In this month’s Traders Talk we’re chatting with Jon Wirrick, a highly experienced trader who caught the trading bug roughly 25 years ago trading penny stocks while still in high school. A decade later he found his way into the realm of options and has been hooked ever since.
His passion for trading is matched by his desire to coach and pass on information empowering others, which he’s been doing across the country for more than a decade. Jon’s quarter-century of experience has molded a simple approach and overall philosophy on trading which he gladly shares with individuals he trains or mentors, “Educate yourself, develop a good game plan and stick to it. It’s not complicated, but it does require discipline and self- control. Do that and you can tilt the odds in your favor.”
That’s sage advice from a trader who’s managed to make it happen for many years in a profession renowned for washing out the vast majority who try their hand. He kindly offers additional insight in the passages that follow”
TEI: How long have you traded?
JW: I actually got started way back in ë86. I was trading penny stocks in high school.
TEI: What got you interested in that?
JW: My brother-in-law had a broker with Merrill Lynch that was giving him advice on different penny stocks and when he told me about it I wanted in. I remember being in the high school library pulling up the paper to see where my stock was trading and all my friends were impressed.
TEI: What was the size of your first account?
JW: That first account in high school was probably only five or six hundred dollars. I first began trading options in the’90s, about 10 years later – around ë97 or so. I think I actually rolled over a 401(K) that I had from a previous job. I’m guessing that was probably around six or seven thousand dollars.
TEI: How did things work out with that account?
JW: I did carry it forward, but I blew up about half of it with my first or second trade. I bought a bunch of stock and I didn’t really have a plan, just like lots of rookies do. I was hoping it would go up, but it went down.
TEI: When you got going in earnest with a real plan, what was your primary strategy?
JW: My focus was buying calls on stocks in uptrends and buying puts on stocks in downtrends. That’s what I did for the first several years.
TEI: What kind of success did you have with that?
JW: Fortunately I had tremendous success because of a couple really outstanding trades. I had one that my broker couldn’t even believe where I bought calls for 6.50 and a couple months later at expiration they were at 93.875. It’s hard to mess up when you have that kind of success.
TEI: Certainly makes up for a lot of bad trades.
JW: Exactly. It gives you a lot of cushion. I also had a few other trades where I got triples or quadruples. The market was trending really nice in the’90s, so it was easier to buy calls and hit those home runs. I haven’t done it, but I bet if I were to go back and see what my success rate was as far as winners to losers, it was 50/50 – maybe even a little less than that.
TEI: With the perspective you’ve gained since, what would you consider the toughest issue you had trouble dealing with back then?
JW: Not really knowing how to handle a draw down. When you have a losing streak and things going against you, what do you do with that? I think that’s the same problem a lot of people experience.
TEI: They certainly test your metal and make you question everything you’re doing. What was the turning point where you felt you were on the right track and could make it as a trader?
JW: I think it was finally not trying to force a square peg into a round hole”not trying to force a specific trading strategy, but instead learning to go with whatever the market was currently giving me. Now I’m much more of a spread trader. I think it’s important to be flexible with whatever the market is doing currently” whatever the current market cycle is. Doing what works in the current market.
TEI: We’ll come back to your trading in a bit, but let’s focus for now on training. Prior to joining Preston’s team, did you ever engage in training through another service or was it books and trial-and-error to begin with?
JW: Well, I was very fortunate in that my mentor in the market was a best-selling author on trading options”he was my brother. So I really cut my teeth through him and the things that he taught. I was fortunate in that I got to travel the country with him doing seminars on trading. I’ve also read books, gone to workshops offered by brokers or charting services, listened to other traders and experts, and taken some online classes. To this day I enjoy taking classes and hearing what other traders are doing and teaching – it helps with overall perspective.
TEI: Did you ever go through any of Preston’s training?
JW: No, but I actually worked with Preston a few times back in the 90’s. He was traveling and doing seminars – that’s how I first got to know him. As I said earlier, I got to work with many of the country’s best and brightest traders and instructors and he was one of them. I didn’t really take any of his classes, but as I was becoming a coach for him I was able to audit some of those classes taught by some of his top instructors.
TEI: How long have you been involved with the mentoring/training/seminar side of the business?
JW: I would say 10 to 12 years.
TEI: How many traders do you think you’ve worked with in all that time?
JW: I would have to say thousands. When I used to travel the country there were sometimes classrooms of up to 350 people. The company that I worked for before was more of a classroom-type of experience where oftentimes there would be six to 10 people in each class. Now what I’m doing is more one-on-one.
TEI: When did you start with Traders Edge and how many traders have you worked with there?
JW: A little over two years ago. I’d say over a 100″probably almost 150 in one-on-one training.
TEI: Can you describe the typical scenario in terms of a person starting in the training?
JW: Well, there are two basic programs that are offered. One is our over-the-phone coaching program in which we use the Go To Meeting platform. Students can actually see my computer screen and we’re talking to each other either over the computer or over the phone. In this way I can show them charts”how to structure charts in an account or things that we typically do, like rolling options. With that program we’ll typically meet once a week for about 50 minutes. Between meetings they have access to me for questions via email or over the phone. That will typically go anywhere from eight to 16 weeks, but we don’t have to meet every single week. They usually have six months to a year to complete the program and thereafter they use me as a resource.
TEI: You mentioned a second program. That’s the recently launched “excursion” program, correct?
JW: Yes, that’s something that we refer to as mentoring. People come out to St. Louis and sit with me for two days, working with me live one-on-one. We actually have programs where people get both, which I think is the best. There are advantages to both the live one-on-one and over-the-phone training programs, so combined you get all those advantages.
TEI: How does the excursion program work?
JW: I do this on Mondays and Tuesdays. An individual can contact the office if they’re interested in the program and they’ll be informed of what’s available on my schedule. I then send them a welcome letter with information as far as where we’ll be meeting and the times we’ll be meeting, which is typically 8:30 a.m. to 4:30 p.m. CST. I also send additional info, such as a link to different hotels they can book near where we’re meeting, instructions on how to get there from the airport, etc. I then meet them on both mornings and we sit and I go over my daily routine with them. We will actually watch the indicators and trade.
TEI: So these are set up as two-day blocks of training?
JW: Yes, they purchase a two-day block. So they would come out and work with me on those two days. I’ve found that a lot of those people actually get a package where they also have the 12 one-on-one phone sessions with me over the next year.
TEI: So they see it live and then they’re able to go back and start to fill in some of the blanks utilizing the phone-session training.
JW: Right. Sitting with them one-on-one for two days is a great way to build a foundation for what they’re going to want to do.
TEI: Drawing on your experience, what do you see as the biggest problem for traders that you’ve worked with?
JW: Not having a plan. We all need to plan. The most important thing is that you plan your trade and you trade your plan, but people are just trading kinda willy-nilly, based on water cooler talk or what they hear on CNBC. But you’ve gotta be more structured – you’ve gotta treat it like a business.
TEI: You know that newer trader’s hate that answer”but it’s no less true.
JW: Oh yeah, because having that plan and then following it takes discipline. And it’s not fun to sit and measure your risk-reward”actually write down a couple sentences about how you plan to manage that position. It’s like keeping your books in a business – it’s tedious, but it’s essential.
TEI: How would you characterize a sound, comprehensive trading plan?
JW: The plan needs to entail what to trade, when to trade, how much to trade, when to take a loss and when to take a profit. Once you understand how to put that plan together, it’s really not complicated. But if you fail to plan, then you’re planning to fail.
TEI: How does the training tend to start with someone new to the program?
JW: The first thing that I always have to do is determine where this person is at. What kind of experience they have, their trading knowledge and what kind of lifestyle they have. For someone busy all day running kids around or having business meetings who can’t watch the market, day trading is not conducive to their lifestyle”they’re probably gonna be miserable and not likely to be successful.
On the other hand, for someone that has quite a bit of money to trade and a high-risk tolerance that actually enjoys sitting and watching the market all day, trading leaps or covered calls is not gonna work for them either. I like to help people custom-tailor a trading program that fits their personality, their risk-tolerance and their lifestyle. That’s the first step. From there we take a top-down approach.
I work with them on determining the market cycle”the importance of trading with the market and not against it. Then we focus on the different strategies that they can use and how to practice good risk-money management on those strategies once they’re in them. To me trading comes down to three steps:
1) Correctly identify the direction of the stock.
2) Apply the appropriate strategy.
3) Practice good risk-money management.
So, once we’ve talked about trading with the current market cycle, then we talk about fitting those three steps into what they are gonna be doing.
TEI: Is there a typical profile of a trader coming in and what’s the general learning curve involved?
JW: It varies widely. I’ve worked with people who are brokers or money managers and I’ve worked with people who’ve never traded a stock or an option in their life. Some people I’ve had take a course knew most everything that they needed to know to make this work. They just needed more of an accountability partner to hold them accountable and bounce things back-and-forth with. Other people could use this course over and over because they’re just starting out. Everything is so new that the concept of doing a spread or something similar is simply overwhelming. If they can get their head around the concepts and how they work, that’s a big accomplishment for them.
TEI: So information overload can be an issue and a one-size-fits-all approach isn’t going to work.
JW: Correct, especially for somebody who’s new. The nice thing about the one-on-one training, as opposed to more of a classroom-type of experience, is I can custom-tailor the education for them. For somebody who is new to this, we may not be going into butterfly spreads very quickly versus somebody who’s been trading a long time where you don’t have to spend any time talking about something like delta or how price is affected when the underlying stock goes up.
TEI: When it comes to psychology, how much do you find it to be a stumbling block for most you’ve worked with?
JW: It’s really all psychology. You know that fear and greed run the market, but fear is actually the more powerful emotion. It’s what destroys traders I think. The two main types are fear of taking a loss and fear of losing a profit. Because of those two things people tend to take big losses and small profits. That’s one of the things I like to address when we’re meeting together.
TEI: What’s the best easy-to-understand advice when it comes to dealing with risk in trading?
JW: Well, when you enter a new position you need to know exactly what your risk is and how you plan to manage that risk”and you need to be comfortable with that risk. If you look at a new position and realize your risk is a little too big on that one, you’d pass on that trade.
TEI: Do you focus only on option training?
JW: I would say that a great bit of focus is on options – both on stocks and ETFs.
TEI: Can you tailor things for the person looking to trade currencies or gold or oil futures and other types of instruments?
JW: Yeah, the same principles generally apply no matter what you’re looking to trade. We still use those same general rules of thumb, but if somebody wanted to focus on just one, two or three trading instruments we can certainly do that.
TEI: You have a unique perspective having trained/mentored traders in different programs. What sets the Traders Edge training programs apart from others?
JW: I do have knowledge about that because I have seen so many different programs. In my experience a lot of the other programs basically teach you the same stuff you can read in a book. What a bull put spread or a bear call spread is. But they don’t really teach the application of those strategies so well. So they’re educating about different strategies and how they’re structured correctly, but not when to put them on, when to take them off”providing a system for doing these kinds of things.
That’s where I think Traders Edge pulls ahead of other programs. You get emails directly from Preston and Karson explaining exactly what they’re looking to trade”they’re on the website as well, so you can follow right along. Instead of generalized knowledge you can read in a book, you get a lot more on the actual application of the strategies.
TEI: In terms of the one-on-one excursions/mentoring you provide, in what way do you feel traders are benefited the most?
JW: I would say building confidence. Most people that have actually come out and worked with me one-on-one for a couple days have all said they really weren’t approaching it the correct way before – they were trading just to trade. For example, when they come out and work with me they see how picky I am about my setups. If the market is not giving me anything, I don’t want to force trades – I’ll simply sit and wait.
TEI: Focusing now on your trading, what are the primary strategies you use routinely?
JW: Nowadays I typically prefer to be a seller of premium. It gives you a higher probability of success and I’m trying to create cash flow by selling premium. I can sell either call or put premium. That’s determined obviously by what the current market cycle is and what the underlying stocks I’m looking at are doing. But I do that in a couple of different ways. I sell a lot of vertical spreads. I do that usually based on the reaction of stocks to their news. The news is actually unimportant to me – it’s just how the stock is reacting to that news. I’m doing it based on sudden heavy accumulation or distribution of the stock by the institutions”I simply try to ride their coattails. When I wanna do intermediate-term trades I’ll usually go with diagonal or calendar spreads.
TEI: What’s your daily routine?
JW: Typically before the market opens I like to look and see where the futures are trading to get a sense for the market direction. I have a few websites that I like to glance through”I scan through the headlines and see if there’s any kind of worthy news that I need to be aware of. After the market is opened I scan my watch list, which is made up of what I call my usual suspects – the stocks that I trade most often. I run through that list to see if anything is on the move”any gaping or breaking to new highs or new lows that I want to be aware of as potential trading opportunities. After market hours and before the market opens I’m looking at my current positions to determine if I need to make adjustments or conversions to those trades.
TEI: Which indicators do you tend to use?
JW: I’m using the Augen Indicators for day trading, but for my own trading outside of that I’m a big fan of keep it simple. More often than not I find that people make this entirely more difficult than it needs to be – using too many indicators. Price is the number one indicator to me, yet you see people trying to use eight to 12 different indicators that never all agree with each other – so they don’t know what to do or when to pull the trigger. I think you are better off just picking your favorite two or three things and getting really good at using them. For me that’s trend lines, moving averages and volume.
TEI: The market cycle is a big issue with Preston and something you’ve mentioned several times. Please explain its importance and how it applies to trading?
JW: I think that trading with the current market cycle and not against it is the single biggest thing traders can do to tilt the odds in their favor. And while it sounds easy, you’d be surprised how many people have on bearish trades when the market is going up and bullish positions when the market is going down. And they wonder why they are losing money.
Now if you watch CNBC or Bloomberg you’ll find that they have all these analysts analyzing the market, yet they never all agree with each other. So if they don’t know, how are we supposed to know? Well, instead of trying to predict where the market’s going, I just go with whatever the market is currently doing”you know, what is the trend and where are we in the trend. But it’s fair to say there’s much more to his very unique story. Known for his unbridled enthusiasm, a belief that individuals can find success trading the markets, a healthy dose of skepticism toward Wall Street’s establishment and a refreshing, straight-shooting approach, it’s easy to understand why the Pirate resonates with everyday traders. But it takes much more than style and some slick marketing to build the best damn option trading service in the country – Traders Edge”or to be recognized by renowned option trader Jon “Dr J” Najarian as “One of the sharpest option traders around.” We concur! So do yourself a favor and join us in the upcoming March edition of TEI’s Traders Talk – you’re sure to benefit from the thoughts, experiences and insight shared by the Pirate.
TEI: How do you determine the market cycle for shorter versus longer-term trades?
JW: It’s all relative to the type of trading that you’re looking to do. For day trading I’m usually looking at a three or five minute chart, simply looking for trend. And I’ll have one moving average on there to help determine if we are trending higher or lower and how far the stock is from that moving average. For my swing to intermediate-term trading I use two things to determine the market cycle. One is the IBD Accumulation/Distribution record. The other is looking at the charts of the Dow, NASDAQ and S&P 500 to determine what the trends are and where we are in those trends. To me that’s the whole purpose of the charts – to answer those two questions.
TEI: What’s your parting advice for our readers?
JW: I would say keep it simple. The net result of a complex position or portfolio can almost always be achieved in an easier way, so you’re better off doing it the easier way. And as I said earlier, trade with the trend – you gotta trade the market that you are given.
Jon Wirrick began his trading career back in 1987 trading penny stocks. He began actively trading options in 1997, encouraged by the fact that his first 10 option trades were profitable! His most memorable trade was a $1,950 investment that grew to $28,012 – a 1,336 percent return – in less than 90 days! In addition to his personal trading career, Jon has distinguished himself as a top mentor and training coach with more than a decade of experience.He’s traveled the country facilitating trading seminars and sharing the platform with the country’s best and brightest traders and instructors.
His trading approach is discretionary, blending sentiment and technical analysis. In short, he’s a BIG fan of charts and believes in the KIS Theory (Keep It Simple). For many years, Jon was also a regular contributor to a popular trading website, read by many avid option traders on a daily basis.
The TE Mentoring Program gives you a chance to sit side-by-side with one of our top trainers for two full trading days. We like to mold your thinking so you analyze the markets and look for setups exactly like we do. We also will help you establish an overall trading plan and discuss the strategies you need to know to make that trading plan work and be effective. Mentoring is offered in both our Salt Lake City and St. Louis offices.
For more information, please call: (801) 717-3993.