Day Trade Warrior Business Plan Trading as a Business
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.
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.
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?
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
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.
1 st 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!!
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)
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.
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)
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.
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
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.
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.
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
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.
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!
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.
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.
Day Trade Warrior Advanced Level2 Techniques
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.
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.
Reading Level 2 Bid Support Concepts Showing Fake Orders Showing Resistance Looking at Market Depth
Time & Sales Watch 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
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
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
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
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.
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
Low Volume Stocks Big Spreads are common on Low Volume Stocks
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
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
Direct Access Routing
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.
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
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
Day Trade Warrior TAS Market Profile Indicators & Hot Keys
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
TAS Boxes Boxes Give Support/Resistance Areas
Tas Boxes
TAS Navigator Great indicator for timing shifts in momentum between buyers and sellers. Look for alignment on Multiple Time Frames 1min, 5min, 15min
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)
TAS Navigator The Navigator can help time Reversals
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 1 st orange or the 1 st candle to make a new high
Reversal Examples
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.
Navigator on Flags
Navigator on Flags
Navigator on Flags
Navigator on Flags
Exhaustion Warning
Exhaustion Warning
Exhaustion Warning
Day Trade Warrior Scanner Settings
TAS Continued A continued look and review of TAS Market Profile Market Map Always trade a Qualified SETUP
$CNET
$MACK
$CNNX
$SWFT news
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.
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.
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
Hotkey Buying Orders I Allow Re-Routing on my Buy Orders
Hotkey Selling Orders
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
Extras & Links Email me with questions daytradewarrior@gmail.com