[INTERVIEW] Matt Choi, Founder And Chief Strategist Of Certus Trading

Start small but have a big mission.

That’s the kind of thinking that’s helped Matt Choi win on any number of fronts and a philosophy he suggests other entrepreneurs can also live by. That’s because, as he’s found, having a big mission can also lead to big outcomes.

Matt Choi is a man who wears many hats: Professional trader. Educator. Best-selling author. He’s pulled those talents together under the roof of Certus Trading Inc., a small trading education company that does, in fact, think big. His aim through Certus Trading is to help others master the art of trading – stocks, ETFs, futures, currencies, and options  – so they can achieve financial success in what can be a very complex and risky endeavor.

Matt has been a professional trader for 17 years, self-taught and, unlike most professional traders who learn on the exchange floor or trading other people’s money, trading on his own money. A true entrepreneur, that experience taught him another valuable lesson: You’re going to make mistakes. So, learn from them.

One of these mistakes was the hours and money he spent in search of the “perfect” trading system. Matt tried day trading, but hated staring at monitors all day. Position trading tried his patience; when markets stalled or went against him he got fidgety. He gambled on biotechs and traded illiquid exotic futures and options positions. And he also spent enormous amounts of time and money programming trading systems that were useless.

“I thought having a good strategy was all I needed to achieve success,” Matt Choi recounts. “In hindsight, I now realize that it takes so much more than strategies and systems.”

In fact, with the help of a mentor, the late George Fontanills, a world leader in options trading, Matt found the formula for success was actually quite simple for all the challenges he had getting there. Understand your “trader personality” (Matt’s was swing trading). Specialize in a few markets instead of trying everything. Learn risk management techniques to preserve capital when times are tough. And most importantly? Acquire a winning mindset.

That foundation led to a trading career that has been consistent and profitable and was the basis of “The Winning Way,” a book Matt co-authored with motivational speaker and self-help expert Brian Tracy. The foundation has also helped him establish his reputation as a respected educator to thousands of traders.

Matt Choi took some time to talk with us about his entrepreneurial career and how others can learn from his mistakes – and his successes.

You had a successful car dealership during the time you were searching for the “perfect” trading system. What was the appeal of something as risky as trading when you already had one solid business going? Do you think it’s just part of the entrepreneur’s nature to walk that kind of tightrope?

Matt Choi: First of all, thanks for having me here. Your question actually brought up some of my fondest memories during my entrepreneurial journey. With my car dealership, a lot of people thought at the time that it was a very easy business with little risk, but that is not true at all. Now that I am no longer in that business, I can share some inside scoop with you to get a clearer picture.

The land, building, and all the equipment cost about 10 million. Then, you add another 8 million of inventory, and another 3 million in employee salary. That is a lot of money invested and tied up to make a couple of million bucks a year.  Don’t get me wrong, it was a good business, but the ROI was low. So looking at the numbers, there were substantial risks. For example, every quarter point hike in interest rate costs me a quarter million dollars a year. Also, the manufacturer often has labor related delays, so when the union workers go on strike I couldn’t get any cars to sell. Plus, being a physical business really limited my ability to travel with my family, which is something I love to do. We still traveled, but I always had to check in on the dealership while I was on vacation.

Having said all that, I learned over the years not to worry about external factors that I can’t control, and concentrate only on areas that I can.  I focused on treating my customers right and took care of my staff, and that made us successful. Eventually, we came to a family decision to sell the dealership for a couple of reasons. One, we just didn’t want to be tied down anymore by a traditional brick-and-mortar business. And two, it got to a point where I was doing so well with my trading that I really wanted to focus on it. Circling back to your question around risks, you should see the faces of my friends and family when I broke the news to them that I was selling the dealership and going to trade full time. They really thought I was crazy giving up a multi-million dollar business, and getting into trading … which to some of them, still to this day, think it is very risky.

So to answer your question, I don’t think we as entrepreneurs walk a tightrope. Let’s put it this way, all successful entrepreneurs have their business goals, their passion, and their life goals all aligned.  Take me as an example, I really love the challenge that the markets give me everyday … that’s my passion. At the same time, I take trading seriously and treat it as a business. What other business allows for triple-digit return in a few weeks, or in some cases, a few days?

Of course, just like in any business, there are reckless traders who take on too much risk and lose their shirts. But if you study the markets and manage risks properly, it becomes a non-issue.  Finally, we have a lot of family overseas and we love to travel. For my wife and me, one of our goals as parents is to travel around the world with our son and help him become a global citizen. I think it is very important to expose the next generation to different cultures so they can learn to understand and respect all human beings even if others have different beliefs and values than us. That’s me. I am sure all entrepreneurs have their own goals … and I know the happiest ones always have their business goals aligned with their personal goals. Sure, there will be obstacles and sacrifices along the way, but to me I don’t see them as risks, but rather just part of the journey.

How do you suggest entrepreneurs think about that balancing act between risk and safety to achieve success?

Matt Choi: Yeah I get asked this question a lot. The key is to start small, and have a plan to scale up. When I was looking into the car business, I didn’t have the money to acquire a BMW or Toyota franchise. So when a Hyundai franchise became available, I did the numbers and believed that it would work. I created a plan with some financial milestones that would be used to evaluate my success or failure. Slowly I grew the business, added staff, increased inventory, bought land, built a brand new state-of-the-art building, and progressively got the business to its peak potential before selling it.

If I stayed in the car business, the next logical step would be to acquire more dealerships and repeat the same process.  It’s kind of like going through school – I know once I passed Grade 10, I have the ability and knowledge to move on to Grade 11, and so on.  As entrepreneurs, what we learn from the school of hard knocks serves as a foundation, and having this foundation to fall back on removes a lot of the risks.

The same principle applies to trading. Always start small and risk as little as possible, even a hundred bucks is fine. The key is to learn, learn, and learn. I can never learn enough. And by learning I don’t mean watching CNBC. What I mean is to look at the thousands and thousands of stock charts, take notes, create your own hypotheses, draw your own conclusions, and create your own strategies.

I talk to so many new want-to-be traders and most of them think they can become trading masters in a few months. I’ll use doctors as an analogy here. It takes at least ten years of university and post-graduate education to become a surgeon, what makes people think they can become a successful trader in a few months? I am always baffled by that.

Back to my point. Once you are able to consistently make money trading a hundred bucks, now you are ready to trade two hundred bucks. And once you are able to succeed with trading two hundred bucks, then you can trade four hundred, eight hundred, sixteen hundred, thirty-two hundred bucks … and so on. This scaling up process is one of the most important skillsets to have in order to achieve ultimate success. To summarize all this, having the proper education and experience help keep our money safe, while having the ability to scale up gives us the opportunity to be very successful.

You speak of George Fontanills as your mentor, who was a valuable person in guiding you. Talk to us about the importance of mentors to entrepreneurs and how you suggest finding them and getting them in your corner. (And how did you connect with someone of Fontanills’ caliber, anyway?)

Matt Choi: Yes absolutely. This is obviously very emotional for me … George passed away a few years ago and he was absolutely one hundred percent instrumental in helping me get to where I am today. I really don’t think I can do what I do now without his guidance … that’s how important he was and still is to me. I think in order to understand why having the right mentor can expedite any trader or entrepreneur’s path to success, we need to look at the process in sort of a reverse chronological order. As you know, I am a short-term trader and I focus on catching market swings. My trades last anywhere from a few days to a few months, depending on the stock and market volatility.  And because swing patterns are highly repetitive and happen over and over and over again, stock movements can be predicted with a high degree of accuracy.  But the point is, when I first started trading, I didn’t know that I was going to be good at swing trading.

Like a lot of newbies, I was attracted to day trading – you know, trading the markets a few hours a day and closing all positions before the closing bell rings in New York, so I don’t carry any risks overnight.  I worked with a couple of super successful day traders and they taught me some very good strategies.  I did quite well, making about sixty grand every month net commissions.  But, I was exhausted from staring at the screen all day long. I would skip lunch and munch on junk food when I am trading and it just wasn’t healthy. I was always on a sugar high and felt very tired at the end of the day. I would literally not drink anything so I won’t need to use the washroom. It just wasn’t right.

Also, day trading requires me to literally sit at my desk all day long. I love to travel and unfortunately, day trading and travel are mutually exclusive and I couldn’t do both at the same time. This is a prime example of why money doesn’t always bring happiness. So I decided to stop day trading and started looking at longer-term holdings that don’t require day-to-day management. I took a few online courses and the strategies were useful, but I quickly found out that I just don’t have the patience to see those trades through. I would get fidgety and anxious waiting for these trades to work out, and I ended up too trigger happy and couldn’t hang on to them long enough to make any meaningful profits.  So I had to give up on that too.

It was around that time that I met George at his live seminar. I was immediately attracted to his personality and how effective he was in simplifying complex options strategies into something that anyone can understand.  It just showed the depth of his trading experience.  Also, he was very approachable and was willing to answer everyone’s questions.  So when he opened enrollment to his mentorship program, I jumped at the opportunity. It was a no brainer. George mentored me for a couple of years, and during that time he taught me a lot of trading strategies.

More importantly, he spent time getting to know me and my personality. He came to know that I don’t have a lot of patience, and he also knew that I love to travel and want to keep a flexible lifestyle.

George loved cars so I was able to share a lot of my car industry experience with him.

It was good times learning from George. He was able to pinpoint my strengths and weaknesses as a trader, and he told me to focus on swing trading using options and futures.  He taught me valuable risk management skills and how to protect my trading capital.  He taught me how to trade small but win big.  He taught me how to scale up. He taught me to focus on mastering one or two markets before expanding into other areas of trading.

So I think you can now understand why having the right mentor, in particular someone who plays to your strengths, can help anyone achieve success at a much faster and sustainable pace.  A lot of times it is a process of elimination. I kept trying different things, different approaches, different strategies until I land on something that is perfect for me.  One last thing, almost every successful person you ask will tell you they had a mentor somewhere along the line. So get out there, attend industry trade shows, networking events, and find someone who you respect and look up to, someone who has achieved what you want to achieve. Tell that person your story and your goals and ask for guidance. This will keep you focused, challenged, and get you more prepared to achieve the success that you want.

You also talk about your mistakes. Do you consider your wheel-spinning as you tried to figure out the right trading formula one of your biggest ones? And how do you think that influenced your subsequent thinking and direction?

Matt Choi: Yes absolutely. A lot of entrepreneurs spin their wheels looking for the perfect business. You know, the financials have to be good, the brand has to be well-recognized, and the product has to be popular, do you want whip cream with that too? When I decided to get into the car business, Hyundai wasn’t a well-recognized brand. Their cars weren’t the most popular. And the financials certainly weren’t good. But I saw the potential and decided to take a calculated risk and the business took off. I learned a lot reading about guys like Steve Jobs, Eric Schmidt, and Bill Gates – and one common trait among all of them is that they all got to the market fast and improved their products and services afterwards. The old saying “Done is better than perfect” is so true… I actually have that quote pinned on the wall in my office.

So imagine the mistake that I made when I first started trading. I really thought there was a perfect way to trade where I would be one hundred percent right and make tons of money. I spent hours each day trying different permutations and algorithms, and in the end I couldn’t beat a coin flip.  You see, when I was in school, or when I was slaving away in the corporate world, and even when I owned the car dealership, I made the right decisions most of the time. So you can imagine how I felt when I could barely beat 50/50 trading the markets … it was emotionally devastating given the success that I’ve had prior to that point in my career.

However, that also led to perhaps my biggest ah-ha moments in my life. After meeting George, I finally realized that trading can never be 100% right. In fact, the best traders in the world often achieve around 75% accuracy, and of course their winners are much more substantial than their losers. So long story short, I started to focus on my overall trading portfolio rather than each individual trade. My number one priority is capital preservation. So many people lost their life-savings during the financial crisis because they didn’t manage their portfolios properly. They were too bullish just prior to the crash, and they were too bearish after the crash and were caught on the wrong side of the market.  The key is to have a good balance of bullish and bearish trades.

For example, I am usually in about 30 to 40 trades at any given time, primarily using options. About half of them are bullish, and half of them are bearish. Stocks move like waves and what we always want to do is to be bullish at the bottom of the wave, and be bearish at the top of the wave. So under normal trading condition, I can make money on both my bullish and bearish trades. This is called delta neutral trading.

One major benefit of delta neutral trading is that it naturally acts as a hedge to market crashes. For example, if the Dow Jones Industrial Average drops 5,000 points tomorrow, I’ll be ok. I will lose money on my bullish trades, but my bearish trades will make money, thereby neutralizing the risk.  I spend the majority of my trading time making sure that my portfolio is well balanced. Having a well balanced portfolio creates consistency, and such consistency in turn creates a smooth rising equity curve. Of course, having the right strategies to pick the best stocks to trade is important, and I teach my students how to do that. But much more importantly, I teach them how to manage their portfolio. Boring stuff. But I’ll tell you this – among my students, the ones who have the discipline to master this have become incredibly successful traders.

Everybody points to mistakes. What do you think was the smartest thing you’ve done as an entrepreneur, and what can others take away from it?

Matt Choi: I think the smartest thing I’ve done as an entrepreneur and as a trader is to hire smart people to help me. You may think that this is a very simple concept, but it’s actually not. I speak with a lot of entrepreneurs who have great ideas, ideas that can help a lot of people.  The problem is, most of them try to do everything by themselves. They want to be the product inventor, content creator, the sales team, the marketing department, operations, and customer service, all-in-one. Well, unless you are superman, that’s just impossible. And I am sure you would agree with me that when we spread ourselves too thin, nothing gets done properly and the results are never good.

Now, I get why entrepreneurs want to take on everything themselves. I’ve been there. After all, my business is like my baby. I want to take care of it, nurture it, and grow it exactly the way that I want it to grow. So it is easy to fall into the trap thinking only I can do the job, when it couldn’t be further from the truth.

When I got into the car business, I spent a lot of time diving deep into the operations so I could evaluate where we were, and understand the purpose of each department and each staff member.  After that, I took a step back and wrote down where I want the business to be in 5 years. Once that exercise is completed, our weaknesses and gaps were identified, and it became very intuitive and obvious what I needed to do to reach my goals.

Long story short, I made a culture change and spent a ton of money to hire a hand-full of high performing individuals to manage the dealership. My job as the CEO was to make sure that everyone believes in the same vision and are able to work together to make things happen.

Same with trading, a lot of inexperienced traders all think they can learn everything about the markets and become super traders.  Yes that’s possible, but it would take years to achieve that. When George was mentoring me, we spent a lot of time talking about my life goals and money goals, and we worked backward to reverse engineer what I would need to do in order to succeed.

I would never have been able to do this kind of deep dive by myself. And even if I was able to, it would have taken me many more years to get to the same consistency and profitability. So, if I can only get one message across today, it would be that the self-discovery process is an absolute requirement to correctly align your passion, your goals, your actions, and your life.  If you can connect all those dots, I assure you that it will be a life-changing transformation. So get out there, find someone who you respect, someone who resonates with you and has already achieved success, and do whatever you can to get that person to become your mentor.