Better Trades Interviews: Michael Sincere

Joe Taylor
December 16, 2008

What is some general background information you feel would be of interest to our readers?

My entire family, including my grandfather, was involved in the stock market so from an early age I learned both the benefits and risks of investing in the market. Eventually I intrigued with trading stocks and participated heavily in the market. About 10 years ago I made some really dumb mistakes trading stocks so I decided to write a book about the mistakes I made and to help others avoid making the same mistakes.

I was pleasantly surprised when a publisher accepted my proposal. I quickly discovered that I thoroughly enjoyed writing books. I also learned that I like writing books that are entertaining, educational, and understandable. My books rely heavily on interviews with experts and other financial professionals who know much more than I do. My expertise is in taking what they tell me and in converting into readable and useful advice to the readers.

How long have you been trading?

I've been investing since I was a child but trading for the last 10 years.

How did you get involved in trading?

My father introduced me to the stock market when I was younger. But I got involved in trading when I worked at a company as a corporate trainer. And I quickly learned that with well-timed trades, I could almost earn my yearly salary in a short period of time. That's when I became fascinated with trading stocks for short-term gain. (I also learned that if you're not careful, you could also lose your yearly salary in a short period of time!)

What is the most enjoyable part about trading the markets?

Losing money! On the other hand, you always learn more from your losing trades than your winners. So when you lose money, you should view it as a learning experience. The second worst part of trading is when you don't follow your own rules and get smashed. It takes a lot of discipline to be a successful trader and when you are undisciplined and make errors, it can be very discouraging.

What do you see as the biggest changes in trading from when you started?

The biggest change was the introduction of the Internet and online trading. As a result, commissions fell from hundreds of dollars a trade to around ten dollars. And the Internet meant that you didn't have to rely solely on your stockbroker to make trades. You could also do your own research, acting as your own broker. The Internet really changed the trading world. Other changes included the conversion from fractions to decimals. Also, more recently, the introduction of ETFs has changed the way people invest and trade in the stock market.

Do you see these changes as beneficial or more of a hindrance when it comes to trading?

I believe the Internet has been a fantastic benefit but at the same time, all that power in the hands of individual investors and traders meant you had to learn as much about the markets as possible. And that is another reason why I wrote my books: to help educate individual investors and traders so they have a chance at competing with professional investors and traders.

Traditionally stock/options trading is seen as an arena for men...do you think that's changing?

As a freelance writer and author, I have the opportunity to interview hundreds of people, both men and women. Although there aren't a lot of women traders, the ones I've known have been tremendously successful. The two women traders I know best and have interviewed many times are Linda Raschke and Toni Turner. To answer your question, from the seminars I've conducted and in e-mails I've received, more women seem interested in investing and trading than 10 years ago.

Do you think women have any special advantage when it comes to trading that men do not have?

My observation is that, in general, many men tend to take it very personally when they lose money and feel the need to get revenge over a losing stock. Therefore, some men get too emotional when trading, resulting in losses. The successful women traders I've known have been less emotional about trading and don't seem to take it personally when taking losses. On the other hand, many men have been successful in the stock market once they have learned to be unemotional and disciplined. This means putting your ego to the side and recognizing the market is bigger than any one person. In my opinion, this might be easier for some women than for some men. I have no way of proving this, however!

What time frames do you enjoy trading?

In the past, when we weren't in a bear market and there was an established trend, I enjoyed a three to five day trading period. By the end of the week, if the trend was in your direction, you could sell for a gain and be flat over the weekend. Now, however, that is a difficult strategy and will be until the bear market is over.

What are your favorite instruments to trade (stocks, options, futures, Forex, etc.)

I have moved more and more into ETFs, but I also trade options whenever I see an opportunity, including buying calls and puts, and selling covered calls.

Do you have a favorite strategy?

I have had favorite strategies in the past that worked well, but like many people, as the market changed I've had to change, too. I don't know if you call it a strategy but I am always looking for financial opportunities. Right now I'm still looking! At the moment I don't have a favorite strategy and am really studying the markets to see what might work best moving forward. In general, however, my favorite strategy is making sure I don't lose money!

Any trading secrets you are willing to share?

I have to quote author and options expert Sheldon Natenburg, who I interviewed for my latest book, Understanding Options (McGraw-Hill, 2006). He told me there are no secrets, only hard work. And I agree with him. If someone really had a secret, no one would share it with you or me. I see the market as a huge puzzle with missing pieces. You have to look for clues so that you can complete the puzzle. Many of the clues are false and can take you in the wrong direction. The challenge is finding out which clues are beneficial. Therefore, the best advice I can give is it's essential that you always think of the worst that can happen when making a trade or investment and take steps to reduce losses in case you are wrong.

What would you recommend to someone just starting out in the trading arena? How should they get started, where should they focus their energies etc.?

Obviously, start by reading books and perhaps taking free or inexpensive classes. Think of trading and investing as similar to taking a college level course. After studying the markets, you can open up a practice account online. And once you do open an account, if you are first starting out, trade in very small sizes (100 shares or 1 options contract) until you can consistently make money.

Do you think trading is something people could do full time to make a living?

Few people can consistently trade full time and make a living out of it. I've met many who have and they have devoted an incredible amount of time and energy in achieving success. It's not something you can just jump into and expect instant and continuous gains. But there are many opportunities for people to trade and invest while still holding full time jobs. As long as you have realistic expectations, and protect your downside, you can use the markets to enhance your portfolio.

How big of a trading account would you recommend to someone to start with if they wanted to do this full time?

It really depends on the person, but I would say start off small. If you can consistently book profits in the market during many market environments, you might have a shot at trading full time. But that is a process that will take years, not months.

Which of your books is the most popular?

Understanding Options (McGraw-Hill, 2006) is the most popular, followed by Understanding Stocks (McGraw-Hill, 2004).

Why do you think that this book is so popular?

My books are popular because I write in a very easy-to-understand conversational style. You get the feeling that I'm sitting next to you at the kitchen table. I also rely heavily on interviews with professional traders. Second, I am not only educating you but attempting to entertain you by including amusing facts and information. Perhaps the main reason is that I have taken a rather complex subject, options, and broke it down so that it is understandable. I get letters every week from readers who say they were afraid to learn about options because it seemed so difficult, that is, until they read my book. Those letters are very gratifying.

Is there a book you would recommend to a beginner to start with? Or do you recommend a particular order for reading your books?

With my books, read Understanding Stocks first, and then Understanding Options. The stock market books that compete with mine include Jason Kelly's book, The Neatest Guide to the Stock Market. Kelly did a really good job with his introductory book. Also, Eric Tyson's book, Investing for Dummies, is excellent. On the options side, I hate to sound like I'm bragging but I still haven't found a book for beginners that is clearer and more useful than Understanding Options. Once you get your feet wet with options, however, I would recommend Guy Cohen's book, Options Made Easy (FT Press, 2005) and Mark Wolfinger's book, The Rookies Guide to Options (W&A Publishing, 2008) which is quite good.

What books have inspired you in your trading career.

The most influential book for me was Reminiscences of a Stock Operator by Edwin Lefevre, which is about the life and trades of the great stock speculator, Jesse Livermore. It's really a fantastic book.

Any advice on trading the recent volatility?

I wrote an article for Fidelity Investments on this subject, which you can read by accessing this link:
http://personal.fidelity.com/misc/framesets/iwarticle.shtml?pagename=AT0810leadtradingvolatility

Any advice on trading the current Bear market?

I just finished an article for Fidelity Investments E-newsletter which answers this question. That article should be out next month.

Do you see a bottom near here? If not, when?

Read the upcoming article for the answer!

Any parting words or advice you would like to share?

I have learned the hard way that you have to listen to your own instincts, take steps to protect profits and reduce losses, to prepare for the unexpected, and to trade in smaller sizes, especially in a bear market. The stock market is very psychological, fueled by fear, greed, and hope. Being contrarian can often bring success but also pain along the way. There are no easy answers with the stock market but I find it to be an extremely fascinating environment, which is why I continue to write books and articles about it.