It was about 10 years ago when I was struggling to turn the corner as a trader. I had put a lot of time into it. I had had a lot of losses. It wasn't for a lack of trying really hard, but it just wasn't clicking. And the frustrating thing is I felt like I was this close to turning the corner, but it kept not happening until I had a big blow up loss.
that forced me, I couldn't trade in my account anymore, so it forced me to analyze my metrics. And you know what happened? I discovered a pattern and I'm telling you, I am trading this pattern to this day, 10 years later, and it is the pattern that changed my life.
My account not only started growing, it skyrocketed. But here's a hint, it does not work on every single stock. In fact, this pattern that I trade, it only works on a very specific subset of stocks.
on any given day. So in this class, we're going to talk about how to become a day trader. And I'm going to share with you the pattern and the strategy that I trade every single day.
And I'm going to try to make it as simple for you as possible, because my goal is that you walk away at the end of this class with some knowledge that you can implement in your own trading today. All right, everyone. So in this class, we're going to talk about how to become a day trader. And I'm going to show you some real examples of trades that I've taken in. What I want to walk you through is the process of creating your own strategy that you can implement today.
So this is a calendar right here showing me averaging $893.24 per day. All right, so this was a nice month, but what was special about this month was that I started at the beginning of the month with $583.15 in my account. All right, so we're going to write it down here.
$583.15. That was my starting balance at the beginning of the month. At the end of the month, I produced $17,000 in gross profit. with an average of about two trades per day.
I took a total of 49 trades. I had 87.8% accuracy, 43 winners, one breakeven trade, and five losers. All right.
So we're going to talk in this episode about how I made $893 per day average. You need a simple day trading strategy. That's what you need. Now, I want you guys to get excited because the fact is there is so much opportunity in the market and all you need to do is come to the table with a strategy and with the discipline to follow the rules of the strategy.
I'm gonna give you that strategy. I'm gonna lay it out for you right here in this class. So a simple day trading strategy for me is finding a stock trending higher, taking an entry, with a 5% stop loss and selling half once it's up 10%.
Then I adjust the new stop to a trailing minus 5% stop. So if it drops more than 5%, I sell the rest of the position. All right.
Now, you often don't hear me talk about percentages. There's a reason that I'm doing it in this example. I think that in this case, it's easier to think about percentages because what I want you focusing on is a goal of getting a 10% account growth, growing your account by 10%.
And this is going to sound crazy, but doing that in one day and doing it in one trade. So what we're ultimately looking here for is a stock that has the potential to go up 10%, 20%, 30% in one day, and for you to capture 10% of that move with essentially your whole account. So I'm going to talk in this episode about different account sizes and things like that. Certainly, we're not talking about doing this with a $500,000 account and making $50,000 in one day. We're talking about relatively small accounts.
So this is a simple day trading strategy, but it requires knowing a few things. You need to know how to find stocks to trade. You need to know where to buy them and where to sell them, right?
Okay, so these are the type of stocks that can go up 10%. This is really important. We need to be trading stocks that can move quickly.
So what are the type of stocks that can go up 10%? If I want to grow my account 10% in one day, I need a stock that is moving. So, typically, what I have found is that these are indicators of the type of stock that can make a big move.
It's going to have, number one, five times relative volume today. So what does five times relative volume mean? Well, if you have a stock that over the course of, and we could just, it doesn't really matter the timeframe, but you have a stock over the course of, you know, a long period of time, each day it has volume, right?
Volume is the number of shares traded. So you'll have some days that are a little above it, some days that are a little below it. This line is your average. So this is just your average volume. So on a day where all of a sudden the volume is like this, what are we experiencing?
This is above average volume, okay? Why would a stock have above average volume? Above average volume is typically the result of a news event, some type of catalyst. It could be quarterly earnings, it could be FDA approval, it could be clinical trials, a new contract, some type of news. So what that news event has done.
the news has been released. The algorithms, the market makers, the high frequency traders scan news headlines in real time. And when they see news headlines, they have these computer programs that will automatically initiate buy and sell orders.
So all of a sudden, the news comes out and these buy orders are being initiated. Now the stock starts moving up, right? The market makers are trying to get in first.
But what happens is other traders like you and I, regular retail traders, we notice the stock is moving up. We see it's already up 5%, 8%, 10%. And what I have found is that once a stock is already up 10%, it is becoming an outlier for the entire stock market for that day.
It is pretty rare for a stock to go up 30, 40%. In fact, on any given day, usually there's only three or four that will do that. But you know what? I've been trading for a long time and every single day, there are a handful of stocks, three, four, five, some days a couple more, some days a couple less, that are making a big move because every day there are stocks that have news.
So I look for the stock, number one, to have news. That's what's going to bring in the volume. That's going to create the five times relative volume. That's what's going to make the stock already up 10% on the day. And I have found for small account traders, which is going to be most of us, trading stocks between $1 and $20 is going to be better because our goal is to make 10% per day.
So it's going to be easier to get that on a $2 stock. A $2 stock only has to go up 20 cents and you're up 10%. A $200 stock, you know, your Teslas, your Facebook, these are not companies that go up 10% in one day. So inevitably, as we search for the higher volatility and the higher returns, we're going to be focusing on lower priced stocks. But there is a sweet spot there.
OK, so I don't want to trade stocks, for instance, and I'll show you this whiteboard. I'm not going to trade stocks that are below one dollar a share. All right.
So this is one dollar a share right here on the low side. So down here, you've got your you know, this is zero. All right, so these are penny stocks down here.
I don't trade these a lot because they're very difficult to trade. I often find that these penny stocks are just shady. I don't trust them, and I don't wanna get caught up in them. And then on the other hand, when you get over $20, my frequency of trading also declines because it's harder to get those 10% intraday moves.
And when you do get them, usually the spreads are bigger, which creates more risk. That may be a little bit more advanced than where some of you guys are at right now, but that's okay. So just for right now, know that my frequency of trading is in this range right here, trading stocks generally between $1 and $2 a share.
All right. Now, this right here, you could say, okay, Russ, that's your opinion of the type of stocks that have the potential to go up 10%. But how do we even know it's true?
Well, those are my actual personal trading metrics that show this is the type of stock that I trade every single day. And one thing that I get so excited about teaching fellow traders, it is never too soon and it's never too late to start learning about the stock market. I started learning about the stock market when I was a teenager.
That's when I took my first trades. I'm 38 years old now. I just kept learning incrementally.
You know, I learned a little bit here, a little bit there. As you watch this class, you're going to learn a little bit. As you watch another class that I've taught, you're going to watch a little bit more. So you're going to learn a little bit more.
So you just keep getting these incremental boosts of learning. And for me, I have learned beyond a shadow of a doubt that the right stocks to trade have high relative volume, are up at least 10% on the day, are priced between 2 and 20, generally 1 and 20. And one thing that I didn't mention is the float. So the float right here, number five, is supply level.
So the float is important because these first four indicate demand, but number five is the supply. Because ultimately, we're working in a market where we deal with supply-demand imbalances. So when you have a huge amount of demand and a limited level of supply, that's when you get some really big moves. And this is something that... you know, I understand a lot of traders.
When I first got into the market, I didn't really understand float and things like that. So just to give you that brief understanding of that term, when a company does its initial public offering, they sell shares onto the open market. So they may sell, let's just say, for example, 10 million shares on the open market, and they price their IPO at $10, which means the company has raised $100 million in their IPO. But from that point forward... there's only 10 million shares available to trade on the open market.
That's it, 10 million shares. So if all of a sudden you want to buy a position or you want to buy a huge position, a 10% stake or 20% stake, you really only have to buy one or 2 million shares, which let's say the price goes down to $3 or $4. It's not unthinkable that someone could come in and do that. And so what we find is that companies with limited levels of supply, when the demand cranks up. for a variety of reasons, but typically driven by news, all of a sudden you can see these really fast moves where stocks just start squeezing faster and faster and faster.
And that's what we're looking for as retail traders. Now, I like to always emphasize and remind you guys that there is a degree of us versus them in the market. Us is retail traders. We're the little guys who, although I've made some money, I'm nothing compared to a hedge fund or an institutional trader. I'm a nobody.
We're all nobodies. The people who make the real money on Wall Street, those are the institutional traders. Those are the hedge funds, the big banks.
Those are the market makers. My hope in some ways is that when we're winning, we're... we're making money because they're losing money. I don't like to think of trading as retail against retail because there's no reason for us to be battling each other when we can be trading against the market makers.
So there's something that is interesting that happens when these stocks start going up. So what are the market makers doing? So if a market maker sits and a market maker, someone who makes the market, so they sit on both the bid and the ask. So if I switch to the whiteboard here, you've got a stock that has the bid and you have a stock that has the ask right here.
Doesn't matter the stock. Every company has this. Every stock has it. So if you have four dollars on the bid and you have, you know, four twenty, let's just say on the ask, doesn't matter.
Then what you have is a 20 cent spread. the people who create the spread are the market makers and they profit from the spread because they sit on the bid and they sit on the ask. And at the end of the day, their goal is to buy and sell the same number of shares.
So they're balanced at the end of the day. And they just made money by trading the shares across the spread to retail traders like you and me. But what can happen is if they have a 25,000 share sell order here and all of a sudden a retail trader buys the full 25,000 shares, that order is gone. The price now goes up. to 450. they have another 25,000.
That goes. And now what's happened is they're starting to become short the stock. They're imbalanced. And now in order to cover themselves, they have to buy. So now you start seeing as it goes higher, $475,000, a 50,000 share buyer on the bid.
And now it's $5 on the ask. And now retail traders, we start to see what's happening with this algorithm. And we're going to capitalize.
on this momentary sign of weakness that the market makers have displayed. So this is where we start to get these moves where a stock goes from four to 450 to five, and all of a sudden now you've got a 25, 30, 40% move. All right, so I can tell you without a shadow of a doubt that these are the right stocks to trade. But now the question is, how do we find these stocks in real time, right? That's part of the strategy.
It's important to know the right type of stock to trade, but ultimately you need to know how to find it. In the old days, when I was getting started trying to find these types of trades, you would go on Yahoo message boards, these, you know, just message boards where people are making posts. You would Google search stocks, you know, to buy penny stocks to trade. And it was really hard to find the right stocks to trade in real time.
For some of you, you might like using free services. You can scan on Finviz. That's a service that people use for scanning. but it's delayed data. So you're not getting real-time scans.
And so it's not super helpful for day trading. So what I ended up doing was I actually hired development team to build out a set of stock scanners that I use every day. And this is what they look like right here.
So whether you're using these scanners or you use some free scanners on Finviz, or maybe use some free scanners that are provided by your broker, the way most retail traders find stocks to trade is by using scanners. So these are scanning the entire market, searching for stocks that meet the criteria of whatever you tell the scanner to look for. So in my case, what am I telling the scanner to look for? A stock that has five times relative volume, a stock price between one and 20, a stock that's up at least 10%, right? This is what we're looking for, a float of less than 20 million shares and a stock that has some type of news catalyst.
And then I start step one with find the top percentage gainers each day. All right, so now I'm looking for the top percentage gainer and that's on this scan right here. So this is showing me the actual leading percentage gainer in the entire market on this particular day. And you can see here, we've got a number of stocks that are up a lot, 95%, 93%, 58%, 27%. So these are the type of stocks that we're looking for, obviously, that we're interested in.
So step one is just looking at the scan. Now, what you'll notice when I look at the scan to try to find these types of stocks, I sort it by the percentage of the gap. So I'm looking at the leading gappers first. Then I can see the symbol, which, you know, I might recognize it or I might not.
I can see the price right here. I can see the amount of volume that's taken place. When you have one that's really light volume, that's got a really big gap like this, usually it's the result of a reverse split.
So this is a stock we probably wouldn't trade on a particular day. And then here we can see the float. So now we see that this one is a 39 million share float. This one's 3.8 million. This one's 53, 36. And we start crossing out the ones that are higher.
And we start focusing on the ones that are lower. Because we know that those are the ones that are more likely to make the big moves. So now we're starting to find that needle in the haystack.
We're starting to figure out which is the stock here that could make the big move. So then I check the news headline. I read the breaking news.
I try to understand why is this stock moving higher? And as retail traders who are day trading, we don't have to spend a lot of time thinking about fundamental analysis. You know, we're not drilling all the way into, you know, the quarterly filings and things like that. We're really just focusing on high level. What is the catalyst for this particular stock?
and then from there, we start looking at the chart. I look for my favorite chart pattern. I see the stock squeezing up, and I can't just buy it as it's moving higher.
I have to wait for a pullback. So we have two red candles to pull back right here. I set my stop at the low of this pullback, so that's my max loss, and my entry is right here, and we're gonna talk about this in more detail right now. Where to buy a strong stock.
So this is my preferred pattern. And you can see, you know, for those of you who watch me on YouTube, I have YouTube videos that I uploaded more than 10 years ago where I'm talking about this pattern. So I've been trading this pattern for a really long time.
It is tried and true. It is proven. I love it, but it doesn't work on every single stock.
Now that's the important thing. If you try to apply this to the wrong stock, you're not gonna find success. Why? What makes these patterns work is that high relative volume.
So you have to make sure you're focusing on stocks with high relative volume. That's a big mistake a lot of beginner traders will make. They'll see the pattern, but then they apply it to the wrong stock, and therefore, they don't find consistency.
So the way this pattern works, the stock is squeezing up, and I could use a, let me see, let me use this. All right, so stock is squeezing up, moving higher, moving higher like this. All right, and we have this nice move up. Actually, let's stop the move right here. So it's moving up, and then we get a couple candles of pullback.
All right, so pullback, pullback right here, and pullback. What I want to see in this pattern... is that the stock pulls back, but it should not pull back more than 50% of the move. So if the 50% line is right about here, we don't want to see the stock pull back more than that.
Typically, we will also notice a moving average called the volume weighted average price, and we don't want to see it pull back below that either. Now, usually the volume weighted average price will be above or right around that 50% mark anyways. So those are sort of, they usually are kind of the same. All right, so as it's pulling back, I would have found the stock using my scanners, right? So I would have found the stock on my high day momentum scanner or on my top gainer scanner.
So I see it squeezing up and now it's time for me to be patient and wait for it to come to me. Wait for it to pull back a little bit. So I let it pull back. one candle that's red, two candles that's red, three candles that's red. And then what I'm looking for, and sometimes it's only one candle, sometimes it's four.
If it's more than four, then I start to feel like it's pulling back too much. The buyer should have stepped in. So when it's between two and three candles, I start just looking at the high of each of these candles.
So what was this price? What was this price? What was this price? Why is that important? Because the first candle that breaks that price, is now stepping back up.
It's changing direction. Psychologically, this is a really big deal. So I am a buyer. as soon as a candle makes a new high, and I'm getting in right at that price right there.
That's my entry. Now, what I'll sometimes do is I'll get in a little early to anticipate that breakout. So I'll buy just a little bit lower, and then I'll add as it's breaking through that level. Alternatively, you could just add on the break to that level, and then we're looking for a move back up to new highs.
All right. So this is the pullback setup. This is the pattern that I trade every single day.
This is what I'm looking for. And the big tip that I would give you during this class, you're going to see a bunch of screenshots of chart patterns. Take a screenshot of it, print it out, put them all around your desk.
Because what I want you to do is I want you to train yourself to recognize this pattern. So when you start seeing it in real time, you see, okay, there's the green candles. Here's the first red candle. Here's the second red candle. This is what I'm looking for.
really what we're doing as traders is we recognize these patterns in the market and we can capitalize on them, but you've got to be able to take action. So you have to be able to recognize it in real time. And this is kind of part of the process of converting the general theory and knowledge into actual working skill.
All right. So this is the, this is the setup right here. And by the way, the stop your max loss is at the low of that pullback, which is right down here. So that's your max loss right down here. Oops.
All right, so I'm going to read this to you. You don't have to read the whole thing. So I'll just, I'll read it to you.
So this is a description of the entry setup. Okay, so the first candle to make a new high is the apex point of the flag, the bull flag pattern. All right, this pullback pattern. Sometimes I'll enter early to anticipate the breakout. If I'm entering early, what typically triggers that entry is either a break through a psychological level just below the apex point, such as a half dollar or a whole dollar, or seeing a surge of buying on the level two.
I would always prefer to have an early entry because it offsets my risk, right? If I'm in, if I take my entry, let's just say this is $4.61. And the low here is $4.31.
Doesn't really matter. These are just numbers. If I get in at $4.47. right here, that would be only a 16 cent stop. So my stop is 16 cents, which means my profit target on this is going to be a ratio of two to one.
So my profit target is 32 cents. Okay. So now I'm looking for a squeeze up to like, you know, 470, 480 ish. And now I've got a better risk reward ratio.
It's going to be a little easier to achieve that because I got in early. The only downside is that. if I've gotten in at $447, I actually bought before I have confirmation. So my accuracy is going to be a little lower if I'm getting in without confirmation, but then that's offset by having a tighter stop.
So my risk is a little bit lower. And you see in this example, how I'm talking about stops in cents per share. That's the way a lot of traders will think about it. But ultimately you could also say my goal is 10%. So on a $4.40 stock, I need to be able to make 44 cents a share.
So therefore my stop is 22 cents. Obviously, if you can get your stop tighter than that, that's even better. Okay, so oops, camera was pointed the wrong way.
That's okay. All right, so almost immediately upon entering, upon entry, I wanna see the price moving up. If the price moves down immediately, my timing is wrong.
If I have a starter position, I may hold with my stop at the low of the pattern and look to add off support because I haven't gotten stopped out yet, and that's fine. However, when I go red on a trade almost immediately, I often change my perspective from getting out, you know, from this being a winner to just getting out breakeven and minimizing the loss, right? I kind of, this is about damage control.
It's no longer looking like a big winner because I'm not expecting, you know, it went down as soon as I got it. So this is the type of trade that when it works well, it works almost immediately. And that early entry allows me to start accumulating a position as we see volume coming in. And this is also likely due to other traders anticipating that same breakout and perhaps short sellers covering as the stock is showing some increasing strength.
So the target is always a retest of high of day. But if the pullback was a bigger one, then there will be an increased risk of a double top formation and a possible rejection. and I'll draw that out so you see what it looks like. This would require the formation of either a flat top breakout pattern or an ABCD pattern, but neither of those cases, I wouldn't hold my initial position and wait for those setups to fully form. I would get out, take my profit, and then get back in.
All right, so what do I mean by the double top? All right, so let's say this pulled back for one more candle down here, and then it starts to squeeze up. So the problem is that now we might find resistance at the Hayade. This is called a cup formation.
And in order to trust and trade a cup, we need a handle. You cannot drink from a cup that does not have a handle, is the ancient saying. So now we have to let it pull back again.
and maybe it pulls back quite a lot, and it does like another three red candles, and then it comes back up, or maybe it just consolidates right under this level, and then breaks through. But either way, this is what I now have to wait before I establish my new trade. And this is a little bit of a more complex pattern, which I would say, if you're thinking about becoming a trader, you're looking for simplicity. So I wouldn't worry as much about this, and maybe I shouldn't have even mentioned it, but.
this is a bit of a more complex pattern that you will see me trade from time to time. Okay, but trading, of course, is not without risk. And as you, I'm sure, already know and have heard me say a million times, my results are not typical. So what are some risk factors with this type of trading? Well, stops are tight, and these flag patterns are typically strong.
So we're able to get a pretty tight stop. However, that false breakout and double top rejection is a risk factor. And what can sometimes happen is we'll see the stock come. up to this level and it can be either right there or it could be right here and it can do what's called a false break where it squeezes up initially so the candle's looking green and then it reverses and goes down and becomes a red candle with a tall body.
and that's a shooting star candle, that's a reversal indicator, and that's a false breakout. So that's something that can happen, but your correct entry was still way down here. So even by the time that happens, you should still already be at a point where you're taking profit.
So I suppose there are times where even when we come up for that first candle to make a new high, that right here, we get that pop and rejection. But the good news with that is that you're very close to your stop, which is within your risk parameter. So that's, again, it's not a big deal to lose and have losses as a trader.
This is something you have to get out of your head. You will have losses. That's okay.
A successful trader loses. The ones who are the most successful are the ones who are the best at losing quickly. Cut your losses and move on to the next trade.
You do not want to hold and hope. You don't want to average down. You're going to make the situation worse. You just ruthlessly cut it and then move on to the next trade. So with a stop loss at the low of the last five-minute candle, you can use that 5% stop, or you can use arbitrary stop based on cents per share, or based specifically on the actual low of that candle.
In a strong market, it's worth noting that rather than sell my position through the first move, I may keep adding to my position. So if our stop is 5%, our profit target is 10%. So what do we do when we're up 10%?
Do we sell the whole thing? My answer is no. I don't want to cap my winners. I would be capping my winners if I sold the whole thing, but I also have to pay myself.
So what I want to do is I want to take a little off the table. In a hot market, maybe I hold the whole thing and kind of let it ride a little longer and just watch carefully for an exit indicator, which I'll talk about in a second. But in a colder market, maybe I'll sell half when I'm up that 10% and then hold the rest with that trailing stop. So there's different types of trailing stops you can use. You can use an actual live trailing stop, which if you did a 5% trailing stop, then what would happen is as the stock moves up, it's moving along with it.
So your stop just keeps moving up and it just stays 5% below the high. and then as soon as the stock turns around, you get stopped out. However, you will always get stopped out when the stock is dropping using a trailing stop, and that means you'll be getting some slippage because other people are selling at the same time.
And so it's a little bit better to sell into strength as it's going up rather than waiting to sell the whole thing as it's coming down. But at the same time, if you've taken profit and sold half up here at your 10% profit mark, and then you sell another half when you're up 15% here, and then it comes back down, selling that last piece through a trailing stop is not the end of the world. Okay, so once I'm in a trade, what do I focus on?
Once I'm in the trade, I am focusing on the level two. What am I looking for? I'm looking for signs of strength.
Signs of strength means green on the tape. See how we have green on the tape right here? that's green on the tape, this is the time in sales.
Those are actual orders that have gone through. So if I just got in this at 10.30 or 10.32, I like seeing green on the tape right here, all right? The number of shares on the level two, I wanna see these orders decreasing. So maybe this was initially a five and it went from a four to a three to a two to a one.
I like seeing that. I like seeing the price moving up naturally, hopefully fairly quickly. The stock should be hitting new highs and being on the high of day scanner.
That is good. That means more traders are going to notice it. This helps maintain its position as the most obvious stock to be traded.
the level two jumping up to the next levels where sellers are three, five cents away or even eight, 15 cents apart, now you're starting to get these bigger moves. You can see how this goes from 33 to 44, from 44 to 64 to 76, and then all the way up to 1144. So now this is telling us if we start breaking through some of these critical levels, we can start accelerating. We can start moving a lot faster.
So these are signs of strength. This is what I look for. What's the inverse?
What are signs of weakness? What's an exit indicator? If I see a big seller appear on the level two, right where I got in, all of a sudden there's a 10,000, 15,000, 20,000 share seller, that's going to make me a little nervous.
The obvious appearance of a hidden seller, we're seeing buying, but it's not breaking through. That's a problem. A large burst of red on the tape indicating a lot of selling going through. An initial pop, but then that dramatic reversal where it does that kind of like jackknife, whipsaw.
and I don't like entering on a red candle, right? My intention is to be entering on a green candle, but if I get in and then all of a sudden, you know, it was going up, but then it reverses and that candle closes red, that's the time to exit because obviously the trade is wrong. And that's okay.
Again, like I said, it's not a big deal to be wrong. It's a big deal to not take your losses when they happen. So now this is an example of this pattern.
Right, so this is a stock that was obviously moving up quite a bit on the day and it starts to squeeze up here. It starts to move quickly. Notice the volume bars, high volume on the candles moving up and then light volume on the red candle. See how that's colored red? So now we have light volume on the red candle, light volume on this candle too.
This is the low right there. The entry therefore is right here. your first target is a move through the high.
And this went all the way from like 560 or so. It's hard to tell exactly where that is. 540 all the way up to six, to 650, to seven, 750 to eight, 850, and it keeps going. This is the type of stock that can grow your account 10% in one day, right?
this is what we're looking for. So we would have found it again on the scanners. We would have looked at the news and then we were waiting for this pattern to form.
And we had to wait a little while. Now notice here, you can see the beginning of the formation, but then it just pulls back and stalls out. So traders weren't ready to buy it up and that's fine. It never gave us the trigger to buy.
It never gave us the buy signal because you didn't get that first candle that made the new high. I usually like to see at least three green candles in a row, but there are times where I'll trade with less. We'll see some more examples.
So here are two big green candles in a row and then two light volume red candles. So now my max loss is the low of this red candle right there. My entry is as soon, the second this green candle breaks the high of that red candle.
So I'm constantly looking at what was the high of that last candle? Let's say in this case, it's $10.30. So now I'm thinking as soon as this breaks 1030, I'm a buyer.
But if I'm looking at the level two and all of a sudden I see, wow, there's some buyers here. This might be a spot I want to step up to the plate. So I'll just show you level two, for example. So today's the day where I am a little above that $900 daily average. Today is $2,000 green day.
All right, so let's look at this here for instance. So the stock's up 30%. So you've got 1230 on the ask.
So if I knew that 1235 was the first candle to make a new high, what would I be looking for here? I'd be looking to see some green on the tape. I want to see some other people stepping up to the plate. That confirms that what I'm seeing, other people are seeing it too, right?
I want to see maybe a tighter spread. This is 1212 by 1230. So we've got a bigger spread. The spread is the difference between the bid and the ask.
So I might prefer a little bit of a tighter spread. Let's look at a different stock, VFS. Okay, 7 cent spread. That's not too bad, right?
A little bit of a tighter spread, 8 cent spread. Again, these ones are both a little more expensive than maybe my preference, but I start dialing in the level two. You know what I don't like?
There's a lot of sellers stacked here at 1780. See how it feels heavy? You can visually see how it's heavy right there. And then there's some sellers that go through, so other traders recognize that weakness.
Here's another example. A couple of green candles, a couple of red candles, and then first candle to make a new high is right here, and this one goes from $1.60 all the way up to $3.50. this is like a 100% move right there.
So this is the type of stock that we want to trade. And this is the pattern that I have consistently found to be the easiest for me to visualize, to find in real time and to manage my risk on. There's another one. All right.
So we get that squeeze up three candles, two candles to pull back. First candle makes a new high. Boom.
We go from $2 to three. That's a 50% move there in 15 minutes. It goes a little bit higher. So these are the types of stocks I was trading that I've been trading for basically forever. But on that calendar where I showed you the 49 trade, I think it was 49 trades, that calendar, these are the types of stocks I was trading every single day.
All right, there we go. Another example, moving up, two candles will pull back. That's the entry, moving higher. So by all means, take a screen grab, print this out, put it on your chart, put it somewhere near your trading station.
Now here's a day where we got the two big green candles. It pulls back. First candle makes a new high.
It goes from 550 to 650 to seven. These are exceeding 10% moves. they are, right? These are some really nice moves.
This is $10,000 in one day. This was $85,000 in one day. Every now and then you get a home run, right?
And obviously my results aren't typical. I was trading with a larger account. But nonetheless, this is a nice pullback right there. And then right into the open, you got a squeeze from $8 to $24 a share.
Holy moly, we didn't see that coming. Here's another day where I ended up making $77,000 trading the leading gapper. It was up 67% on the day. INDP, $19 stock around this level at the gap, 121 million shares of volume, 1.61 million share float.
And you can see the stock goes from 12 to 13 to 14 to 15 to 16, all the way up to $28 a share. Holy moly. And this pattern, this one's a little more complex. This one maybe is not exactly as clean as some of the others.
And so one of the things that you'll learn is to recognize moments of strength and weakness in the overall market, market sentiment, when it's time to be a little more aggressive, when it's time to take a little risk and trade the B and C quality setups because the market's hot, and when it's time to go back to basics and focus on what you know really works the best. again, another day, 50,000 bucks. These are big green days.
And I put these out there not to brag. I mean, I really am just showing you like this is the potential. This is the type of stuff that we're looking for. but we have to talk about trading psychology because there's a challenge that a lot of people have. And this may relate to you where you've been, if you've been trading for a little while, you have bigger losers on average than your winners.
So let's just say, for example, your average winners are like a hundred bucks, but your average losers are 200. And you're like, man, I cannot break out of the cycle. Why does this keep happening? Often this is the result of fear in your trading.
So what am I talking about here? What happens is you're selling your winners too soon, and you're holding your losers too long, quite simply. But the reason that we do that, and I'm guilty of this, I've done it myself, is because of fear.
when I have a winner, I'm afraid of losing it. And so the best way to alleviate that fear is to press the sell button and lock it up, even if I'm only up 3% or 4%. But I didn't even achieve the full profit potential of the trade. And maybe it ends up going higher, but I sold too soon.
And worse, maybe I get back in higher and then lose. That's extremely frustrating. And we've all probably done that once or twice, maybe more.
but then on the losing side, when you get into the loser, you're also afraid. You don't want to have a loser. And this is going to make me feel so frustrated. I'm going to be so disappointed. And so you get stubborn and you hold it and you hope it'll turn around.
And next thing you know, your loser is getting bigger and bigger and bigger until you finally capitulate, give in. And often you give in right at the low and then the stock bounces back up a little bit. But you were holding it way too long in the first place. So this is a battle up here.
The best traders, they're dialed in up here. It's mindset. And I'll tell you something that's really frustrating. I have found that some of the people who do the best in trading, and who make the most money are the people who need the money the least.
And I think what's important to realize is that the big difference is when you don't need the money, you don't trade from a point of desperation. You don't get as emotionally fueled. You don't get as frustrated.
You're just genuinely trading from curiosity and from, I want to try to make some money. This is kind of fun, but you don't need it. So you can cut your losers and you can let your winners ride a little bit because you're not that afraid of, you know, this is a small winner. I don't know.
You just let it work. And that's the right attitude. So let's talk a little bit more about trading psychology. Learning to scale into winners is important. But most people do the opposite.
They add to losing positions. So they're in a loser and they add more, they add more. They're in a winner and they scale out.
So what I like to do, and what you hear me say a lot when I'm trading, for those of you who have tuned into my live streams, is I'm adding to the position. The day that I made $185,000 on GameStop, what was I doing? I was adding to my winners. The market was hot.
It was the right thing to do. The day I made $475,000, I was adding to my winners. I was buying high, I was adding higher, and then I was selling even higher.
What losing traders do is they add to their losers. They sell their winners way too soon, they add to their losers. So I would encourage you to avoid averaging down as a beginner trader.
More experienced traders who have a track record of profitability will learn that there is a time and a place when you can average down, but it is not something that beginner traders should do. as traders, we all suffer at times from the fear of missing out, dealing with emotionally fueled trading behaviors, getting frustrated, seeing other people making money. But this is a thing that I want to encourage you to think about.
I want you to learn how to capitalize on FOMO without falling victim to it. So what does that mean? There are times in the market where there's a lot of FOMO, where traders are getting really amped up, they're getting really excited and stocks are going crazy.
This is a time to capitalize on that volatility by being more aggressive. Falling victim to it means getting emotionally fueled, getting frustrated, and starting to get stubborn. Just chasing, buying something at high of day without really calculating your risk. Gamblers think only about profit.
Traders are thinking about risk. And that's what separates you in the market because there are people that come into the market and they simply gamble. And then there's people that come into the market and they trade.
What's the difference? The difference is that once you are no longer guessing, once you have statistics and a track record to back up your strategy, it's not a game of chance. You actually have a statistical edge. And that's what I have as a trader who's been doing this for a very long time.
Now, recovering from big losses is something that is inevitable as a trader. You will have some big losses from time to time just because that's life. One of the things that I always encourage people to do is to go back to basics.
So if you have a big loss, go back to basics and focus on taking one trade a day. It's really important to rebuild confidence after having a big loss. So going back to basics, taking one trade a day, two trades a day, maybe for a period of time.
And what I usually do is I say, all right, if I lost, if I, if I go into a drawdown, um, you know, so let's not that this matters, but, um, so, you know, generally my account's growing, but then, you know, I have a loss here. And it doesn't matter. I mean, this could be $10 million of profit, and this is a 50,000, 500,000.
It doesn't matter. It just could be $1,000 of profit, and it's a $50 loss. It's a loss that's made you feel emotionally activated. So what I say is, okay, what we don't want to do is have a little bit of progress and then take another big step down because you're getting emotionally fueled and you're swinging for home runs. because that's when you start making huge mistakes.
We do not want to do that. That's a no. All right, we don't want to stair step down. So what we need to do is we need to start tightening up the risk. So we need to start trading less, trading higher quality setups, and start to slowly rebuild like this.
once I've made back about half of the loss, then I usually emotionally start to feel like I'm getting my feet back under me and I'm starting to feel confidence to start to step up to the plate again. And then I grow my account some more. And then inevitably, you know, overconfident, whatever, things happen, and I have another loss.
And now once again, I've got to start building back up slowly and then scaling back up once I've recouped about half the loss. That's my strategy for recouping losses. When it comes to becoming a disciplined trader, I will tell you that we're not born disciplined. You learn and develop discipline. It is a muscle and you have to keep working at it.
So if you see yourself making mistakes, you've got to push yourself to be a better trader. The trading rules that you set out for yourself are designed to protect your account and protect your emotional state. So for me, even though I've made a lot of money trading, I don't take a lot of risk because I never want to have a big drawdown. I really, even with over $10 million of trading profits, I never want to draw down more than $50,000.
This past year, I don't think I've had a drawdown of more than $25,000, which is, it's kind of crazy because even if you put your money in the stock market, you know, a three, four, 5% drawdown on 10 million is, you know, hundreds of thousands of dollars, but I won't allow that. I want to always stay at the top of my game because that's protecting my emotional state. So yeah, I'm minimizing my risk.
Maybe that's costing me some opportunity, but ultimately for me, it's about keeping myself at the top of my game. So you create a set of rules to live by. Those rules include max loss on the day, max position size, the type of stocks you're going to trade.
You're doing all of that to manage risk, to preserve your account, keep growing your account. And I encourage you to quit the day trading sooner. So many people fall into this habit of over-trading, punching the keys, boom, boom, boom, boom, boom. Your job is to make money. Your job is to take a little money out of the market each day to do that consistently.
So once you've made a little money, walk away. Do it again tomorrow. Do not overstay your welcome.
So the minimum account size for trading, you could trade with a tiny account. It doesn't really matter. I've traded with an account as small as $583. You could trade with a $5,000 account, $10,000 account, but the ratio is 10%. So I'm thinking about a good day growing my account 10%.
Now, if I've got four or five, $700,000 or something in my account, I'm no longer really thinking about it in those terms because that's kind of being a little too aggressive. but with accounts of less than, you know, 50,000, a $50,000 account, you should easily be able to have $5,000 green days. Honestly, like that is not for a skilled trader that is not out of the range of, of realistic.
So $5,000 account, $500 green days, um, you know, et cetera. And I set my red day, sorry, my red day is, um, my daily goal. So if my daily goal is 10%, my red day is 10%.
And that's it. I want to walk you through quickly choosing the best broker for day trading. You really have two options.
You have US broker-dealers and you have offshore broker-dealers. When it comes to a US broker-dealer, we have the PDT rule here. So even if you're a European trader, if you come and you open an account with a US broker-dealer, they're going to tell you you need a minimum of $25,000 for a margin account. the margin account is what gives you leverage and allows you to day trade as much as you want.
So you put in the $25,000 and you could buy actually $100,000 worth of stock because you get four times leverage. And you could trade $100,000 worth of stock 10 times in a day. It's a million dollars of stock that you're trading. You could trade it 100 times a day. You could trade hundreds of millions of dollars of stock each day if you wanted to.
that's the benefit of a margin account. However, you could fund a cash account with, there's no minimum, so $10, but trading is limited and you don't have leverage. So, you know, there are people that like to use cash accounts for taking one trade a day and that's fine, but you're going to be a little bit limited. But the nice thing is you can open an account with less money.
So Charles Schwab using the thinkorswim platform, Lightspeed, Interactive Brokers. These are a few of the brokers that are popular among both US and international traders. There's a lot of international traders that use Lightspeed, right?
That's fine, you can use Lightspeed, you just have to have 25,000 if you want the margin account. Now you've got offshore broker-dealers. So international traders will often go to TradeZero. TradeZero only has, I think, a $500 minimum for a margin account, and they give you not four times, but six times leverage.
CMEG offers six times leverage as well. CMEG accepts U.S. residents. TradeZero does not. TD Direct is for Canadians.
Interactive Brokers is also popular among Canadians. I don't think CMEG or TradeZero accept Canadians. So... You know, it's kind of interesting because some U.S. traders will go and trade with an international broker so they can get the margin. But then they pay higher fees and you don't have insurance on your deposits the way you do with like a U.S. broker dealer.
So there's a little bit more risk there. And it kind of just depends on what you're looking for. I think there's a lot to be said for just using Charles Schwab and the Thinkorswim platform, especially as a beginner trader who's getting started out. prove yourself before you go into the trouble of setting up an offshore broker and doing this or that. And when it comes to platform requirements, fast executions, reliable, stable performance, and hotkeys for quick trade management.
If you've got that, you're going to be in good shape pretty much wherever you trade. Now, the simple day trading plan to accompany the simple day trading strategy. You want to use the gap scanners each morning to find stocks capable of going up 20, 30% or more.
Research the news, study the charts, draw your support and resistance lines. Look for entries on the first or second pullback, stop at the low using the 2 to 1 profit to loss ratio. Begin to take profit after hitting the first profit target and trail the rest as long as possible.
Walk away early because less is more. Upload your metrics, study your trades, and take notes of what you could do better. Build a track record of 4 to 6 weeks of profitability focusing on just 1 to 2 trades a day. increase your share size, increase trade frequency slowly, go back to basics after red days, and always like and subscribe on YouTube for good luck.
This is perhaps step number nine, the most important. This is what they don't tell you, all right? Now there is a blessing and a curse of day trading.
Here's the curse. The curse is that you can spend literally years trying to make $10 a day consistently. if you don't have a proven strategy, let me give this, I'm gonna give this to you straight.
The curse. You could spend years struggling to make $10 a day. If you don't have a proven strategy, you will not consistently make $10 a day.
And it is the most frustrating thing in the world. $10 a day, that's barely a cup of coffee and a donut. You're not asking to make a lot of money. You're not talking about getting rich. But to make $10 a day requires consistency.
So here's the blessing. Once you are consistently making $10 a day, which with 100 shares would only be 10 cents a share, the only difference between $10 and 100 is going from 100 shares and adding to 1,000. and then the only difference between 100 and 500 is going from 1,000 to 5,000, and you can scale up from there. So one of the things that I've noticed is that traders who finally turn the corner can do exceptionally well.
It's the turning the corner that is so difficult. So I could do everything possible to give you my strategy, share my strategy with you, but ultimately it's up to you to follow the rules of the strategy, to have the discipline. to trade the markets every single day, to not overstay your welcome, to not give into FOMO. So I'm asking you the question, how badly do you want this? If you are willing to be disciplined and you've watched this class, you're already setting yourself up.
So keep working at it, keep watching these episodes and just stick with it.