Day trading for Jimmy H.

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Hi all, today I have a huge realization what day trading is about. I want to write it down here as a self-reminder.

 

There are two parts being a consistent and profitable trader:

 

Being profitable requires you to nail at recognizing patterns. For example certain patterns is bullish sign, ABCD, ORBU, Fallen Angel, etc. Bullish patterns historically have more than 50% of chance of going up, but every entry you make you are still betting on a chance. A pattern that has higher chance going up doesn't always turn out that way, that's why you lose a trade.  Most traders focus their energy on trying to nail the pattern, some traders religiously abide by only trading certain criteria. They no longer just look at the definition of pattern, they look at fundamentals,  RSI, support/resistance lines, etc. They try to study the market the best they can before putting an entry, only left shocked at losing their trade after all those preparation and studies. Even the most seasoned traders know nailing more than half of all trades are extremely difficult, if you can nail 60-70% of all your trades you are legendary. So by playing pattern's game one can be profitable, one might even score a jackpot on one single trade, but in the long run, one just cannot be consistently profitable because he/she is trying to study their way to beat the market, no one has done that.

 

I am not downplaying the importance of studying the market and patterns, but I believe it is only part A of the game. So how can a trader, even with the best patterns and studies, consistently profit by winning about 50% of their trades? Some naysayers will say it is a zero sum game.  The devil lies in the winning ratio, and this is what part B of the game is all about. Sometimes people call it the risk management.

 

Traders are different from casino gamblers in that traders can choose how much they want to win and how much they lose. Every entry you make you need to at least have 2:1 risk ratio in mind to come out ahead in the long run. Since a good trader can only nail 50% of their trades, we might as well assume every trade you make you have 50% chance winning (this is after you already have done your pattern studies). If your bet is 2:1 risk ratio, 2*0.5-1*0.5 = 0.5. The probability that you come out ahead is positive. If you make 100 trades of 2:1 risk ratio in a week, you earn $50 dollars at the end of the week. Of course this changes when you change the ratio, the higher the better. If one strictly abides by the ratio when entering a trade, it becomes how well you can execute that ratio.

 

If you set 2:1 ratio, not all people take the profit when it hits 2, nor do they stop loss when they lose that 1. So they end up losing more and more. If you trust in probability, you should realize that the greed/fear is prohibiting you to earn $50 dollars at the end of the week. So it is a great incentive to put your emotions aside and not let your emotion control the outcome of your one single trade. Because bing a consistent profitable day trader is not about how well you nail a single trade, it is about you execute on a profitable ratio every single time, and eventually you come out profitable at the end of the day.

 

 

 

 

 

 

[[email protected] 2]

5/21/2018 @+510 sims traded $ADOM, $AMAT, $MU

 

 

 

I didn’t start trading until around 10:30 am in the market because I have a job that sort of prevents me trade at market open. I wish I can do better in trying to block off that time so I can trade at the opening, market opening always has the biggest wave. Riding the wave first hour into opening is crucial.

 

 

 

$ADOM: First ticker I traded is $ADOM around 10:35am, there’s really no strategy for target except I recognize this is a bullish pattern, and I know my stop loss is the 9EMA which is what $ADOM has been respecting it.

 

What I can do better:

 

-          When there’s no apparent target line on the graph try not to jump into a trade fear of missing out.

 

-          My first entry near $1.9 is due to FOMO, I should have waited for the pull back.

 

-          The long strategy didn’t work out maybe because I traded late, had I started traded at the open I would have bank on the way up.

 

Good thing I did:

 

-           I promised myself that my max loss for a single trade cannot be over -$250, I capped at -$190. It turned out that taking my loss and walked away was not only executed well, but grateful that I followed through because it broke down 9EMA afterwards.

 

I later shorted the breakdown of 9EMA with the target of VWAP in mind and the stop loss would be 9EMA. I covered all tickers when it was near VWAP. I made $250 sims off of it. Because I capped my loss earlier, my net trade $ADOM was positive.

 

 

 

 

 

 

$AMAT: I traded the 1 minute chart of AMAT when it hit the resistance line of EMA, it was a quick +90.

 

What I can do better:

 

-          Again, as soon as recognizing the bearish pattern I didn’t have a target in mind with only a hard cap loss -$250 in mind.  I think the major reason why I covered very quickly is because I didn’t see the previous day close that was outside of my graph as shown in the second picture. Had I zoomed out I would have seen $49.5 as my target and wait it out.

 

 

 

 

 

 

 

$MU: First trade was around 10:30 to long on break up the VWAP, but the buying strength wasn’t as strong so I sold at break even. I shorted on my way down recovering full at EMA, and then the second short I didn’t know where it would end so I covered my profit. I made $170 on the way down.

 

I scalped a little on its way up and then a little bit in the afternoon too. I was trading mostly inner EMAs. I also realize that MU tends to have a wave in the afternoon too. I miss the bearish wave at 2PM when I looked at it, it already more than half of it. I should be more ware of afternoon waves.

 

 

 

[Robert H 453]

Nice trades, Jimmy! Good job on noting areas of improvement.

[Robbie Williams 12]

Thanks for sharing your trades with us Jimmy

[Andrew Aziz 97]

Excellent guys!

[[email protected] 2]

05/22/2018 @ +1170 sims traded $BLNK$JCP$KSS$MU

 

Here's my today's P/L.

 

 

I said I would try to trade at market open and I did today!! 20 minutes into the trading, I was up +800 by shorting $KSS and longing $MU. I wanted to call it a day, but I figured I am in the simulator so I might as well practice as much as I can.  I am well aware that every time I trade I am putting myself against the risk of losing, but my logical brain tells me the risk you are up +800 is really no different than the risk you are at +0 before market opens. You should not be afraid to put yourself "at risk" of being in the market, as long as it's calculated risk. If you have a really good self discipline you can be in the market all the time, capping your loss and shoot for your winner as much as you can.

 

That being said.... the next ticker that I traded wiped out almost all my gain back to P/L +100 with a really terrible trade $BLNK (-600). I was really bummed out by losing all my early gain just by one ticker alone. But the day was still early, so I continued to stay in the market. I traded my way back and ended the day with +1170. I felt that every time I make a come back for the day I prove to myself once again that I am closer to the kind of trader that I want to be, the trader that trades properly (2:1, and risk management) instead of the trader that tries to shoot for the moon with a jackpot that they may never have and lose very quickly for the lack of discipline.

 

$KSS short +325 - Gap down pre-market and It has respected the lower EMA pretty well, it had a chance to pop up the VWAP close to 9:35AM, but it came back down further. So I shorted close to $64, it wasn't the best entry because it consolidated up a little bit. But even when it was consolidating I didn't panick because it didn't break over EMA. Had it break over EMA, I might still want to wait it out see if it breaks up the second EMA. The hard cap loss for me would be if it breaks over VWAP.  The target price is easy to find on my graph,  YY low on my graph (the green doted line). Sure enough once it hit that target I told all my positions and had a nice $325 profit.  I would say it is a well planned trade.

 

 

$JCP long +0 - I remember being very excited to jump into this trade because it is a low float, so I had about 5k position on this one.  I jumped in @$2.42, The strategy is to test the high of the day which was $2.46 or more, and the cap loss would be the EMA line at about 2.4. This is still a good 2:1 ratio. The reason I didn't wait for it to go up is because I saw the volume has died down A LOT. it was trading 25k in total volume, and I myself as a retail trader can purchase 5k at a time it just tells you how SLOW this ticker is. So realizing that I jumped right out, and had 0 profit on it. I think being a good trader you always have to stay moving with the market, even though the 2:1 ratio is great the momentum wasn't there at the time. Surely it went up tested higher high an hour later, but I wouldn't want to wait until then. The opportunity cost of waiting to just stare at one ticker and not able to trade other tickers is not smart. A well traded ticker is nailing the pattern, the ratio, and the timing.  I didn't enter at the right time, so getting out immediately was the only smart move.

 

 

$BLNK long -600 : This I remembered up +800 P/L, being overly confident, I jumped right into this ticker trading $MU at the same time. I didn't cap my loss earlier. This type of low float cheap tickers are very scary, the can run right through your cap in a matter of millisecond. Your fingers won't even be fast enough to sell all your positions. The strategy was trading the reversal breaking up EMA to test VWAP. It was a stretch because it has reversed half of what it lost. So my entry wasn't good. The next 1 minute candle hovering around EMA makes me think that it was a consolidation period and it run up even higher. wrong! I went right down crashing like jet,  I couldn't sell my positions in time had a -600 loss.

 

what I could do better: start with a smaller size with low float, like maybe 2k. 5k is a little too much....

 

 

$MU long +600, short +845: $MU became my all time favorite to trade the fact that (1) it runs without news (2) it runs just at the right place, so it is not as scary as low float stocks (3) and the wave just keeps coming throughout the day. It is literally day trader heaven.

 

My first long trade was trading the fallen angel. Fallen Angel tends to have a big drop at the open, and quickly reverse and test higher high. I nailed the entry and banked my way up to VWAP, I purchased more shares at VWAP to test higher high and quickly sold around $59.6. This early trade made my first +600 in a matter of minutes.

 

what I could have done better: I really never traded Fallen Angel before so I knew my target was at VWAP, but maybe I could have waited it out because it sky-rocketed even higher. Although I quickly jumped right in the second time with a full position at VWAP, so technically I made all the way from $58.4 to $59.6.

 

After being wiped by $BLNK, I saw that $MU is coming back down and potentially will go lower breaking down VWAP. However, my eyes are really on the EMA line because my entry was at VWAP  $59.3 around 9:59 am, but I added more shares when it pulled back at $59.4. I think that was a sensible move because as long as it didn't break that EMA line I am good. If it breaks up that EMA line, all hands are off sell all your shares with cap loss. the rest is history, I banked all my way down with +845 profit.

 

 

 

 

 

 

 

 

 

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05/23/2018 - +370 sims traded $AVGR$MU$SNES$TWOU$WMLP

 

 

 

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05/31/2018 +1005 sims, traded $MU$IQ$GM

 

 

 

 

 

 

 

 

$IQ - this is really an unlucky trade, I shorted right at the wrong time, because I got squeezed up above vwap, loss of -600, I had to get out. But the price that I got out was the highest point for the rest of the short. It was a right decision to get out at the stop loss, it was just really unlucky trade for me. I jumped to trade a different ticker, or I would have come back to short again.