Tom Bierovic Uses Discretion on Top of His Rules

Off floor trader Tom Bierovic, trades according to a set of rules he has developed over the years, but uses his own discretion on top of these rules. Bierovic believes he was lucky because he was introduced to the futures business at a very young age. His father was a trader at the MidAmerica Exchange and Tom would plot daily and weekly bar charts of the agricultural contracts for his allowance money.

"We didn't have computers ... I'd get the afternoon newspapers and get the closing prices every day," Bicrovic explained. Additionally, during the summertime, Bierovic worked on the trading floor for his father. "I would keep 15-minute intraday bar charts and I did a 10-period simple moving average of the 15-minute closes," he explained. "My dad would trade in the market scalping ... but the only difference is that he would only take trades in the direction of what I told him the 15-minute trend was," Bierovic added.

After plotting charts by hand for years and doing manual calculations for exponential moving averages, stochastics, RSIs, ADX and MACD, Bierovic said, "I don't do anything by hand anymore." But, he added "I think that it is very good for when you are learning."

Bierovic is strictly a technical trader. In fact he "makes a deliberate effort to not know anything about fundamentals" he said.

"All the fundamentals are summarized perfectly in the current price of the market," Bierovic explained. "Technical analysis is applied social psychology. It's just crowd behavior-hope, fear and greed," he said.

Currently, Bierovic trades from his home in suburban Chicago and manages "a couple of million dollars" calling himself a "discretionary trader with a very specific methodology; I have all my rules written down exactly and carefully. So somebody else could trade my system. But, I deviate when I choose to."

However, he is not a CTA and abides by the restrictions of not soliciting funds and limiting the number of people that he trades for to under 15 in a 12-month period, he noted.

Bierovic has developed what he calls a "momentum retracement trading method" which "involves knowing the direction and the quality of the trend, knowing how to measure countertrend reactions and when the trend has reasserted itself and knowing what to risk and knowing how to risk it," he said. In terms of time frame, "I trade basically still off the daily charts, but I do watch the markets intraday and do trail my stops intraday," Bierovic said.

He focuses on trending markets and is not shy about taking profits. One example of the type of trade he might put on is "If I get in today, I'd get out tomorrow if the market returns to today's high," he said. "I won't take a trade unless the market has recently had a strong directional trend ... to go long I'm looking for a real rice upthrust in the market," Bierovic explained.

"I think it's important to take profits because markets take them away nine out of 10 times," he said. "I just try to be right on at least 40% of the time using a 2:1 reward/risk ratio. There is a very good living in that," he said.

"I take profits and look for an opportunity to re-enter," he noted, saying he is usually in his trades two to four days. This is one area where Bierovic said he sometimes uses discretion over his rules. "I deviate on exits. I say, 'Gee if I've made enough money.

I just might take profits on the close.' To me, a good trade is when I doubled what I risk," Bierovic added. As a chartist, Bicrovic doesn't favor one market over another. "I really treat them all the same," he said. However, "My favorite market is the most recent market in which I had a winning trade and my least favorite market is the one is which I most recently lost in" he joked.

He does, however, focus on the more liquid markets. "The bigger the market, the better your fills are and the better technical analysis works" Bierovic said. "I stay in liquid markets. I don't trade lumber or pork bellies, palladium or the Australian dollar,"

he noted. "In a little market like pork bellies - it is not difficult to control the market - a big fish can move a little pond," he said explaining that "in a smaller market, technical analysis might not work as well" if the hopes, fears and greed of the masses aren't being reflected.

Specifically, Bierovic credits Chuck LeBeau--he taught me to look at markets with a (minimum) average daily volume of 5,000 and total open interest of 20,000 or more ... but I can fudge on that a little bit."

Bierovic advises beginning traders to "develop a trading style compatible with your own psychological make up ... some people can day-trade the S&P and some people can't. A trading style has to be congruent with your own personality," he said.

"A beginning trader should concentrate on learning technical analysis and trading rather than the dollar gain or dollar loss... Keep losses small so you don't get knocked out of the game.

"Don't get overly excited about winning trades and don't get overly despondent about losing trades ... you shouldn't feel like a hero after one winning trade and you shouldn't feel like a bum after a losing trade. Just hang in there and keep trading."

"The whole battle is to have a trading method and to follow it," Bierovic concluded.