'Find Your Niche': The Drivers Of Day Trader Phil Goedeker's Success

Phil Goedeker's interest in trading began when he was in college during the dot-com boom. 

“Back in the late '90s, you had all these IPOs doubling every day. The headlines were ‘everybody’s becoming a day trader and everybody is getting rich,’” he told Benzinga during a discussion about the hard truths behind trading. 

At the outset, Goedeker was a long-biased swing trader who encountered mixed success.

He found it hard to participate in rapid up moves, he said.

“How do you buy a stock at $10 and say, 'OK, in two weeks, it’s going to be $30?' It’s impossible.”

Most of the spiking stocks came back down, Goedeker said. 

“I found out shorting was possible. Literally, it was just like a light switch. Bam! I went from two years of nothing — kind of small losses — to it just taking off ever since then.”

Once Goedeker learned short-selling was possible, he developed a strategy that shorted stocks that were overextended on nonsensical news.

“No books. No Twitter. The only online information I ever had at the time was Yahoo message boards, which were just like a free-for-all of garbage. Everything was self-taught.”

Focus On What Will Get You Paid

At the beginning of his career, Goedeker said he made plenty of mistakes.

Reflecting on past trades was important for important for his success, he said: Goedeker recommends that traders spend time studying trades, uncovering and leveraging successful setups to increase the number of positive outcomes. 

“At the end of every month, or quarter, sit down. Figure out exactly where you’re making money, where you’re losing money and try to figure out why.”  

Goedeker emphasized the importance of patience, noting that the market is unforgiving when tradeable setups are nonexistent.

“I think the markets are there to take your money. When your setup is there, then you take the market’s money.”

Risk Less To Make More

Goedeker said he wanted to get to the next level as a trader.

After a few years in the markets, he came to a realization. Instead of risking more, he said he decided to focus on losing less. 

“Why don’t I stop placing all these trades I’m 50/50 on, and just focus on the trades that I win seven or eight times out of 10?”

Stick To Your Rules

Goedeker does a "really good job" with cutting his losses, he told Benzinga. "That’s one thing I stress over and over again."

About three years ago, Goedeker briefly stopped listening to his rules.

Dryships Inc. DRYS squeezed from $15 to $115, he said. 

"I lost about $1 million on it." 

Though Goedeker said he made the money back on subsequent reverse splits and news the stock was involved in toxic financing deals, his takeaway from the situation was that you can never disregard your rules.

During DryShips' up move, Goedeker said he kept thinking the stock wouldn’t go higher.

“Well, guess what? It did.”

You Will Lose, Just Don’t Blow Up

Goedeker said that success comes for some traders after a string of losses.

“Luckily, when I blew up, I was only trading in college; I had $3,000, so of course  I could afford to lose it,” he said.

During times of uncertainty, Goedeker placed an emphasis on limiting the amount of capital at risk and persevering through difficult losses.

“You can get very greedy when easy money is coming in. You have to go through a difficult time to learn how to get better.”

Keys To Success: Find A Niche, Limit Risk, Apply Rules

Goedeker places an emphasis on finding a niche and a go-to-strategy, enacting proper risk management and sticking to your rules.

"The first thing is to try to find your niche — what you can be successful at. Is it going long? Is it going short? Find your niche so you can focus on one thing." 

Failure is common because traders like to experiment, he said.

"If there is one thing that I see some traders struggle on, it's that they want to do everything, you know. They want to short because this guy made money last week shorting this stock. They want to long because this guy made money buying a breakout. They want to trade options because the Najarians are doing it on 'Fast Money.'"

After a trader finds their niche, they should try to formulate and perfect their strategy, Goedeker said.

“Study the charts. Study the trends. If there is one thing I’ve learned, it’s that trends repeat themselves. So, study the price, study the volume, study the historical moves and try to [understand] the patterns.”

His final pieces of advice:

Have rules in place to protect your earnings. 

Don’t think for a second that the market will act in a manner that seems logical.

You will get humbled.

Phil Goedeker spoke at Oct. 11-13 at the Traders4ACause conference in Las Vegas.