David's website: TheCrosshairsTrader.com

Tim Bourquin: Hello, everybody. Welcome back to traderinterviews.com. Thanks for joining me for another episode this week. We're going to be speaking with David, David Blair, and we're going to talk to him about his trading strategies and the ways that he finds good opportunities in the markets. So David, thanks very much for joining me on the phone today.

David Blair: Glad to be here.

Tim Bourquin: All right. Well, first of all, kind of start out by talking about what type of trader you are -- a day trader, a swing trader, that sort of thing.

David Blair: Well, I like to call myself a "swend" trader, and what I mean by that, Tim, is I am a swing trader, combination swing and momentum. And I look at bigger charts. I'm not a day trader. So I'm not going to look at 5-minute charts or 10-minute charts. It's more a bigger intraday chart, a daily chart, and a weekly chart. That's the basis of my strategy.

Tim Bourquin: Okay. And you have talked about having a single pattern to follow. Can you kind of discuss that pattern and how you look for it?

David Blair: Well, there's one particular pattern. I've always felt that it's best to be very simple in your trading. You know, there's a gentleman 2000 years ago, a very wise gentleman from an ancient text. His name is Solomon. And Solomon said that there's nothing new under the sun. So really, for trading for me, there's really no reason to go out and try to find something new. So I simply take things that have worked, always worked on the street, and combined those into a pattern that I look for. So I have, you know, a few of the technical indicators that I look for and I combine those and I look for support and resistance. I look for just a few moving averages and a few timeframes, and I combined those and I've developed what is called a crosshairs indicator and that indicator is simply the beginning of my steps that I'd go through to decide whether there's a high probability trade or not. That indicator combines these things. And then I take that indicator, and as I said, I look for a few others things along with the indicator such as the general market sentiment, what's going on with the futures, the Dow, the NASDAQ, the S&P, the OEX, and a few other things and combine those and have a set of rules or guidelines that I abide by. And once all of things line up, I feel like it's a very high probability trade and that's what makes the decision for me if that makes sense.

Tim Bourquin: So Dave, talk about that crosshairs indicator. Can you talk about what's inside of it?

David Blair: Well again, you know, it's nothing really new that I've developed. I just feel like the market trades off emotions. So what I've done is I've taken a few of the same indicators that have been used forever and simply programmed them in a certain way and combined them -- there's four of them -- and combined them in a certain way that it locates the bigger moves that I'm looking for. In other words, I'll give you for instance. If you look at a MACD, the MACD is defaulted in your platforms, 2613, whatever it might be. Well, you can take those and if you've got a good platform, you can actually adjust those and change those based on the type of pattern that you want to trade. So I've taken that particular indicator along with a few others and I've programmed them in a certain way where they all fire a buy or a sell signal at a certain time based on the inputs that I have personally put in there. And then once that happens, it forms a crosshair.

Tim Bourquin: You said there were four indicators. Can you talk about those?

David Blair: MACD is the only one I'm going to talk about. There's no secret to these things but it is proprietary and I have spent a lot of years working on this. But it is something that I teach at my seminars for others to be able to understand exactly what's going on with this combination of indicators that I use.

Tim Bourquin: Well, how about -- you had talked about general market sentiment. Can you tell like more about how you gage that?

David Blair: Yeah, sure. When I say general market sentiment, when I'm looking at an individual stock to trade, 9 times out of 10 an individual stock is going to move in the same direction as the general market. So when I'm making a decision about let's say a crosshair has fired on Apple for instance, I'm going to look at what the Dow is doing, what the S&P is doing, what the NASDAQ is doing, but particularly, I'm going to be looking at what the S&P futures and NASDAQ futures are doing. And what I mean by that is I'm going to be looking for support and resistance areas on those charts on a daily and a weekly chart. I'm going to be looking at the moving averages. I'm just going to be looking to see whether it's indicating that we're in a choppy sideways market or a trending market. And by doing that, it helps me determine where a profit target could be on Apple and where a loss target could be. It could also give me an indication. Let's say Apple is breaking out to a new high. Well, if the general market is getting ready to bump up against some very strong resistance, then I'm going to be reluctant to get into that Apple trade because I believe Apple may be setting up for a fault breakout. So that's when I say a sentiment, I'm looking at a general market sentiment. What is the general market doing that could affect an individual stock 'cause I do not want to trade against that sentiment and trade against the general market.

Tim Bourquin: Right. And is there a particular area of support and resistance that you like to watch, whether it be a previous day's high or a monthly pivot or anything like that?

David Blair: No. I basically look back at the history of the stock, basically what I can see on my chart back about three months, and if I see some major resistance that lines up with the way my indicators are set up, either at an oversold or overbought. I also look at whether it's been range bound, whether it's recently broke out, and where that next level is where it's really sold off or found some support and started moving higher. So there's really no hard and fast rule on that. You know, the last 20 days, the last 10 days, I simply look back at the chart and combine that with my indicators.

Tim Bourquin: Are you trading full-time right now?

David Blair: Absolutely, yup.

Tim Bourquin: How long have you been trading full-time?

David Blair: Going on seven years now, seven years.

Tim Bourquin: Talk about how you got started in kind of making that transition from part-time trader to full-time trader.

David Blair: It wasn't easy. Let me put it that way. I was in the insurance industry for 10 years and I was getting a little burned out. And I just wasn't happy making good money, but I just wasn't happy doing what I was doing. And a friend of mine suggested that I take a look at trading. I never even thought about it. He had taken a course and suggested that I do the same. I went through the course and there was a lot of discussion about options trading and I had no idea what an option was, so I just dove right into it. And, you know, being a successful business person, I thought, "Well, shoot, I can become a very successful trader." Well Tim, you know as well as I do and you read this all the time. You can't necessarily take any success out here in the business world and translate that into success in the trading world, because the rules in the stock market are so much different than the rules in business, and the logic that we find in business is so much different than the logic that you find in the stock market. So I had to go through a transition period of a couple of years of just really getting beat up and just being humbled and realizing I'd have to go back to school and pay for this education. And it did take some time as it does most if not all, but I found it very, very rewarding. I just had to turn off that business mentality, at least a part of it, and switch over to a market mentality which is very, very hard to do. But unless you can do that, you'll never succeed at trading.

Tim Bourquin: So you had some savings from previous business life and you lived on that while you learned how to trade?

David Blair: Absolutely. If you don't have anything to live on, it's going to be very, very difficult, very difficult.

Tim Bourquin: How do you set goals for your in terms of success in your trading? Do you set a dollar amount or a percentage of your account? How does it work for you?

David Blair: For me, my goals are never based on money, percentage-wise, dollar amount, end of the year, how much I have to pay to the IRS. It doesn't have anything to do with that. My goals are based on am I following my rules for entering and exiting the trades? If I am following my rules for entering and exiting the trades, the money is simply a byproduct.

Tim Bourquin: And how many trades a day do you typically take?

David Blair: You probably need to ask me how many a month. I would say on a monthly basis, depending upon the market, anywhere from 10 to 15 trades a month. In some months it may be 5. Again, it just depends on the market, on what the market is doing. If it's very choppy and volatile with up 300 days and down 200 days, I'm sitting out of the market.

Tim Bourquin: So it takes some patience.

David Blair: It does. And one of the things that I teach in my seminars is three things ‑ patience, discipline, and focus, and if you don't have all three of those in combination, it's going to be very difficult to trade the way I trade.

Tim Bourquin: So do you sit in front of the computer all day looking for these opportunities? Or kind of describe a typical trading day for yourself.

David Blair: Well, I have developed the crosshairs indicator and programmed that into the trade station platform. So it's in what's called a radar screen and it will actually give me an alert as to when there is a crosshair on my intraday, my daily, or my weekly chart. Once I get that crosshair, then I do the other -- go through the other steps that I go through looking at the general markets for resistance, the way the moving averages are lined up, those types of things, to decide whether I want to make that trade or not. I've also developed a way of measuring moves in the stock. So in measuring the move in the stock, I know when I get a crosshair that there is a high probability that it's going to go to a certain point. So I can look at a stock and determine with a fairly high degree of success. If I've gotten in for instance at 52 and it's telling me it could go to 56, then when I get into that trade, I'm looking at possibly being in that trade for three to five days while I'm waiting for that. So I don't watch it necessarily once I get into that trade. The other thing too is I know when a stock is getting close to setting up a crosshair, and I know that it can take one to three days or even up to a couple of weeks for that situation to arise. So when I have several stocks in my basket that I'm watching, depending upon the market, depending upon that stock, I can pretty much tail how long it's going to be before that stock gives me a signal or before I want to get into that trade after it gives me a signal. If it's giving me two days, I don't necessarily watch the spot market. Does that make sense?

Tim Bourquin: Yeah. So it's scanning the whole market for this, right? It could be any stock or is it a basket of stocks?

David Blair: I have a basket of about 350 stocks and that includes ETFs. These are based on they have to be optionable, they trade at least a million shares a day, they're at least $15 a share, and they are high beta stocks, a beta of 1.5 or higher. So that's my criteria and it pretty much boils it down to a little over 300 of them.

Tim Bourquin: All right. And then as we finish up here, how did you decide on this method? Did you try a bunch of things and you found this worked over the long period or how did you kind of settle on this?

David Blair: I got tired of losing money, Tim. I mean, I've tried everything. I mean, I watch CNBC and I thought maybe someone who is on CNBC could tell me how to trade. I read up on gap trading, I read up on intraday scalp trading, and I just found that those short charts just did not work with my personality. And because it did not mix with my personality, I found it wasn't that you could not make money trading on a small chart. It's just that I could not make money trading a small chart. I like to look at the big things. I also have what I call a life outside the charts. I do not want to be glued to watching my computer screen all day long. I like to enjoy my life outside the charts. So in order to do that, I've had to develop a trading strategy that works for me from a big chart perspective.

Tim Bourquin: Well, you just say you found something that matched your personality. I like that fact and the fact that you realized -- I guess a lot of traders, if they're having trouble with a system or some way, they try to force it and try to make it work for them. And you just said, "That doesn't work for me. I'm going to try something else," which I think is valid.

David Blair: You're right. I try to trade like some other people that I know that said, "Hey, you can make a lot of money trading this way." They can do that but I can't and I have to accept that, Tim. You got to realize there's thousands, hundreds of thousands, even millions of trades that I miss every single day. Your ego says, "Don't you want to get into this, that, and the other?" You got to step back and say, "There's no way in the word I can learn to trade every pattern and every strategy and follow every method out there. There's just no way I can do it." You have to step back and say, "Okay, out of all of these, which one matches my psychology?" And I'm going to focus on that and not get deterred by all of these other trading strategies that may work in a choppy market or may work in this market or that market, but it doesn't suit what makes me money. I would rather make money than be right.

Tim Bourquin: Absolutely.

David Blair: For me, this strategy is what makes me money.

Tim Bourquin: All right. Well, let's give listeners your website address.

David Blair: It's TheCrosshairsTrader.com.

Tim Bourquin: All right, thecrosshairstrader.com. We'll link to it in the Show Notes. Dave, thanks very much for your time today.