- Tomas Claro, a 2020 US Investing Championship hopeful, didn't hit his stride as a trader until he cracked open a copy of Jack Schwager's classic "Market Wizards" text.
- Claro employs multiple trading strategies and leans on a wide array of technical-based market indicators to bolster his returns.
- He's captured a 409.1% return through August 31, landing him in third place in the 2020 US Investing Championship.
- He listed three stocks that have helped contribute to his eye-popping performance.
- Click here to sign up for our weekly newsletter Investing Insider.
- Click here for more BI Prime stories.
"So when I started trading, I didn't know much; I didn't have a strategy."
That's what Tomas Claro, a 2020 US Investing Championship hopeful, told Business Insider when asked about the genesis of his trading methodology.
"I heard a lot of tips from friends," he said. "I started taking big bets on the market with big leverage. And I went broke twice trying to do that: get rich in like five minutes … that never worked."
Needless to say, Claro knew it was time for a change. Fortunately, he'd soon stumble upon a copy of Jack Schwager's classic "Market Wizards" — a text that would shape the evolution of his approach moving forward.
Prior to his fortuitous encounter with Schwager's written work, for over a decade, Claro worked in various positions embedded within the financial industry. He spent time at Grupo Security, Credicorp Capital, and Banco BICE refining his skillset in equity trading and sales.
It was during this time, in his native country of Chile, that he learned the mechanics and idiosyncrasies of financial markets. When Claro merged Schwager's words with the foundational knowledge he'd built over the years, the result was an unstoppable alliance. Eventually, he'd sharpen his acumen even further with an MBA from The University of Chicago Booth School of Business.
Today, Claro is maneuvering in financial markets with relative ease. His trading performance as of August 31 was an awe-inspiring 409.1%, putting him in third place in the 2020 US Investing Championship.
Here's how he's doing it.
Claro has amassed success in financial markets by employing a swath of technical indicators alongside subtle aspects of fundamental analysis. Furthermore, Claro doesn't back himself into just one trading strategy or approach.
At any given moment, he may lean on scalping, intraday trading, swing trading, or any combination of the three in conjunction, to expedite his returns. For any of these strategies to succeed, a trader must use technical indicators to anticipate moves in single stocks and take profits in a timely manner.
For context, here's a basic breakdown of the holding periods that generally coincide with each strategy:
Scalping — seconds to minutes
Intraday trading — hours
Swing trading — days to weeks
The goal of Claro's approach is simple: leverage scalping and intraday trading to take advantage of short-term, volatile moves in markets, and rely upon swing trading to capture longer-term, larger, and more-sustainable trends.
"I do a lot of scalping," he said. "Today, I might do a hundred trades and I might hold 20 different stocks longer-term."
Claro chooses his buy/sell points by exhausting a multitude of market gauges. Some of his favorites are the 21-day exponential moving average (EMA), the 50 day (EMA), the 200 day (EMA), channels, pivot points, VWAP (volume-weighted average price), Fibonacci retracements, support/resistance levels, order books, and insider transactions.
Claro's indicators of choice gives him an idea of the health and sustainability of a stock's trend, along with an idea of how much demand/supply (or lack thereof) may be building under the surface.
It's during this assessment that Claro determines if the stock is worth buying and holding for a longer-term play, or if it's a better candidate for a quick in-and-out intraday trade or scalp profit. He'll use the aforementioned moving averages to help him arrive at a decision.
"I try to buy on breakouts," he said. "I try to buy on the lower range of channels, with tight stop losses. And I use the 21 EMA to cut out a bit of my positions. Maybe the 54, for a more strong sell."
Along with the technical indicators detailed above, Claro also keeps a keen eye on psychological buy points (round, whole numbers like $100 and $200), and gaps. What's more, if a position is working in his favor, he'll incrementally add leverage to boost his returns. If the position moves against him, Claro will generally limit his losses to 3%.
When we spoke to Claro, he was holding three stocks that are based in Chile: Sociedad QuÃmica y Minera de Chile (SQM), a producer of plant nutrients; Compañía Cervecerías Unidas (CCU), a distributor of water and beverage brands including Perrier and Absolut Vodka; and Corporación América Airports (CAAP), an operator of airport cargo terminals across Latin America and Europe. The picks were based on longer-term, large trends in commodities and aerospace.
Since the majority of his financial acumen was built while he was living in Chile, Claro feels more comfortable with trades based in Chilean companies. Similar to legendary investor Peter Lynch, Claro also likes to buy what he knows best.
"Last year, I made much more on the return on my account than the guy that won it," he said. "So I said, 'I will join it next year for sure and see what happens.'"
Source: Read Full Article