Tom Bierovic is an off-floor trader who has developed a unique trading style over the years. While he adheres to a set of well-defined rules, he also exercises discretion when necessary. In this interview, Bierovic shares insights into his trading philosophy, methodology, and advice for aspiring traders.
How did you get started in trading?
I was fortunate to be introduced to the futures business at a young age. My father was a trader at the MidAmerica Exchange, and I would plot daily and weekly bar charts of agricultural contracts for my allowance money. Without computers, I relied on afternoon newspapers to gather closing prices each day.
During the summer, I worked on the trading floor for my father. I kept 15-minute intraday bar charts and calculated a 10-period simple moving average of the 15-minute closes. My dad would trade based on these trends, only taking positions in the direction indicated by the charts.
How has your approach evolved over time?
Initially, I plotted charts by hand and manually calculated technical indicators like exponential moving averages, stochastics, RSIs, ADX, and MACD. Although I no longer do this manually, I believe it’s invaluable for learning the fundamentals of technical analysis.
I am strictly a technical trader. I deliberately avoid knowing anything about market fundamentals because I believe all relevant information is already reflected in the current price. To me, technical analysis is applied social psychology—it captures the essence of crowd behavior, including hope, fear, and greed.
Can you describe your trading methodology?
I refer to myself as a “discretionary trader with a very specific methodology.” I have written down all my rules meticulously, ensuring that someone else could trade my system if needed. However, I occasionally deviate from these rules, particularly on exits. For instance, if I’ve made sufficient profit, I might close a position at the end of the day.
My approach is called the “momentum retracement trading method.” It involves:
- Identifying the direction and quality of the trend.
- Measuring countertrend reactions.
- Recognizing when the trend reasserts itself.
- Determining risk levels and how to manage them.
I primarily trade using daily charts but monitor markets intraday to adjust stop-loss orders accordingly.
Which markets do you prefer to trade?
As a chartist, I don’t favor one market over another. However, I focus on liquid markets because they offer better execution and more reliable technical signals. Larger markets tend to reflect the collective hopes, fears, and greed of participants more accurately.
I avoid illiquid markets such as lumber, pork bellies, palladium, or the Australian dollar. In smaller markets, a single large player can manipulate prices, making technical analysis less effective.
Chuck LeBeau taught me to look for markets with an average daily volume of at least 5,000 and total open interest of 20,000 or more. I sometimes bend these criteria slightly, depending on circumstances.
What is your strategy for taking profits and managing risks?
Taking profits is crucial because markets often reverse gains nine out of ten times. I aim to achieve a 2:1 reward-to-risk ratio and strive to be correct at least 40% of the time. This approach provides a solid foundation for profitability.
For example, if I enter a trade today, I might exit tomorrow if the market returns to today’s high. I won’t initiate a trade unless there’s been a strong directional trend recently. When going long, I look for a significant upward thrust in the market.
I take profits and seek opportunities to re-enter. Typically, I remain in trades for two to four days. Occasionally, I use discretion to override my exit rules if I’ve achieved substantial gains.
What advice would you give to new traders?
Develop a trading style that aligns with your psychological makeup. Some people excel at day-trading the S&P, while others may not. Your trading style should resonate with your personality.
Focus on mastering technical analysis and trading principles rather than obsessing over dollar gains or losses. Keep losses small to stay in the game. Maintain emotional balance—don’t become overly elated after a win or despondent after a loss. Consistency is key.
Ultimately, the challenge lies in having a robust trading method and sticking to it. The whole battle is to create a system and follow it diligently.
