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Daniel Thomas

A Bird's Eye View of How I Trade

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Hi all, 

So I was going through some old messages that I've received over the years, and I stumbled upon a question (and my subsequent answer to) from a fellow trader who asked If I wouldn't mind sharing the strategies I used while growing my CMEG account -- twice -- from from a couple thousand, to over $20k each time.  I'm going to paste my response below, because: 1) I think it may inspire someone on the fence relative to trading by providing an over-the-shoulder look into my days, 2) encourage those of you out there who may be doubting yourselves (because if a guy like me can do it -- ANYONE CAN) , and 3) highlight the notion that trading is NOT rocket-science, and largely dependent on our own personality/psychology.  I've said it 1,000 times, and I'll say it once more:  Trading is 90%+ psychology.  I could teach my 7-year old daughter how to trade, but I'll never be able to control her mind....That portion of her being, as it is with all of us -- is an inherent battle within ourselves that very few external influences could effectively sway. 

As always, questions/comments are more than welcomed....  

-- ---- --- --- -- --- ---- --- --- -- ---- --- --- 

Hi xxxxxxxxxxx, 

To be honest, I didn't trade much differently than my "normal" way of going about things. During the first run, I had to take somewhat smaller positions, and I did find myself trading more of the low-float variety, but once the account was around $3-4k, trading normal is all I did.  My "normal" position size varies, depending on a few things, but my ideal trade is a mid-cap stock (priced in the $15-40 range), with medium to high float, and a tight spread.   I like to start with 200-400 shares, then scale in to about 2-3x my initial take as my comfort level with the trade increases; if I don't gain comfort with the trade, I'll stick with the initial entry, or stop out.  Anyways..., as the account grew, I would occasionally take more chances, but for the most part -- I just kept things "normal," as mentioned... 

The strategies I use are both simple, yet complex.  Andrew would probably laugh at my saying "simple" (he calls me a very complicated trader, lol), but that's only cuz I'm looking at so many things at once (I call it the "big picture").  

The first thing I always do is get a feel for the overall markets:  I listen/watch CNBC, search for headlines, and check the major indices...  I start trading the premarket around 8:45 am...with very small position sizes...  I call this my "warm-up" for the day; kinda' like a football player warms up during his pregame...  During this time, and as I'm filtering through my scans, I ALWAYS check the day charts of the stocks I'm interested in.  I ask myself, "what is this supposed to do today; which way will it end based on a swing traders perspective?"  By about 9:00 am I usually know what I'll be trading on the day, AND I have a very good idea of which way I want to trade the stocks on my list (but things can, and do change).  

At 9:30 am I'm usually hyper-focused on 1-2 stocks.  I'm waiting for confirmation that my pre-market analysis is panning out.  Usually it takes a few minutes, but there's always a huge chunk of volume that'll come in and move the stock one direction, or the other...  At this time (about 4 minutes in), I've usually already begun to scale in, and will add to my position on obvious pull backs.  If we get a clear cut 5-minute candle (white, or red), I'll usually play that direction till about 9:45 am (scalping profits, and reentering on pull backs).  Again, though, things can change...so I'm always ready to stop out...  

At about the end of the first 15 minutes (this time is often ruled by "flag" type patterns; which are easy to see on the 1-min chart), I'll watch the 5 minute chart for reversal dojis; I guess I should clarify that I'm primarily using the 1-min chart for entries/exits during the 1st 15 minutes.  By this time (~9:45am) my attention is now spread over about 3-6 stocks, and anything that's hitting my momentum scanners.  Again, I'm looking for reversal dojis on the 5-min chart (or anything else that would indicate a reversal), and using the 1-min chart to enter, scale in, exit, etc...  

After this reversal is over, I'll often take another reversal around 10am ish, set a hard stop, then walk away...  I HATE trading after 10:00/10:30 am, so my goal is to set it, and forget it from here on...  Often times I'll fall victim to more trades, though....but again-- my goal is to be done after I've closed out the trades I took at 9:45.  After a short break, I'll come back to the computers, and see if there's anything else worth taking a "set it/ forget it" type trade..., and then I'll handle other business (I used to have a YouTube channel, but now that I've deleted it, I have lots of free time!  Lol  ***edit --  I actually brought the YouTube Channel back last week; just search my name, Daniel Thomas, and add Day Trader at the end and I'll pop up)***

EVERYTHING I do is rooted in the ideals of support/resistance.  Whether it's a pattern, a candle formation, a previous area of consolidation, walls/stacks in level 2, a moving average, VWAP, etc...  IT'S ALL THE SAME.  We're either going to fight the support/resistance, then violently push through, Or we're going to bounce (off the supportive/resistive area).  So I look at all of it....and I'm looking it all somewhat simultaneously.  There is ALWAYS a very obvious sign when we approach support/resistance, so having an open mind (to incorporating every thing I'm capable of seeing) helps me take high probability trades.  I think this is why Andrew calls me "complicated," because when most traders are looking for a finite "system" for taking trades, I handle it more in a more multi-dimensional way.  

Anyways...  I think people can trade ANY "style" with a small account.  Of course it's harder due to the capital limitations, but it's possible to trade whatever style you're comfortable with.  With a $1,000 account, and receiving 4:1 leverage, you can take roughly (depending on maintenance requirements and leverage restrictions): 800 shares of a $5 stock, 400 shares of a $10 stock, 200 shares of a $20 stock, etc... The key is to trade within your comfort zone, and ignore everybody/everything else.  If you like flags, play low floaters...  If you like obvious reversals, play mid-to-large caps.  100 shares of a $40 stock that moves $2 is $200 gain/loss.  And 1,000 shares of a $4 stock that moves .20 cents is the same (+/- $200).  Pick what fits your personality, and run with it...  

Also...  keep in mind that with a small account, it's almost necessary to take on more risk than you normally would.  At some point there is a cost to doing business (commissions, platform fees, etc.), so making 2% on a $1,000 account isn't going to pay the bills.  My point is, even though you're in a smaller account, your risk is still present.  I look at "small" accounts as an "opportunity" to trade somewhat normally, with a significantly tilted risk to capital.  In other words...  All I need is a few good days to even out my risk on capital, but I know/understand that a bad trade on day 1 (or 2...or 3...etc..) has the potential to blow up the account.  I think the $4k mark, give or take, enables me to trade nearly identical to the way I trade in a $50k account.  The problem many traders run into (I know I did) is taking on larger risk as the account grows larger (primarily by taking on larger sizes).  If you can moderate what you do as your account grows, and you trade anything like I do -- when you get to $4k you're off and flying... 

Moral of the story...  Pick a style that fits YOUR personality.  For me, its mid-cappers with tight spreads and respectful float metrics.  I can trade the low-floater pennies too...which I do on occasion, but they're not necessary; even if you have a "small" account.  Avoid over-trading, avoid jumping the gun (FOMO), and take what the market gives you.  If you don't see a trade -- don't trade.  The markets aren't going anywhere; there is always another trade waiting on the horizon...

And I'll end with this...  I have talked to a lot of people that have found success in waiting for the first 10-15 minutes to pan out before taking a trade.  There's a "sweet-spot" around this time every morning where the range to come is still profitable, and yet the volatility has simmered down.  And I say "sweet spot," because-- again-- I think trading after 10/10:30 leads to more problems than it's worth (namely over trading with minimal reward potential).  Day traders DO NOT trade for 40 hours per week like a "normal" person works their job(s).  We prepare, study, etc for 40 hours (or more) per week, but our actual trading is MOST EFFICIENT for just that first hour, or so, of the day.  My biggest struggle when going full time was appreciating this reality; that the money is made from 9:30-10:30, and sticking around much longer is most often a bad idea (unless you're just watching, but NOT actively trading).  This is why I'll still take a trade after 10, but i WILL NOT (I try not to) sit around and watch it...  I'll put a hard stop in, then come back around 1:30/2pm to see how it panned out..  

In any case...  I know I probably didn't answer your question like you hoped for, but I'm not into selling pipe dreams and false "strategies."  The BEST thing any would be trader can do is get in repetitions....preferably in simulator...then trade the markets based on THEIR unique personality.  I swing a golf club differently than you, I shoot a basketball differently, and I even sing karaoke differently (okay, I never really sing karaoke)... We can learn from each other, of course....implement things we see others do into our personal game plans....,  BUT no matter how closely you study my golf swing, free throw, or vocals -- yours will ALWAYS differ...  Trading the markets is very much the same... 

Keep me posted as the account grows...  





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Hi, thank you so much for sharing.

I'll follow you for sure on YouTube.


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