November 30, 2012 at 23:24 PM EST
Exclusive Interview with Rachel Fox, Top Stock Trader and Actress
This is an exclusive Stockerblog.com interview with Rachel G. Fox. You should pay attention to her for several reasons. First of all, she is a female stock trader with a very successful track record in a field that is dominated by male stock traders. Second, she is a very young trader, only 16 years old, in a field that is dominated by traders who are much older. And third, she is an actress, who starred in Melissa & Joey, and had a reoccurring starring role in Desperate Housewives, in which she was nominated for a Best Recurring Young Actress in a Television Series Award. (How many actors do you hear about trading stocks, other than Shia LaBeouf, who practiced stock trading for his role in Wall Street 2.) Rachel Fox is also the publisher of her own blog, FoxOnStocks.com. Check out this fascinating interview.

How did you get involved in trading stocks? Do you have a parent or relative who is in the financial services business or is an active trader?

No. I’m the only one in my family who is an active trader. Everyone else invests for the long term. My mom has a degree in finance and was the first one to explain to me what the stock market is and how it works. I’m a very money driven kind of person. Swing trading in the stock market seemed like such a simple and logical way to make a lot of money quickly.

I think the concept of the stock market hits everyone a little differently. I know some people who understand it but for them, the thought of trading and putting their money in such a volatile position is way too unnerving.

I enjoy the risk and unnerving-ness and love the potential to make such great profits.

After I understood how the stock market works, I had to convince my parents to let me trade with real money. They weren’t sure how safe it was so my mom had me trade for a little while in a virtual trading account where I traded with fake money. There I learned the actual basics – how to place trades, limit orders, stop orders – all that good stuff.

Then, a couple of Thanksgivings ago, my family and I went to a friend’s house for dinner. I talked with a man who’s a stock trader and he was telling me about a $2 stock RAYS that he claimed would rise to $10 in the next couple months. He made it sound like such a great buy. I decided to take the stock tip from him and buy the stock with my real money. I learned a valuable lesson. Never take a stock tip from anyone. Ever. Trade on your instincts and yours only. The stock is currently trading at .005 cents.

It was a tough lesson to learn but I’m glad I know it now and it’s what got me started.

In your October blog on Confessions of a Day Trader, you talk about how you prefer to day trade instead of invest for the long term, but do you ever make long term investments?

I’ve thought about long term trading in the past but I just have so many doubts about doing it with the way the market currently works. If the market worked how it was intended to, I would. But I’ve seen so many examples of companies that are amazing and that have very progressive growth but the stock price just doesn’t go up in the same direction as its success. So many others factors like day traders, institutional and block traders, and short sellers can falsely influence the direction of a stock price. I don’t begrudge that the stock market doesn’t work the way it used to work. I’m very happy with swing trading and shorting and riding on the advantages of that. It’s just far less safe to trade long term because the market no longer works the way it was intended to work.

Do you ever look at charts when deciding to invest in a stock?

Always. Every single trade. There’s not a trade where I wouldn’t check out oversold/overbought stats, accumulation/distribution stats, etc. However, it’s extremely easy to get too wrapped up in those. They provide a nice blanket of reassurance that can sometimes be hurtful because you’ll end up leaning too heavily on them and forget to follow your gut instinct. Everything is best in balance.

What sorts of things do you look for when trying to determine what stock to buy?

First, I’ll consider the whole market and whether I should go long or short. Then from there, I’ll look at overbought/oversold charts and look for stocks that are seriously sick with one of those conditions then trade the reverse of that. For every stock, I must know its trading volumes. Being a day trader, every penny matters. I need to know how many shares are traded on an average to get a good idea of how quickly the stock price may changes. I also look at the average daily price spread. I love when the stock has heavy volatility. That makes for quick ins and outs with high profit.

Where do you get your best stock ideas?

Mainly from YahooFinance.com. I live on Yahoo Finance and I read about many new stock ideas on their website. I check the Twitter feed as well to see what’s going on with companies, government stats, and the economy. But, as I mentioned, I NEVER take a stock tip and I never trade off a recommendation from another trader.

Can you describe the best trade you ever made?

The best trade I ever made happened back in May. I used a technique many investors warn against. Averaging out. It seemed to work out nicely though in this instance.

I bought several shares of the oil stock SLB after I had seen it get beaten down very heavily. I bought it for roughly around $69. However, it didn’t matter. May was one of the worst trading months of 2012 for the market as a whole. The stock had dropped another $8 from the price at which I bought it in just a few days. I was freaking out and didn’t know what to do. My dad told me about averaging out and I thought it was such a great idea because I definitely believed that market and SLB would rebound in the near future. So I bought the same amount of shares at about $61 and got my average price to roughly $65. It only took about a week for the stock to rise up to $68. I sold for the $3 profit and made a very tidy sum.

Can you describe the worst trade you ever made?

The worst trade I ever made was my first one. The one I described in the first question. I took a stock tip, which I now know never to do, and bought a stock called RAYS for $2. That stock dropped to .005 cents. I was told by the man, who gave me the tip, that the stock was going to rise to $10. I lost my shirt and my shoes but am still glad I learned that lesson then, instead of later on.

Do you think there is a strong need for young people to learn the basics of finance in high school, and if so, what to you think is the best way to provide that education?

I absolutely think there is a strong need for young people to learn the basics of finance in high school. Money management and investing are some of the greatest skills to learn early on. That way, when it’s time for young adults to be on their own away from their parents, they’ll be competent, they won’t be taken advantage of, and they’ll be smart in how they invest and manage their money. I think it’s a much better use of time in high school to learn about finances.

The best way to provide that education is to enforce mandatory finance classes also with the core subjects -- math, English, history, and science. I think it would be cool to have professional traders, investors, hedge fund managers, bank employees, and anyone in the financial world come to schools and help teach the students more about money management.

What advice would you give to a young person who wants to start investing or trading but doesn't know where to start?

First, I would recommend they read my daily blog at www.foxonstocks.com and watch my upcoming Fox on Stocks three minute videos about stock basics.

Second, I would recommend they start with virtual trading on cboe.com for instance. I learn best by just jumping in and trying things hands on. Some trading companies provide a platform where you can trade fake stock shares with fake money as if it’s all for real. It’s a great way to learn what works for your trading and what doesn’t as well as how to do it.

Is finding time to trade ever an issue for you?

Finding trading time definitely is difficult on busier days. I find I have to constantly be splitting my head in different directions between being on set, playing with my band, reading scripts, to placing my trades before 1pm. (Regular stock market hours are 9:30 – 4pm Eastern Standard Time and Los Angeles is on Pacific Time)

A few weeks ago I was filming a show and in between takes, I grabbed my iPhone, checked out my stocks, and placed my trades. Trading on the go actually makes it even more fun because my adrenaline levels are so high.

What stocks do you think should do well next year?

It’s hard to say because I don’t know exactly what will happen with the Fiscal Cliff and whether the Triggers of Sequestration will be pulled or if lawmakers will once again delay the inevitable of paying the deficit.

Our national and global economy is on the brink of a mess, whether the government bandaids the economy or whether they start to pay their debt to reduce the deficit.

If they do not begin to pay off the debt and the market starts to nose dive, I would short sell stocks. I would focus on the highest volume trading stocks to get the biggest margins.

On the other hand, if the government can reach a compromise and can begin to pay down the deficit, the market will stabilize and be a bit more of a logical platform. However the stock market is not necessarily logical, so I’d still recommend caution. If you’re going long and the government begins paying down the deficit then I’d focus on tech, biotech, and utilities.

You've probably noticed that I haven't yet asked you a question about your acting background yet, so here it is, and I hope it doesn't sound like a job interview question. Where do you see yourself ten years from now, as a mutual fund or hedge fund manager, or a famous actress, or both, or something completely different?

I actually didn’t notice and I appreciate the focus on one career at a time.

In 10 years, I see myself working on many of great films and TV shows, day trading on the go, trading options, blogging about trading and constantly learning about the market, and touring with my band. I love rock music and love playing guitar, singing, and writing rock music. Acting is my number one passion, with stock trading a distant second place as far as what I was born to do. I love staying busy and filling life with tons of amazing things. I will be doing it all -- acting, trading, and rocking.

Thank you very much for taking time out of your extremely busy schedule to do this interview.

Rachel Fox's blog can be found at FoxOnStocks.com.

No investment recommendation nor any investment promotion is expressed or implied by either Stockerblog.com or Rachel Fox in this interview.

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