Lou Mercer:All right. Now we're going to move on to another day in the life segment with Randy Frederick and Schwab's own Joanna Payne. Randy, take it away.
Randy Frederick: Thank you, Lou. Appreciate that. So Joanna, the basics of investing are this. You buy low and you sell high. But there's a lot more to it than that. So you're a trader. You also have to figure out, okay, which stocks do you want to buy? How do you buy them? How do you manage them once you own them? And then how do you decide when to sell them? So tell us how you do that process.
Joanna Payne: So like a lot of people, I have a full-time job, so I'm all about efficiency. I look for ways to get my ideas, to manage my positions, in as few steps as possible. So I have some very distinct things that I do.
Heavy user of screeners. I love screeners. And I have a few different ones, depending on what strategy I want to employ. But I will say that I'm also – I don't know if guilty is the word, but I do consider myself to outsource the fundamentals a little bit. And so what I do is even though I'm a shorter term trader – I consider myself a swing trader – but I definitely use the screener to – for me, I just use SCR as a proxy. It doesn't matter what rating system – you know, if you want to do this, that you use. But for me, it's important, even though I don't tend to spend my time looking at the fundamentals so much, I know how important they are. I don't want something that's going to have some fundamental trouble, or have as much of a chance of having some bad conditions during the time – limited time of my trade.
So I definitely incorporate – for myself, I'll look at SER A through C, for instance, just a general way of incorporating some fundamental analysis, because I've looked at the parameters of how they're picked, and for me, it seems to fit.
Randy Frederick: So we've got some smart guys, and Adam Lynch talked about this earlier, who are in Chicago, who have this beautiful model that they've put together. Why not let them do the heavy lifting? Let them decide what are the good stocks? Because if you have a full-time job, you can't spend all your time looking at balance sheets and income statements. I mean, those things are 100 pages long, right?
Joanna Payne: It's boring. For me, it is. For me. Some people are going to love that, and that's going to be their favorite thing, and maybe there are some people that are looking to simplify the technical aspect, and there are tools for doing that. For me, I enjoy the charting. I enjoy the technical bit a little bit more. And so I just recognize that it needs to be there, whether it's fun for me to do or not. Strategically, I know it's important. So that I do.
Then I'll look for certain things. For me, I have a sweet spot in price, and so I'll enter those price parameters in. I'm looking for a stock that's between say this and this. I also look at volume. I want to be able to get out of the stock that I get in.
Randy Frederick: So you're looking for a stock that has a decent amount of volume, like the half million shares or a million shares a day or more, right?
Joanna Payne: I go at least – yeah. I go at least 250,000, but again, 500,000 is even better, right?
Randy Frederick: Okay.
Joanna Payne: So – in terms of liquidity. So I'll look at those parameters. And then I look for conditions. Once I get some general screeners, I'll use some SMA, some 15 and 200 _____ SMA –
Randy Frederick: So SMA standing for simple moving average.
Joanna Payne: Simple moving average.
Randy Frederick: So that's a study on our chart package, right? Okay.
Joanna Payne: Yes. So it helps me determine trend and where some potential entry and exit points – I use that a little bit, just like support and resistance. So there are certain technical things, but for the – the main purpose for me of the screener is getting a manageable list of ideas. So what I do is if this is a day where I'm looking for potential opportunities – and every day isn't like that. Some days, like, hmm, I'm not sure how I'm feeling about the market. I'm just going to manage my positions.
Randy Frederick: So there are days when it really is good probably just to not trade at all?
Joanna Payne: For me it is, because like I said, I only have a certain number of pockets during the day when I can check things, between projects and between tasks. And so I need to be on it. So I decide pretty early in the day, based on how – just how I feel about how things – my confidence, and then I'll decide whether this is going to be a risk off, where I'm just managing what I have, and just looking at those and seeing how they're doing, or whether I'm certainly keeping an eye, but also have an eye for opportunity, for new opportunity.
Randy Frederick: So let's expand a little bit on one of those points. If it's a risk off day, you're managing your positions. How do you do that? How do you keep track of what you have and know whether it makes sense to hold onto them or whether to get out of them?
Joanna Payne: So there are a few things that I look at. Charts are very important. But I also use – we have lots of Schwab – so we have our chart studies, but we also give access to some third party guidance as well. So I use tools that we offer, such as Market Edge and Recognia. These are both third party technical analysis tools. But I'll use them to get a snapshot, to check myself on what I think I'm seeing on a chart. What does Recognia say? Are there any chart patterns that they're recognizing that may be developing?
Randy Frederick: And they might even see something you don't see.
Joanna Payne: Exactly. And that's the thing. And then I can go to my chart, and I'm learning something as I'm doing it. I also may take a look at things like Mark Edge, but also on the charts, what we have, again, I'm looking at support and resistance. Are we nearing any important levels to me? I don't put a trade on without having a stop level, so I'll look at my stop levels and see, are we getting close on any of those?
And so I'll just – I'll just keep an eye on my stuff. I also actually use a study called the Chaikin Money Flow. So I do like that one, because it tends to be a leading indicator. And so I like it for a – as a sign of weakening of funds that are coming in versus out, and a general sense, because a lot of times, you can see something change on there before the price actually reacts. And so for me, that's a nice little early indicator, and it just gives – it's like giving you a heads up that something might be happening. You still have to wait and see, but for me, having those little tidbits, it's efficient.