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Think day trading is only for adults?  Think again.  Our interview today is with James Wright, a teen entrepreneur that makes money day trading.  Yes, I said makes money.  You may wonder how he got his first investment capital.  He answers that along with other great questions.  He is someone to aspire to if you want to learn to manage your finances.

How did you know you wanted to start day trading?  Some teens start websites.  You start day trading.  Didn’t that seem strange to you?

I was with my dad, and he was watching Bloomberg, and I found it intensely interesting.  It could have been the rapidity of numbers changing which made me think, I can make some real money in this. Following that, I decided jumping into the market without knowing what to do is like taking part in the ‘Tour de France’ without riding a bike before. So I decided to start learning about the financial world through books, reading etc.

After that, I used the Investopedia stock simulator to:

• To check I was any good at it
• To try different strategies to see which suited me best (And I still use it when trying new strategies today)

You mentioned a few books.  What are they?

A good one is ‘The Naked Trader’.  It gives you quite a good insight into the financial world (however it is pretty crude at times).  Also, I recommend ‘For Dummies’ series in the aspects you are interested in.  I recommend Investopedia most of all however.  It is a fantastic website and explains stuff really well.

What do you do to learn the new strategies?  Are there any?

There are all sorts of new strategies, some you read about on the internet, such as buying at (what you feel is) the lowest price of a stock, as the only way to go is up.  Then some are self developed, which you’ve had the idea of by yourself – such as I had one idea of ‘rapid selling’ where each day you sell stocks up by 2-3%.  It didn’t work but that is why you test it on a simulator.

What resources do you use to pick your stocks?

I pay close attention to the financial and business news, whether in the FT, Online or on CNBC/Bloomberg.  After all, trader & public opinions are what drive the markets. I also use all sorts of graphing sites to decide whether or not to buy them.  My favourite ones are Bloombergs’ (because of its tools), and Google finance (because of how customisable it is).

Where did you get your initial money from?

I’ve always been pretty good at saving my money, I had around £300, although that wasn’t really enough to start trading. Basically, I then had to prove to my dad with the simulator and knowledge that I knew what I was doing, and he gave me around £700.

What do you think is the reason you did well in trading stocks?

A Few things:

1. I am pretty good at holding my nerve – stock trading can be a killer, one minute you’re going “Yes! Up 3% for the day”, a few minutes later it can be down 3-4%. You’ve just got to stay with your opinion.  If you say in your head “next month it will go up 10%” and it is down 5% in its first week, you may still not be wrong (although I would re-analyse it) it may just be undervalued or, in contrast,  if your head says “this is a no goer” then sell.  Stocks aren’t your best friend, they’re tools to make money, and you can’t make money hoping it will go back up.

2. I studied it, I think I’d have nothing if I dived in feet first.

3. Learning from mistakes, if you don’t you re-make them, over…and over…

4. Don’t lose hope – even the top JP Morgan bankers have runs of bad trades. Bloomberg recommend making some smaller winning trades to build your confidence back up, and I liked this concept (although recently I haven’t had the chance to try this – fortunately?)

What was a mistake you made that you learned from?

Not Following Others. ‘Warren Buffet Invests in Goldman Sachs’ – Ah he is never wrong, so shall I. ‘Goldman Sachs hit with fraud charges’ – Cheers Warren.

What were some past winners?

Twice I have made over 20% with American Steel ‘X’ — one of the times it went up around 10% the next day, which was something to smile about.

Citibank ‘C’ — it got nice earnings figures recently, which was nice for me.

Apple ‘AAPL’ – I’m actually still holding those (I bought them at the base of the recession) – I think apple are going places.

What were some past losers?

Goldman Sachs ‘GS’ – Pretty much died on announcement of fraud inquiries.

Chevron ‘CVX’ – my first investment, what can you expect

Falkland Oil & Gas – A Penny Stock of an oil company with absolutely no drills, refineries or deposits of oil. Simply put, I was investing in the 30% of them finding oil, and at one point they did and it went up 15% (I should have sold… but thought, lets see where this can go!), anyway, then the Argentineans and various other people got involved, and basically the verdict was – this is not your oil, and as a result  it dropped again, and never recovered – In the end I sold at a 29% loss.  Luckily it wasn’t too large an amount of money, because it was the same as betting at a horse race. Due to this, I’d say set a limit either mentally (or physically with your brokerage) – Sell @ ‘x’ amount, or else your heart leads you astray.

What are you going to do with the profits you made?

Reinvest them.  My dream is to own a finance company, and with my current capital it isn’t viable – so I’ve still got a long way to go

What have you learned from trading stocks?

I’ve learned how to control my nerve.  After some of the experiences I’ve had, I’d probably end up offering a burglar a cup of coffee.  More about business.  Most people are concentrated on one area of business and that is it, but in stock trading, you need to pay attention to all aspects, from product to the management style of a new director.

For teens out there looking to start trading in stocks, as risky as that sound, what would be your advice to them?

Do what I did, study the subject first.  I cannot stress that enough.  Don’t start if you get worried easily, I can guarantee you’ll start ripping your hair out.  If a company does badly for you, don’t rule it out for the rest of time, you’d never have anything left to buy if that was the case.  Never invest money you aren’t prepared to lose (for some people that is £500, for others that is £5m pounds (if they have it) but also, still invest a reasonable amount, simply because £90 (+£10 initiation)=£100 – the stock needs to go up over 10% before you break even, so to make even a small amount of money, you’d have to do pretty well.

So you wouldn’t recommend stocks to everyone?

For people who aren’t so risk tolerant, you still shouldn’t totally discount stocks from your investment portfolio.  I invest in growth stocks, and I won’t lie, they are the key area money is made on the stock market. However, there is another option – you can invest in stocks which don’t fluctuate in value too much (Coca-Cola ‘KO’, ExxonMobil ‘XOM’ to name a few) – and mooch off of their dividends. I will point out though, by no means are they guaranteed to stay the same price.

You must follow the global economy very closely.  Where do you think it will be in 5 years?

The only direction left to go is up really… I think growth will be slower than expected, simply because markets have grown fast recently, and just like in business, growth has to be sustainable. I think once business begins booming again, jobs will open, and that will cause a chain reaction. Hopefully, this time, we will be more intelligent about the way we run the economy though.

Anything you think is wrong with the world that you like to change?  How would you do it?

I wish the media wouldn’t over-react to everything as much as they do. As soon as they tell the world that everyone is going to lose their jobs, and we’re all going to live in slums, we were 10 foot deeper in trouble. In the UK, I think we should re-think our tax system, we say the economy’s growth is slowing, but that is what you have to expect when you are taxing our largest businesses to Switzerland etc. – I won’t turn this political.

What else do you do like to do in your free time?

What is strange for somebody who is into such a technical math-related thing, is that I am also really good at sport, I play for my Local ‘Soccer’ Team on Sunday Mornings, and really, if I focused on that solely, with my awards I probably could have gotten into an academy of some sort, but that isn’t where my heart is set.

If someone has a question or wants to contact you, how can they reach you?

If they have any questions they can message me on TeenBusinessForum- JWInvestments.

James Wright lives in Hertfordshire, UK and has had a vast interest in business since he was in elementary school. He is currently a day trader in the stock market, in which his annual return last year was 15% on an initial £10,000 investment.  This lead to a £1,200 profit after various commission and initiation fees were paid.  However – this year he no longer thinks he will achieve nearly as high.