The Truth about Day Trading and What It Takes

-
Time for some content! Are you all ready? In this post I will attempt to debunk a myth, show you 1 of the long strategies I play since a lot of new learning traders are not too familiar with shorting yet, and also show you a ticker that I played today. And OMG a perfect call out!
A lot of new beginning traders started out their journey in trading because they fell for the hype and all the glamour they see on Instagram, Twitter, and Youtube videos that some of these successful stock gurus posts. Making day trading look like it's easy money. I have been trading since June 2016 and I can tell you, I fell victim to that hype when I first started as well. As time progress and I begin my journey trading, I have eventually find out the truth the hard way. TRADING IS TOUGH WORK! Up until today, I'm still not a part of the consistent 10%. At least I don't consider my self to be so. Let me show you why I think trading is a tough gig:
I made a perfect call out last night in my detailed nightly watch list for the premium members. I even played the plan my self and did ok with it. Ticker NKTR, this stock made my watch list since November 13th when it had 3 super green days running up from $25-$32. After monitoring it for a couple more days, looking at all the news articles that came out on in on Yahoo Finance and Finviz.com; I finally drew out a plan on it.
My research took me about 2 hours nightly. It usually takes me about 30 minutes to research a single stock, look at its chart in different time frames, and then finally draw out a plan on pen and paper; go back to the charts one more time, mark out all the key support and resistance levels that I see significant and screen shot it. Finally I type everything up and add it into the list. At the end of the night, I usually have about 4 stocks on watch each with it's different game plan.
The playing time on this stock was about a few minutes during market hours. But the prep time for it took days. Please note attached my plan and call out from last night, my trade recap on how I played it. And the overall 5 min chart of how the stock ran the entire day. If you have any questions, please don't hesitate to ask.
This is one of my go to Long strategies. Notice the lower highs that it's forming. If you draw a line connecting each lower high, you will get a very clear and clean up trend. In order for it to be a true lower high, the volume on those spots should have significantly higher volume relative to the regular movements of each volume bar.
Your entry should be on one of these lower highs, your risk or stop loss should be a lil bit under the previous lower high, and your profit target should be around 3:1 risk to reward ratio. That means if from your entry to your risk level is about 50c apart, your exit profit target should be about $1.50 The 3:1 ratio is very key that one must try to adhere to. It means that you could actually be wrong 2/3 times and still be a break even trader. As you can see in my play, I totally failed at this 3:1 today. That is why I consider this a bad trade for me. It is also why I don't consider my self a consistent winning trader.
When you are in that trade and you see a lil bit of green, we as human beings have a natural tendency to take that gain asap. We like instant gratification! It's an automatic built in mechanism. To become a consistent winner, one must learn to fight that basic instinct. Reign it in. You can't be successful if you keep cutting your winners short. Note that you also cannot be successful if you don't respect your risk level and accept the loss when the stock hits your risk level. 'You need to keep your losses small and your wins big!' I'm sure you guys have heard this a lot from other gurus. The 3:1 is what they are talking about.
In the beginning, I believe a new trader need only 2 strategies and they need to master it. A long strategy and a short strategy. For a short strategy, one would have to find a nice clean down trend marking off the lower highs. It's basically the inverse of what I just described above.
It's getting late, so I'm gonna cut it off here for now. If you guys have any questions about this post. Please don't hesitate to ask in the comment section below. I will try to answer each question to the best of my ability. And if researching a stock, writing out a plan, honing in your mental psychology is too much work for you on a consistent DAY TO DAY basis, I'm just gonna be blunt and tell you day trading is not for you.
You will also be spending your extra time day in day out reviewing your trades. Watching youtube vids, reading blogs like these, and reading books about technical analysis. This is what it takes to come close to consistency. Yah, I consider my self close. But close is not financial freedom. There is no prize for being close.
Until next time. Cheers.



Comments

Post a Comment

Popular posts from this blog

Introduction to the winning mentality

-
Having a winning attitude.  I believe the psychology and mindset of a trader is key to differentiating you as a trader from being the big part of the 90% losers, to the minority of the 10% consistent winners. With that said, I have studied and chat with a lot of the professional retail traders in my year and a half of trading experience. One thing I do find that they all have is a positive winn ing mindset. So let’s define it; The proper attitude a trader must have: A positive expectation of your efforts, with an acceptance that whatever the results you get, are a perfect reflection of your level of development, and what you need to learn to do better. I want you guys to write this down, put it in a spot where you can glance at it daily, memorize this. Try to pick apart what this truly means. I understand that I literally just wrote a summary. I will dive deeper into what this truly means in the next post. Really break this down for you guys. Have a good night.
Read more

Buy the dip, sell the rip

-
Image
In this write up, I would like to show you how I personally take entries and exits in trades. Hopefully this will help shed some light for those who are still struggling to identify and time their entries and exits. Before we start though, I’d like to show you that there are 4 stages/states to any market though, illustrated in the image below. We will be focusing on stage 2-4. The up trend of the market, the topping and sideways action of the market, and the down trend of the market. It is during stage 2 and stage 4 that we need to decide whether we are already too late to hop on the train, or do we still have time to get in and turn a profit. Most of the time I find my self missing stage 2, the beginning trader will see it as hype and the market is hot and jump in. Only to find themselves getting in too late and stuck on stage 3. For my self, I usually find my self spotting stage 3, I sit stalking and waiting for the first sign of stage 4 coming. That’s the bulk of my trades. ...
Read more

The biggest mistake the new learning trader makes. My 'Aha' moment.

-
Okay, I feel that I really need to get this blog out asap as I find it imminent to address this issue before I see anymore account blow ups or bad losses.  I've seen too many and I personally have blown up quite a few accounts my self.  No one should be losing this much money if they apply this very basic principle I'm about to talk about.  How to set proper goals, and defining the moment when we are a consistent winning trader. If any of you have read my past blog entry, I have shown pretty clear that it is absolutely impossible to know what the market will do let alone control it.  The only thing that we, as traders have absolute 100% control over is how much money we lose, or willing to risk. That is the key differentiation between trading and gambling. With that said, I see some traders set daily goals for themselves. Many of them set monetary goals like, 'I'm want to make $100-$150/day. I want to make 'X' percentage of my account daily/weekly/monthly....
Read more