- Sunny Harris began trading independently after a fund manager lost a large portion of her investment.
- She has also developed her own trading indicator using dynamic moving averages.
- She recommends testing your strategy and rules at least 100 times before using them for trades.
Before becoming a stock trader, Sunny Harris was a computer programmer with a master’s degree in mathematics.
By 1974, she had started a small computer graphics software company with three other partners. She retired in 1980 at the age of 30 after selling her shares in the company.
At that time she knew nothing about investments or even economics. So Harris did what she thought was best at the time: She gave away $1 million of her money to money managers. Within three weeks they had lost $75,000 of that. In 1980 that was a lot of money, she said.
“And so I decided I could do this badly on my own. So I took my money back and started learning how to do it myself,” Harris said.
She started reading every book she could get her hands on. To date, she told Insiders that she’s read 746 trading and investing books, with her favorite being John Murphy’s “Technical Analysis of the Futures Markets.”
It’s safe to say that Harris didn’t fare as badly as her ex-money managers. In 1994, she was ranked the highest-ranking commodity trading advisor among the 100 most profitable CTAs under $10 million under management. Under the registered name Roark International, it returned 365.5%, according to Stark Research.
She has been trading for 42 years and has developed her own indicator called SunnyBands. It is based on a series of dynamic short-term and long-term moving averages that it believes bypass the influence of Whipsaw, where a stock’s price moves in one direction but quickly reverses in the opposite direction. This is a common event that can affect moving averages.
The turning point that helped her improve her trading skills wasn’t so much a book or a study as one of her biggest mistakes. During the Gulf War of 1990-1991, Harris traded the S&P 500.
“I watched the news and on the news I heard James Baker say, ‘Ladies and gentlemen, I am sorry,’ and the next words were ‘to tell you that we have not reached a peace agreement.’ But on the word ‘regret’, the S&P fell sharply and I was long. So I lost $13,000 in two seconds,” Harris said.
The sobering experience brought her to a realization that would help her develop a successful approach. If she had been zoomed in on shorter-term charts like the 5-minute chart rather than the daily chart, she would have seen the price slow down and roll over, which is an indicator in the futures market that measures investors’ willingness to see price to keep betting. This is one of the signals now included in their SunnyBands indicator.
“Markets don’t go straight up and down. Sometimes they do, but usually when it’s going down, it’ll spend a little time turning around before it falls so you can see that it’s lacking interest and then it falls,” Harris said.
4 of her biggest takeaway tips for trading in the market
Her overarching advice is: develop your own trading strategy. You can borrow ideas from other traders, which Harris has done by reading numerous books. But in the end you have to refine it to make it work for you.
Your strategy consists of your set of clearly defined rules. The thesis or idea on which you base your trading can be viewed as a set of rules. These are the parameters you use to enter and exit a trade. Your strategy will be played within these rules. Harris uses her mathematical logic to construct “if-then” statements, or so-called conditional statements.
“Take simple moving averages, for example. So if the 10-period moving average is below the 20-period moving average, then sell. If the 10-period moving average crosses the 20-period moving average, then buy . Well, that’s a full system right there,” Harris said of one of their rules.
Test your thesis and your rules. This part will take a lot of time and patience. You can do this either through paper trading or manually noting your trades on paper or an Excel spreadsheet. This will help you determine how much money you would have made or lost. You don’t have to wait for the market to develop. If you do it manually, you can go back and use historical charts to test your theory.
On average, Harris says the general rule is to test your strategy with at least 30 trades. But from her personal experience, she recommends at least 100 trades before you can really tell if it’s working over time. You also need to test your approach in a down, up and sideways market to validate it, she added.
“I learned that if the market closes on Friday, it will open on Monday. And I watched that happen every day for three weeks. And then I thought, well, this! I have a system, there it is! And of course the opposite of what I expected happened the next three days when Monday came. And I lost money three times in a row. I thought, well, that wasn’t tested very well,” Harris said.
You must be able to handle the losses They will inevitably compete as traders, she said. This part of the craft is inevitable. As with any business in which you have expenses, losses are the cost of doing business when you are a trader.
“If you’ve tested your system, you know there’s going to be some amount of loss, and it shows in your test that you’re going to lose 30 or 40% of the time. You have to be able to get through those losses and not get too emotional,” Harris said.
A big mistake many traders make is revenge trading, which is when you start overtrading after a loss to make a comeback or recoup losses, she said.
“Everything I am is shaped by the fact that I am a mathematician. I think very logically all the time, I don’t get emotional,” Harris said.
How much you can afford to lose depends on your win-to-loss ratio. A profitable strategy usually has losses between 30 and 40%. But the real key is that your wins are greater than your losses. So even if you have a 60% loss, it’s still fine, but if you’re only winning 40% of the time, you need at least a two-to-one ratio for your wins, she noted.
Harris told Insiders she has a client who made $1 million from a $30,000 investment during the 2021 bull market. But when 2022 arrived, this client lost everything. It’s a sad story, Harris said, because now they’re afraid to act.
Comments are closed.