Oliver Kell Interview: The Mind & System Behind a +941.10% Year
Deep Dive Into How The 2020 U.S. Investing Championship Winner Thinks & Trades
I am really excited to be putting out this interview with Oliver Kell, a renowned stock trader who made headlines in 2020 by winning the United States Investing Championship with a staggering 941.10% return.
His strategy is based on the CAN SLIM method made famous by the legendary William O’Neil. He is also influenced by the likes of Jesse Livermore, Nicolas Darvas, Richard Wyckoff and many of the great investors throughout history.
I am thrilled to have had the opportunity to speak with Oliver and learn from his expertise as a follow-up to the excellent insight into his system that his book Victory in Stock Trading offered:
Be sure to check out Oliver’s substack as he frequently puts out important and informative market updates, as well as his twitter where he regularly posts relevant thoughts and charts:
As we dive into our conversation, I hope some of you understand these key principles Oliver goes over that are essential for making it in this business - enjoy this deep dive into the mind and system behind Oliver Kell’s super-performance:
Oliver’s Background
My Dad was a market maker on the Pacific Exchange so grew up going to the floor as a kid. I never wanted to be a trader as I have a different perspective on it than a lot of people. This perspective has more or less been confirmed to me now that I trade full time. It’s the best job in the world when things are going well and the worst job in the world when things are going poorly.
From there, a friend I played football with in college went the prop trading route and started talking to me about trading. I ended up reading some of the books from his reading list and started to get hooked.
With no other real prospects when I graduated I took some money I had and went to trade at what I would consider a modern day bucket shop in New York City. The type of place that says “We will let you trade our capital” but they really just leverage your 5k, takes a commission off your trading, and invest heavily in recruiting new idiots to fill the empty seats. Just go see who is advertising the most on LinkedIn and you will get a sense of the types of places I am talking about.
Daily & Weekly Routine
I keep a Main, A, B, and C list of stocks. I fine tune the A (usually 7-10 names), B (25 more names), C (wider list) each weekend to prepare for the week. I have different criteria for each list but it usually comes down to how much I like the stock bigger picture and then how close it is to setting up.
I build these lists via larger lists of IPOs, Liquids, Bull Snorts, etc. Just other lists I have built over the years or via my daily scanning process. I then write down a “story” for the week based on what I think about the markets overall environment:
How could things go if we trade up?
How could things go if we trade down?
This is something new I started doing that has helped me a lot.
Based on my thought for the environment I mentally think about the maximum overall exposure I want and that will effect how many names I can trade/be involved in. Keeping my name count down in general is a major focus for me. That prepares me for the week.
Each night I go over the names I own:
Where is my current stop?
What levels do I expect it to hold on dips?
If I want to add to the position what is the strategy for that?
The Main list is usually 1-3 names that I am going to focus on for the day outside of what I own. A name I own and want to add to may be one of those names. More and more I am adding to current positions vs adding new names.
The exercise of finding other setups and seeing how they do, even if I don’t trade them, is good feedback on the health of the market. I will have alerts set around the 10/20EMA or a breakout level on all names on the Own, Main, or A list.
Lastly, I do some daily scans for Bull Snorts, 52 Week Highs, add new IPOs to my IPO list, and a few other select scans.
The Importance of Multiple Timeframes
I start at the weekly chart - ideally, something is within range of the 10 Week moving average for a more intermediate term (multiple week) trade. If it is more extended from the 10 Week and I decide to trade the stock I want to be taking profits more quickly and treating it as a shorter-term swing trade.
Then I look at the daily chart, see where the 10/20EMAs are, from there I fine tune by looking at the 65 Min chart. The best case scenario for me is buying support on the daily chart via a breakout on the 65 Min chart.
I do look at the 10 Min chart the first 10 minutes of the day and switch to the 15 Min chart the first half hour of the day. I also do not trade the first 10-15 minutes unless a stock has a catalyst like earnings. After the first half hour, I switch that to the 195 Min and have the Weekly, Daily, 195 Min, and 65 Min on my screen.
I made a conscious decision to remove lower timeframes from my process more or less. It has benefit me in a major way.
Approaching Risk Management & Position Sizing
It depends how well I am trading - if I am making progress I will take bigger positions and be more aggressive with my account vs. if I am not making progress or feel like none of my ideas are following through I will take smaller positions and less positions. I more approach it from an overall account exposure perspective.
In a good environment my target is to have 6-7 core positions and will go on margin.
In a poor environment, I will only trade 1-2 stocks and cap my exposure at 30%. If I can’t make progress I will reduce further.
Secondly, I want to buy positions in two pieces - for example:
If I am looking for a stock to support on the 20EMA I might take a 15% position with a 1-2% stop (risking 15-30bps).
If the stock follows through the next day I may add an additional 15% to bring it to a 30% position. I will be raising my stop to the follow through day low though. I will likely still have 20-30bps of risk but I have doubled my position size as that follow through, to me, has increased the likelihood that my support buy will work. I am mostly looking at pullbacks on the 65 Min chart for adds and often even initial positions as it helps me avoid the chop.
The Importance of Progressive Exposure
I buy in pieces and add additional positions as the original positions work. I can go fully invested probably a lot more quickly than most people and this can hurt me.
Buying in pieces, not trading or reducing size during index corrections (below 20EMA), and being aware of the overall environment are the key elements to keep me out of trouble.
How Oliver Manages Open Positions
I use the 10/20EMA as a trailing stop. If a stock has been trending for multiple weeks it will usually let you know which moving average is of importance and that is the one I will use. On top of that, as we get more extended into the move I will look for opportunities to sell into extensions from the Daily 10EMA.
For a loser, I am often using the breakout pivot or day’s low as my stop if buying a breakout. If buying off support, it is usually against the 10 or 20EMA and will use that low as my stop.
Essentially, if the reason for buying is no longer present I am exiting the position. I do not use pre-determined targets but more base it on the length of the move and how the stock is trading relative to the moving averages.
I also assess where the index is. For example - if I think the QQQ 0.00 is going to start correcting, then I am not going to add/buy a bull flag on a stock that did not advance during the previous index move higher. This is based on experience and I am not always right obviously. Lastly, I have some breadth indicators I pay attention to.
When I think we are approaching a turn I will be more aggressive.
When I think we are “later in the cycle” I have been learning to just sit out or pass on a setup as it often doesn’t follow through in a big way.
How To Get Out Of A Rut
Trade smaller.
Focus on a single position.
Less positions.
How To Maintain Discipline, Manage emotions and fight the urge to overtrade
I mostly do this by increasing my timeframe.
There is this concept that you need to zoom into the 5 minute chart to “manage your risk.” For me, I have found that is the worst way to manage my risk. I use the 65 Min to execute. The benefit of taking less trades outweighs not getting the exact/absolutely perfect entry for me. I also do not day trade at all. If I do, its because my trade didn’t pan out.
I work with a trading coach/psychologist and I have become very mindful of how relaxed I am. I am extremely relaxed in a good environment but more tense when trying to force trades in a bad environment. Recognizing this emotion is huge. I think I have great natural intuition for the market but recognizing that, being aware of it, and allowing it to guide my actions is a new thing for me. Its going to be big for me from a longevity perspective.
Regaining Focus & Developing Insight: Understanding and Overcoming Deviations from Trading Discipline
I think when I have not been trading well I have tried to “hit singles” via day trading. That is not my strategy and has never worked consistently for me. I am too emotional to consistently operate on the lowest timeframes. I have adjusted to make it so that cannot happen.
I work with a coach/psychologist and an important activity he had me do has had an absolutely enormous effect on me being content and true to my process/timeframe. The activity was to imagine you were at your retirement party, what is it you would want your mentors, friends, clients, etc to say about your trading over the course of your career? I spent a lot of time thinking about this. My conclusions had personal, professional/trading, and mental components to them.
All my answers led to the intermediate term timeframe (2-12 weeks give or take). For whatever reason, going through that activity removed all FOMO to look at lower timeframes and has stopped me from trying to be this multi-earnings cycle position trader.
Probably for the first time ever, I am completely content that I am what I am from a timeframe perspective. This has been HUGE for me. I literally do not care at all what anyone else is doing.
The Importance of Post-Trade Analysis
I have always logged the biggest movers from a quarter in OneNote. I will also put trades in there I did not take that I thought I should have had, focusing on:
What criteria were present to tip off the move?
Why didn’t I see it?
What mistakes did I make?
Did I follow my rules?
Additionally, I started using this software TraderSync consistently into the end of last year. It allows me to tag my setups and gives me great data on my trading. It is VERY insightful and you can identify pretty quickly where you are making mistakes.
For example, when I started using it I found that nearly all my losers took place buying things too extended from the moving averages. When I say extended, most people may not view what I am talking about as extended. It may only be 3-4% above the moving averages but that was too much.
I want to be buying “in the pocket” and managing my risk very tightly against the moving averages. When I am stopping out of a position I want it to be because the stock didn’t work (it broke the 20EMA a lot of the time). A clear sign I am not being specific enough in my buy criteria is when I trade a stock 2-3x, get stopped out each time, but the stock is just consolidating or is in the exact same place. Tradersync showed me this clearly.
Seeing this has improved my discipline dramatically, reduced my trading, and has made it so I pretty much do not care if I miss breakouts/other trades that aren’t setup perfectly against the moving averages.
If buying a breakout and it doesn’t go I will just sell it now without hesitation as I do not want to get chopped up. Another clear deficiency I found was that I might take a smaller position “with plans to add” when a stock is slightly extended. This has never worked for me. I stopped doing that based on the data.
Deciding Which Setups To Buy
I do my best to try to determine which setups are the best, but it is subjective.
I like to trade a lot of the same names over and over vs scanning for the new darling stock. I do go through my scans but if it comes down to picking between two different names I am going to trade the name that:
I am familiar with
Has more liquidity
Through my mistakes, I have learned I am better off taking a bigger position in one name than “diversifying” with 2-3 names.
The Most Common Trading Mistakes
I think people focus too much on the shorter-term timeframes. That is how I sort of initially learned and think it is a huge trap.
Comparing yourself to others also creates FOMO and may cause you to take trades that do not fit your strategy because you think everyone is “killing it.”
In reality, once you have your strategy down it probably makes the most sense to trade completely alone, not talk to anyone, and just execute what you had planned out in advance. Despite what people say this is not a team sport.
Oliver’s Top 5 Trading Rules
Follow your strategy: No excuses.
Sell your losers quickly: Always.
Never average down: Average Up.
No FOMO: Don’t overtrade. Ignore other people. Trade your plan. Not someone else’s.
Not trading is the hardest but most important trade you can make. It is better to be out and want in than in and want out.
Reviewing Recent Trades
AMD 0.00%↑ Annotated daily chart:
AMD 0.00%↑ 65 MIN
Below is the 65 Min chart of TSLA from this past week.
Four trades, two scratches, two losers, and now I am long with my stop above cost and I think it is going to work but we will see.
Basically, I went long on the Wedge Pop through the 20EMA and took it in post Fed. Bought support on the 20EMA via the crossback and again exited it as seemed like market wanted to pull in.
I took it long on the re-test of the 20EMA and took a loss when it reversed lower. There were actually two losers here but too tight to show.
Then I got it long after we undercut and rallied. I still have that position with a stop above cost and we will see if it works. If it starts to work I will ride the 20EMA higher and discretionarily raise my stop via the trend structure on the 65 Min chart. We need to get out and over 200 first.
I would like to express my gratitude to Oliver for taking the time to share his valuable insights and experiences as a successful trader with impressive perspectives on what it takes to develop and maintain a trading system built for super-perfomance.
Check out some of his valuable resources below:
Website: kelltrading.com
Book: Victory in Stock Trading
Substack
To add on to what Oliver mentioned about post-trade analysis.
Excellent thank you
Did u publish a TV market indicator? They took it down because it violated a rule