When Paul Scolardi first began trading stocks, he was an accounting major in college in the 90’s. Although he went into corporate finance working as an accountant after graduating, he continued to trade and eventually developed a strategy that over time grew his account past $1M dollar. When he decided to leave his corporate job to begin trading full time, he knew that he would also eventually want to teach and help others avoid the costly mistakes he made early on.
Today, Scolardi has an education site SwingTrades and in 2020 alone he surpassed $5M in personal earnings from trading. As one of the most popular thought leaders on learning to trade, he’s helped thousands of beginning as well as seasoned traders learn how to take calculated risks, with the goal of minimizing losses and maximizing gains to compound wealth. With stock market volatility at a high and more retail traders than ever jumping into the market during the 2020 pandemic, Paul’s general words for new traders seems more relevant than ever. We sat down with him to get his thoughts on how new traders should approach the market to avoid making mistakes they’ll regret later.
How did you first get started as a stock trader?
Paul Scolardi: I was an accounting major in college, and I always had a strong interest in the stock market. It was 1997-1998 and the internet tech boom was soon to follow. One of my good friends in college was into the stock market big time so I asked him to show me how he trades online. That's how it began. My first online broker was Datek which was eventually bought by Ameritrade.
What are some of the biggest problems society currently faces around financial education?
PS: Too much of financial education just focuses on the upside or how much can be made. More education is needed on risk management principles. That is why I teach my students easy to understand and follow rules of investing where the goal is to minimize losses and maximize gains. It scares me to see new traders blindly following each other into what I call cult stocks like GME and AMC recently, as examples. Many traders lost tons of money in those stocks when they crashed.
Additionally, I was an accounting major yet I was never taught adequate principles or information about investing stocks.
How should one know if the financial markets are an investment they should consider?
I think financial markets are an investment everyone should consider. It is more a question if they are willing to learn what they are doing before they jump in. Additionally, everyone should understand it takes education and discipline to succeed. The good news is that everyone can learn if they are willing to put some time in. We put in four or more years of college to learn a certain trade. My stock market strategy can be learned in four to six months depending how much time one has to put in. In doing so, one is learning another revenue stream that can always be there.
What's the difference between active trading and passive investing?
For what I do, active trading is picking individual stocks and adjusting real time as the market changes. Passive investing would be buying mutual funds or ETF’s that track overall sectors or the entire market.
Who is the ideal profile of an active trader?
The best personality types are those that are self-disciplined and can control their emotions to follow general rules and as well as a trading plan with specific rules for each trade. Personalities that are prone to being lazy and or want to get rich quick as well as those with a gambler's mentality are the most dangerous. Those people have to pay attention to what I teach about the psychology of trading, where I help them train themselves to be disciplined traders.
Can trading be done part time?
Absolutely! I created my strategy while I was excelling at a demanding full time job. It is called swing trading and it does not require you to be glued to the computer screen all day. It can even be done just with a smartphone. Swing trading is not day trading. It is best described as short term investing. My stock picks can take anywhere from days to weeks to months in order to work. Swing trading is perfect for those that have a demanding full time job and/or cannot be glued to a computer screen.
Where do most people go wrong when they begin trading?
They do not study and learn a system so they are just buying stocks without any discipline. There are tons of many common mistakes that all new traders make. Without learning a strategy and discipline, many new traders will lose their money. That is why I teach. When I was learning this myself I lost my money many times. I made my first million then lost it months later and it was devastating. That is what made me create my strategy with rules and discipline to go along with my ability to find momentum stocks before it happens. Now I teach that strategy to help new traders avoid the devastating mistakes I went through when I learned this myself.
Do you think the current levels in the stock market make us poised for a correction?
I did think that the market needed a correction and as of writing this it has. The indices held up fairly well but most bloated and momentum stocks have pulled back. I did think this was needed.
Does that change how you approach your trading strategy?
In any market I must follow my easy to understand rules. When I follow my rules I make money. When I do not follow my rules I lose money. However, if I think overall stocks are frothy I will not take significant positions or chart stocks. I wait for my pitch so to speak.
What's the biggest misconception about trading that you would like to end?
That stocks only go up and trading is easy. Many internet celebrities have got into the trading game and have created this phrase “stocks only go up” and that insinuates trading is easy. Stocks do not only go up and trading is not easy 12 months out of the year. If you do not learn a disciplined strategy like the one I teach you could lose all of your money. The good news is that anyone can learn a disciplined strategy and learn to minimize losses and maximize gains, which should be the goal of any stock strategy.