day trade warrior business plan – trading as a business
TRANSCRIPT
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Day Trade WarriorBusiness Plan – Trading as a Business
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I want to be a Professional Day Trader What do I need to do? Just like any other profession, if you are
serious, you have to evaluate whether or not this is really a potential career path.
This isn’t a part-time hobby you do on the side, learning to day trade requires a tremendous amount of time and energy.
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Write your Business Plan I don’t care if you are going to open a
professional lawn mowing business or a Day Trading business, you need a business plan.
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Day Trading - Business Plan Basics What is your Strategy
Setups, Stocks Traded, etc Stats on the strategy (from papertrading) What time of day you trade?
How do you Manage Risk? Risk Reward Ratio Following the Volume What is your max loss/trade
What is your goal for next 6 months?
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Trading Plan For the next three months, you must
follow a strict trading plan. You must prove to yourself that you are
successful and that you worth investing in.
You have to prove this not only to yourself, but to anyone else considering supporting you in this process
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First 3 months Trade 10 times per day. Aim for 50%
success rate. Use 2:1 profit loss ratio, expect a 1.5:1
profit loss ratio average. We will build up from risking $50 per
trade to risking $200 over 3 months.
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1st Month - $50 Risk You are risking $50 per trade with a
target of $125 / day profit. If you lose $125 in 1 day you are done
for the day! You want to have 4 days per week
where you hit your goal. 1 day can be your max loss. This means your weekly goal is your
Daily goal x 3. ($375)
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Take 10 trades per day Risk $50 per trade. Lose on 5 trades. You are down $250. Make $75 on 5 trades, you make $375. You have a net profit of $125. You may hit a winner that far exceeds
$75 because all your trades had the 2:1 profit loss ratio, but expect 1.5:1 as your average.
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Do this for 1 month Do this every day for 1 month Prove to yourself that you can choose
the right stocks, the right patterns, and consistently come out ahead.
Right now, it’s not about how much you make, it’s about building consistency!!
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Month 2 - $100 Risk You are risking $100 per trade with a
target of $250 / day profit. If you lose $250 in 1 day you are done
for the day! You want to have 4 days per week
where you hit your goal. 1 day can be your max loss. This means your weekly goal is your
Daily goal x 3. ($750)
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Month 2 – Double your Risk Risk $100 per trade. Lose on 5 trades. You are down $500. Make $150 on 5 trades, you make $750. You have a net profit of $250. You may hit a winner that far exceeds
$150 because all your trades had the 2:1 profit loss ratio, but expect 1.5:1 as your average.
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Month 3 - $200 Risk You are risking $200 per trade with a
target of $500 / day profit. If you lose $500 in 1 day you are done
for the day! You want to have 4 days per week
where you hit your goal. 1 day can be your max loss. This means your weekly goal is your
Daily goal x 3. ($1500)
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Month 3 – Double your Risk Risk $200 per trade. Lose on 5 trades. You are down $1000. Make $300 on 5 trades, you make
$1500. You have a net profit of $500. You may hit a winner that far exceeds
$300 because all your trades had the 2:1 profit loss ratio, but expect 1.5:1 as your average.
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Set Realistic Goals Don’t expect to be profitable in the first
3 months trading. You should be papertrading, and
breaking even at best. Trading is a process. SURVIVE UNTIL YOU LEARN You learn by experience in this industry
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Don’t Trade Real Money Don’t Trade with Real Money until
you’ve proved that you can make money with a papertrading account.
This would have saved me over $30k in losses…and I’m not the only one!
Once you are consistently making money on paper, you can transition to live trading with small size.
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Trading as your Primary Income If Day Trading is your primary income
you need to speak with an account to declare yourself as a professional day trader.
This is will give you Mark to Market accounting and allows you to write off your losses, exempts you from wash sales, and is really important for professionals.
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Opening an LLC Many Professional Day Traders trade
under an LLC. LLC and S-Corps are pass through
corporations, meaning the owners pay the income taxes.
The LLC and S-Corps don’t have to pay taxes on the income since it’s going to be paid by the owners
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Advantage of LLC The Advantage of the LLC is that you
separate all your day trading income AND expenses in 1 account
Like any other business, there will be business expenses that are you can deduct from your income.
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Typical Day Trading Expenses News Subscriptions ($100/month) Esignal ($170/month) TC2000 ($100/month) TAS Market Profile ($250/month) Chat Room Memberships ($200/month) Data Fees, NYSE, NASDAQ ($130/month) We are at $800 / month already!
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Day Trading Equipment Fast Computers An Office Space (rental, utilities, etc) Fax, Printers, Phones
These are all equipment that depreciate over time and need replacing.
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Accounting Pay the money to hire a professional
account to advise you on the process of becoming a professional day trader.
There are many areas where you can decrease your taxes and take advantage of programs for being a small business.
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Day Trade WarriorAdvanced Level2 Techniques
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Advanced Level 2 Learn to read the Level 2 and
understand buy and sell signals. Studying Level 2 can be good for
scalping and finding quick entries and exits.
Level 2 can show us where retail buyers and sellers are lining up.
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Chart Reading vs Level 2 Level 2 is really important, but it doesn’t
override chart reading. As pattern based traders our first focus
is finding good patterns.
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Reading Level 2
Bid Support Concepts
Showing “Fake” Orders
Showing Resistance
Looking at Market Depth
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Time & SalesWatch the order flow in the Time & Sales
Large orders indicate Retail Interest
Orders in Green are at the ASK price
Orders in White are in between BID/ASK
Orders in Red are at the BID price
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Time & Sales tips Pauses in Time & Sales are usually a
bearish signal for me A Heavy ASK at a key level of resistance
confirms that the resistance is real. Look for the shares to get bought and then a quick breakout over that price
Breakout Trading at key Price Points requires Time & Sales and Level 2
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How to Hide Shares Using ARCA you have to display 10% of
your actual size. If you have 100k shares you can show 10k.
If you are selling a thinly traded stock, you may want to hide your shares to not scare away buyers
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Market Manipulation Some traders will place extremely large
orders without the intention of having them executed.
A “fake” buy order on the bid of 200k shares could make retail traders think there are big buyers.
In reality, that order will probably be canceled before it is filled
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Institutional Traders Institutional buyers may not be
represented fully in Level 2 This is one of the reasons some traders
believe focusing on Supply and Demand areas on the chart is more important than using level 2.
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How to Identify Institutional Trades Intuitional trades that are executed by
an algo/computer are typically 100 share blocks.
These orders fire off rapidly and can deceive traders into thinking there are buyers/sellers.
These trades do not necessarily represent retail traders
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Low Volume StocksBig Spreads are common on Low Volume Stocks
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Direct Access Routing Send your orders directly to the market
maker displaying shares available on the ASK or BID for the quickest fills.
Super Smart orders in Lightspeed will send orders to multiple routes and gives you partial fills from all of them until your shares are gone. The cost is higher, but execution speeds and fill times are excellent
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Dark Pools Dark Pools are where institutional
traders place their transactions These “pools” of shares are not
available to retail traders This means when a retail traders places
a buy or sell order, we won’t get access to those shares.
Some Brokers allow Dark Pool Routing
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Direct Access Routing
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Adding / Removing Liquidity Adding Liquidity to the Market means
you are adding shares that can be bought or sold. This would be any order that is not immediately “marketable” or filled when it’s placed
By Adding Liquidity to the Market, many Market Makers will give you ECN Rebates
When you Remove Liquidity you may get charged an ECN Fee.
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Adding Liquidity Adding Liquidity to the Market means
you are improving market liquidity by adding shares.
This would be considered ANY order that is not immediately Marketable.
When you Add Liquidity, you get PAID ECN rebates. ARCA pays .005
This means if I sell 10k shares on the Ask ARCA will pay me $50.00
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Removing Liquidity When you place a market order, you are
taking liquidity away from the market. Some brokers will charge you an ECN
fee for this. It may be anywhere from .0025-.01
This can be costly, but is the price to get fast executions with direct market routing
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Day Trade WarriorTAS Market Profile Indicators&Hot Keys
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TAS Market Profile This suite of indicators is available on
Bloomberg Terminals and is used by over 15,000 institutional traders.
It is commonly used on FOREX, Futures, and Commodities.
It can also be used on Equities
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TAS Boxes Boxes – Give Support/Resistance Areas
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Tas Boxes
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TAS Navigator Great indicator for timing shifts in
momentum between buyers and sellers.
Look for alignment on Multiple Time Frames
1min, 5min, 15min
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TAS Navigator Pink Bars = Trend Exhaustion Light Green = Strong Up Trend Dark Green = Weaker Up Trend Light Red = Strong Down Trend Dark Red = Weaker Down Trend Green Dots / Red Dots (buyer/seller
control) Yellow Dots / Cyan Dots (trend/sideways)
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TAS Navigator The Navigator can help time Reversals
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TAS on Reversals Reversals can be extremely powerful
moves. I look for Pink Exhaustion Bars on the
Navigator Many red candles in a row on the chart Look for Orange Candle to indicate
seller shift Buy on the break of the 1st orange or the
1st candle to make a new high
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Reversal Examples
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Navigator on Flags On Flags I look for the point where
momentum and volume are beginning to shift from sellers to the buyers
This is indicated by the Green Dots on the navigator bars.
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Navigator on Flags
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Navigator on Flags
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Navigator on Flags
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Navigator on Flags
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Exhaustion Warning
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Exhaustion Warning
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Exhaustion Warning
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Day Trade WarriorScanner Settings
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TAS Continued A continued look and review of TAS
Market Profile Market Map Always trade a Qualified SETUP
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$CNET
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$MACK
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$CNNX
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$SWFT news
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Market Map Lines Yellow Line is the Point of Control for Vol
The Blue Lines are the extension away from where the most volume is taking place.
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Market Psychology The Winners Walk away The Losers Keep Fighting it Out Trading 9:30-11am is the easiest, except
for breaking news Trading out of frustration to make back
losses is a recipe for disaster.
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Using Hot Keys Using Hot Keys allows very quick orders. Most Brokers provide Hot Key
configurations that you may be able to customize for your preference
Direct Access Software used by Speedtrader provides great Hot Key functionality.
Sterling and Lightspeed Pro also have good Hot Key settings
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Hotkey Buying Orders
I Allow Re-Routing on my Buy Orders
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Hotkey Selling Orders
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Proprietary Scanners My Flat Top Breakout Scanner is one of
my absolute favorite scanners. When I designed this scanner I was
trying to picture what I see as the perfect Flat Top Setup, what are the common patterns?
Spike up, consolidation, below the highs