Tim Knight has been charting and trading since 1987. His first stock trade was, in fact, on October 19, 1987 – the day of the crash – which perhaps goes a long way explaining his disposition toward bearishness. He has been involved in personal computers since late 1979 and, starting at age 16, began writing a couple dozen books about using and programming computers. His most recent writing has been focused on charting and the history of financial markets, including his newest books, Panic, Prosperity, and Progress, and, more recently, Silicon Valley Babble On. He has been running Slope since March 29 2005 and has, during that time, written more than 30,000 posts on the site.
In 1992 Knight founded Prophet, a web-based technical analysis company that was acquired by Investools (and, later, Ameritrade) in January 2005. Tim served as Senior Vice President of Technology for Investools from 2005 through 2010. You can watch this documentary about how Prophet was created, built, and ultimately sold.
Knight directed his passion for the markets to fuel the innovation for which Prophet was known. In fact, Barron’s and Forbes consistently named Prophet the #1 website for technical analysis. He also hosts a daily show on the tastytrade network, Trading Charts with Tim Knight.
Before starting Prophet, Tim was Vice President of Technology Products at Montgomery Securities in San Francisco, where he led the development of an institutional online-trading platform.
Additionally, he has held various positions in marketing management at Technical Tools and Apple Computer. He lives in Palo Alto with his wife, their children, a bevy of egg-laying hens, a pond full of fish, nine thousand honeybees, and a trio of dogs which occupy whatever free time may be available. He has also been known to burst into song from a wide repertoire of Broadway musicals, irrespective of the preference of those around him at any given moment.
Over the many years that I’ve been building and running the Slope of Hope, one of the most frequently-asked questions is, in one form or another, what my style of trading is. I’ve emailed bespoke answers to this question for years, but I figure it’s high time to put something permanent on the site to clear the air and also save myself the time of answering the question any more. I’m going to take a somewhat lazy style of writing and construct this as a series of questions and answers, which might make it more efficient for those who are only interested in certain aspects of how I trade.
When you place options trades, do you do straddles, butterflies, calendar spreads, or………?
None of the above. I have made a deliberate point of being a surprisingly unsophisticated trader. I sometimes tell the viewers on my tastytrade program that they are almost all more sophisticated traders than me. I tend to simply buy options (puts, usually) which are (1) at least a few months out in the future (2) in the money (3) liquid enough to have a reasonable bid/ask spread. When people ask me questions about options greeks and what my delta is, my eyes just glaze over.
How do you decide what to trade?
I tend to take a “bottoms-up” approach to my trading ideas, meaning that I prefer to look at a large quantity of symbols (literally hundreds of charts per day) and then pick out from them those that seem the most promising. The SlopeCharts product was designed early on to appeal to organization freaks like myself, so the watch lists are very flexible and easy to use. I keep a frequently-updated watch list called “Bear Pen” which I review daily, and if anything within there seems promising, and I don’t have a position in it yet, I’ll take a close look to see if its risk/reward relationship is appealing enough to warrant a trade.
Do you make a living by trading?
No, and although I’ve been mixed up in the world of trading since 1987, my belief is that precious few people are mentally constructed in such a way that they can do so. To me, it’s sort of like being a great artist or pianist. I believe that traders, by and large, are born and not made, and although there are certainly skills, techniques, and knowledge that we can acquire that helps us in trading, it takes a certain kind of person to actually thrive year after year as a trader. I am exceptionally proud of the tools I’ve created, and the words I’ve written, about the world of trading, but I do not hold myself out as a professional “trader” by any means.
How long have you been doing this?
Pretty much my entire adult life. I first got involved in the world of charting and trading in 1987, and I’ve never looked back. In all that time, I’ve created, from scratch, two popular charting platforms, two successful websites, and have written several books and tens of thousands of posts about charts and trading. Simply stated, I really like looking and talking about charts, so I’ve made a career out of it.
What kinds of financial instruments do you trade?
Virtually all of my trading is stock options. Over the years, I have traded large quantities of stock (both buying and shorting), crypto-currencies, FOREX, and equity futures contracts. I’ve pretty much honed in just on options trading, however, for the sake of leverage and risk management.
How significant is your trading account to your overall financial situation?
It’s a good-sized account, but it represents – – if I dare to use a term associated with Cramer – – “mad money” on my part. In other words, whether the account zooms in value or plunges to zero (and I do try to avoid that latter outcome), it isn’t going to affect the choices in my life, for better or worse. More than anything else, the existence of the account, and the trading thereof, constitutes for me a living experiment of all the things I develop here on Slope. In other words, I put my money where my mouth is.
Why are you a stock market bear, when assets usually go up over the long haul?
This question is probably best left to a crack team of psychiatrists! Maybe I was dropped on my head. Ironically, the vast majority of my own personal wealth has come from “long” positions in either real estate or small business. There’s something about a chart that looks like it’s about to fall that has always appealed to me. I must emphasize, however, that technical analysis, and the tools offered on Slope, are utterly indifferent to direction. You can be he world’s most fanatic perma-bull and still get every morsel of value out of these tools as would the world’s most resolute bear. One hammer can serve all styles of carpenters.