- In 2017, Jack Kellogg started day trading at the age of 19.
- This year, he made slight adjustments to his strategy to remain profitable in bear market rallies.
- He says each trader should find their own strategy and just use other’s approaches as a guide.
In 2017, Jack Kellogg started day trading at the age of 19. He was finishing high school and watching his friends go off to college. With no solid plans of his own, he began to feel anxious about what was next for him.
He had heard about trading stocks from a friend and began to take up an interest in it. Kellogg’s goal was to find a way to be financially comfortable outside of a paycheck or a 9-to-5 job. However, his first few tries were met with failure after working a valet job, depositing $7,500 of his earnings in a trading account, and losing a few hundred dollars.
Kellogg decided to take a step back and try his luck with paper trading. He also invested in an online educational stock trading platform taught by Timothy Sykes, a trading teacher and former penny-stock trader known for claiming to flip his bar mitzvah cash gift into over $1 million in gains.
By 2020, he eventually began to reap the rewards of his efforts. Kellogg’s tax returns, viewed by Insider, showed that he reported over $8 million in gains from day trading in 2020 and 2021. His big gains began in 2020 when he had a total income of $1.6 million. In 2021, that amount grew to a total income of $6.5 million.
His profits took off alongside the raging bull market that engulfed most of the last two years. He found that he was profitable on two-thirds of his trades. In a previous interview with Insider, Kellogg shared six key things he does when setting up a winning trade.
This year hasn’t been as easy for traders. Kellogg began to notice the stock market trending negatively in November and December. By January, he had taken a loss of $100,000. His year-to-date, win-to-lose ratio was also down to 50%. The negative trend prompted him to slow down and rethink his strategy, he said.
His first adjustment was to lower his profit expectations. Instead of aiming to beat his previous years, he aimed to just make $1 million to $2 million for the year. So far, he’s on track to reach his goal. Year-to-date, he has unrealized gains of over $1 million, according to his Cobra monthly brokerage statements. In August alone, he had over $280,000 in gains.
“I think a lot of people who pushed themselves to do better in 2022 than 2021 probably gave back 50% or more of their profits, unfortunately, because it’s just been a tough market,” Kellogg said.
He continued: “And I felt like in 2020 and 2021, 90% of people were making money. And now I feel like, in this market, it’s only like 10% of people are making money because you have to be more selective. You have to take quicker profits. And people were trained to hold in 2020 and 2021 because every dip got bought and it kept going higher and higher.”
In July, Kellogg either stopped using some of his strategies or slightly readjusted them to navigate the bear market rallies he’s now trading.
6 adjustments he has made
Instead of slamming on a full position immediately, Kellogg scales into a trade while moving his stop loss up. But this year, he’s more cautious when scaling into a position. In the past, he could continue to scale into a trade even after he has seen the share price rise by 10%. Now, he stops adding once the price has increased by 1% to 3%.
He takes profits sooner. Once Kellogg is up by about 3%, he exits the trade. In the past, he had been much more lenient when holding a position, sometimes keeping a stock throughout the day. The high trading volume cushioned him.
“Even if the stocks that I was long had a harsh dip, if anything, it would just be like an adding opportunity for me,” Kellogg said of his previous strategy. “But in this market you want to get out before that harsh dip even happens.”
He no longer constantly buys the dips. If he does, it’s after a multi-day selloff, when the market has been down between three and seven days, he said. This is because not every dip is bought back up during this bear market.
On September 7, Kellogg attempted to buy the dip on Globalstar, Inc. (GSAT) after the stock’s price spiked to $3 intraday. He entered his position at $2.28 a share but the stock never rallied back. He exited his position at a share price of $2.22. During the bull market of 2021, a stock like this could have caught more attention and rallied to as high as $5, he said.
“Usually a good sign for me is when you start seeing everybody bearish. When you see the fear-mongers coming out and saying the market is going to tank like 80% or whatever it is, that’s usually when it’s a good spot for a bounce,” Kellogg said.
For example, he recalls observing seven red trading days in a row between August 26th to September 6th. The S&P 500 plunged by about 7% during that period. Eventually, it was followed by a four-day bounce back before the stock market continued trending lower.
Ideally, he sticks to trading during the first hour of the market’s opening when volatility is at its peak. In the previous two years, he witnessed volatility throughout the day and stocks could hold their trends longer, he said. This year, there’s less action.
“The volatility is highest at the open and the close, but I noticed even more in this market because there are a lot less traders,” Kellogg said.
For much of August, he traded popular meme stocks such as AMC (AMC), GameStop (GME), and Bed Bath & Beyond (BBBY) because they experienced a few rallies.
He’s more cautious about following breakouts. His previous strategy leaned heavily on trading breakout patterns, which is when the price of a stock moves outside its support or resistance levels at an increased volume. Kellogg often entered a long position after a stock broke its resistance level.
He says this approach seemed to work for him about 60% to 80% of the time in 2021. This year, that strategy has only worked about 10% to 20% of the time. Now, he uses the S&P 500 to help him gauge whether a breakout is worth trading.
“If the S&P 500 is going up and we have a breakout, the odds of it working are a lot higher than if the market is going down,” Kellogg said.
He believes the flip side of that strategy, which is shorting a breakout, would now work better. However, he’s not taking that approach because he doesn’t want to shift his mindset in a way that may impact his performance in the long run. Instead, he’s making fewer trades.
“I don’t want my thesis to change or to not trust the breakouts or even shorten into the breakouts. I want to be able to make that transition into buying breakouts again quickly because the breakouts will work very good once this bear market finishes and we start to push back up,” Kellogg said. “So, I’m saving my mentality and my strategy so that I’m still aggressive when I think the time is right.”
He normally reviews headlines to see why a stock’s price may be moving upwards. But market-moving news doesn’t matter as much in an environment of short rallies. Therefore, he’s less focused on the reasons behind why a stock is moving.
For Jack, these slight adjustments have worked. However, he noted that not everyone will be successful following the exact same strategies. He talks to other great traders regularly to learn what they’re doing. But he only uses their strategies as a guide. If he tries to mimic their exact steps, he’ll mess up, he said. This is because he doesn’t have enough conviction in their processes and may not be comfortable with their risk management styles.
“I’ll end up just chopping myself up, verses when I just follow myself and understand and know what to expect. Even if I don’t make as good a trade execution, my mental execution will be a lot better,” Kellogg said.