Advice before I take the plunge

[drodz 2]

Hello. I’m an intro member and I’m finishing off Aziz’s book on how to day trade. Trading has always been of interest to me but only now am I starting to seriously look at it as an option. However, I have some concerns/questions that I’m hoping I can get some answered. 
 

1. I don’t have a lot of startup capital for the brokerage account. I currently have $1,000 and the income from my job can pay for monthly costs. If necessary, I could probably shuffle some money around to get more but I’d like to know is if $1,000 is a reasonable starting point. Based on the book, I shouldn’t risk more than 2% of my account on any trade and sub $10 low float stocks are a bad idea. That doesn’t leave me with many opportunities left. Do I need more money? What about platforms that allow fractional shares?

2. I’m looking at the various monthly subscriptions and want to avoid paying $200+ per month before I even start. I hear a lot about using DAS with IKBR and level 2 data subscription. Can I scan, trade, and get access to level 2 with a single tool?

3. I would like a mentor. Preferably 1 on 1 from someone who has demonstrated their success in this business. Do the owners of BearBullTraders offer this? If not, where should I go to find someone?

Thanks in advance for your answers!

[sawtooth500 33]

Are you in the U.S.? If so then you need to be aware of the PDT (Pattern Day Trader) rule - which means you need at least $25,000 in your account to day trade. You can circumvent this by using an offshore broker, but you'll pay more in commissions. 

In terms of subscriptions, yeah you need DAS with the full L2 book, it's $175 a month. Sorry, there really isn't any way around this. 

Have you traded in sim yet? You can get DAS and just trade it in sim with no additional fees. That's the best way to get your feet wet. You don't even need to open a brokerage account, just get the BBT sim package. What I definitely don't recommend is starting to trade with live money with no previous experience. 

Regarding live trading, yes you can trade live with a $1000 portion, but at that small amounts commissions will pretty much eat up almost any/all profits you made. Even the difference between trading with a $2000 portion vs a $1000 portion is huge in terms of how much the commissions will eat into your profit. I'm not saying it's impossible, but you need to be aware of this. 

Do consider though that you can leverage your money 4-6 times depending on broker, so with $1000 you can get $4000-$6000 of buying power, but not having traded before that would be too risky in my opinion. 

I've been with BBT for a little over 2 years, and I'm currently trading with $2000 portions, thinking of scaling up to a $3000 portion. I am green about 90% of my days. 

Also, keep in mind that when you start trading, you WILL lose money. Consider it the market tax. Nobody just goes in and makes money right off the bat with no bumps. So you also need to consider that you will need money to replace the money that you lose, and with just $1000 you don't have much margin. 

I'm not an expert in trading, but if you do get sim I'm willing to spend some time to help you out a bit with a few things. If you get sim and you want that, send me a message. 

[drodz 2]

I ran the numbers and realized exactly what you said - commissions will eat my gains on such a small account and margin isn’t a good idea right now.

I resigned to using TOS for a while until the situation changes and have been sim trading on TOS for a week now with the expectation that I’ll have to be on a non-margin, zero commission account.

When you say “portions”, do you mean $2000 per trade?

How much money would you say I need in my account to overcome the commissions with an offshore broker (say CMEG)?

[sawtooth500 33]

Correct, with a $2000 portion I mean taking $2000 worth of a stock - so a $10 stock that would mean 200 shares, or a $100 stock that would be 20 shares. When I trade, I decide what portion I'm going to trade, which is currently $2000. Big thing to remember is that you do NOT have to trade with all the money in your account. In fact, that's a great way to have 4 figure daily losses. Don't ask me how I know that! I have my hotkeys set up so that DAS automatically calculates the appropriate share count to fill $200 worth of a stock, regardless of the price the stock is at. I highly recommend this as it lets you have uniform risk across differently priced stock without having to do mental share math. As a new trader you have enough to think about not including share counts. 

If you're using TOS on a free account, then you don't need to worry about commissions, but be aware that if you're in the BBT chatroom especially during the open, that style of day trading will be virtually impossible to replicate on TOS. You need L2 and nobody will give you L2 for free, and you also need direct access routing for quick order fills which nobody will give you that for free either. There are day trading communities out there that use software other than DAS, but they have a different trading style than BBT, especially the rapid scalping and breakup/breakdown style that Andrew trades. Using TOS to trade the open would be very risky.

Right now, my recommendation would be to stay in sim and do not trade live using real money. When you go live, regardless of platform, you WILL lose money. Ask yourself, how much am I willing to lose? If you have a $1000 account, can you lose $200? $300? $500, or all of it? When you hit that losing mark, what are you going to do then, give up on day trading or put more money in the account? I'm not saying that you will lose all your money, but when you first start you will lose money, how much can you afford to lose and what's your plan when you hit that mark?

Being a successful day trader is about being able to manage your losses until you get good enough to start making money. 

Also, if you're trading with a $1000 account, and no leverage, say you lose $30 the first day. Now you can only trade with $970. Say you get down to $700, now you can only trade with $700. The smaller the account, the harder it is to grow it. If you have 4x leverage, and you start with a $1000 account and trade $1000 portions, you could be as low as $250 account value and still be able to trade with the $1000 portion because of the 4x leverage. 

I know it's tempting to go live, but stay in sim for at least a few months. Can you go an entire month of daily trading and make an average of at least 1% on your trading portion size daily? With 22 trading days in a month, that means if you're trading with a $1000 portion, at the end of the month you have $1220. First demonstrate to yourself that you can do that in sim. If you can't do that in sim, then why would you think that you can do that live? Day trading is not get rich quick. It will not pay your rent the next month. It's a marathon, not a sprint. It takes years to develop the skills to be a good day trader. 

Also, the money for DAS will be worth it. 

Ultimately, it's your money, and everyone has a different risk tolerance. You need to decide what risks you are willing to tolerate. If you want to immediately jump to live trading on TOS you can do that, but it will be very risky with a high probability of loss. If you get 3 months of DAS sim, and you get a proven track record of being able to make money in sim, then you can start to think about going live, small portion. 

Regarding commissions, that's very complicated. I'd say about a $2000 portion is the min that you can make some money without commissions eating up just about all of it. But I trade with DAS and IB as my broker, and I know CMEG offshore has higher commissions. But right now, you don't need to think about commissions, you just need to focus on learning how to trade because if your trades aren't winners then it doesn't matter how much or little you are paying in commissions. 

[drodz 2]

The tough part for me is not simply the $175 for DAS but also the $99 BBT membership that I would most likely need/want in order to learn quickly. So now we’re at $274 before trading a dime. I need to focus on getting my family finances in a better position before I can commit to that unfortunately. 
 

The positive thing is that even though I’m using TOS, I’m still learning a lot. Hopefully I can make it work and someday transition to DAS. 

[drodz 2]

So after testing TOS for a couple of weeks I think I’m done with it and moving to IB. The non existent hotkeys make it too difficult to trade and their paper trading is far too restrictive. At first, I was learning a lot but now I’ve hit its limitations hard.

[sawtooth500 33]

52 minutes ago, drodz said:

So after testing TOS for a couple of weeks I think I’m done with it and moving to IB. The non existent hotkeys make it too difficult to trade and their paper trading is far too restrictive. At first, I was learning a lot but now I’ve hit its limitations hard.

Keep in mind that if you're in the U.S., and intend on only doing a $1000 account, do not bother with IB because the PDT (pattern day trader) rule will make day trading impossible for you with IB - you need to have a $25000 account to comply with the PDT rule. Look at CMEG or another offshore broker, that will allow you to get around the PDT rule. 

Furthermore, DAS trader is software that's independent from the broker. If you are just intending on doing sim trading for the time being, you don't even need to open an account with a broker, you can order just the DAS simulator from BBT - https://bearbulltraders.com/order-das-simulator/

Of course, if you do open an account, you can always ask your broker to also set you up with a paper account in addition to your live account, and switching between them in DAS is as easy as a few mouse clicks. 

Whether you get the DAS simulator with BBT, or get DAS through a broker like CMEG, DAS is functionally identical between all installations (although some brokers have it private labeled, but it's the same DAS). Your layout, hotkeys, etc with DAS can very easily be transferred between DAS installations if you start with just the BBT simulator and then move on to DAS with a broker. 

If you have any more questions, just ask! And safe trading!

[drodz 2]

Were you comfortable using margin after training? That’s my only concern but maybe I should just train enough on DAS to make myself comfortable with leverage so that my small account can see some growth.

[sawtooth500 33]

28 minutes ago, drodz said:

Were you comfortable using margin after training? That’s my only concern but maybe I should just train enough on DAS to make myself comfortable with leverage so that my small account can see some growth.

You really need to look at your personal financial situation to determine what portion size you want to trade, irrespective of margin. 

For example, let's say that you open an account with $1000, but also have $10000 in a savings account at a bank somewhere. So if you take a $3000 portion, it's not like you are risking an inordinate amount of your money. But if you only have $1000 and literally nothing else, then taking a $3000 portion would be super risky. 

Remember: You don't have to put all your money into your brokerage account. My personal mentality is that I don't put more money in my brokerage account than I can afford to lose. No, I don't intend on losing it all, and it's really unlikely for you to run your account down to $0, and if I did that I'd be super pissed but it wouldn't break the bank financially for me. I think of it as a built in circuit breaker, the amount of money you actually put in your brokerage account. 

[drodz 2]

Just wanted to report back - I signed up for BBT membership and I'm using a 14 day trial of DAS to see how it goes.

I had better results in the first 30 minutes of DAS today then I've had in 2 weeks of Think or Swim all because of the hotkeys and charting capabilities. If all goes well through the end of this trial, I'm going to sign up for 3 months of simulator and build my account. You guys have probably just saved me a lot of headache I could have caused myself by trying to penny pinch.

[mhileman 21]

If you are limited to funds for the account like I am you should go with CMEG as your broker which allows you to get DAS with Level2 for $125 per month.  Their commission structure isn't bad and you can definitely grow your account with them as long as you learn and abide by Risk Management.   Example of CMEGs commission structure with the BBT discount code is I have been trading 50 shares of a stock and I partial out 1 time and then take the rest out at an acceptable level unless the trade starts in the opposite direction that I am trading in.  So with that being said those 50 shares with the 1 buy, 1 partial and the final trade of getting out costs me $1.862 in commissions which include ECN fees, SEC fees, TAF fees and Misc fees.  My overall goal is to make at least 1-2% of my account and sometimes I am able to make that or up to 3-6% on certain trades but I've learned to take it slow and to not over trade just so I can try to make more than $100 a day.  

Not everyone is fortunate to be able to open an Interactive Broker account with $30-35k dollars so you have to work with what you can afford or you need to start saving as much money as you can to be able to reach the $30-35k for the IB account. You have to keep in mind that with a small account you will have to take it slow on growing the account and not expect extremely large gains like some of the other more experienced traders make daily.  The worst thing you can do is trade low float stocks that move in extreme volatility as it can eat you alive and ruin your attempt at becoming a successful day trader.   

[Matthew Bennett 0]

On 6/23/2020 at 10:13 PM, sawtooth500 said:

let's say that you open an account with $1000, but also have $10000 in a savings account at a bank somewhere. So if you take a $3000 portion, it's not like you are risking an inordinate amount of your money. But if you only have $1000 and literally nothing else, then taking a $3000 portion would be super risky.

Is it though? Couldn't you technically trade with $10,000, but set a stop-loss so that you're really only risking $100? Just set a stop-loss order so that although you hold a large share size, you sell everything when your trade is putting more money at risk then you intend.

Edited July 5, 2020 by Matthew Bennett

[sawtooth500 33]

2 hours ago, Matthew Bennett said:

Is it though? Couldn't you technically trade with $10,000, but set a stop-loss so that you're really only risking $100? Just set a stop-loss order so that although you hold a large share size, you sell everything when your trade is putting more money at risk then you intend.

Yes, you could do that, but remember that most trading software auto stop loss is a market order, that's triggered when it's -$100, so by the time you get your actual fill you can be down -$120 to -$140. And then you're pissed off and you jump into another revenge trade two minutes later, and get stopped out again. And then you get pissed off and change your risk controls and lose even more... 

The point is that the variety of ways that you can lose a ton of money in an account is endless... traders can be quite creative in finding ways to lose money! The ultimate stop loss is you have no more money in your account, because then you're broker won't let you trade anymore and it's a very high effort act to add more money into your account, a natural circuit breaker. 

In my personal experience, the PDT rule in the U.S. has hurt me a lot. I had a 25K account because you have to to satisfy the PDT rule, which meant I had $100K buying power. Personally, in my trading journey I have lost 5 figures worth of money with that $100K buying power. If I did it over again, I wish I didn't have to comply with the PDT rule and literally just deposited $1000 into an account to get started. It would have saved me so much money.