Linton White Explains How To Trade The Nasdaq Like A Pro
He grew up in Estcourt in KwaZulu-Natal and studied computer engineering before taking up a job as a tool and die maker for a machine shop in Pietermaritzburg.
“From there I joined a company building swimming pools for a number of years. It was during this period I made the decision that I did not want a capped income and needed something with target incentives that would drive me to earn more,” says White.
He took up a job as a vacuum sales representative, which turned out to be far more lucrative than any of his previous jobs. “One of the people I sold a Kirby to offered me a position as a real estate agent. I ended up starting a real estate agency in Durban which I ran successfully until 2010 when the property market tanked. I needed to supplement my income and looked around at various opportunities. I decided to start trading the financial markets, using a little knowledge that I had gained from my father.”
He started with R50 000 and within two weeks had doubled it to R100 000. Then in week three he lost it all.
“I learned two very important lessons from this: one, you can make a lot of money from trading and two, you can lose a lot of money trading,” he says.
“I embarked on a three-year journey, while selling properties, that got me to the point where I was trading successfully. I spent days, weeks and months educating myself, trying strategies and developing my own approach to trading,” says White.
In 2013, having built up a reasonable track record of success in trading, he was offered a position with a company in the trading industry where he focused on growing the client base while trading for himself.
“This was great because I learned about the business side of trading too. I ended up starting a company called Green Box Markets [GBM] and grew a substantial book of clients under an existing South African-regulated brokerage.”
He sold that business and eventually ended up as head of business development at QuickTrade. He continues to actively trade the markets, his preferred instrument being the tech-heavy Nasdaq.
Advice for new traders
White says one of the most frequent mistakes he sees new traders making is over-leveraging their trades. They have a R10 000 account and stick half of this into a trade at 500:1 leverage (meaning losses or profits are amplified five times), only to see the trade turn against them.
“In my opinion, new traders should not over-leverage their trades, to keep their risk as low as possible until they are consistent, and to look to the long term instead of trying to get rich quick. This is definitely not a get-rich-quick scheme. It takes a strong foundation of knowledge to be a successful trader. You have to give yourself time to become knowledgeable in the markets, and build up confidence before the profits appear.”
Current view on the Nasdaq
Another way to lose your shirt in trading is fighting the overall trend. Nasdaq is an instrument that trends, and has been doing so for a decade.
The trick is to be able to ride out the corrections. “I more of a long-term trader, so I focus on averaging into positions so that I can take full advantage of the trend as a result,” says White.
Averaging into positions means waiting for the right market conditions, which can take days or even weeks, and then taking a small position in the trade, adding further positions the more the market trend moves in your direction. The above chart of the Nasdaq shows a 23.6% retracement in the Nasdaq, which professional traders recognise as a key ‘Fibonacci’ retracement level (Fibonacci is a series of natural numbers found in nature that many traders believe have some application in financial markets).
“I make use of the Relative Strength Index (RSI) and Williams Percent Range to find areas in the Nasdaq that are oversold. The chart above shows both indicators breaking into oversold territory in March 2020 and a serious bull trend develops from that point onwards. This is where I begin to average into trades. This system can be applied to smaller time frames as well,” adds White.
He uses Fibonacci retracement levels to assist in defining trade entry points. Though the chart above shows the Nasdaq has retraced 23.6% and has therefore hit a key Fibonacci level, this does not mean you should bet the house on a trend reversal at this point, as the correction may go deeper. The overall trend is still bullish, and retracements provide an opportunity to enter the trade while the major bull trend pauses for breath.
The US Federal Reserve is expected to raise interest rates throughout 2022 and this is likely to have a negative impact on tech stocks (and the Nasdaq). The Nasdaq is already weakened in expectation of interest rates hikes, and White says he is waiting to see whether the index takes further pain before resuming its overall bullish trend.
“Should this Fibonacci support level break, I will be looking to add into my long position at the 38.2% [Fibonacci] retracement level,” he says.
“I start with a very small lot size in comparison to my total equity, which means that I am in a position to ride out corrections of this nature and because I end up being in three or four positions at a time. If I’m correct in my analysis, I would take profits as the trend continues. If I am wrong and the trend reverses into a long-term bear market – which I do not see at this point – I would exit my positions to preserve my capital.”
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