Warrior Trading Intro to Day Trading Series
We Will Teach You…
1. What is Day Trading 2. How to setup a Day Trading Account 3. The Importance of Paper Trading 4. How to setup your Charts & Read Chart Patterns 5. How to Buy and Sell 6. How to Manage Risk 7. What stocks you should trade 8. How to Make a Watch List 9. How to Identify Safe Entries 10. Final Words of Wisdom
Why Is This Important? In order to be a profitable trader: You MUST find momentum stocks with home run potential You need to be able to find safe entries in realtime, not just in hindsight You have to be able to manage your risk and understand risk to reward ratios You need to create a strategy based on the best time of day to trade, the best type of stocks, and the best patterns
What is Day Trading? What is Day Trading?
What is Day Trading?
Day Trading is the simple process of buying shares of a stock and then selling those shares on the same day. That is considered a Day Trade. A Day Trade can last anywhere from several hours to a few seconds. When you buy AND sell the same security from the same account in the same day, it is called a round trip, and under the Pattern Day Trade Rule, you get 3 round trips in a rolling 5 day period.
Why Day Trade?
As a Day Trader our goal is to make money on relatively small moves in a stock. The only way to profit on smaller moves is to take larger positions. These positions sizes would typically be larger than you would be comfortable holding as an investment, but over the course of a few minutes or a few hours, the risk is acceptable because your monitoring the trade the entire time.
10k investment vs trade?
If you make a 10k investment in mutual funds, you will expect a 5-7% return ANNUALLY. That means you would aim for $500-700 return over the course of the year. That is less than $50/month. If you take a 10k position in a day trade we aim for 5-7% in 1 DAY. That would be a $500-700 profit in just 1 day. This requires putting the entire investment into 1 position which would be against safe risk management for investing, but is accepted behavior for day trading.
Stocks that MOVE
Finding a 5-10% mover INTRADAY isn’t easy. It’s what every day trader looks for. There are stocks every single day that make 5-10% moves. These stocks move because they have a reason. Whether they reported positive earnings, had a breaking news release, or something similar. Our job as day traders is find stocks giving an early indication that they could have big potential.
Required Tools & Overhead
As a Day Trader you will need some tools Stock Charts - $99/month Stock Scanning (finding trade ideas) $49/mo Stock News Services (optional - $89/mo) Chat Room Subscription - $99/mo Stock Broker $4.95 per trade Overhead can easily reach $300-400/month, but as a new trader it’s important to keep costs low
Keep Costs Minimal
As a new trader you will want to papertrade (trade in a demo account with pretend money) and use basic, free services. Keep your costs low and focus on education, developing your strategies, and increasing your skills. For some the learning curve is as short as a few months, for others it’s much longer. Like any career it takes dedication to become one of the best.
A Day Traders Favorite Setup
We look for strong stocks that have just reported news because these have the potential to make huge moves. We routinely see stocks run anywhere from 10% to 100% in minutes.
The key to success is finding these setups in realtime and taking a position while managing how much you are risking. This is what we teach!
OHGI 100% mover in 20min
$OHGI profits
$OHGI students profits
The Hard Truth
90% of Day Traders will fail to make money in the first year, and most will quit. This is a result of poor risk management, poor stock selection, and a lack of education. Fortunately, we teach day trading AND swing trading! There are very few day trading classes that offer the depth of education as Warrior Trading. Our first tip is to stop trading with real money if you aren’t making money. We will teach you a proven trading strategy that has been tested by time. When you are starting out, swing trading allows you to trade at a slower pace while practicing the more complex day trading strategies, but still learn about how the market works.
Our Students
When we ask our students how they are performing, we see an average over 85% success rates. This impressive success rate is over 8x the average success rate of a Day Trader. Warrior Trading teaches trading. We give you the exact details of our trading strategies so you can trade successfully.
Opening a Trading Acct Opening a Day Trading Account
How to Start? To
Start Day Trading you will need to open a trading account. We recommend starting with a Demo Account ( a pretend money account) with Ameritrade. This gives you the ability to simulate trades and practice trading strategies without risking any money. This is extremely important for new traders.
Stock Brokers For
Live trading, there are many options including Ameritrade, Etrade, & Scottrade. These brokers cater to retail traders who also want to use their accounts to pay bills, write checks, and need an ATM/Debt card. These brokers are better for investors and are not a good option for active day traders.
Best Brokers
As Day Traders we need access to the best tools.
For Paper Trading we Recommend
TD Ameritrade (ThinkorSwim)
For Live Trading we Recommend
Speedtrader Lightspeed Suretrader (if under $25k in capital)
SpeedTrader Layout
Lightspeed Layout
Ameritrade Layout
Importance of Paper Trading Importance of Paper Trading
My “Cost” of Learning I
lost over $30k trading untested strategies
In
my eagerness to make money trading, I bypassed a critical step.
I
never had a written trading plan or a strategy with historical data to support it.
The
only way to get historical data is to trade for yourself in a demo account
3 Big Questions What
Setups, Stocks Traded, etc Stats on the strategy (from papertrading) What time of day do you trade? Results?
How
is your Strategy
do you Manage Risk?
Risk Reward Ratio Following the Volume What is your max loss/trade
What
is your goal for next 6 months?
Education Comes First
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. When trading, you are an entrepreneur. You want your business to be profitable and you have to work hard.
Make your Plan and Trade your Plan In
order to succeed as a trader you MUST be organized and disciplined. This starts with tracking all your trade data on a spread sheet and continues with writing a trading strategy and overall trading plan
Never Trade an Unproven Strategy You
should only live trade a strategy that is proven to be successful. This is part of risk management. When you know a strategy has a 65% success rate and 2:1 profit loss ratio, you have a full understanding of the risk.
First 3 months Trade
no more than10 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.
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)
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.
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!!
Set Realistic Goals Don’t
expect to be profitable in the first 3 months trading. You should be paper trading. Trading is a process. SURVIVE UNTIL YOU LEARN You learn by experience in this industry
Build your Foundation The
market will always be there You need to focus first and foremost on building your foundation as a trader. Learning how to read charts, find stocks, and execute trades. The learning curve for some is as short as a few months, and for others (like myself) is much longer
END OF DAY 1 With
questions please email me!
[email protected]
Setting Up Your Charts
Setting up your stock charts
How to setup Charts
As Day Traders we rely heavily on Stock Charts. Stock Charts are a form of technical analysis. We look for specific chart patterns to find areas of support and resistance. We use a minimum number of indicators to avoid over complicating simple strategies and setups.
Candle Sticks
Stock Charts are comprised of candle sticks. Each candle stick represents the price action within a set period of time. If you are looking at a daily chart, each candle stick represents 1 day. As Day Traders we use 1min and 5min charts. Each candle represents 1min or 5min of price action Some Traders use Bar Charts, or Line Charts, but most Day Traders use Candle Stick Charts
Candle Sticks What does each Candle Stick Tell us
Open Close High Low
The shape of candle can also give us information about the market sentiment The open on Green candles is always the low, opposite for Red Candles
Bar Charts
Line Charts
Candle Stick Charts
Hammer & Inverted Hammer Candles
Doji Candles
My Charting Layout I
use 3 time frames. Daily chart 5min Chart 1min Chart Remember
to step back and look at the bigger picture!
Technical Indicators Technical
Indicators are simply designed to give you a context for the current price action and sometimes gives you an indication of future direction You can never rely on Technical Indicators. Instead use them to confirm what you already suspect in chart patterns.
Volume Bars Volume Bars show us visually how much volume occurred during a candle stick period. We can look for patterns such as increasing or decreasing volume.
Moving Averages Moving Averages are simply averaging price over a set period of time. An exponential Moving Average heavily weights recent price action vs older price action. A simple Moving Average is just the average without any weighting. I use 9ema, 20ema, 200ema
VWAP The VWAP is the Volume Weighted Average price. Like a moving average, this is an average price of a stock. What is unique is that it takes into account the amount of volume at each price. Like exponential moving averages, it gives us more information than a simple moving average. VWAP is Orange Dotted Line
MACD MACD is a Moving Average Convergence / Divergence indicator. It tells us whether the moving averages are moving apart (indication strong price trend) or moving together (indicating weakening price trend)
MACD are the Bands at the bottom of the chart
Bollinger Bands Bollinger Bands are price averages offset to the top and bottom. 90% price action occurs INSIDE Bollinger bands. When the price is outside Bollinger bands, it’s considered an extreme situation and a potential reversion indicator Bollinger Bands are the pink bands around the price.
Reversal Example
Simple Chart Patterns Bull
Flags and Flat Top Breakouts are two of the simplest chart patterns. These are both bullish chart patterns when they occur in the context of a stock in a strong up trend. I use both patterns as potential buying opportunities.
Flat Top Breakout Pattern Long period of consolidation above moving averages. Then a breakout about the resistance line. These can flag like this for hours before breaking out.
Flat Top Breakout Pattern Flat Top / Bull flag
Flat Top Breakout Pattern Flat Top Breakout
Flat Top Breakout Pattern
Flat Top Breakout
Flat Top Breakout
Flat Top Breakout
Bull Flag Pattern Bull
Flags work best on high volume stocks in the morning. I look for these patterns and then trade them on the Momentum Strategy I will review tomorrow Quick Ramp up, small pull back, then go
Bull Flag Pull Back/ Breakout Pattern
Bull Flag Example Pull Back in the form of a bull flag
Bull Flag Pattern (volume)
Bull Flag Pattern (volume)
Bull Flag Breakout Pattern
How to Buy & Sell How
to Buy and Sell Shares
The Bid and Ask Level 1
Every stock has a Bid and Ask. This is considered Level 1 of the Market (NBBO – National Bid & Best Offer). The Bid is where buyers place offers and Ask is where sellers place offers. As a buyer you can choose to wait on the bid to try to get the best price, or you can simply buy from a seller on the Ask instantly.
The Bid and Ask Level 1 Level 1 will show you the Bid x Ask. In this case, 2.16 x 2.17 This Bid as a 1 cent Spread. The Spread is the distance between the bid price and the ask price. Some stocks will have a larger spread. The spread is how market makers collect there money.
The Bid and Ask Level 2 Level
2 provides more market depth than Level 1. Level 2 shows the current Bid and Ask and shows you how many buyers and sellers are lined up behind the Bid and Ask. This can give a Day Trader an indication of the strength and potential direction of the market.
The Bid and Ask Level 2
Order Types Buying
and Selling using Direct Access Software by Speedtrader (A Direct Market Access broker). Other DMA brokers will have similar layouts.
Order Types Market
Orders: This order will give you shares at ANY price
Limit
Orders: This order will give you shares only up to a price limit you set when you create the order
I
use Limit Orders
What is a Stop Order A
Stop is an order that sells your position when a certain price is hit.
This
net.
It
can be considered a type of safety
is possible for a stock to drop so quickly your stop order will either not get filled, or get filled at a very bad price.
Preparing your Order You
will decide the Order Type (market or limit) If you choose limit, you will choose a limit price, then you will send the order.
Once
you have a position you can prepare a stop order, or prepare a sell order. Sell orders can also be Limit or Market orders.
Learn to Manage Risk
Know your Risk before you BUY Most
importantly, before you ever take a trade, whether real money or paper trade, you must know how much you are risking. Risk is present in every trade. Learning to manage risk will make you a successful trader.
Risk Management is #1 What
Separates Good trades from Bad Traders? RISK MANAGEMENT Why do 90% of Day Traders fail? They don’t utilize RISK MANAGEMENT Using Proper Risk Management Principals, we can make money and be WRONG half the time!
Success in Trading Success
is not about being right 100% of the time. In reality, its about learning to cut your losses when you are wrong. Imagine if all your losses were only $10, but your winners were $90.00. You wouldn’t need to be right that often to cover your losses. In fact, if you were right just 10% of the time you’d break even.
What is a Profit Loss ratio 2.00
average winner : 1.00 average loser is a 2:1 profit loss ratio. Successful Day Traders have a MIN profit loss ratio of 1:1, and aim for 2:1, 3:1 and sometimes higher. A high profit loss ratio means you can be wrong a lot, and still make money.
Profit Loss Ratio Stats 2:1
Profit Loss Ratio = 33% is Breakeven 1:1 Profit Loss ratio = 50% is Breakeven 1:2 Profit Loss ratio = 66% is Breakeven
Put Statistics in your Favor KNOW
YOUR STATS Know your Average Winners and Losers Aim to always Improve this Ratio Small Adjustments can amount to Big $ The only way to know what your statistics are is by paper trading.
END OF DAY 2 With
questions please email me!
[email protected]
You should only Day Trade certain stocks
What Stocks to Trade?
As a new trader the common approach is to make a list of your favorite stocks and start trying to apply basic chart pattern principals to find entries. This is WRONG. We want to trade stocks that have the potential to run 5-10% in a single push. This means we have to choose very carefully which stocks we can trade. Big stocks like AAPL, TWTR, FB, will rarely make big moves like that. Instead, we focus on under the radar stocks that have big news
We are competing against computers High
Frequency Traders are computer systems. Just like playing chess against computers, trading against a computer is nearly impossible. It’s a losing battle. HFT Traders dominate certain stocks, but are less present on other stocks.
Day Traders hunt for News Day
Traders typically focus on trading stocks that are trading on very high volume due to news. When tens of thousands of traders all trade a single stock, we overpower the HFT traders. This means the stocks can be easier to trade and are more predictable.
We Trade EXTREME Stocks
We Combat HFT’s by Trading High Volume stocks Look at RELATIVE volume Every Single Day there is a stock having an extreme, once in a year event. The Chart Patterns we trade only work on Certain Stocks. On some stocks, they don’t work at all! These are the days the when stocks have the potential to move 10-20% or more.
What Makes a stock Extreme? High
Relative Volume is the result of a Catalyst We look for the Catalyst! Earnings, Breaking News, Activist Buying, FDA Aprrovals
We Trade the Big Days
We MUST follow the Volume Trading
Low Volume stocks is asking for trouble. Low volume stocks are more likely to be manipulated by a small number of traders or HFT traders. The patterns you see on charts will rarely be respected.
Low Volume Example
High Volume Example
Stock Selection as Risk Management Stock
Selection is a 2nd level of Risk Management By avoiding penny stocks, low volume stocks, illiquid stocks, we can focus our trades in safer areas of the market. Use your Stock Selection as an opportunity to reduce risk.
How to Make a Watch List
How to Make a Watch List Every
Trader needs to be able to make a watch list each morning. Your watch list will be the handful of stocks that you think have the potential to make a big move. The best way to look for these stocks is to use simple stock scanners.
What is a Stock Scanner? A
stock scanner will automatically scan the entire market of thousands of stocks to find the specific conditions you told it to look for. We look for stocks that are trading up in the pre-market session with heavy volume. The only reason a stock will trade up with heavy pre-market volume is if there is news.
What is a Gap? A
stock that opens higher than it closed yesterday, will form a Gap on the daily chart. We are always looking for stocks gapping up because this is typically due to breaking news.
Gap
Gap Scanners We
tell our scanners to look for stocks that are trading higher in the pre-market session because they are Gapping up.
Gap Scanners
Watch List I
look at all of the gappers and review the pre-market charts. I make a list of the gappers that have the strongest pre-market charts. These charts will have patterns including Bull Flags or Flat Tops. For the stocks with the best patterns I review the news and take note of other important details including earnings dates.
Typical Watch List
$ACUR – I’m watching it long over possibly 1.30 (pre-market highs) ACUR: Acura Pharmaceuticals – The Company announced it has entered into a license and development agreement with Bayer Healthcare for Acura’s IMPEDE technology. Gapping up 30% with a 34M share float. $GBSN – I’n watching it long over the pre-market highs, or the high of the last pivot. GBSN: Great Basin Scientific – The Company announced receipt of a European Patent for the Company’s on-chip amplification technology, currently patented in the U.S. Gapping up 8% with 2.6M share float.
Typical Watch List I
usually have 4 stocks on watch each day. As the day progresses I may remove some stocks that fail early on, and I may add stocks that become strong in the first hour of trading.
Finding Safe Entries
Finding an Entry Once
you have created a watch list, you have done ½ the work! Simply creating your watch list is a HUGE accomplishment Now it’s time to find a safe entry. What constitutes a safe entry? You need to be able to manage risk, in other words, risk $100 to make $200, and have that 2:1 profit loss ratio
Combine what you have learned
You have your watch list, and you have your charts setup.
Look for the chart patterns that you have learned are pull back setups on strong stocks.
When I’m trading Momentum, I trade pull backs (bull flags), and breakouts (flat top breakouts)
Momentum – The First Pullback Flat Top / Bull flag
Momentum – The First Pullback Flat Top / Bull flag
Recognize the Patterns Recognize
these simple patterns, they occur again and again. But remember, they only work well on stocks with high volume. So make your watch list each day of the top 4 stocks, and then look for a pull back entry if they are showing momentum. Stocks that suddenly gain momentum mid-day are also candidates, although they can be more difficult to find.
Finding Mid-Day Momentum To
find Mid-Day Momentum We use our stock scanners to get ideas
Reviewing Stocks on Scanners When
a stock shows up on the Momentum Scanner I look at the chart and review the level of volume and attempt to identify the source of the volume (news, technical breakout, etc) If everything looks good I will consider a trade on the next Bull Flag or a Flat Top Breakout
Final Words of Wisdom
Final Words of Wisdom
Day Trading requires a high level of discipline and composure in order to make the right decisions under pressure. The ability to maintain discipline and composure are muscles that will become strengthened the longer you exercise them. Don’t be alarmed if at first you struggle! This is how every professional trader begins, hence why we say to start trading with a paper trade/demo account!! Why practice or struggle with real money?
Final Words of Wisdom
We have taught you the basics of trading but we have just scratched the surface. In our trading courses we go in depth on each of these topics and other topics to advanced to cover in this intro class. The most important thing for a new trader to focus on is educating yourself. We will teach you the skills to be a professional trader. If you are ready to learn we’re here to teach!
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Email
me with questions
[email protected]
