A 40-year stock trader and mathematician who had a 366% return shares her 4 biggest tips, plus the winning strategy she learned from her worst mistake (2024)

• Sunny Harris began trading on her own after a fund manager lost a big chunk of her investment.
• She has also developed her own trading indicator that uses dynamic moving averages.
• She recommends testing your strategy and rules at least 100 times before using them to make trades.

Before Sunny Harris became a stock trader, she was a computer programmer with a master's degree in mathematics.

By 1974, she had started a small computer graphic software company with three other partners. By 1980, she had already retired at the age of 30 after selling her company shares.

At the time, she didn't know anything about investing or even economics. So Harris did what she thought was the best thing to do: she handed $1 million of her cash over to money managers. Within three weeks, they had lost $75,000 of it. In 1980, that was a lot of money, she said.

"And so I decided I could do that poorly on my own. So I took my money back and started learning how to do it myself," Harris said.

She began reading every book she could get her hands on. To date, she told Insider she has read 746 trading and investing books, with her favorite being, "Technical Analysis of the Futures Markets" by John Murphy.

It's safe to say, Harris didn't do as poorly as her ex-money managers. In 1994, she became the top-ranked commodity trading advisor among the top 100 profitable CTAs managing under $10 million. She had a 365.5% return under the registered name Roark International, according to Stark Research.

She has been trading for 42 years and has created her own indicator called SunnyBands. It's based on a set of dynamic short and long-term moving averages that she says circumvent the influence of whipsaw, which is when a stock's price is moving in one direction but quickly flips to the opposite. This is a common occurrence that can impact moving averages.

The turning point that helped her hone her trading skills wasn't as much from a book or degree but from one of her biggest mistakes. During the Gulf War that took place between 1990 and 1991, Harris had been trading the S&P 500.

"I was watching the news, and on the news, I heard James Baker say, 'ladies and gentlemen, I regret', and the next words were 'to tell you that we have not reached a peace agreement'. But on the word 'regret', the S&P dropped precipitously, 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 craft a winning approach. If she had been zoomed in looking at shorter-term charts, like the 5-minute chart rather than the daily, she'd have seen price slowing and rolling over, which is an indicator in the futures market that measures investors' willingness to keep betting. This is one of the signals now factored into her SunnyBands indicator.

"Markets don't go straight up and straight down. Sometimes they do, but typically if it's going to go down, it'll spend a little bit of time rolling over before dropping, so you can see that there's a lack of interest and then it drops," Harris said.

4 of her biggest takeaway tips to trading the market

Her overarching advice is to develop your own trading strategy. You can borrow ideas from other traders, which is what Harris has done by reading numerous books. But in the end, you need to refine it to work for you.

Your strategy is your set of well-defined rules. The thesis or idea you're basing your trading on can be seen as a collection of rules. These are the parameters by which you enter and exit a trade. Your strategy is played within those rules. Harris uses her mathematical logic to set up "if-then" statements or what's known as conditional statements.

"Let's just use, for example, simple moving averages. So if the 10-period moving average crosses under the 20-period moving average, then sell. If the 10-period moving average crosses over the 20-period moving average, then buy. Now, that's a full system right there," Harris said of one of her rules.

Test your thesis and your rules. This part will take a serious amount of time and patience. You can either do it by paper trading or manually jotting down your trades on paper or an excel sheet. This will help you determine how much money you would have made or lost. You don't have to wait for the market to play out. If you're doing it manually, you can backtrack 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 a minimum of 100 trades before you can really determine if it will work overtime. You must also test your approach in a down, up, and sideways market for it to check out, she added.

"I learned that if the market closes down on Friday, it'll open up on Monday. And I watched that happen every day for three weeks. And then I thought, well, this! I've got a system, there it is! And of course, the next three times that Monday came, it did the opposite of what I thought it was going to do. And I lost money three times in a row. I thought, well, that wasn't very well tested," Harris said.

You have to be able to handle the losses you will inevitably take on as a trader, she said. This part of the craft is unavoidable. Like with any business, where you have expenses, losses are the cost of doing business when you're a trader.

"If you have tested your system, then you will know that there will be a certain amount of losses and it'll show in your test that says, 30 or 40% of the time you're going to be losing. So you have to be able to weather those losses and not get all emotional about it," Harris said.

A big mistake a lot of traders make is they revenge trade, which is when you start over-trading after a loss in an attempt to make a comeback or regain losses, she said.

"Everything that I am is colored by the fact that I'm a mathematician. I think very logically all the time, I don't get emotional about things," Harris said.

How much loss you can afford to take depends on your win-to-lose ratio. A profitable strategy will typically have anywhere from 30 to 40% losses. But the real key is to have your wins larger than your losses. So even if you have a 60% loss, it's still ok, but if you're only winning 40% of the time, then you need at least a two-to-one ratio for your wins, she noted.

Harris told Insider she had a client that made $1 million from a $30,000 investment during the 2021 bull market. But by the time 2022 hit, that client lost it all. It's a sad story, Harris said, because they are now afraid to trade.