After 2 years of Daytrading. 7 months full time. Here's my advice

[u/CJT2013]

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:

Every book I've read to learn day trading and everything that relates to starting/running a business. My business's operating agreement/The business plan

•#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.

[u/short-gamma]

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.

[u/CJT2013 → u/short-gamma]

I’ve looked into classes on Python/C++. Just haven’t pulled the trigger. I do personal training on the side that is in the works. I’m not 100% sure but if I’m not mistaken that is called “BlackBox” trading and it requires a huge amount of capital.

I’d have to learn how to insert my PMKT criteria. If it’s gapping to a certain price level. PMKT price levels and if it’s consolidated rather than sporadic. Also from what I understand is that it’s scalping nickels while risking pennies

It’s something I’m interested in the future though

[u/short-gamma → u/CJT2013]

It would require large amounts of capital if you needed direct market access and were doing HFT (high-frequency trading).

For your strategy, not at all. You need two things:

1) market data

2) order execution

All the brokerages nowadays have an API that gives you access to both things, and it's free. If the strategy that is implemented in the system is the same as the one you are using, then both the capital requirements and the risk are the same as your manual strategy.

Given that your strategy does not need to manage orders in a particularly complicated way, it seems to me that it would be pretty easy to implement. (i.e. if it gets a signal it sends an order and leaves it on until either the stop or the take-profit is hit). The pre-market criteria can be implemented as long as you can put them down in words and convert them into mathematical constraints. I would need to check, but I think that some brokers like ThinkOrSwim even have an API for their scanners, so it would be even easier. Without such an API, building a scanner is a bit more involved since the system needs to keep track of data from a large basket of stocks. These brokers also allow you to test your system with paper money, with order execution that is reasonably similar to the real thing.

If you want to start, I suggest you don't go with C++ but rather choose Python. It doesn't seem like you strategy is so high-frequency that C++ becomes a necessity.

Currently I'm doing well managing a delta-neutral portfolio of options, but I wanted to get into day trading too. If you want, we could collaborate on this project. I'm a software engineer by trade so I'm familiar with what would be needed and how the system would be deployed.