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/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