxims like “Cutting losses and riding winners” need to be personalized and felt for yourself for the trader to really internalize them and understand them on a deeper level
Trading is not a one size fits all, you need to try all types of trading setups and methodology in order for you to find your niche and what you are good at.
Examples of Trades:
In 2018 had been full-time for about four years, ROKU 0.00%↑ had building a base for many months and they crushed the street expectations on revenue, EPS, and net income. He reviewed the chart and the way it was moving, bought it PreMarket (PM), and watched it go up significantly over the next few days. That gave him validation that the methodology he was using was working.
The chart below is what I believe is the earnings day Josh was referencing.
$ROKU/ $SPY - Daily, 2018
In 2020, GME 0.00%↑ was one of his best tickers to date. It not only offered one type of setup but a handful of different plays such as mean reversion trades, parabolic shorts, and consolidation breakouts on the long side.
$GME - Daily Chart, 2020/2021
Process and Scanning:
Every night he will go through a Google Sheet with 75 to 150 rotating tickers in different sectors (looking at ADR, high/low day, news attached to the stock, etc)
Uses TC2000 for scanning stocks (will get about 100-500 tickers)
4% breakout intraday on volume threshold
Stocks up 30% in 1month, 50% in 6 months, and stocks down 30% in 1month, 50% in 6 months - in order to find Relative Strength and Relative Weakness
During earning season he will go through earnings calls, going through 2-3 quarters of the company’s earnings
Roughly 1-2 hours of nightly work to prepare for the next market day
Uses Evernote to document all past setups and journal all of his trades
Trading Tools He Uses:
TC2000 (scanning stocks)
Trading View
MarketChamelon
Indicators:
10/20/50Moving Averages
ADR and ATR (uses for proper risk management)
Trader Mistakes:
Traders will bring their ego into trading. You need to remove your ego. You have to experience it, it takes time, it takes years to do.
Traders don't give themselves enough time to be a trader, it takes years and years to build experience and gain expertise in the area you specialize in
Goals to Implement:
Using options as a possible avenue due to high liquidity in certain stocks
If swinging long, having a hedge on the sector by shorting a weaker stock in that same sector
