Day Trade For Living - Andrew Aziz (best black authors txt) 📗

I'm also a FOREX (foreign exchange market) trader and sometimes I trade commodities and currencies. But in the mornings, I am mostly an equities day trader and I focus on the real stocks. The majority of day traders don't trade penny stocks or on the over-the-counter (OTC) market. Penny stocks are extremely manipulated and they do not follow any of the rules of the standard strategies. We at www.Vancouve r-Trade rs.com trade real stocks. Sometimes we may be trading Facebook (ticker: FB) and sometimes we may be trading Apple (AAPL), but we will always be trading the stocks that are having a big day. You may be surprised , but on almost every single day in the market, there's a stock having a big day because the company has released earnings, had a newsbreak, or had something bad or good happen to it. These are the fundamental catalysts that you must look for.

What does my day look like as a day trader? You will read about it in detail in Chapter 8, but a day in my life typically starts at around 6 a.m. (9

a.m. New York time) with pre-market scanning. I'm scanning to see where there is volume in the market. As early as 5:30 a.m., you'll know what stocks are gapping up or gapping down. Then I start scouring through the news for catalysts that explain the gap. I start to put together a watch list. I

rule some out and then I pick and choose which ones I do and don' t like. By 9:15 a.m. (New York time) I am in my chat room, going over my watch list with all of our traders. By 9:30 a.m., when the bell rings, my plans are ready.

From when the market opens at 9:30 a.m. until around 11:30 a.m. New York time, is when the market will have the most trading volume and also the most volatility. This is the best time to trade and to especially focus on momentum trading (which will be explained later). The advantage of having all of that volume is that it provides liquidity. This means there are plenty of buyers and plenty of sellers, which in turn means that you can easily get in and out of trades.

Around mid-day, you can have good trading patterns but you won't have the volume. This means a lack of liquidity, which makes it harder to get in and out of stocks. This is especially important to consider if you want to take large shares. My focus has always been on trading at the market's opening, which is 9:30 a.m. in New York (Eastern time) . I personally trade only within the first one or two hours of the market's opening. If you join the private chatroom that I mentioned above, you will see that I rarely make any trades after 10:30 a.m.

On a good day I have reached my goal by 7:30 a.m. Vancouver time (10:30

a.m. New York time) and I'm easing up. Often by lunchtime I've already hit my goal and I'm going to be sitting on my hands unless there is that perfect setup. From 4 p.m. until 6 p.m. I am in trading courses and we're reviewing our trades from the day.

Why is the market at low volume during the mid-day and afternoon ? Imagine you made $1,000 by 10 a.m. What are you going to do? Are you going to walk away with that profit or will you keep trading until you lose that money? Hopefully you will walk away. Many people are finished for the day at some point in the morning, and then they are going to go golfing or spend the rest of the day at their leisure. But, if they have lost $1,000 by 10 a.m., those traders are going to keep fighting it out to stay in the market. They're going to keep trading, trying to make back what they lost. That means that mid-day trading is dominated by traders who have lost in the morning and are aggressively trying to regain their losses . That causes

a lot of volatility, and not in a good way. That causes stocks to shoot up and down because people are going in and out with market orders. It 's this time of day that I consider to be dominated by more amateur traders and trading. Extrapolating from this, I go really easy at mid-day.

I avoid pre-market trading because there's a very low liquidity as there are very few traders trading. That means stocks can pop up a dollar, then drop a dollar, and you can't get in and out with large shares. You have to go really small, and you have to use such small positions that, for me at least, it's just not worth it. If you don't mind trading in only a couple of hundred shares, then you can certainly trade pre-market.

I live in Vancouver, Canada, so in my time zone the market opens at 6:30

a.m. (Pacific time). This means that my days start really early. The great advantage for me is that I can be finished trading before most of the people in my city are even out of bed. I can then spend the rest of my day skiing, clim bing, with family and friends, or focusing on other work and the other businesses that I have. I try to hit my daily goal by 7:30 a.m. my time (which is 10:30 a.m. Eastern time) and then ease up. You know how easy it is to lose money. Once you have some money in your pocket, you should hold on to it.

Risk and Account Management

To be a successful day trader, you need to master three essential components of trading: sound psychology, a series of logical trading strategies, and an e ff ective risk management plan. These are like the three legs of a stool - remove one and the stool will fall. It is a typical beginner's mistake to focus exclusively on indicators and trading strategies.

A good trading strategy delivers positive expectancy; it generates greater profits than losses over a period of time. All of the strategies outlined in Chapter 7 have been demonstrated, if executed properly, to show positive expectancy. But, keep in mind, even the most carefully executed strategy does not guarantee success in every trade. No strategy can assure you of never having a losing trade or even suffering a series of losing trades. This is why risk control must be an essential part of every trading strategy.

The inability to manage losses is the number one reason that new traders fail in day trading. It's a common human inclination to accept profits quickly and also to want to wait until losing trades return to even. By the time some new traders learn to manage their risk, their accounts are badly, if not irreparably, damaged.

To be a successful trader, you must learn risk management rules and then firmly implement them. You must have a line in the sand that tells you when to get out of the trade. It's going to be necessary from time to time to admit defeat and say, "I was wrong," or " The setup isn ' t ready yet," or "I'm getting out of the way."

I'm generally a successful trader, but I still lose frequently. That means I must have found a way to be a really good loser. Lose gracefully. Take the losses and walk away.

I can ' t emphasize enough how important it is to be a good loser. You have to be able to accept a loss. It's an integral part of day trading . In all of the

strategies that I explain in Chapter 7, I will let you know what is my entry point, my exit target, as well as my stop loss.

You must follow the rules and plans of your strategy, and this is one of the challenges you will face when you are in a bad trade. You may very likely find yourself justifying staying in a bad trade by saying, "Well, you know, it's Apple, and they make really great smartphones. They're definitely not going out of business. I'll just hold this a little longer."

You do not want to do that. You must follow the rules of your strategy. You can always get back in, but it's hard to recover from a big loss. You may think, "I don't want to take a $50 loss." Well, you definitely don't want to take a subsequent $200 loss. And if you ended up taking an $800 loss , it would be really hard to recover from that. Take the quick losses, get out, and come back when the timing is better.

Every time you trade, you're exposing yourself to the risk of losing money. How do you minimize that risk? You need to find a good setup and manage the risk with proper share size and stop loss.

Here is my next rule:

Rule 5: Success in day trading comes from risk management - finding low-risk entries with a high potential reward. The minimum win:lose ratio for me is 2:1.

A good setup is an opportunity for you to get into a trade with as little risk as possible. That means you might be risking $100, but you have the potential to make $300. You would call that a 3 to 1 profit-to-loss ratio. On the other hand, if you get into a setup where you're risking $100 to make

$10, you have a less than 1 risk-reward ratio, and that's going to be a trade that you should not take.

Good traders will not take trades with profit-to-loss ratios of less than 2 to

It means if you buy $1,000 worth of stock, and are risking $100 on it, you must sell it for at least $1,200 so you will make at least $200. Of course, if the price comes down to $900, you must accept the loss and exit the trade with only $900 ($100 loss) .

If you cannot find a setup with a good profit-to-loss ratio, then you should move on and keep looking for another trade. As a trader, you are always looking for opportunities to get low risk entries with big win potential. Being able to identify setups that have big win potential is also part of the learning process. As a beginner trader you may not be able to differentiate between a range of setups. It may be difficult for you to recognize what is a home-run Bull Flag and what will end up being a "false breakout". That's something that comes with both experience and training. We will cover this in more depth in the coming chapters. You can learn from videos on YouTube and Google. You can also join our private chatroom (free to you) in www.Vancouver-Traders .com where I explain my trades in real time while I am trading them. You will be able to observe me and my monitor and my trading platform.

Using a 2 to 1 win:lose ratio, I can be wrong 40% of the time and still make money. Again, your job as a day trader is managing risk, it is not buying and selling stocks. Your broker is buying and selling stocks for you in the market. Your job is to manage your risk and account. Whenever you click "buy" in your trading platform , you expose your money to a risk.

How do you manage that? You essentially have three steps in managing risk. You need to ask yourself:

Am I trading the right stock?

Chapter 4 focuses on finding the right stocks for day trading. I will explain in detail how to find stocks that are suitable for day trading and what criteria you should look for in them. You must avoid stocks that (1) are heavily traded by computers and institutional traders , (2) have small relative trading volume, (3) are penny stocks that are highly manipulated, and (4) don' t have any reason to move (no fundamental catalysts). I will explain these in more detail in Chapter 4. Do remember that risk management starts from choosing the right type of stock to trade. You can have the best platform and tools and be a master of strategies, but if you are trading the wrong stock, you will definitely lose money.

What share size should I take?

One share, 10 shares or 100 shares? What about 1,000 shares? This depends on your