Day Trade For Living, Andrew Aziz [bill gates books to read .txt] 📗

market opens at 9:30 a.m. I will check the news on each of them to learn why they gapped up or down. Is there a fundamental catalyst for that stock? Has there been any news coverage or extreme events for the company?

 

From these nine, I usually select three or four stocks to watch closely. You cannot watch nine stocks, and regardless , there are usually no more than

two or three good candidates. I watch them closely on my screen, looking for potential setups. I plan my trades before the market opens and then wait for the market bell. I then trade my plan.

 

Real Time Intraday Scans

 

For some strategies, you cannot find stocks in the pre-market. The Momentum, Top, and Bottom Reversal Strategies explained in Chapter 7 are the types of strategies applicable for when a setup suitable for trading happens, and that is usually during trading hours. It is hard to find these stocks during a pre-market scan watch list. For these strategies, I have specific scanners that look for these stocks and I will explain these scanners in detail in Chapter 7.

 

Real Time Volume Radar

 

During the day, there may be some Alpha Predators in the market that I did not catch in my morning watch list. Therefore, I have a scanner on my Trade Ideas software (see Chapter 5) that is set to find real time stocks for me that:

 

 

 

My intraday Volume Radar scanner looking for real time Alpha P redators.

 

Have gapped up or down at least $1

 

Have ATR of more than 50 cents

 

Have average relative volume of at least 1.5

 

Have average daily trading volume of at least 500,000 shares

These are my requirements for an Alpha Predator. Having ATR of more than 50 cents is important because you want stock to move during the day so you can make profit out of its volatility. There is no point in trading a stock that is moving only 5 cents on average in a day.

 

I will also take a look at the sector of stocks. If I have a few stocks in one sector, there is a good chance that these stocks are not Alpha Predators. They have high relative volume because their sector is under heavy trading by institutional traders. It is important to know that stocks usually trade with their sector. For example, when oil stocks are selling off, almost all of the oil companies sell off Therefore, it is important to recognize your real Alpha Predators from the herd.

 

Real Time Bull Flag Momentum Scanner

 

For the Momentum Strategy, as I explained above, you need to find low float stocks that are moving. You cannot find these stocks unless you are using a good scanner. I am using the Trade Ideas scanner. (www.trade­ ideas.com).

 

My intraday real time Bull Flag Momentum scanner.

 

In the screenshot above, you can see how I am scanning real time for my Momentum Strategy. During the day, the scanner is finding stocks that have high relative volume, low float, and high activity. I then check them in my trading platform and decide, based on my Momentum Strategy set out in Chapter 7, if I want to trade them.

 

Real Time Reversal Scanners

 

Top and Bottom Reversal Strategy is another type of strategy that you cannot find stocks for in the pre-market. You must have an intraday real time scanner. Here is an image of a Top and Bottom Reversal scan:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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My intraday real time Reversal scanner.

 

As you can see, I am scanning the market real time to find stocks that are selling off or surging up so I can trade my Reversal St ra tegies. You can read more about these strategies in Chapter 7.

 

I won' t go into the details here about how to make these scans, but I will explain in Chapter 7 under each strategy the specifics of what to look for in stocks in each category. If you develop new strategies for yourse lf, you can define new scanners for yourself. These scanners are highly adjustable and you can change the parameters as you like. These are the parameters

that work for me, but as you gain experience and learn more about other strategies and your trading style, you may very well decide to define new scanners for yourself.

 

Many new traders don't initially need a scanner. If you join a community of day traders such as www.Vancouver-Traders .com, you will be able to see my scanner in real time. These scanners are costly, around $100 per month, so at the beginning of your career transition to day trading, you will probably want to keep your expenses down as much as possible.

 

Planning the Trade Based on Scanners

 

Once I find my daily Alpha Predators (the stocks that are independent of the overall market) I start to look for the individual setups in them. I constantly monitor their charts and try to plan a trade based on the strategies detailed in Chapter 7. I usually select three Alpha Predators and watch them separately on my three monitors. When I see a potential strategy, I plan my trade. This is a fast decision making process. Sometimes you have to plan a trade in a few minutes and at other times in just a few seconds. This is why you need months of training in simulator accounts to well understand the decision making process.

 

I focus considerably on quality versus quantity. There are millions of traders out there and there are no doubt millions of strategies out there as well. I had to find the strategy that worked best for me, my personality and my account size. I've found a strategy that works really well for my students as well as for my own personal trading. This strategy involves taking only the best setups and waiting on the sidelines until I see something worth trading.

 

Day trading can be a boring profession - most of the time you are just sitting and watching your list. In fact, if day trading is not boring for you, then you are probably over-trading .

 

If you require a reminder of the importance of patience in trading, here it is. There are plenty of traders out there who are making the error of over­ trading. Over-trading can mean trading 20, 30, 40, or even 60 times a day. If you do that, your broker will love you. You'll be commissioning them to do all of those trades, so you are going to lose both money and commissions. Many brokers charge $4.95 for each trade, so for 40 trades, you will end up paying $200 per day to your broker. That is a lot. Remember, your goal is to trade well, not to trade often.

 

Another problem with over-trading is risk. While you're in a trade you're exposed to risk, and that's a place you don't want to be unless you have proven that there is a setup in the strategy worth trading.

Here is my next golden rule:

 

Rule 8: Experienced traders are like guerrilla soldiers. They jump out at just the right time, take their profit, and get out.

 

The stock market is controlled by machines and highly sophisticated algorithms and, as a result, there is considerable high frequency trading. High frequency trading creates significant noise in the price action and is specifically designed to shake out retail traders like you and me. You must be smart. Don't expose yourself to them. Profitable traders usually make only two or three trades each day. They then cash out and enjoy the rest of their day.

Chapter 5:

My Tools and Platforms

 

Like starting any other business and profession, to start day trading you require a few important tools. You need a broker and an order execution platform. These are tools you will definitely need for yourself.

 

As explained in Chapter 4, you will also need a stock scanner to find your watch list and look for potential real time setups. You may not need a scanner though if you are part of a trading community. People who are part of our community in www Vancouve r-Traders .com can see my screen in real time and use my scanners.

 

What Broker to Use?

 

For day trading, you need an awesome broker. You don't need a good broker; you need an awesome broker. Your broker is your vehicle to trade. If you have a bad broker, you lose money, even if you are trading properly and accurately because a broker eventually has to fill your order on time and at a good price. There are many brokers out there with various software and price structures. Many of them are great but expensive, some are terrible but cheap, and many of them are either terrible or expensive or both. For the sake of keeping this book short, I will not start reviewing all of them, but I do have additional information on my website about brokers and which ones to choose. If you visit my website, you will have access to that information. I will share here though what broker I am using and why.

 

For several good reasons, I am currently using Interactive Brokers or IB (www.int eractivebrokers .com ). First, I live in Vancouver, Canada, and IB allows me to have my tax-free and registered retirement accounts for day trading. Many brokers do not allow you to have tax-free or retirement accounts for day trading. Second, IB is an inexpensive broker. It charges you less than $1 per trade. Another reason I am with IB is because IB does not require people in Canada to have a minimum of $25,000 for day trading. If you are in the USA, you will probably need a minimum of

$25,000 for day trading . You can read further about the