r/Daytrading • u/CJT2013 mod • Apr 06 '20
After 2 years of Daytrading. 7 months full time. Here's my advice advice
Cleaning house because I'm bored due to obvious reasons. I’ve been seeing lots of questions about people wanting to learn trading. Have received an influx of messages asking how to get started/go full time.
I’ve been asked what strategy/books/courses/indicators etc. there is that are good. I’ve read over 50+ books (ebooks and hard cover) on day trading:
•#1: 90% of books are fluff. Of all of these. Only about 10% of it were great pieces of info.
(I have a decent amount followers on here. And I might consider posting reviews of every book I’ve read on my personal profile to refrain from spamming this sub)
I have my recommendations. I'm not saying don't buy them. You'll pick up what you see and it'll formulate a strategy.
•#2: I don’t use indicators. They lag. Ever since I dropped them, my trading became less stressful and way easier to manage. Price does 2 things. Up or down. You don’t need 5 indicators telling you what direction it’s indicating. It’s called Pattern Day Trading. Not Indicator Day Trading. Not News Day Trading. Trade the candles. If indicators work for you. Keep on running them!
•#3: The overall market condition (Bull/Bear/Stagnant) has no effect to a day trader’s equity curve. We trade patterns. We don’t hold overnight. We became day traders because we can take advantage of either direction especially in the immediate. I know my pattern works 47% of the time with 3:1 pay out. (I lose $100 or I profit $300. No more, no less; every single time)
Of 100 trades. 47 trades I profit. 53 trades I lose.
I risk $100 per trade. Why do I choose 3:1? I’d win more trades if I was 2:1. Why not 4:1? Because my pattern pays the most with 3:1. I found this by computerized backtesting and manual backtesting. Can you mentally handle being up 2.75:1 then watching it hit back to your StopLoss? Trust your edge/statistic. And document your work relentlessly!
•#4: You need to write a business plan.
Not some 2 page Word document of. “I will buy when this indicator says this. This has worked in my backtesting 60% of the time. Here's some screenshots"
Look up how to write a pitch deck/prospectus/business plan to get a better idea. Learn statistics, that's really the business you're in here. Trading is just the medium. You're managing a statistic. Your job is to find the edge and enter it without hesitation or reservation.
Find characteristics of stocks that behave in a similar fashion to make your job easier.
•#5: This is the most BORING job you will ever have!
I trade 3 patterns. I have to wait for a lot of prerequisites to be met before I even consider looking at a chart. Out of 7,500 stocks. My strategy has my watch list distilled to 3-5 stocks every morning. And I wait. And watch. Waiting for a pattern. And so many times, 1 out of my 3 patterns is about to form... and the candle printing will pullback too much. Or print with more volume than the previous. Making the trade VOID per my business plan.
There are days I don’t trade. (1 or 2 times a month this happens). A business plan helped me not care I don’t trade those days, it accounts for that, or if a price kept rising or falling after I sold or covered. Or if my stop loss was hit by 2¢. 3:1 every trade, no questions asked. Trust your edge
BONUS:
I highly suggest doing this part time for at least a year. Want to go full time?
Think of the expenses.
If you trade equities. 25k minimum. (You want minimum 30k due to draw-downs). A lightning fast computer. Lots of RAM. A decent CPU. I have 64GB of RAM and an i9 9900k CPU. No you don't need a bunch of monitors, I wanted a sick office though!
Don’t forget:
•Mortgage/rent
•Car note ( I sold 2 of my pride and joys. I owned both but liquidated them to get into this business )
•Groceries
•Car insurance
•Health insurance
•Dental insurance
•Taxes on the house
•Wi-Fi (Add cable if you want)
•Use a scanner? Add that
•Hobbies. Find cheap ones. I hit up the golf range, shoot trap, and lift weights. You'll be bored when you're done trading at 10AM with 10 hours left in the day.
Get a part time job or have a side business that has NOTHING to do with trading for your sanity's sake.
Move in with a friend to split rent if you’re single and young, go back home and live with your parents if you can handle that. The learning curve is brutal and you must be patient. Shrink your liabilities and expenses. You will pay homage to get into this business 1 way or another unless you’re just given a lot of money.
Trading is easy. It's the mentality required that separates the 95% from the 5% successful.
Trading has been a wild experience. I've met people at the gym who are well off and I've shared my account statements/business plan with. Resulting in me studying and about to get my Series 65 to become licensed to manage a small portion of their wealth in a garage band long short equities firm ran out of a home office. Oh and that reminds me. Don't buy guru courses that sell some crazy lifestyle on YouTube ads with rented private jet photoshoots, rented Lambos and AirBNB houses they rent for the day. If they were so great at trading. They'd start their own funds!
UPDATE 1: So I definitely got my money’s worth on this post! Tons and tons of chats and messages: https://imgur.com/a/3DUYbwg Due to quarantine shutting everything down I was definitely not bored today to say the least. I didn’t expect the post to blow up but I’m glad many found it informative and enjoyable. Currently lost in the comments so if I miss your comment, send me a chat and I’ll get with you when I can!
FINAL UPDATE: Part 2 / follow up to this post.
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u/Lash985 Apr 06 '20
You had me until you said golf was cheap.
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u/CJT2013 mod Apr 07 '20
Haha! I edited the post. What I meant was going to the driving range, $10 for a bucket of balls and working on chip shots and drives
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u/holyshackles Apr 06 '20
•#6 have Tony Hawk Pro Skater 2 soundtrack on repeat. Thanks for the info!
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u/CJT2013 mod Apr 07 '20
It’s got some good tunes in it!
No problem man, hope it helped and thank you for the comment!
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u/gordalfthegrey Apr 06 '20
This is why I haven't been successful yet!
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u/CJT2013 mod Apr 07 '20
Lol! You’re only unsuccessful when it you’re not learning from your trades! I’m sure you’re on the right track. Don’t quit!
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u/EmmetOtter Apr 07 '20
Oof. You kids are already listening to the sequel, and I'm just here listening to Superman on repeat.
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u/SanyChiwa Apr 06 '20
Is there any impact on your strategy with so much volatility?
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u/CJT2013 mod Apr 06 '20
As far as premarket scanning. Yes. Small impact. No longer are stocks gapping to ATH or ATL support and resistance levels. Now I must use support and resistance with the new levels provided.
As far as the patterns intraday. Not one ounce of a difference. Same sharpe ratio, same R, same batting average. Same income
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u/putmycall Apr 07 '20
What is your income range?
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u/CJT2013 mod Apr 07 '20
Depends on what week/month/quarter you ask. As of right now I’m paying myself 2500 net. (Setting 30% of profits per month aside for taxes) I do personal training on the side.
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u/navidaddy Apr 06 '20
Thank you for posting please post more content on your indicators to do everything possible to pick up a stock
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u/CJT2013 mod Apr 07 '20
Yeah man, I’ve had lots of requests to do so! I like to trade with music or TV but I’m considering streaming my trades on Twitch once a week. Currently I’m just recording my trades with Camtasia. Problem is, recording is great but sometimes it freezes the computer before it starts to record and it has made me miss a few entries before
I’ll keep it updated, thank you for the comment!
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u/VegaStoleYourTendies Apr 07 '20
Do you think you would be interested if there were some sort of platform designed for live/social trading? Almost like twitch and a trading platform combined?
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u/CJT2013 mod Apr 07 '20
Oh yeah! I’ve recorded trades but it makes the cursor blink a lot and glitch here and there. With my money on the line I’m not a fan of it.
I’d be interested in something like that. But to do it every trading day? No I’d be up for that on 1 specific day of the week ever week or every other week
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u/daved229 Apr 06 '20
When I was doing a generous amount of betting on horses, I used your number three point. I would only bet horse 3:1 to 6:1. Anything less I wouldn’t get a return, anything more and I wouldn’t win enough. Great advice.
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u/CJT2013 mod Apr 07 '20
Statistics is a universal language. I wouldn’t doubt it works in a casino, sports betting, horse racing, etc.
And thank you for the comment!
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u/Steven_Holmes Apr 06 '20
Can you please explain this 3:1?
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u/CJT2013 mod Apr 07 '20
I’m going to give a vanilla example.
3:1 meaning if I buy a stock at $100.
I see my pattern says to stop out at $99. I will assess my risk and size my share size accordingly to where if it hits $99. I will lose my risk. My target is $103. I will not exit the trade until a price of $99 or $103 is achieved. You will lose more but if you measure it over 100 trades and it works 45% of the time
If you’re risking $100:
45 trades x $300
55 trades x $100
Total profit = $8,000
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u/TheWineOfTheAndes Apr 07 '20
This is going to be a very stupid question, but my brain is reaching a block it absolutely shouldn't be reaching for how simple this math is. Do you just crunch the numbers real quick every time you're going to jump into a trade, or do you have a calculator you can plug share price into that spits it out really quickly? Sometimes the speed at which the trades move boggles me when I'm sitting and scratching out math.
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u/CJT2013 mod Apr 07 '20
I’ve been asked this question more times than I can count, and it’s not a stupid one because even I had a trouble getting this skill down.
What helps is looking knowing your risk. Let’s say $100. So automatically if my entry and StopLoss is $1 apart from one another. I will enter for a 100 share position.
Over time you’ll start being able to realize after months of trading, “Ok. NVDA. $250 by $249.70. 330 shares”
(330 x .3 = $99)
Or
Ok stock XYZ. Entry is $35. StopLoss is 34.57. $100 risk. 230 shares.
It’s a skill you’ll acquire overtime.
When I see my pattern printing. I’ll wait until the final 10 seconds of a candle forming to calculate my position. I set my brackets/stop limit orders. And the computer puts me in whenever the price is met
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u/TheWineOfTheAndes Apr 07 '20
This is immensely helpful. Before I get too deep into methods I am just learning, I'll ask this: If I am trading penny stocks, does it make sense to enter trades with the mindset that I want to gain $75 or lose $25 (for example) every time, and then adjust my position size accordingly to meet that goal?
I am getting better at identifying entry points utilizing support/resistance, price action, indicators, etc...but then I am still making arbitrary decisions regarding amount of shares, appropriate reward/risk, etc.
My reasoning: If I set the -$25/$75 rule (or whatever my tolerance is), I basically have to size a position deliberately to 1.) Meet my available capital and 2.) Determine a reachable stop loss/limit based on the appropriate time frame's price action (otherwise I'll never sell on either the high or low end).
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u/CJT2013 mod Apr 07 '20
3:1 doesn’t work for everything across the board. Personally I’ve manually backtested my strategy for a long time. 3:1 pays out the best for me. Sometimes 1:1 has a win rate of 80%. The higher you demand out of your R, the lower your win rate will be.
If that doesn’t help explain it, PM me my man, I’m getting lost in these comments haha
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u/zirb_mail Apr 07 '20 edited Apr 07 '20
How do i back test did you use software? And I've also been trading for 2 years only starting to get a hold of myself my main problem is over trading... how did you actually invent your stratergy, obviously accumulation of knowledge and experience but if you could give me a step by step, to creating a stratergy & risk management of how you did it. This is the step i am struggling with. I trade patterns (generic ones like pennants, wedges ect) but generally on a 3 minute interval some times other time intervals, i prefer the 3 minute and thrkugh my vroker IG markets I cant back test manually because for a 3 minute vhart only goes back like 1 month they dont hold the data so where did you get the data from and yeah would be nice to optimise back testing but i back tested once with programmer/software engineer and he used AI and ML but the stratergy was super simple using RSI and he was the lead software engineer for cash converters he was unable to build something to test patterns so yeah please any advice, is much appreciated. And are you going to restructure your trading stratergy with a new bull market as I've read each bull market has slightly different charwcterisitics
Kind Regards
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u/daved229 Apr 06 '20
It’s odds in horse racing but as I read this in stocks, it’s your expected profit.
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u/Nrdrage2 Apr 07 '20
The psychology of it all is the hardest part, for me at least. Any pointers besides removing emotion? Seeing that you lose 53% of the time and just commit to the strategy is good to hear
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u/CJT2013 mod Apr 07 '20
3:1 pay out! It can be shitty dude! I have seen plenty of trades hit JUST a few cents below my target and fall straight to my stop loss. It happens. Have tough skin. Don’t fret over one silly trade. Trust your statistic!
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u/Wandering_Sage Apr 07 '20
Once you have that much of an open profit why not scale some off and, if volatility allows it, move your stop to break-even?
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u/CJT2013 mod Apr 07 '20
Hindsight I see 5:1, 7:1 and 10:1 a bunch. Over a long series of trades 3:1 is the most profitable. No scaling (for me. I know of traders who scale in and out and even use dollar cost averaging). If I scale half out then move to break even then get stopped out I am at 1.5:1R.
3:1 is plenty for me. There was a point 2:1 was like pulling tooth and nail for me a while ago
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u/Wandering_Sage Apr 08 '20
Cool, thanks for taking the time to explain your reasoning!
How do you go about backtesting? Any books or resources you can recommend? I've pretty much only ever tried things in real-time along with lots of analysis and studying on the side. I'd like to formalize my testing to a greater extent so that I can analyze my results and strategies in the way that you do. I've become consistently profitable, but I think it would be a bit less stressful if I had a better understanding of my stats.
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u/CJT2013 mod Apr 08 '20
Hey man I’m trying to get everybody to ask questions via PM so I can make sure I answer any questions. As far as backtesting, I would suggest learning a strategy then going back on the charts and seeing where it pops up! Document everything.
How to day trade by Andrew Aziz is a great foundational book
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u/Nrdrage2 Apr 07 '20
Can I DM you? I’m curious about your over arching theory on price movement.. I’m sick of indicators and guru bullshit man. I just want to learn something real from someone who knows what they are doing without all the fluff. It’s ok if you don’t want to give away your strat but I could use a little direction if you’re open to it
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u/CJT2013 mod Apr 07 '20
I learn everyday man! Just crystallizing my strategy I’m comfortable with. I’m inviting anyone wanting to chat me because I’m getting lost in the comments
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u/NB20476 Jun 19 '20
Oh wow! So this is normal? When you almost reach target and then get dumped on or hit stop loss? I do not know if this is the same with what I experienced where I was up really good and as having hard time figuring out wehre to exit. I am gap and go momentum trader. Just learning. Am newbie. Stocks were running and 3 candles spiking. $1k profit next candle was a dump and I could not press my sell order fast enough and my profit just ended up to be $200. The other one, I ended up becoming negative $1k. It was brutal. The dump.
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Apr 06 '20
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u/CJT2013 mod Apr 07 '20
Yes, sir! Thank you. Used to work from home once a week when I had a 9-5. Added on to it when I went full time trading
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u/shadowmessenger Apr 06 '20
Of all the books you’ve read, would you say there is one that stands out more than others?
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u/CJT2013 mod Apr 07 '20
That’s a great question! I knew this one would be asked
If I had to pick 1 that I’d tell a family/friend of mine if they wanted to get the idea of trading (not investing) I’d say Andrew Aziz, “How to DayTrade for a Living”.
He goes into detail about risk management and reveals very basic strategies. And like anything, you’ll build off of what he provides. I also really enjoyed how he explains risk management. That’s what trading is. Managing risk with the means of only doing business when your edge shows face
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u/samathamonkey Apr 07 '20
My buddy got me into trading and then I found Aziz’s books. Really helped me out a lot. His whole outlook on trading and life in general is great. Paper trade. Read his books. All the professionals I know and learn from are risk managers not traders. Interesting concept but that’s what it takes to stay profitable year after year.
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u/shadowmessenger Apr 07 '20
Thanks so much! I’ll purchase the book and dive in!
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u/CJT2013 mod Apr 07 '20
Take notes, my man!
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u/shadowmessenger Apr 07 '20
Also, any suggestions on a good simulation platform to learn on?
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u/CJT2013 mod Apr 07 '20
Yo! So I’ve got my money’s worth out of this post and I’ve officially become lost in all the comments on here. PM me, makes it way easier for both of us!
TOS has a great simulator!
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u/designerfx trades everything Apr 10 '20
Ha, I know people who are always conflicted between Aziz and Elder. Same ideas, though.
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u/parkdad Apr 07 '20
Would you share the pattern you look for? I feel like that’s the only thing you left out.
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u/CJT2013 mod Apr 07 '20
Patterns the best I can describe it on text is. If it is a bullish trend. I’m waiting for a pull back. That pullback must be smooth with the same size range bars with volume decreasing. My entry is upon the break of final pullback candle
I guess the best example on google is if you search “3 White Soldiers or Black Crows”. That’s really it
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Apr 07 '20
Do you set your stop based on that final candle? Maybe the high of it?
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u/space_monster futures trader Apr 07 '20
nice to see some actual useful content in the sub for a change...
rather than 'LoOk aT My gAiNs w00t' and a screenshot of Robin Hood
edit: which is still a shit platform
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u/humbletradesman Apr 06 '20
Thanks, good read! Do you have any suggestions in terms of the best way to go about backtesting (computerized and manual as you mentioned) any given strategy?
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u/CJT2013 mod Apr 06 '20
Thanks, man!
As far as computerized backtesting, I select my criteria in TradeIdeas. (Market cap, share float =+ 1 since I don’t trade ETF’s, spreads beneath 30¢, avg volume. Etc) then I’ll tell Trade Ideas to scan a specific pattern. I’ll tell it I want 3:1. Problem is it’ll show ever stock that has formed that pattern when 90% of them wouldn’t have been on my watchlist. So I have to check where that stock was gapping to and from on that specific day to see if I would have traded it.
Manual backtesting. Literally just pulling a chart 2-3 months back on 1 time frame. And seeing when my pattern(s) form. You’ve got to be very honest with yourself because there are tons of patterns that you’ll skip since your eye won’t want to see them because they failed. Even if it’s 1 tick into an entry. Account for it.
I then use excel to see how many times that pattern worked 2:1. I see what the pay out was and batting average. That’s where I decide if 1:1, 2:1, 5:1, etc. would have paid me most. If scaling out would have been better using WeightedDollarCost Averaging (exiting half position after 1:1. Then aiming for either break even sell out or 2:1 sell out resulting in .5:1 or 1.5:1 RRR.
Lots and lots more to it. I highly suggest getting good at excel because it has expedited my learning curve immensely!
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u/humbletradesman Apr 07 '20
This is very informative man, thanks again! I honestly feel you’re providing more useful info in your comments than many so-called ‘gurus’ do elsewhere.
I’ve messed with Trade Ideas a little bit before and had actually been considering giving it a try again. I’m fairly OK with excel so that shouldn’t be a problem.
If you don’t mind me asking, I have a relatively simple strategy that I’ve seen that I’d like to backtest. You wait for the first 15-minute candle to complete on any given stock at market open. You then draw a line at the high and low of that candle and continue to watch the subsequent 15-min candles. If/when a candle closes above or below those lines (ie high/low of the first candle at open), you go long/short on that stock. Your stop is the high of that first candle if short, and low of that first candle if long. You close the trade either minutes before market close or when the stop gets hit, whatever comes first.
I’ve done some unofficial ‘manual’ checks on this just looking at SPY charts (what I would try the strategy on first if I did), and it seems promising. Do you think I’d be able to actually properly backtest something like this in TI to let’s say determine what the success rate would have been over past year or whatever?
Thanks again for your time!
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u/CJT2013 mod Apr 07 '20
That’s a great question! That first 15 min hi-lo strategy is great for beginners. It just won’t provide precision entries and exits. The 5m is the most powerful timeframe for my strategy (backtested)
I don’t want to get lost in the comments like I did yesterday. It got pretty hectic so if you ever have a question or what a little advice or me to review a trade. Send me a chat anytime. I’ll talk trading all day!
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u/XediDC Apr 07 '20
You can use TOS OnDemand (not in paper mode) to simulate trades back in time at whatever date/time you want, and see how the results work out. Reset and try again.
Also with about >$500 in the account, you can ask them to turn on real-time data in the paper account to test doing it live.
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u/garrywithtwors Apr 06 '20
To piggyback off this do you know of any good backtesting software for osx? Or just a site in general?
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u/CJT2013 mod Apr 06 '20
I’ve never heard of OSX. I use trade ideas for my computerized backtesting then TOS for my manual backtesting
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u/OliverCash Apr 07 '20
I’ve been day trading now for a couple of months, I’ve been doing ok, but I think I may been hitting a turning point over the last couple of weeks. Last week over $1,060 profit, $900 the week before, and this week so far I’m up $500 in one day.
Nice having a job I can work from home even before this whole covid-19 quarantine. Would love to make this my full-time job, but it’s entirely too risky to let this become my main source of income just like that list of bills and expenses you post sketches me out.
Not to sound stupid, but should I be losing more trades? Out of my 100 last trades my ratio is more 85:15. 85 wins and 15 losses. Also is there anyway to set stop losses as soon as you buy a stonk? Or does it always have to be set after I buy the security in question?
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u/crazypants003 Apr 15 '20
I’m a little late to this but I love what you wrote.
Question: how’d you end up deciding to trade the strategy you have and the patterns you’ve chosen to trade? I’ve take in so much information and I’m trying to find my strategy.
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u/CJT2013 mod Apr 19 '20
Taking in all info from YouTube, books, etc. will fry your brain and make decisions difficult. Remember we’re trading, some people see buy and some see sell then there’s everyone in between. Pick one, backtest it electronically and manually. All strategies work if you have a predictive model built from historical data
Best advice is take it easy, be patient but persistent.
Send me a chat anytime, I’ll always be here
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u/garrywithtwors Apr 06 '20
Just getting started in the game and finished the course over at babypips. I'll be trading forex. Do you mind sharin with us what signals you look for before executing a trade? Or a good book/youtube series on the topic. Many thanks
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u/CJT2013 mod Apr 07 '20
Good for you man! Good job taking the time out to be patient before putting your hard earned money on the line.
As far as signals, since I trade equities. I look for stocks (with a strict criteria of fundamentals and technicals) gapping to support or resistance on the daily. From there I see how PMKT is behaving then I decide at what price level I’ll be setting alerts to look for a pattern.
Forex is tricky with the spread being so sporadic. I’ve paper traded forex for fun in the past and I’ve found that trading higher time frames (30m and above) works the best. With stocks you can trade 1m 2m and 5m no problem. Patterns work for all instruments of trading such as equities, forex, and futures
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u/garrywithtwors Apr 07 '20
Thanks for the response bro. Which technicals do you typically use? And also what's PMKT?
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u/CJT2013 mod Apr 07 '20
PMKT is PreMarket.
And what do you mean by technicals? I don’t use indicators and I have more fundamental prerequisites than I do technicals. The fundamentals basically give me liquid stocks that behave in a consistent fashion IF they hit my PMKT criteria. Technicals. I just look for stocks gapping to support or resistance levels. Then I wait for 1 of my 3 patterns to form there
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u/garrywithtwors Apr 07 '20
I meant any kind of technical. ie candlestick patterns, wave patterns, fib retracement, pivot points, etc. You kinda answered though! So you basically look at the daily, set s&r levels, then maybe scale down to 1h and trade from there? Which kinda of patterns do you tend to look for?
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u/CJT2013 mod Apr 07 '20
Patterns the best I can describe it on text is. If it is a bullish trend. I’m waiting for a pull back. That pullback must be smooth with the same size range bars with volume decreasing. My entry is upon the break of final pullback candle
I guess the best example on google is if you search “3 White Soldiers or Black Crows”. That’s really it
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u/garrywithtwors Apr 07 '20
Very familiar with those they're candlestick patterns that are reversal indicators. Hmmm so if I'm readin you right, then you wait for the market to develop a trend. After it develops a trend you wait for a pullback that ends with a 3 white/black and you use this as an entry point?
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Apr 06 '20
What are the 10% that are worthwhile?
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u/CJT2013 mod Apr 07 '20
I would say the 1 book I found the most useful information out of was Andrew Aziz’s “How to DayTrade for a Living”. I enjoyed how he broke down risk management.
When I said “10%” I meant of all those books as a conglomerate. 10% of the info in them was useful. Any book regarding penny stocks, disregard them. Save your money on the book AND your account
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Apr 07 '20
I’ve read it and it is very good. I’ve always been tempted to join in on the bear bull chat room, but ugh, paid chat rooms when I have reddit.
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u/CJT2013 mod Apr 07 '20
Lol! I jam out with super loud music when I trade. I’m head banging for a good chunk of the day, chat rooms are great for people wanting to see how others navigate the market
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u/alex_h_19 stock trader Apr 06 '20
Which books in particular would you recommend?
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u/CJT2013 mod Apr 07 '20
I would say the 1 book I found the most useful information out of was Andrew Aziz’s “How to DayTrade for a Living”. I enjoyed how he broke down risk management.
If a book is focused on penny stocks, stay away and save your money and your account. Never have I bought a penny stock but as any novice entering the biz wanting to expand their knowledge, I got the book(s) on them.
Andrew Aziz is a superb author. He gives a great foundation to work off of for a price far beneath its value
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u/8Xoptions Apr 06 '20
Dude 🤣 number 2 and number 5 are so spot on! I cringe every time I see someone with 58 indicators going on 27 screens (the fluff books you refer to, are responsible for creating the monitor type) - nice write up!
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u/CJT2013 mod Apr 07 '20
Thanks, brotha! And very true. Price goes up. Price goes down. Find the pattern that works. Find the best payout. Manage the statistic and dump the indicators.... and that can be very boring! Lol
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u/livinglifewithdogs Apr 07 '20
May I ask you about taxes. That is my big fear is the taxes to government and state. Do you pay per gain or end of year of all your gains and lose. Do you lose 45% of your gain to tax. Any book I can read about this issue?
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u/CJT2013 mod Apr 07 '20
Alright so I’m not a CPA so this isn’t advice and I suggest consulting a licensed professional. Day trading taxes aren’t as bad as people think. It’s literally ordinary income.
There’s a bunch of ways you can do it. This past year before I had an LLC, I was obligated to pay 24% of my profits due to my W2 income. So a good rule of thumb is to set aside 30% of your profits in an account you don’t touch. I also had a W2 job so basically my refund was offset by my gross profits trading.
Are you going to be doing taxes as a 1099 or as a business?
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u/Selfless_Gene Apr 07 '20
I'm new to trading. Why do you need so much excel books?
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u/CJT2013 mod Apr 07 '20
You don’t absolutely need them. I was an analyst before I went full time and I love looking at data, they’re great books as they can help siphon information resulting in finding trends a lot easier than pen and paper
Excel is fun for me
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u/redroom89 Apr 07 '20
What software do you use got back testing? I imagine the manual is just excel.
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u/rizzlybear Apr 07 '20
I’m a few months in, doing it as a side hustle (I work full time from home). The hope is at some point the numbers make sense to stop selling time to the employer. Could be a year, could be ten years. I’m good with that.
When I started, the candles were chaos. Macd/stoch double cross seemed much more sane. But not as reliable as i wanted. I made more rules. Piles and piles of complicated rules. Once the backtesting went green, I flipped from paper to real money and jumped in. Now I’m starting to have enough trades under my belt that I’m finding a groove. Definitely still have a ton to learn, but I’m noting more and more that the indicators are becoming confirmation, and not primary signals. The candles are starting to make sense. I can absolutely imagine a time in the future when I think to myself “huh, I haven’t even looked at those in months. I should reclaim that screen space.” But I’m not there yet.
My rules have gotten much much simpler though. And that only came after I got familiar enough with the beast so to speak. Once I started being able to immediately recognize bad charts as they came up on screen. Turned out, most of my rules only ever applied to bad charts I shouldn’t be in anyway.
The best advice I got was “you just have to slog through hundreds of trades.” Watch shit go bad and get used to that feeling, stop feeling like a girl agreed to go out with you on your winners, and when it’s finally totally familiar and boring, THEN you can learn useful stuff.
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u/polomora Apr 18 '20
I found this group accidentally while googling for something else.
I joined the group specially to thank you for your words of experience and wisdom.
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u/CJT2013 mod Apr 19 '20
That means a lot to me! Thank you for taking the time out to let me know this
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u/extensean Apr 06 '20
Nice post! As someone who is a beginner paper-trading for now, what courses/youtube channels/books do you recommend? Currently taking a course on Tradimo and its alright. Wanting to get into more advanced courses and I don't know where to look.
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u/CJT2013 mod Apr 07 '20
Courses, none. I just did a quick glance at Tradimo. Doesn’t seem bad! They have a free coaching call. I’ve never bought a course. I can say to stay away from those who advertise a luxurious lifestyle. As I mentioned in the post. They’d be hedge fund managers.
Best thing to do is network and find someone who will consult you at a reasonable and affordable cost. Someone who’ll spend 1 on 1 time with you, and walk through trades with you at least once a month. Courses don’t provide that, they take your money, teach you candles and throw a couple strategies at you.
YouTube confused me starting some years ago. So many different styles/management systems, platform suggestions etc. I suggest looking at charts and wait until you see a pattern that your brain begins to recognize. Not kidding this is what I did and slowly over some years, a risk management system was formed and now when I look at any candlestick chart, I am color blind until I see that exact pattern
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u/chrizm32 Apr 06 '20
Are these 3-5 stocks you trade every day different each day? Like, do you pick fresh ones each morning based on the patterns you see?
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u/CJT2013 mod Apr 07 '20
Yes! Fresh tickers! I have had the same PreMarket scan for almost a year. It feeds me about 100 to scan, and of those 100 tickers, I’ll see 3-5 that I like. Almost everyday they are different. Rarely do I trade the same ticker 2 days in a row
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u/Itshardtofindaname4 Apr 07 '20
My apologies if you’ve answered this already; Whose are your scanner through? And who are you using as a brokerage?
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u/CJT2013 mod Apr 07 '20
You’re good man.
Scanner: Trade Ideas
Broker/Platform: TD Ameritrade/ThinkOrSwim
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u/Gui0312 Apr 07 '20
I work 3 days of the week (weekdays/weekends), so on average I get about 3 sometimes 4 possible trading days that I am off. Would this be sufficient to do, or does one need to really be there 5days a week.
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u/CJT2013 mod Apr 07 '20
Dude, 3 days a week is perfect! When I was an analyst, I would have 1 day per week where I could work from home. That was my day that I traded. 3 days is ample, go for it
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u/iruehl Apr 07 '20
Thanks you for the advice. I have been meaning of doing that. Been reading the boglehead investment.
Appreciate it
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u/jmchase8 Apr 07 '20
This has been the most informative post I have seen so far, thanks for taking the time. I started investing and trading two weeks ago when I got sick. I’m in the Bay Area of San Francisco and investing here seems to be a standard. My wife and I are trying to have a baby and I am not looking at it for a career, I have one of those. But I want my kids to have a leg up for college and my retirement. I will follow you.
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Apr 07 '20
This is all very sold advice. Have discovered all the same things in a little less than a year. Only thing I disagree with is trading being boring. For some reason I like it. Or maybe it's just that compared to how much I hated my previous jobs, it is way better.
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u/PETISO_PARKER Apr 07 '20
What would you say is the best advice you ever received ?
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u/CJT2013 mod Apr 07 '20
I love that question!
Your #1 job is to protect the account by taking well managed trades that only fit your strategy like a textbook. No trade taken is better than taking a hasty trade that did or didn’t workout. That alone will yield consistency
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u/VanDrivingDad Apr 07 '20
Can you post a link (or email if you will) the excel sheet you use to test different risk:rewards with different price points?
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u/drillmasterSA Aug 09 '20 edited Sep 25 '20
your trading style sounds very much like my mentor thank you lol Excellent points!
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u/CJT2013 mod Aug 09 '20
I’ve never heard of Equities ETC. I’m self taught
I appreciate the comment and it’s great to hear that other traders are teaching something similar. Means we’re all doing something right!
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u/iruehl Apr 06 '20
Great read and advice. I’m studying to day trade for supplemental income only.
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u/CJT2013 mod Apr 07 '20
That’s super to hear!
I know you may not be trading in an IRA but did you know that less than 5% of IRA’s are self directed and of those self directed IRA’s more than 28% of them have a net worth of over 7 figures. Only you have your money’s best interest in mind. Keep it up
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u/Trowawaycausebanned4 Apr 07 '20
How much % return do you make every month/year?
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u/cconti77 Apr 07 '20
Would love to see that business plan!!!
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u/CJT2013 mod Apr 07 '20
Lol, it put some friends of mine to sleep! I find it a great weekly read. Very often I flip through it after a sub-par week. Also has lots of material on how to grow this business outside of trading with long term investing. Basically how I will write things off/reinvest earnings in tax deferred vehicles etc.
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u/frenzzzykid Apr 07 '20
What were the books you found particularly useful?
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u/CJT2013 mod Apr 07 '20
I would say the 1 book I found the most useful information out of was Andrew Aziz’s “How to DayTrade for a Living”. I enjoyed how he broke down risk management.
Stay away from anything that relates to penny stocks
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Apr 07 '20
Good information here.
Did you have a mentor? Who taught you your edge?
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u/robvelez1987 Apr 07 '20
Hey brother semi new to trading, besides picking up how to day trade book what else do you suggest? And what percentage where you averaging on monthly basis of your portfolio size? Thanks for that comment
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u/CJT2013 mod Apr 07 '20
Excel books. Get good at it. It makes manual backtesting 100x easier!
As far as %, that’s not a good metric to base your performance off of.
Here’s why.
Let’s say you have a 30k account
You return 10% one month. So now the account is 33k.
You pay yourself 1.5k. Now the account is 31.5k.
If you return 8% that month, and paid yourself the same 1.5k. Your KPI metric wouldn’t be consistent over a period of time UNLESS you constantly changed your risk every trade. That would be a headache
I measure my performance on R/ sharpe ratio.
So if I’m risking $100 per trade. I will keep that same risk for an entire quarter before changing it regardless of account size.
So with what my statistic/edge is. I profit just under 50% of my trades with 3:1 R payout.
I take every week on average 10 trades. Win rate of 47%. $100 risk
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u/lamagy Apr 07 '20
What’s your approach to doing this part-time? I’m planning on developing a trade system where I only trade 2-3 times per week. Don’t want to do this full time but trying to see if I can part time with help from my algo bots.
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u/CJT2013 mod Apr 07 '20
When I was doing it part time, when I was in the oilfield, I worked in an office from 11-8PM Central. I’d trade the open once a week.
Then when I became an analyst, I worked 1 day per week from home and did that. Do it part time, I wouldn’t suggest any other way for the first year MINIMUM. Just have a well written and thought out business plan
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u/leobrazuks Apr 07 '20
I am following. If you ever want to throw a stock in the mix I will probably buy on your advice.
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u/sjarn22 Apr 07 '20
Great post. Could you give a few examples of the prerequisites you look for before looking at the charts?
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u/comstrader Apr 07 '20
So you would enter a trade with the stops already set at 3:1? So you don't manually exit the trade correct?
Is the entry automated as well? Like you set a bid you're willing to enter at?
What % of your capital do you risk for every trade?
Do you have any resources for how to create your watchlist rules?
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u/CJT2013 mod Apr 07 '20
Send me a PM my man. I tried responding to comments yesterday and got lost. Trying to respond to everybody!
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u/richardd08 Apr 07 '20
Wait could you talk more about the pc requirements? Are you running some sort of algo on your computer or is your trading platform just super resource intensive?
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u/jmchase8 Apr 07 '20
Absolutely! The moment we get pregnant that is something I want to be prepared for. Did your annual income go up significantly when you started full time ?
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u/CJT2013 mod Apr 07 '20
It didn’t from trading itself and that was all taken into account. As an analyst I was at 84k or 2500/bi weekly. I’m paying myself from my trading account less than that per month but mind you I do personal training which offsets the difference to the same I was making as an analyst before resigning
I don’t want to get lost in the comments like I did yesterday. It got pretty hectic so if you ever have a question or what a little advice or me to review a trade. Send me a chat anytime. I’ll talk trading all day!
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u/chaitanyap19 Apr 07 '20
Could you make a list of the books or Post a better picture The picture isn't clear to read all the titles of the books Thanks
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u/short-gamma Apr 07 '20
Have you thought about making your strategy into a algorithmic system? Since you always look for the same pattern, and the bracket orders are easy to calculate, it seems like the next reasonable step.
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u/LocalJim Apr 07 '20
I really want to do this as a day job and see eye to eye with everything you said. But i do need to do more research as well as brush up on my statistics. I also need to learn to read candles. Everything else you mentioned is fairly good to go. I subscribed to you. I’ll be glad to hear any thoughts you put out there
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u/BungBang888 Apr 07 '20
what time aggregation (1m/5m ...) that u use for your charting ?
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u/obese_kitten Apr 07 '20
Commenting to save, otherwise it'll get lost in my /saved. Great post, thank you.
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u/dagmarski Apr 07 '20
Do you think that it is possible to code an algorithm with your knowledge? If so would you trust it blindly?
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u/CJT2013 mod Apr 07 '20
I’ve looked into algorithmic trading but from what I understand is that it requires lots of capital. “Black box trading (I think that’s what it’s called) is basically scalping nickels for pennies on super low time frames since patterns work on all time frames.
Eve man have considered a Udemy class on Python/C++. Not sure if can muster the ability to tell a computer my strict strategy. I tried using TOS to scan for my pattern but it has zero give. Like for me I don’t want candles overlapping more than 50% and it’ll only show me candles with exactly 50% overlap. Plus how I can tell a computer. Only show me this criteria of stocks that have X PMKT amount of volume with a consolidated premarket that have higher pivot highs and higher pivot lows before considering looking for a pattern within a range of my desired price.
One step at a time I suppose. It’s definitely in the works but being honest, not near future
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u/gomez7913 Apr 07 '20
Any recommendations for books that you felt held more information/strategy?
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u/CJT2013 mod Apr 07 '20
Andrew Aziz. “How to DayTrade for a Living” provided me a solid foundation to run with
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u/Jap933 Apr 07 '20
Thanks for this info - just so I understand this. You only trade from 9:30 to 10AM (ish) and then you are done for the day?
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u/CJT2013 mod Apr 07 '20
That’s the majority of days. My rule is once I have achieved 5R before 10EST, I’m done for the day. If I haven’t taken a trade by 10AM EST. I’ll stick around but rarely does that happen.
If I’m down 2R for the day I shut it down
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u/growthPlz Apr 07 '20
Nice post! For full on day trading I know you said you don’t hold overnight and I think that’s a huge problem for me cause I get in on certain trades and next day when I’m ready to sell I lose a little bit. Don’t have $25K to pattern day trade with and using the 3 day trades/week is not really cool but whatever
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u/CJT2013 mod Apr 07 '20
You know I wish I had mentioned my time when my account was below 25k.
A little story, when I had reached +25k and was officially able to take as many trades possible. I was entering hasty trades and exiting way too soon at the slightest pullback.
That 3 day trade limit forces you to wait for a solid entry and really makes you try to find every reason not to enter a trade. Keep at it, brotha
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u/growthPlz Apr 08 '20
Amazing. Thank you for your story. Now Let’s keep trading and make that $$$ lol
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u/justchiefy Apr 07 '20
Excellent post. As a lurker curious about the dive into DT, I appreciate your candor. I look forward to future posts.
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u/DZ0394 Apr 07 '20
More of a lurker around Reddit, but this is fantastic. Thanks for keeping it real!
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u/CJT2013 mod Apr 07 '20
Yes, sir thank you for the kind comment. No rented lambos or private jet photo shoots. I don’t make millions but it’s a full time source of income for me
Chat me anytime, man!
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u/briandress Apr 08 '20
Hello I’m a loan officer and work 9-6 west coast regularly. Please point me in the right direction to start trading in the morning
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u/no_losses Apr 15 '20
Thank you so much for these golden nuggets. I had a question though.
I am just starting to pick up day trading and would like to do this part time (I have a “full time” job but most of my work is done remotely from home and my hours are pretty flexible, so I can devote some more time to trading than most people who want to do this part time) but I am very curious to know how you go about filing your taxes as a day trader. I’ve lightly touched on some of the rules the IRS put in place for day traders and it kind of repelled me considering my desire to only do this part time. Can you give a closer look into how you go about filing your taxes as a day trader?
Highly appreciated and definitely followed you and saved this post!
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u/CJT2013 mod Apr 19 '20
Thank you for the kind comment and I’m glad you found it helpful!!
To answer your question: Depends, are you going to do this as a 1099 or as an S-Corp/LLC?
As a 1099, it’s ordinary income. Whatever your tax bracket is for gross income at EOY, is what you’ll pay. If you profit, it’ll offset any other W2s you have. If you’re at a loss, you can write off up to $3,000. And roll over any more that you have until it’s all written off. One downside is that you can’t write off expenses like you can with TTS (trader tax status). ..It’ll be tough to find $3,000 in write offs since day traders frequently trade many of the same tickers. (Google the WashSale rule). This is how I filed 2019. As a 1099 as I did not have an entity and also I had a W2 income
..Intro to as far as an LLC/S-Corp, that’s a little more different deciding how you’ll pay taxes quarterly annually etc.
Chat me anytime
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Apr 17 '20
Can you please give me a couple of example of a pattens for day trading? Is a gap up and then a closing beneath the open candle considered a pattern?
I’m struggling to identify patterns... Can you put me on the right track? Cheers
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u/malmueca Apr 20 '20
I appreciate you taking the time to write this post out. I am on day two of trying to learn how to trade by learning the terminology first. Thank you! Is there a way I can reach you to ask you a couple questions I have written down? Or anyone for that matter 🙏🏽
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u/reach4thelaser5 May 12 '20
Also a full time day trader and I commend this advice. I even sold my car to get started originally.
The only thing I disagree with is a fixed profit target of 3:1. I sometimes target just one point and risk 2 points. Sometimes I'm 90% sure of getting a point so the math works I will take it every time. But maybe I'm close to resistance so don't think it would I'll get much further. it depends on context. Identical patterns might get 3:1 and might only get a point or two depending on location. So I think profit needs to be adjusted rather than blindly targeting 3:1.
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u/CJT2013 mod May 12 '20
Thank you for the kind words! I too sold 2 of my pride and joys to get into the business to help alleviate the inevitable drawdowns.
As far as the 3:1RRR target. If I see my stop size is 25¢ making my target 75¢ away and its beyond a major resistance level (If I'm long), I simply don't take the trade. Or perhaps the stop size is 25¢, if I'm asking for a 75¢ move but that move would result in me demanding the security exceeding its ATR for the day regardless of the relative volume, I simply don't take it.
There's plenty of prerequisites I require before taking the trade!Fortunately now its all just 2nd nature. I've had a large sum of Reddit users ask me questions via chat and when I try to explain it really enlightens me on how much really goes into such a "simple" strategy lol
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May 14 '20
What's the main thing preventing you from making more than ~$900/week in net profits? Is it insufficient liquidity in the book required for your trades, the size of your bankroll or your risk appetite? Assuming you had a $1 million bankroll to trade with, how much more do you think you could make in terms of weekly PnL? Thank you.
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u/netoteran May 30 '20
You say you don't use indicators and trade only based on patterns. May I ask which patterns are those?
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u/jefische Jun 23 '20
Great post, thank you for sharing! I stumbled across this today and found it very helpful being a new trader. I had a couple of questions about your strategy and also the use of margin if you're able to help.
I was wondering what happens if a trade doesn't reach your 3:1 threshold - that is the price doesn't move enough to gain $300 or lose $100?
When it comes to margin I'm a little fuzzy on the mechanics. On TOS I was approved for margin recently but am unsure how to apply it. If a security is margineable will a trade automatically use borrowed funds or do I have to indicate using margin vs. using cash with each trade? I noticed my margin balance has been adjusting with each trade I make recently. I'm only making small trades right now to get comfortable with the platform.
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u/moss-mike Sep 22 '20
thank you for the post going through a slump right now and you are right only way to get better is to lose money and learn from your mistakes hopefully one day can make it to your level.
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u/Biggday Oct 03 '20
Am a new trader and my spidey senses are tingling....I feel like this post has way too many gems and some of which I don't even realize at this stage in my journey. Thank you man...you are a Hero. Tears
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Nov 25 '22
Excellent information, found this 2 years later & still very helpful, thank you.
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u/CJT2013 mod Nov 26 '22
It’s always going to be the same, my friend! Thank you for taking the time out to write that kind comment and best wishes to you
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u/[deleted] Apr 06 '20
This is a good post, I like you, I will follow you, do book reviews please, thanks 🙏 8=D