John Egan: Aka @UrbaneGorilla. His Take On Investing & Stocktwits

I recently had the honor of interviewing John Egan, aka @UrbaneGorilla at Twitter,  one of the most active traders on Stocktwits.com.  He shares his personal investing stories, both the good and the bad.  I had an awesome time reading his stories so you absolutely need to read on.  It really is insightful.  When you get a chance, please send John a tweet with feedback since he deserves it   Here’s the interview:

So John, tell me a bit about yourself. How did you get into investing? How long have you been trading?

I worked for a company that had a retirement plan with a small selection of very poor quality funds. I think the only 5 star rated fund was Pimco. And as it was a bond fund, it moved very slowly. At that time, I considered the market no different than a trip to Reno or Vegas. One day during the tech collapse, I opened my account documents and found that my retirement account was worth about 1/2 of what it had been the year before. So I logged onto Morningstar, reviewed the fund choices and began to try to piece my account together. I was convinced that with a little research, I could produce better results than the fund managers.

I began studying fundamentals as that’s what all the fund managers said was important. I then began watching Jim Cramer and read 3 of his books, studied DOW theory and all the things that clearly have not been as important since. I also took disastrous fliers on penny stocks based on suggestions from mailers and the like.

I can’t remember where I read it, but late last year, I encountered my first article concerning a simple crossover system to buy and sell. Go figure, it kind of worked. That was the beginning of my study of technical analysis. Unfortunately, it came too late to save most of my account from the 2008 collapse.

How would you describe your trading style to be? Short-term? Buy-and-hold? Options? Particular sectors?

My trading style has grown shorter and shorter. I would prefer to swing trade, but have become leery of holding stocks overnight. You only need to wake to find a market drop has wiped out 10% of Apple over night to make you think hard about doing that. So I pretty much daytrade now, although I do hold overnight if a stock tends to drop before close and bounce in the AM. My gut feeling is that we will exit the present lateral market in a week or so and once we pick a direction, I think a lot of the chop will be gone and I can swing trade with more confidence.

Do you have any good success stories? any past mistakes you learned from?

Past mistakes are easy; Don’t listen to CNBC, don’t listen to fund managers, don’t buy anything based on someone else’s opinion before you look at it yourself and decide that it suits your style and the present market situation.

My worst experience as I was learning was to load up (if I recall) $10,000 of APPL, $10,000 of RIMM and about a $2000 of options on the two because Cramer, Barrons and several SeekingAlpha articles said that these companies were rockets. The articles made sense, the gurus were convicing and after all, they knew more about the market than I did. I woke one morning to find the options pretty much worthless, the two stocks down about 10% and the gurus saying ‘Don’t worry, these companies will rebound. Double down’. Well, I didn’t double down, but I did buy another $5,000 of APPL. The stocks began to creep back up, only to lose another 10% the following week. I sat on the options till they expired, hoping they would come back, But took my lumps on AAPL and RIMM.

I measure successes in little bites these days. I hardly ever have more than 20% of my float in the market and take my profits as soon as the stock begins to roll over. I hardly ever keep anything more than 3 days, so big returns are limited, but I have made more than 10% with KIRK, UNG, SLV and several others. Small bites of the sandwich so to speak.

You are clearly one of the most active players on Stocktwits.com (with almost 8000 tweets). How did you discover Stocktwits? And what do you think of it as an investing tool for us traders?

Didn’t know that about me. Guess that makes me the Kudlow of Stocktwits. I have been online for over 30 years (on a few questionable BBS’s in my earlier days), but I’m not faddish about it. I like the web as a tool. I don’t have a Facebook presence, I do have a site, but I’ve only updated it twice. I found a daytrading site but it was hard to follow and limited in its use. I never would have bothered with Twitter, except that I heard about this whizz-kid trader (@Tradefast) and when I went to his site, it said to follow him on Twitter. So I did. Then StockTwits emerged and it proved to be what I was looking for. Short blurbs about particular stocks, ideas about market direction, what to watch for, links to blogs and articles and a nifty way to socialize while staring at a screen all day.

From my perspective, StockTwits is a premier tool for trading. You just need to sort out who you are going to follow and why you are following them. You cannot follow everyone, you’ll go crazy trying styles that are outside your experience and ability. Keep in mind the value of free advice!

Do you have any twitter users on Stocktwits you follow for valuable investing ideas?

That’s why I’m there really. The list is endless and I also follow people that may not be pro, but they come up with novel or off the wall ideas. Also, just because I follow some people, doesn’t mean that I trade their ideas or even agree with their picks. I can’t stress enough that you need to trade your style and not someone elses. But, a big shout out and thanks to :@alphatrends (Great TA book BTW), @stevenplace, @fundmyfund, @kunal100, @StockGod, @upsidetrader, @Mdabbles, @TradingGoddess, @hamzeiAnalytics, @DanFitzpatrick and many more.

As a power user on Stocktwits, do you have any “suggestions” as to how to make the site better? What should the next step be for Howard @howardlindzon (founder of Stocktwits) and his site?

About once a week, Howard announces a new StockTwits linked site of which he’s a co-founder and investor. He seems to have a handle on things. About the only thing I’d like is for Twitter to trot down to Best Buy and purchase another 100 servers and reinstate the Tweets that we can’t see anymore.

Lastly, do you have any investment advice to the readers?

You have to have a plan for each phase of the market and know which phase it is in. It isn’t easy to recognize the phases, but if you trade against the market, you will lose. Those phases are ‘Up choppy, up smooth, down choppy, down smooth, sideways choppy and sideways smooth”. (Can’t remember where I read that, but it’s true.) In essence, the choppier the market, the shorter your trading time frames and of course you have to be ready to change direction at any time. Nimble is the mode-de-jour. There are many ways to accommodate the market, you can hedge, use stops, use indicators, trade resistance, use options, trade portions, layer in and out. Those are the choices that you have to make to suit your style. I buy in and get out. I don’t scale in or out. I do use tight stops and stochastics on different time frames to enter and exit and I trade the market direction, presuming I got that correct.

Good luck out there, and remember, there is a gold chain wearing, cigar smoking Indian out there who will take your money if he can! ;=)

Well, that wraps it up folks.  John, again thank you very much for the opportunity for this interview.  I really appreciate it.