Rules & Step-by-Step to a successful Trade

1.  Day trading is not a strategy to get rich quickly.
   
2.  Day trading is not easy. It is a serious business, and you should treat it as such.
   
3.  Day traders do not hold positions overnight. If necessary, you must sell with a loss to make sure you do not hold onto any stock overnight.
   
4.  Always ask, "Is this stock moving because the overall market is moving, or is it moving because it has a unique fundamental catalyst?"
   
5.  Success in day trading comes from risk management finding low-risk entries with a high potential reward. The minimum win:lose ratio for me is 2:1.
   
6.  Your broker will buy and sell stocks for you at the exchange. Your only job as a day trader is to manage risk. You cannot be a successful day trader without excellent risk management skills, even if you are the master of many effective strategies.
   
7.  Retail traders trade only stocks in play, high relative volume stocks that have fundamental catalysts and are being traded regardless of the overall market.
   
8.  Experienced traders are like guerrilla soldiers. They jump out at just the right time, take their profit, and get out.
   
9.  Hollow candlesticks, where the close is greater than the open, indicate buying pressure. Filled candlesticks, where the close is less than the open, indicate selling pressure.
   
10. Indicators only indicate; they should not be allowed to dictate. 
11. Profitable trading does not involve emotion. If you are an emotional trader, you will lose your moeny.
    

Building a Watchlist

- gapping down/up at least $2

- ATR > 50 cent

- Averange trading > 500,000 shares

Trading Plan (Entry, Exit, and Stop Loss)

- watch the chart for 10 minutes

- after ten minutes, when (ticker) closed below VWAP, I entered the trade by shorting stock around $15.20 with a stop loss in mind just above VWAP. As expected the sellers took control, and the stock price tanked to $13. I exited when a 5-minute candlestick made a new high, as that mean that the buyers were gaining control. I covered my shorts at around $15.20 and locked in a $400 profit.

- You need to master only a few solid setups to be consistently profitable.

-In fact, having a simple trading method consisting of a few minimal setups will help to reduce confusion and stress and allow you to concentrate more on the psychological aspect of trading, which is truly what separates the winners from the losers.

- Plan a trade, and trade a plan.

My trading process looks like this:

• Morning routine
• Develop my watchlist 
• Organize a trade plan
• Initiate the trade according to plan
• Execute the trade according to plan
• Journaling and reflection
•  

Write down your reasons for entering and exiting every trade. 

A bad entry will make a mess of your plan and you will eventually lose your money. You can find a good stock to trade and enter a trade correctly, but if you don't exit properly, you will turn a winning trade into a losing one. All of the steps of the process are important.

Think about something significant that you do frequently in your life, and then think of how it can best be done. Now, consider how you do it currently. 

Education and practice give you a perspective on what matters most in trading, how you trade, and how you can grow and develop your skills. Once you have a perspective on what matters, you can proceed to identify the specific process on which to focus. The key to success is knowing your exact processes. Often you will learn them the hard way - by losing money.

- discipline

- exercise 

- There are scientific studies showing that aerobic exercise has a positive effect on the decision-making process. People who regularly participate in an aerobic exercise (such as running for at least thirty minutes) have higher scores on neurophysiology's functioning and performance tests that measure such cognitive functions as attentional control, inhibitory control, cognitive flexibility, working memory updating and capacity, and information processing speed.

Research has shown that winners think, feel, and act differently than losers.

Change is hard, but if you wish to be a successful trader, you need to work on changing and developing your personality at every level.

Often traders who fail to make money in trading get frustrated and go out and study more about the market to learn new strategies and additional technical indicators. They don't realize that their lack of self-discipline, impulsive behavior and their bad life habits are the main cause of their failure, not their technical knowledge.

* What did I do right?

* What did I do wrong?

* Should I have sold earlier?

Write down or do a video recap of the trade and everything that comes to mind lesson-wise, and then file it away with other past lessons, and use them all as a reference for the future.

Some lessons hit harder than others, but be confident that with time you will only get better.  

- Filter out the emotional social noise

If you focus on the right processes, in the right way, you can design your way to trading success.

- The one key message I desire that you will take away from this book is that under no circumstances can you be an emotional trader. Somehow, you have to find inside of yourself the ability to resist making emotional decisions in the midst of a trade.

- Learn some technical skills

- Find one strategy that suits your personality and practice it in your simulator -> stick to it.

- Decisive, but reasoned, decisions based on your will-thought-out in advance trading plan.

- 2% rule

Successful day trading is based on three important skills:

1. You need to constantly analyze the balance of power between buyers and sellers and bet on the winning group.
2. You need to practice excellent money and trade management.
3. And you need sufficient self-discipline to follow your trading plan, to avoid getting overexcited or depressed in the markets, and to resist the temptation to make emotional decisions.

The Seven Essentials for Day Trading

1. Education and simulated trading
2. Preparation
3. Determination and hard work
4. Patience
5. Discipline
6. Mentorship and a community of traders
7. Reflection and review

Education and Simulated Trading

- Day trading is a science, a skill, and a career, and has nothing to do with gambling.

- It is the serious business of selling and buying stocks, at times in a matter of seconds.

- You should be able make decisions fast, with no emotion or hesitation.

- Doing otherwise results in losing real money.

- Can you be a mechanic by just reading a book? Can you perform surgery after reading a book or taking First Aid 101?

- Read more books

- Best traders vs Best Teacher. look for the best "teacher".

Trading in Simulator

- You should never start your day trading career with real money. Sign up with one of the brokers that provides you with simulated accounts with real market data. Ameritrade offers free simulator. Many simulator out there!(google).

- Once you have a simulated account, you will need to develop your strategy. master one or two of the strategies that fit with your personality, available time, and trading platform. 

- There is no best strategy among them, just like there is no best automobile in the market.

- Keep your strategy simple.

- When you have a solid strategy that you've mastered, make sure there is no emotion attached to it. 

- Keep practicing it, and then start practicing a second strategy.

- Practice with the amounts of money that you will be trading in real life. It is easy to buy a position worth $100,000 in a simulated account and watch it lose half of its value in a matter of seconds. But could you tolerate this loss in real account? No you will probably become an emotional trader and make a decision quickly, usually resulting in a major loss. Always trade in the simulator with the size and position that you will be using in the real account.

- start small with real money. Trade small while you're learning or when you are feeling stressed.

- Are you patient enough for this learning curve?

- Do you really want this career?

- Then you should be patient enough. Do you have this much time to learn the day trading profession?

- What you as a new trader can control is the process of trading: how to make and execute sound trading decisions. 

- A good trading is a day when you are disciplined and you trade sound strategies. Your daily goal should be to trade well, not to make money.

- The market is a dynamic environment and it's constantly changing. 

- Always think ahead and maintain a progressive and winning attitude.

- Learn as much as you can, but keep a degree of healthy skepticism about everything.

- Every day is new. It is about developing trading skills, discipline, and controlling emotions, and then making adjustments continually.

- Traders who are consistently profitable have studied the fundamentals of trading and have learnded how to make well-thought-out and intelligent trades. Their focus is on the rationale for their actions rather than on making money. Amateurs are focused on making money every single day. That kind of thinking can be their worst enemy.

Preparation

John Wooden (or as some call him, the Wizard of Westwood), the famous American basketball player and coach, once said, "By failing to prepare, you are preparing to fail." 

There are two aspects to the preparation process for day traders:

1. The preparation necessary before the market opens (usually the night before or between 8 and 9:30 a.m. New York time), and
2. the specific trading information you must obtain before you can make a trade.

Wake up on time and get behind your PC early. 

- www.finviz.com

- www.briefing.com

- Read about the fundamental catalysts that caused the stock to gap up or down. Compile information such as daily volume, intraday range, and short interest. Review daily charts and identify important levels of support or resistance. 

- Each day, traders shouldn't choose more than two or three of these stocks to focus on.

- The earlier you start you morning, the more time you will have to go through the news and find the best Stocks in Play.

- Being present in the pre-market is important. Every once in a while there will be an opportunity during pre-market trading to make quick money on a breaking news story. 

- "Always do this or always do that" is wrong. Trading isn't about "always" at all; it is about each single trade, and each situation. Every trade is a new puzzle that you must solve.

- "if-then" -> if you see x scenario, then you will buy at y price. Continue creating "if-then" scenarios for each outcome.

 You can write down your statements at the beginning of your trading career to make sure you stick to them, but after a few months of simulated trading you will learn how to quickly develop and review these statements in your mind.

Determination and Hard Work

- Day trading is perhaps most similar to being a professional athlete because it is judged by one's daily performance.

- Watching your trading screens intently and gathering important market information is how we define hard work in day trading.

You must ask the following questions constantly and at a rapid pace for several hours every day:

• Who is in control of the price: the buyers or the sellers?
• What technical levels are most important?
• Is this stock stronger or weaker than the market?
• Where is most of the volume being traded? At the VWAP? Or the first five minutes? Or near moving averages?
• How much volume at a price causes the stock to move up or down?
• What is the bid-ask spread? Is it tradeable?
• How quickly does the stock move? Is it being traded smoothly or is it choppy, jumping up and down with every trade?
• Is the stock trading in a particular pattern on a 5-minute chart? How is the stock being traded on a 1-minute chart?

- Showing up every day to trade in your real account or in a simulator.

- Searching for support and resistance levels each day, including before the market opens, will benefit your trading in the long run. 

- Turning off the PC early after a few bad trades -> give your brain a break.

Patience

 Becoming a consistently profitable trader requires hard work, extensive preparation, and considerable patience.

You need to watch, watch some more, and then keep watching.

If a stock you're watching isn't offering excellent risk/reward opportunities, it's time to move on.

Consistently profitable traders often spend their trading days searching and watching for excellent risk/reward opportunities.

Successful traders are patient and resist the temptation to be involved in every move.

Traders need to wait for opportunities where they feel comfortable and confident.

It is not enough just to buy a strong stock, or sell short a weak one.

Entry price is also very important.

Don't chase the stock.

Example, if a stock is trading near a support and then breaks out downward, and you see a short selling opportunity but miss it, well, that is your first mistake. But if, out of frustration, you sell short that same stock well below that level, you have chased it. Now you have made a bigger mistake. Chasing stocks is a deadly unforgivable sin in day trading. Missing the opportunity will not lose you any money (just an opportunity cost), but chasing the stock will. Do not let one mistake cause you to lose money with another one.

Discipline

Success in trading comes with skill development and self-discipline.

What makes day trading, or any type of trading for that matter, difficult is the discipline and self-control that you need. 

Novice traders who fail to make money in the markets will sometimes try to improve themselves by learning more about how the markets work, studying new strategies, adopting additional technical indicators, following new traders, and joining other chatrooms. What they don't realize is that the main cause of their failure is often not their lack of technical knowledge but their lack of self-discipline, their impulsive decisions, and their sloppy risk and money management.

*Strictly enforced discipline*

*Self-discipline*

Strict external discipline saves institutional traders from heavy losses and deadly sins (such as the averaging down of a losing position), which quite often will destroy many private accounts.

Discipline means you execute your plan and honor your stop loss as you set it out, without altering it in the middle of a trade. Discipline is executing your detailed plan every single time. 

Do not be stubborn about your decision if you are wrong.

Consider two points:

1. Do not judge your trading strategy based upon one trade. Executing your plan, and being disciplined, will lead to long term success. Many times your plan will be fine and solid but a hedge fund manager out of nowhere will decide to liquidate a position in a stock that you are trading, the price will drop suddenly and you will get stopped out. you did not do anything wrong; it is the nature of the market that is unpredictable. At times, the uncertainty of the market will leave you in the red.
2. A professional trader accepts the loss and gets out of the trade. You then re-evaluate and plan another if-then scenario. You can always get back into the stock. Commissions are cheap (for most of the brokers), and professionals often take several quick stabs at a trade before it will start running in their favor.

Mentorship and a Community of Traders

 Dr. Brett Steenbarger, the author of great books such as The Psychology of Trading and The Daily Trading Coach, once wrote: "There is no question in my mind that, if I were to start trading full-time, knowing what I know now, I would either join a proprietary trading firm or would form my own "virtual trading group" by connecting online (and in real time) with a handful of like-minded traders."

- Trading alone is very difficult and can be emotionally overwhelming. 

- It is very helpful to join a community of traders so that you can ask them questions, talk to them, learn new methods and strategies, get some hints and alerts about the stock market, and make your own contributions.

- You should find a mentor whose trading style fits with your personality. It is important to note though that mentorship does not wok unless you are receptive, listen, and then put in the work necessary to adapt successfully.

- If momentum trading is your favorite style, you're wasting your time talking to me. Although I trade them from time to time, my style is really only for those who have an intraday swing day mentality. I mostly focus on VWAP, Opening Range Breakouts and Support or Resistance trades.

Reflection and Review

By now, you may correctly think that trading psychology and self-discipline, a series of proven trading strategies, and excellent money and risk management are the essential elements of success in trading. But there is another element that ties all of your trading fundamentals together: record keeping.

Make sure to include that following points in your trading journal:

1. Your physical well-being(lack of sleep, too much coffee, too much food the night before, etc.)
2. The time of the day you made the trade
3. The strategy you were anticipating
4. How you found the opportunity (from a scanner, a chatroom, etc.)
5. Quality of your entry (risk/reward)
6. Sizing/management of your trade (scaling in and out as planned)
7. Execution of exits (following profit targets or stop losses)
   

    Trading is a full-contact sport, and anything less than your complete focus is disrespectful to the game and will certainly knock you out of that game. 

I am doing poorly doesn't mean anything. You cannot improve if you don't have a proper record of your daily trades.

• Is it your stock selection?
• Is it your entry points?
• Is it your discipline or psychology?
• Is it your platform or clearing firm (broker)?
• What about other traders, is it a bad month for everyone or just for you?

Remove unnecessary programs and apps from your PC.

Your PC, just like your body and mind, needs to be kept clean, lean and fast, all of which have a direct effect on your trading platform and eventually your trading results.

I review my position sizing and why and where I added more. 

Watching your recorded videos of trading is an exercise that can benefit all traders no matter their experience.