DAY TRADING STOCKS –
THE RIGHT WAY
The location: Honolulu, 1999. My goal: make at least $1,000/day by day trading stocks within my first year. Boy was I naive. I made every mistake n the book. But I learned. I captured the best of my “lessons learned, the hard way” in my new site, Daytrading University. It went on to be a phenomenal success, long before copycats borrowed my ideas for their sites.
I went on to teach thousands of active traders worldwide how to day trade volatile stocks in the $5/share – $40/share price range. Mostly morning gappers.
It’s really important to realize just how foolish daytrading cheap morning gappers on large share size (aka scalping) truly is… just don’t. For example buying 5000 shares of stock POS at $1.12 and trying to scalp 12 cents out of it. Day traders should focus on high volume reasonably consistent gappers and breakouts, eg a $9 stock that gapped to $10.37 and we go long once it hits $10.50, with a goal of getting forty cents out of it. Make sense?
Which brings us to this page…. it’s a “quick start guide” for day trading stocks & ETFs. Think of it as a pro’s “cheat sheet” to give you an edge. Try out the ideas.
Chart Playbook: Bullish cup Upside Reversal:
See how far this chart ran up after its pivot?
How much money could you have made trading it?
INTRODUCTION TO DAY TRADING
TYPES of DAY TRADING:
Standard/regular (best): Casual 5-to 30-minute round trips, in by 9:45-10am, out by 10;30. Usual suspects to be found in most local scanning sites.
Intraday multi-hour ‘puppy’ trades: Enter in the morning, leave before the closing bell. Trades may last for many hours, as long as all positions are closed by the bell. Best used with a trailing stop.
Scalping cheap under-$5 momentum trades is a poor approach due to high risk per trade. Nearly impossible to be consistent with. Always chasing and getting stopped out, frustrating af.
RISK MANAGEMENT: STOPS
One of the most misunderstood areas of day trading. i like to keep the total cost of my stop losses no larger than $55/trade, with many stops being in the $50/share -$70/share range.
How? By making initial “pilot trades” of just 300-500 shares, that I then scale up into if it’s running profitably in my direction. I typically have from 2 to 7 positions open at any one given point in the morning.
“Great traders use small stops”.
TAKING PROFIT EARLY & OFTEN
This is the #1 thing that traders make mistakes in, I’ve found in my 25+ years, coaching tens of thousands of active traders.
Get out EARLY at the FIRST sign of trouble, or a key resistance area like a prior high or whole number.
Example: at 9:40amET I buy 500 shares of stock WTF at $21.2/share. It promptly runs up to $22.9. I now trail a stop way tight at 22.8 and it hits, for a net (22.9 – 21.2) = 1.7 (500 shares) = $850
START SMALL. NOT STUPID
I think it’s perfectly smart to start by trading just one share at a time. I’ve heard so many stories of people losing huge amount of money by chasing some dumbass guru and overtrading until they go broke.
Stop the madness, lol. Trade small, trade frequently makes a lot more sense. Patience, grasshopper. I know, easier said than done, right? This ain’t easy.
ORDER MANAGEMENT
CHARTS IN MOTION
As day traders, we need to focus on trading only those charts that are moving relatively quickly. Breakout (or strong pivot) charts need to be spiking up sharply to be worth trading.
USING BUY-STOP ORDERS TO ENTER
This is my favorite way to enter a new position. You aren’t entering yet, but instead if/when gets to your specified entry price.