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Margin Trading | What is Trading on Margin | E*TRADE
How to Grow A Small Trading Account📈
Wrote a lil blog with some tips to help grow a small trading account! Here it is: Almost every trader that is brand new to the market starts off by trading a small account, as they should. After all, why dive into the high-risk world of day trading with all of your hard-earned life savings at risk? It's best to start small and slowly grow your account, or even add more to your account in the future when you're more confident in your trading. However, most people dream of starting a small account of a few hundred or a few thousand dollars and growing it one trade at a time, which is obviously easier said than done. In this post I'll be sharing some tips and tricks that can help you grow a small trading account. Most of these I even used myself when I first got trading and I believe they played a big role in helping me grow my account. Before getting to the good stuff, you may be wondering why it's actually more difficult to trade a small account than a large account. The main reason for this is because of the Pattern Day Trader (PDT)Rule. The PDT rule limits U.S. based traders with less than $25,000 in their trading account to only 3 day trades per 5 business days. Further limitations are placed on accounts that break the PDT rule by placing 4 or more day trades within a 5 business day period. The PDT rule was put into place by the SEC with the hopes that it would protect new traders from trading too frequently and quickly losing their money. In reality, a lot of time what it actually does is forces traders to hold risky positions overnight that they would rather exit the same day, due to them not having anymore day trades available. There are a few ways that new traders can, in a way, get around the PDT rule to be able to place more day trades. First, they can look into opening an offshore trading account. Now, I know it sounds a bit sketchy... but opening an account with a reputable brokerage based outside of the U.S. is a legitimate way to get around the PDT rule. The reason this works is because the PDT rule is for U.S. traders and if your money is in an account outside of the U.S, you're free to trade as much as you'd like! Another way to increase your number of day trades, without opening an offshore account, is to have multiple brokerage accounts. For example, if you have $2,000 to start trading, you could open 2 separate brokerage accounts with $1,000 in each and will then have 6 total day trades per 5 business days (3 with each account). If you're starting with a larger amount of money, but still under the $25,000 PDT minimum, you can even open more than 2 trading account if you'd like and will have 3 day trades in each one! One issue you may run into using this method is that you can only have one margin account per brokerage. Margin accounts are required if you're someone that short sells or plans on doing some short-selling. Because of this, you should have separate accounts with entirely different brokerages. For example, one account with Etrade and one with TD Ameritrade. Aside from the broker that you're using to do your trading, there are of course actual trading techniques and strategies that you can do with you small account that will give you better chances of growing over the $25,000 PDT minimum too. One of those strategies is to simply learn swing trading. You'll still be able to use your 3 day trades per 5 business days, but if you really want to put your money to work while your account is under the PDT rule, being able to profitably swing trade is an incredible way to grow your small trading account. A swing trade is just a position held anywhere from a few days to a few weeks. This is different from day trading, which is when you exit your position the same day that it was opened. The nice thing about swing trading is that there are no limitations on how many swing trades you can place, even with a small account. One great way to swing trade is to follow stocks that already have momentum. By doing this, you're following the stock's trend rather than trying to fight it! "Follow the trend. The trend is your friend." -Jesse Livermore You can use a screener like the one here on finviz.com to find stocks that already have some upward momentum. To do this you may include "Performance +10%" over the past week while screening. This will give you a list of that have gone up at least 10% in the past week. Of course, you'll want to narrow it down further but this is a good way to at least start searching for some stock with some upward momentum that you may be able to get in on. The next tip for growing a small trading account is one that should be used regardless of the trading type that you're doing, whether it's day trading or swing trading. Risk proportionally to your account size. This means that, for example, if you would be risking $250 to $500 with a $25,000 account... you should only be risking $25 to $50 with a $2,500 account. It's important to know your max risk before entering a trade and using the proper position size based on your risk. Doing this will help you prevent any major losses and save you from blowing your entire trading account with just one bad trade! Hopefully instead of having to worry about blowing your trading account, you'll have to worry about my next tip. Don't remove your profits from your trading account. When you first start making some money it can be very tempting to move those profits straight into you bank account, but you'll never grow your trading account this way. In my opinion, you should maybe give yourself some milestone payments along the way, but keep a majority of your profits in your account until it's grown to your goal account size. By "milestone payments," I mean maybe withdraw some profits once you grow your account to $10,000 or $15,000, rather than randomly after you've made any profits at all. Hope you found this helpful!
Wrote a lil blog with some tips to help grow a small trading account! Here it is: Almost every trader that is brand new to the market starts off by trading a small account, as they should. After all, why dive into the high-risk world of day trading with all of your hard-earned life savings at risk? It's best to start small and slowly grow your account, or even add more to your account in the future when you're more confident in your trading. However, most people dream of starting a small account of a few hundred or a few thousand dollars and growing it one trade at a time, which is obviously easier said than done. In this post I'll be sharing some tips and tricks that can help you grow a small trading account. Most of these I even used myself when I first got trading and I believe they played a big role in helping me grow my account. Before getting to the good stuff, you may be wondering why it's actually more difficult to trade a small account than a large account. The main reason for this is because of the Pattern Day Trader (PDT)Rule. The PDT rule limits U.S. based traders with less than $25,000 in their trading account to only 3 day trades per 5 business days. Further limitations are placed on accounts that break the PDT rule by placing 4 or more day trades within a 5 business day period. The PDT rule was put into place by the SEC with the hopes that it would protect new traders from trading too frequently and quickly losing their money. In reality, a lot of time what it actually does is forces traders to hold risky positions overnight that they would rather exit the same day, due to them not having anymore day trades available. There are a few ways that new traders can, in a way, get around the PDT rule to be able to place more day trades. First, they can look into opening an offshore trading account. Now, I know it sounds a bit sketchy... but opening an account with a reputable brokerage based outside of the U.S. is a legitimate way to get around the PDT rule. The reason this works is because the PDT rule is for U.S. traders and if your money is in an account outside of the U.S, you're free to trade as much as you'd like! Another way to increase your number of day trades, without opening an offshore account, is to have multiple brokerage accounts. For example, if you have $2,000 to start trading, you could open 2 separate brokerage accounts with $1,000 in each and will then have 6 total day trades per 5 business days (3 with each account). If you're starting with a larger amount of money, but still under the $25,000 PDT minimum, you can even open more than 2 trading account if you'd like and will have 3 day trades in each one! One issue you may run into using this method is that you can only have one margin account per brokerage. Margin accounts are required if you're someone that short sells or plans on doing some short-selling. Because of this, you should have separate accounts with entirely different brokerages. For example, one account with Etrade and one with TD Ameritrade. Aside from the broker that you're using to do your trading, there are of course actual trading techniques and strategies that you can do with you small account that will give you better chances of growing over the $25,000 PDT minimum too. One of those strategies is to simply learn swing trading. You'll still be able to use your 3 day trades per 5 business days, but if you really want to put your money to work while your account is under the PDT rule, being able to profitably swing trade is an incredible way to grow your small trading account. A swing trade is just a position held anywhere from a few days to a few weeks. This is different from day trading, which is when you exit your position the same day that it was opened. The nice thing about swing trading is that there are no limitations on how many swing trades you can place, even with a small account. One great way to swing trade is to follow stocks that already have momentum. By doing this, you're following the stock's trend rather than trying to fight it! "Follow the trend. The trend is your friend." -Jesse Livermore You can use a screener like the one here on finviz.com to find stocks that already have some upward momentum. To do this you may include "Performance +10%" over the past week while screening. This will give you a list of that have gone up at least 10% in the past week. Of course, you'll want to narrow it down further but this is a good way to at least start searching for some stock with some upward momentum that you may be able to get in on. The next tip for growing a small trading account is one that should be used regardless of the trading type that you're doing, whether it's day trading or swing trading. Risk proportionally to your account size. This means that, for example, if you would be risking $250 to $500 with a $25,000 account... you should only be risking $25 to $50 with a $2,500 account. It's important to know your max risk before entering a trade and using the proper position size based on your risk. Doing this will help you prevent any major losses and save you from blowing your entire trading account with just one bad trade! Hopefully instead of having to worry about blowing your trading account, you'll have to worry about my next tip. Don't remove your profits from your trading account. When you first start making some money it can be very tempting to move those profits straight into you bank account, but you'll never grow your trading account this way. In my opinion, you should maybe give yourself some milestone payments along the way, but keep a majority of your profits in your account until it's grown to your goal account size. By "milestone payments," I mean maybe withdraw some profits once you grow your account to $10,000 or $15,000, rather than randomly after you've made any profits at all. Hope you found this helpful!
Crypto-Powered - The Most Promising Use-Cases of Decentralized Finance (DeFi)
A whirlwind tour of Defi, paying close attention to protocols that we’re leveraging atGenesis Block. https://reddit.com/link/hrrt21/video/cvjh5rrh12b51/player This is the third post ofCrypto-Powered— a new series that examines what it means forGenesis Blockto be a digital bank that’s powered by crypto, blockchain, and decentralized protocols. Last week we explored how building on legacy finance is a fool’s errand. The future of money belongs to those who build with crypto and blockchain at their core. We also started down the crypto rabbit hole, introducing Bitcoin, Ethereum, and DeFi (decentralized finance). That post is required reading if you hope to glean any value from the rest of this series. 97% of all activity on Ethereum in the last quarter has been DeFi-related. The total value sitting inside DeFi protocols is roughly $2B — double what it was a month ago. The explosive growth cannot be ignored. All signs suggest that Ethereum & DeFi are a Match Made in Heaven, and both on their way to finding strong product/market fit. So in this post, we’re doing a whirlwind tour of DeFi. We look at specific examples and use-cases already in the wild and seeing strong growth. And we pay close attention to protocols that Genesis Block is integrating with. Alright, let’s dive in.
Stablecoins
Stablecoins are exactly what they sound like: cryptocurrencies that are stable. They are not meant to be volatile (like Bitcoin). These assets attempt to peg their price to some external reference (eg. USD or Gold). A non-volatile crypto asset can be incredibly useful for things like merchant payments, cross-border transfers, or storing wealth — becoming your own bank but without the stress of constant price volatility. There are major governments and central banks that are experimenting with or soon launching their own stablecoins like China with their digital yuan and the US Federal Reserve with their digital dollar. There are also major corporations working in this area like JP Morgan with their JPM Coin, and of course Facebook with their Libra Project.
Stablecoin activity has grown 800% in the last year, with $290B of transaction volume (funds moving on-chain).
The most popular USD-pegged stablecoins include:
Tether ($10B): It’s especially popular in Asia. It’s backed by USD in a bank account. But given their lack of transparency and past controversies, they generally aren’t trusted as much in the West.
USDC($1B): This is the most reputable USD-backed stablecoin, at least in the West. It was created by Coinbase & Circle, both well-regarded crypto companies. They’ve been very open and transparent with their audits and bank records.
DAI ($189M): This is backed by other crypto assets — not USD in a bank account. This was arguably the first true DeFi protocol. The big benefit is that it’s more decentralized — it’s not controlled by any single organization. The downside is that the assets backing it can be volatile crypto assets (though it has mechanisms in place to mitigate that risk).
tablecoins are playing an increasingly important role in the world of DeFi. In a way, they serve as common pipes & bridges between the various protocols.
Three of the top five DeFi protocols relate to lending & borrowing. These popular lending protocols look very similar to traditional money markets. Users who want to earn interest/yield can deposit (lend) their funds into a pool of liquidity. Because it behaves similarly to traditional money markets, their funds are not locked, they can withdraw at any time. It’s highly liquid. Borrowers can tap into this pool of liquidity and take out loans. Interest rates depend on the utilization rate of the pool — how much of the deposits in the pool have already been borrowed. Supply & demand. Thus, interest rates are variable and borrowers can pay their loans back at any time.
So, who decides how much a borrower can take? What’s the process like? Are there credit checks? How is credit-worthiness determined?
These protocols are decentralized, borderless, permissionless. The people participating in these markets are from all over the world. There is no simple way to verify identity or check credit history. So none of that happens. Credit-worthiness is determined simply by how much crypto collateral the borrower puts into the protocol. For example, if a user wants to borrow $5k of USDC, then they’ll need to deposit $10k of BTC or ETH. The exact amount of collateral depends on the rules of the protocol — usually the more liquid the collateral asset, the more borrowing power the user can receive. The most prominent lending protocols include Compound, Aave, Maker, and Atomic Loans. Recently, Compound has seen meteoric growth with the introduction of their COMP token — a token used to incentivize and reward participants of the protocol. There’s almost $1B in outstanding debt in the Compound protocol. Mainframe is also working on an exciting protocol in this area and the latest iteration of their white paper should be coming out soon.
There is very little economic risk to these protocols because all loans are overcollateralized.
Buying, selling, and trading crypto assets is certainly one form of investing (though not for the faint of heart). But there are now DeFi protocols to facilitate making and managing traditional-style investments. Through DeFi, you can invest in Gold. You can invest in stocks like Amazon and Apple. You can short Tesla. You can access the S&P 500. This is done through crypto-based synthetics — which gives users exposure to assets without needing to hold or own the underlying asset. This is all possible with protocols like UMA, Synthetix, or Market protocol. Maybe your style of investing is more passive. With PoolTogether , you can participate in a no-loss lottery. Maybe you’re an advanced trader and want to trade options or futures. You can do that with DeFi protocols like Convexity, Futureswap, and dYdX. Maybe you live on the wild side and trade on margin or leverage, you can do that with protocols like Fulcrum, Nuo, and DDEX. Or maybe you’re a degenerate gambler and want to bet against Trump in the upcoming election, you can do that on Augur. And there are plenty of DeFi protocols to help with crypto investing. You could use Set Protocol if you need automated trading strategies. You could use Melonport if you’re an asset manager. You could use Balancer to automatically rebalance your portfolio. With as little as $1, people all over the world can have access to the same investment opportunities and tools that used to be reserved for only the wealthy, or those lucky enough to be born in the right country.
You can start to imagine how services like Etrade, TD Ameritrade, Schwab, and even Robinhood could be massively disrupted by a crypto-native company that builds with these types of protocols at their foundation.
As mentioned in our previous post, there are near-infinite applications one can build on Ethereum. As a result, sometimes the code doesn’t work as expected. Bugs get through, it breaks. We’re still early in our industry. The tools, frameworks, and best practices are all still being established. Things can go wrong. Sometimes the application just gets in a weird or bad state where funds can’t be recovered — like with what happened with Parity where $280M got frozen (yes, I lost some money in that). Sometimes, there are hackers who discover a vulnerability in the code and maliciously steal funds — like how dForce lost $25M a few months ago, or how The DAO lost $50M a few years ago. And sometimes the system works as designed, but the economic model behind it is flawed, so a clever user takes advantage of the system— like what recently happened with Balancer where they lost $500k. There are a lot of risks when interacting with smart contracts and decentralized applications — especially for ones that haven’t stood the test of time. This is why insurance is such an important development in DeFi.
Insurance will be an essential component in helping this technology reach the masses.
Decentralized Exchanges (DEX) were one of the first and most developed categories in DeFi. A DEX allows a user to easily exchange one crypto asset for another crypto asset — but without needing to sign up for an account, verify identity, etc. It’s all via decentralized protocols. Within the first 5 months of 2020, the top 7 DEX already achieved the 2019 trading volume. That was $2.5B. DeFi is fueling a lot of this growth. https://preview.redd.it/1dwvq4e022b51.png?width=700&format=png&auto=webp&s=97a3d756f60239cd147031eb95fc2a981db55943 There are many different flavors of DEX. Some of the early ones included 0x, IDEX, and EtherDelta — all of which had a traditional order book model where buyers are matched with sellers. Another flavor is the pooled liquidity approach where the price is determined algorithmically based on how much liquidity there is and how much the user wants to buy. This is known as an AMM (Automated Market Maker) — Uniswap and Bancor were early leaders here. Though lately, Balancer has seen incredible growth due mostly to their strong incentives for participation — similar to Compound. There are some DEXs that are more specialized — for example, Curve and mStable focus mostly only stablecoins. Because of the proliferation of these decentralized exchanges, there are now aggregators that combine and connect the liquidity of many sources. Those include Kyber, Totle, 1Inch, and Dex.ag.
These decentralized exchanges are becoming more and more connected to DeFi because they provide an opportunity for yield and earning interest.
As it relates to making payments, much of the world is still stuck on plastic cards. We’re grateful to partner with Visa and launch the Genesis Block debit card… but we still don’t believe that's the future of payments. We see that as an important bridge between the past (legacy finance) and the future (crypto). Our first post in this series shared more on why legacy finance is broken. We talked about the countless unnecessary middle-men on every card swipe (merchant, acquiring bank, processor, card network, issuing bank). We talked about the slow settlement times. The future of payments will be much better. Yes, it’ll be from a mobile phone and the user experience will be similar to ApplePay (NFC) or WePay (QR Code).
But more importantly, the underlying assets being moved/exchanged will all be crypto — digital, permissionless, and open source.
Someone making a payment at the grocery store check-out line will be able to open up Genesis Block, use contactless tech or scan a QR code, and instantly pay for their goods. All using crypto. Likely a stablecoin. Settlement will be instant. All the middlemen getting their pound of flesh will be disintermediated. The merchant can make more and the user can spend less. Blockchain FTW! Now let’s talk about a few projects working in this area. The xDai Burner Wallet experience was incredible at the ETHDenver event a few years ago, but that speed came at the expense of full decentralization (can it be censored or shut down?). Of course, Facebook’s Libra wants to become the new standard for global payments, but many are afraid to give Facebook that much control (newsflash: it isn’t very decentralized). Bitcoin is decentralized… but it’s slow and volatile. There are strong projects like Lightning Network (Zap example) that are still trying to make it happen. Projects like Connext and OmiseGo are trying to help bring payments to Ethereum. The Flexa project is leveraging the gift card rails, which is a nice hack to leverage existing pipes. And if ETH 2.0 is as fast as they say it will be, then the future of payments could just be a stablecoin like DAI (a token on Ethereum). In a way, being able to spend crypto on daily expenses is the holy grail of use-cases. It’s still early. It hasn’t yet been solved. But once we achieve this, then we can ultimately and finally say goodbye to the legacy banking & finance world. Employees can be paid in crypto. Employees can spend in crypto. It changes everything.
Legacy finance is hanging on by a thread, and it’s this use-case that they are still clinging to. Once solved, DeFi domination will be complete.
At Genesis Block, we’re excited to leverage these protocols and take this incredible technology to the world. Many of these protocols are already deeply integrated with our product. In fact, many are essential. The masses won’t know (or care about) what Tether, USDC, or DAI is. They think in dollars, euros, pounds and pesos. So while the user sees their local currency in the app, the underlying technology is all leveraging stablecoins. It’s all on “crypto rails.” https://preview.redd.it/jajzttr622b51.png?width=700&format=png&auto=webp&s=fcf55cea1216a1d2fcc3bf327858b009965f9bf8 When users deposit assets into their Genesis Block account, they expect to earn interest. They expect that money to grow. We leverage many of these low-risk lending/exchange DeFi protocols. We lend into decentralized money markets like Compound — where all loans are overcollateralized. Or we supply liquidity to AMM exchanges like Balancer. This allows us to earn interest and generate yield for our depositors. We’re the experts so our users don’t need to be. We haven’t yet integrated with any of the insurance or investment protocols — but we certainly plan on it. Our infrastructure is built with blockchain technology at the heart and our system is extensible — we’re ready to add assets and protocols when we feel they are ready, safe, secure, and stable. Many of these protocols are still in the experimental phase. It’s still early.
At Genesis Block we’re excited to continue to be at the frontlines of this incredible, innovative, technological revolution called DeFi.
--- None of these powerful DeFi protocols will be replacing Robinhood, SoFi, or Venmo anytime soon. They never will. They aren’t meant to! We’ve discussed this before, these are low-level protocols that need killer applications, like Genesis Block. So now that we’ve gone a little deeper down the rabbit hole and we’ve done this whirlwind tour of DeFi, the natural next question is: why?
Why does any of it matter?
Most of these financial services that DeFi offers already exist in the real world. So why does it need to be on a blockchain? Why does it need to be decentralized? What new value is unlocked? Next post, we answer these important questions. To look at more projects in DeFi, check outDeFi Prime,DeFi Pulse, orConsensys. ------ Other Ways to Consume Today's Episode:
Wrote a lil blog with some tips to help grow a small trading account! Here it is: Almost every trader that is brand new to the market starts off by trading a small account, as they should. After all, why dive into the high-risk world of day trading with all of your hard-earned life savings at risk? It's best to start small and slowly grow your account, or even add more to your account in the future when you're more confident in your trading. However, most people dream of starting a small account of a few hundred or a few thousand dollars and growing it one trade at a time, which is obviously easier said than done. In this post I'll be sharing some tips and tricks that can help you grow a small trading account. Most of these I even used myself when I first got trading and I believe they played a big role in helping me grow my account. Before getting to the good stuff, you may be wondering why it's actually more difficult to trade a small account than a large account. The main reason for this is because of the Pattern Day Trader **(PDT)**Rule. The PDT rule limits U.S. based traders with less than $25,000 in their trading account to only 3 day trades per 5 business days. Further limitations are placed on accounts that break the PDT rule by placing 4 or more day trades within a 5 business day period. The PDT rule was put into place by the SEC with the hopes that it would protect new traders from trading too frequently and quickly losing their money. In reality, a lot of time what it actually does is forces traders to hold risky positions overnight that they would rather exit the same day, due to them not having anymore day trades available. There are a few ways that new traders can, in a way, get around the PDT rule to be able to place more day trades. First, they can look into opening an offshore trading account. Now, I know it sounds a bit sketchy... but opening an account with a reputable brokerage based outside of the U.S. is a legitimate way to get around the PDT rule. The reason this works is because the PDT rule is for U.S. traders and if your money is in an account outside of the U.S, you're free to trade as much as you'd like! Another way to increase your number of day trades, without opening an offshore account, is to have multiple brokerage accounts. For example, if you have $2,000 to start trading, you could open 2 separate brokerage accounts with $1,000 in each and will then have 6 total day trades per 5 business days (3 with each account). If you're starting with a larger amount of money, but still under the $25,000 PDT minimum, you can even open more than 2 trading account if you'd like and will have 3 day trades in each one! One issue you may run into using this method is that you can only have one margin account per brokerage. Margin accounts are required if you're someone that short sells or plans on doing some short-selling. Because of this, you should have separate accounts with entirely different brokerages. For example, one account with Etrade and one with TD Ameritrade. Aside from the broker that you're using to do your trading, there are of course actual trading techniques and strategies that you can do with you small account that will give you better chances of growing over the $25,000 PDT minimum too. One of those strategies is to simply learn swing trading. You'll still be able to use your 3 day trades per 5 business days, but if you really want to put your money to work while your account is under the PDT rule, being able to profitably swing trade is an incredible way to grow your small trading account. A swing trade is just a position held anywhere from a few days to a few weeks. This is different from day trading, which is when you exit your position the same day that it was opened. The nice thing about swing trading is that there are no limitations on how many swing trades you can place, even with a small account. One great way to swing trade is to follow stocks that already have momentum. By doing this, you're following the stock's trend rather than trying to fight it! "Follow the trend. The trend is your friend." -Jesse Livermore You can use a screener like the one here on finviz.com to find stocks that already have some upward momentum. To do this you may include "Performance +10%" over the past week while screening. This will give you a list of that have gone up at least 10% in the past week. Of course, you'll want to narrow it down further but this is a good way to at least start searching for some stock with some upward momentum that you may be able to get in on. The next tip for growing a small trading account is one that should be used regardless of the trading type that you're doing, whether it's day trading or swing trading. Risk proportionally to your account size. This means that, for example, if you would be risking $250 to $500 with a $25,000 account... you should only be risking $25 to $50 with a $2,500 account. It's important to know your max risk before entering a trade and using the proper position size based on your risk. Doing this will help you prevent any major losses and save you from blowing your entire trading account with just one bad trade! Hopefully instead of having to worry about blowing your trading account, you'll have to worry about my next tip. Don't remove your profits from your trading account. When you first start making some money it can be very tempting to move those profits straight into you bank account, but you'll never grow your trading account this way. In my opinion, you should maybe give yourself some milestone payments along the way, but keep a majority of your profits in your account until it's grown to your goal account size. By "milestone payments," I mean maybe withdraw some profits once you grow your account to $10,000 or $15,000, rather than randomly after you've made any profits at all. Hope you found this helpful!
Wrote a lil blog with some tips to help grow a small trading account! Here it is: Almost every trader that is brand new to the market starts off by trading a small account, as they should. After all, why dive into the high-risk world of day trading with all of your hard-earned life savings at risk? It's best to start small and slowly grow your account, or even add more to your account in the future when you're more confident in your trading. However, most people dream of starting a small account of a few hundred or a few thousand dollars and growing it one trade at a time, which is obviously easier said than done. In this post I'll be sharing some tips and tricks that can help you grow a small trading account. Most of these I even used myself when I first got trading and I believe they played a big role in helping me grow my account. Before getting to the good stuff, you may be wondering why it's actually more difficult to trade a small account than a large account. The main reason for this is because of the Pattern Day Trader **(PDT)**Rule. The PDT rule limits U.S. based traders with less than $25,000 in their trading account to only 3 day trades per 5 business days. Further limitations are placed on accounts that break the PDT rule by placing 4 or more day trades within a 5 business day period. The PDT rule was put into place by the SEC with the hopes that it would protect new traders from trading too frequently and quickly losing their money. In reality, a lot of time what it actually does is forces traders to hold risky positions overnight that they would rather exit the same day, due to them not having anymore day trades available. There are a few ways that new traders can, in a way, get around the PDT rule to be able to place more day trades. First, they can look into opening an offshore trading account. Now, I know it sounds a bit sketchy... but opening an account with a reputable brokerage based outside of the U.S. is a legitimate way to get around the PDT rule. The reason this works is because the PDT rule is for U.S. traders and if your money is in an account outside of the U.S, you're free to trade as much as you'd like! Another way to increase your number of day trades, without opening an offshore account, is to have multiple brokerage accounts. For example, if you have $2,000 to start trading, you could open 2 separate brokerage accounts with $1,000 in each and will then have 6 total day trades per 5 business days (3 with each account). If you're starting with a larger amount of money, but still under the $25,000 PDT minimum, you can even open more than 2 trading account if you'd like and will have 3 day trades in each one! One issue you may run into using this method is that you can only have one margin account per brokerage. Margin accounts are required if you're someone that short sells or plans on doing some short-selling. Because of this, you should have separate accounts with entirely different brokerages. For example, one account with Etrade and one with TD Ameritrade. Aside from the broker that you're using to do your trading, there are of course actual trading techniques and strategies that you can do with you small account that will give you better chances of growing over the $25,000 PDT minimum too. One of those strategies is to simply learn swing trading. You'll still be able to use your 3 day trades per 5 business days, but if you really want to put your money to work while your account is under the PDT rule, being able to profitably swing trade is an incredible way to grow your small trading account. A swing trade is just a position held anywhere from a few days to a few weeks. This is different from day trading, which is when you exit your position the same day that it was opened. The nice thing about swing trading is that there are no limitations on how many swing trades you can place, even with a small account. One great way to swing trade is to follow stocks that already have momentum. By doing this, you're following the stock's trend rather than trying to fight it! "Follow the trend. The trend is your friend." -Jesse Livermore You can use a screener like the one here on finviz.com to find stocks that already have some upward momentum. To do this you may include "Performance +10%" over the past week while screening. This will give you a list of that have gone up at least 10% in the past week. Of course, you'll want to narrow it down further but this is a good way to at least start searching for some stock with some upward momentum that you may be able to get in on. The next tip for growing a small trading account is one that should be used regardless of the trading type that you're doing, whether it's day trading or swing trading. Risk proportionally to your account size. This means that, for example, if you would be risking $250 to $500 with a $25,000 account... you should only be risking $25 to $50 with a $2,500 account. It's important to know your max risk before entering a trade and using the proper position size based on your risk. Doing this will help you prevent any major losses and save you from blowing your entire trading account with just one bad trade! Hopefully instead of having to worry about blowing your trading account, you'll have to worry about my next tip. Don't remove your profits from your trading account. When you first start making some money it can be very tempting to move those profits straight into you bank account, but you'll never grow your trading account this way. In my opinion, you should maybe give yourself some milestone payments along the way, but keep a majority of your profits in your account until it's grown to your goal account size. By "milestone payments," I mean maybe withdraw some profits once you grow your account to $10,000 or $15,000, rather than randomly after you've made any profits at all. Hope you found this helpful!
The Hook I’m not old, but I’m certainly not young anymore… Being squarely in my mid 30s and with a kid and a second on the way I’ve been in a little bit of a panic financially, not so much short term but long term. Will I be able to provide the life I was given by my parents? (Probably not) However, I wanted to do better than what I was currently forecasting. I work a decent job, and so does my wife but with Daycare and her Student loans… I really felt I was never going get ahead. Finally after 9 months, and some pain. I don’t see a fairy tale ending but I see some light and a means to move forward. So what happened 9 months ago? My cousin, asked me “Hey do you invest in the market?” At the time my response was no, I had no money to do so. He responded to me, dude open up a Robinhood account, 0 fees, 0 commission, you can start with 10 dollars, it’s amazing. He told me, “I’ve been researching this Drug Company Relypsa, as a doctor (He is a doctor) the Black Box warning is complete “B.S”, the stock TANKED over literally nothing and a complete steal today. If you even put 100 dollars in today, you are going double your money.” To be fair, if I had a Robinhood account that day for each 100 dollars I put in knowing nothing else about how anything works I would have had 230 dollars today. So now comes the lessons… Losing my shirt! That day came and passed, but the pump machine was real… The stock soared. I saw dollar signs and realized I can make some cash on this! I scrambled some savings, and tried to open up an eTrade account. By this time… RLYP was trading into the mid 20s. Market cap was still well under what a competitor was bought for and that drug wasn’t even FDA APPROVED yet… MAN I’m going be RICH, I thought to myself. After reading the fine print and fee’s eTrade was going eat at so much of my profit margin it discouraged me that I never moved money to the account and I sat on the sidelines. Discouraged, I got another phone call… My Cousin was check in again “Did you get that Robinhood account, I Doubled my money man! If it dips I’m going “buy back in”. So with my tail in-between my leg and already pissed off I missed a boat, I looked at the Robinhood app. The app looked neat but did I really trust it? I mean I had never heard of it before and I was going tie it to my bank account? To give them my personal information? Ugggz…. But the fear of missing out was larger than anything else, so after my research into Robinhood… I finally opened up an account with Robinhood. Since this deal was soo amazing, I moved pretty much my whole savings into it… (DUMB MOVE) and started to add RLYP to the tracking system. The stock was trading near the upper 20s, but my cousin already made 100% this has to be a great deal right? So Whatever BUY! I had the presence of mind to wait for a “dip” and bought in at 26.92. The stock continued push up and took my left over Christmas money and bought more stock at 29.80 because why not? This thing is just going up up up! Christmas passed and stock even reached 30 dollars a share… I couldn’t believe how lucky I was. Then Jan 1st happened. In a moment all that joy was now heartburn as share prices TUMBLED. A few more days and It was already back below my 26.92 and still falling. Note - Being new I didn’t even know what a stop loss was….. We will get back this to later Of course this was just a hiccup all biotechs are down and we will be fine…. Share price continue to fall, 19 dollars… Its just a paper loss, its fine I would tell myself. Prices continued to tank back down to 12 dollars per share… At this point I had lost 60% of my deposit and the wife was ready to KILL ME. THIS IS why YOU DON”T INVEST. I was pretty depressed at this point and debated pulling what money I had left, out. I had been saving a little bit money during this time and I had started researching a lot of things. I was reading 1-2 hours a day on trading, the market, and everything I was reading I was literally saying to myself… I made EVERY single mistake possible. The Curve After reading and finally doing my own due diligence into RLYP, I came to the conclusion that the stock itself was sound, it had FDA approval the drug was selling. I just had a horrible entry point and chased. So instead of selling I was happy to buy more RLYP at any price point below 20 dollars. I figured I could not eat out at lunch and save 20 dollars a week which at current market price would allow me to gain a share or two a week. During this time frame I bought down my avg share price from 27.50 to a final total of 21.92. I made many more mistakes during this period of time and for all my stupidity, I got bailed out. The company got bought out for 32 dollars per share and I instantly sold 3/4ths of my position. Another offer might come in, but a bird in hand is better than two in the Bush. Even if RLYP goes to 0, I still break even and I have learned that the Market will and can eat you alive. So if you read this, you are probably asking yourself how this applies to you? TL;DR section! The LessonTop 10! 1) Robinhood is an AMAZING app, while it still has plenty of room for improvement, its free and all trades are free!!!!! This allows you to learn about the Market and make trades with small amounts of money while you keep your gains without paying commission~! While this sounds too good to be true, I can personally vouch that it is that good! 2) No amount is too small to start… Start with 10 dollars if that is what you have, and if you are like me…. You might become addicted to saving, I now even put a small direct deposit into my Robinhood account. 3) Do your own Due Diligence… Don’t follow ANYONE blindly ever. It worked out for me, but I know I am not good and just got lucky as hell. a. Use Charts - https://new.tradingview.com/ (Free and Great) Chartmill.com (Paid/free) b. Get information – stocktwits.com / reddit / news sites / etc… c. Get information directly from the company – Stockholder qtrly meetings / press releases d. Analyst target pricing they all have agendas and they might not align with your own 4) Set a stop loss, if I had set a stop loss at 26.92 on RLYP It would have sold the stock on the down turn and I would have lost all profits from the stock going to 30. I would have prevented my 60% loss as the stock tumbled all the way down to 12 dollars. I could have rebought the stock at 12 dollars and made a lot more money after doing my own due diligence. Learn the Terms and the differences between each type of Stock Purchase. (https://www.youtube.com/watch?v=jPIL8ncYb6Y) 5) DON"T Buy into the Hype machines either way... if they really knew they would be multi millionaires and not hyping a 10 dollar stock. 6) Invest wisely, ie don’t put all your money on one stock without knowing you could lose it all. 7) It’s OK to take a loss, mentally this was very difficult for me to get over. I still probably hold losers longer then I should, see me still owning PYPL. 8) Entry point, Entry Point, Entry Point… and Patience!!! RLYP was a GREAT buy at 12 and a Good buy at 20… but above that you were chasing. 9) Tax Burden. If you net gains, you will owe taxes on each sale! “If you sell a stock, you pay 15% (20% for high earners) of any profits you made over the time you held the stock. Those profits are known as capital gains, and the tax is called the capital gains tax. One exception: If you hold a stock for less than a year before you sell it, you'll have to pay your regular income tax rate on the gain - a rate that's usually higher than the capital gains tax.” http://money.cnn.com/retirement/guide/investing_stocks.moneymag/index9.htm 10) Have fun, if this isn't fun it isn't for you! The Robinhood experience for me My account creation process took 2 days. My funds clear in 1-2 days from USAA, but it takes 3-5 days from my CapitalOne account My deposit back to my back account take about the same amount of time Robinhood app has gone down from time to time, so always have a stop loss set. If the stop loss is set before the app goes down it will still process regardless if the app is up or down. Customer support is super helpful but sometimes slow Customer support takes suggestions, one of my two suggestions were implemented! What do I trade? I trade mostly BIO’s and Tech. Why? Because I have a tech background and my cousin who I discuss stocks with is a doctor. I try to trade stocks where I feel like I have some knowledge in the field. My returns? Worst point I was at .40% (This is not a typo...) , I am now at 38% returns for the year. _ Lifestyle changes I am way more frugal now… because I see a reason save and invest. The control I have with Robinhood on how I invest gives me a sense excitement and fulfillment that mutual funds and CDs just don’t bring. I now see a means to an End... My goal of having 100k cold hard cash, outside of my house is a real possibility!! Potentially reachable before I turn 40!!!! I've never been so excited to save money and my cousin and I excitement keeps us both going... so sometimes I guess having a saving buddy can be a good thing... kinda like a Gym buddy but someone to remind you not to go out to lunch and brown bag it! Hope you find this helpful~ If you are on the fence about trying Robinhood out and investing... DO it, better today then tomorrow and better tomorrow then the day after! Feel free to ask questions!!!! Update Because it was request in a few private messages, below are my charts. http://imgur.com/a/S9YLg (3 month) http://imgur.com/a/buE5o (Lifetime) http://imgur.com/a/jWiGy (1 Yr)
How many hours a day do you work? - 6.5 actually trading, and probably another 3-4 doing analysis, scanning, finding stocks for the next day, preparation in the morning, etc.
Are you in front if the screen for the whole trading day? - Generally, yes. Unless I have a hot morning at which time I just quit and take the day off and go to the beach!
How do you handle being alone for the whole trading day if you are in front of your screen ask day? - Well, I talk to a lot of other traders on Skype and/or Google chat, and I try to get out of the house and trade in different locations to keep things interesting. It can get lonely, but I have a lot of friends and have no problem inviting people over to chill while I trade and it benefits them too cause a lot of people want to learn it and sitting here w/ someone doing it full time is a really cool and fun way to learn!
I'm curious as after the last 4 years or so where I've been studying and watching, I feel I've got a nice KISS method. I did 2 months of full time paper trading to see how I did. However by the end I couldn't handle being alone and stuck in my chair all day. Did you have to cope with any of that? - Yes it is definitely an adjustment. I worked in IT so I was pretty much glued to a computer all day anyway, so it wasn't AS much of a change for me, but I do read a lot and hear a lot that day traders start to go crazy after a while just from the lonliness/lack of human interaction. That's why I do things like this Reddit, and my courses that are taught via live webinar though. Keeps me from goin nuts and going postal ... on myself!
What's your P&L ? - I try to shoot for a $500-1k gain per day and keep my loss days when they do occur to $250-500. Per trade, I try to risk no more than $200-300 depending on market conditions, and during certain markets I will increase or decrease risk if I feel it is worth it. I also have a detailed risk management plan that I use to make sure if I have a string of losses they are cut to $0 within 3-5 days so I can re-evaluate, and if I have a string of wins, risk increases based on my wins so that I can capitalize when I'm on fire and minimize losses when I am in a slump.
Are you interested in HFT ? - Not really. As an IT geek I do find it fascinating that there are applications that can scalp all day long and consistently make money over the long term, but I just do not believe that in such a dynamic environment that anything like that is really sustainable. It would just be way too much work for me to try to develop something to trade for me, plus it would take all the fun and challenge out of it!
With how much money did you start ? - I originally started investing with only $1k. I swung that very slowly (up and down) while saving from my job(s) up to about $5k. I then injected another $5k of savings and started getting very serious with trading with around $10k. Then I lost about 50% of that in like 2 months (lol). The whole time I worked full time and saved every penny I could until I had saved up enough to open a PDT (pattern day trading) account with $25k and also became fully immersed in trading talking to other traders and taking a few trading courses here and there to tweak my strategy. Now I trade that account (I keep $26.5k in it and build it up as much as I can each month then withdraw back to $26.5k and that is how I get paid) and I have a small $5k account that I use for swing trades and experimental strategies.
Are you interested in working for big firms (GS, JP, City...) - Not really. I have debated it in the past but I think it is just way more satisfying to do it on my own. Also, I don't want to be part of the firms that everyone complains are corrupt/evil/etc. For me it is more fun and exciting to just trade on my own, and it is more rewarding because if I decide I want a raise I just work harder and trade better and boom! I get a raise!
That's actually a very valid question. My method of picking stocks or buying/selling really is not different at all. What is different is that I have the emotional discipline to cut losses quickly and let my winners run. Most traders that fail, and I have seen many come and go even across the very few years I've been doing this, fail because they do not cut losses quickly and they are not good risk managers. I have always been frugal and very cautious with my money, and I am the same when I trade.
I trade very systematically, and analyze everything I do with statistical analysis so I always know the stats between each type of pattern I trade. For example, if you look on my tradervue link in the OP, you'll see tags like IFB (intraday flag break), IBD (intraday breakdown), TTB (triple tap breakout) identifying the patterns I am trading so that I can go back and find all those tags and see how profitable they are, by tag. I also very systematically trade with a 2:1 reward to risk ratio at a minimum, so if I am risking 10 cents on a trade I will always be able to make at least 20, 50 cents for a buck, 1 buck for 2 bucks, etc. It takes a lot of self control to actually cut those losses where they cross that level of risk, but if you can do that there is no reason 98% of people could not be profitable in this profession.
Obviously there are a ton of other factors that go into it, and I am still very new so who knows, maybe I will blow up and go insane and fail and go broke, but for now I'm doing ok, so I can only speak to what I currently know.
BTW, my blog is very reminiscent of my overall strategy and trading philosophy if you want to check it out (it's free). I just recently rolled it from Blogger to Wordpress so some of the links might point back to my old blog but all the info is at both places: Link to www.greenbartrading.com
Consistency does not equal wealth. I live comfortably on what I make but I am not trading to become rich, really. I trade for a living because I like the freedom it offers me, being able to work for myself and go wherever I want and take my work with me (for example spending more time w/ family/friends, traveling, etc)
To answer your question, I am very new in this game so it would be foolish to assume I should be rich already. My strategy works so that I can pay my bills and have money to spend on the things I like and the things I want to do, but I am still limited to the money I have in my account and the buying power that it gives me. If I had millions of dollars in capital and $20m in buying power, sure I could use similar strategies and probably make $100k a day but it takes a long, long time to build up that kind of power in a trading account.
It is a common misconception in trading that as soon as you have a consistent strategy you will instantly be able to scale it to become super-wealthy. That theory leaves out the obvious aspects of being able to handle the swings in P/L emotionally and especially the issue of liquidity. I can identify a pattern on a chart and say I'm going to buy 100k shares and make $10,000 in 5 minutes, but actually getting filled on that 100k shares is a totally different story. It is much harder to execute strategies like mine when you are playing with huge sizes. That is why I try to rack up small gains with a consistent win rate vs just trying to home-run every trade and get rich quick.
I don't know much about that field so I don't want to say too much, but in general I think that like many people in this business they are just out to make a quick buck, by selling something to others who are trying to make a quick buck.
Not at all. Margin is only dangerous if you don't know how to use it. If you understand that trading a $5k account on 2:1 margin means you're trading with $10k, but you still need to manage the risk as if you have $5k, you'll be fine. When I first started getting really serious with trading, I actually traded a $10k account with 10:1 margin but I never used more than 2:1 or 3:1 because I just didn't want to risk that much.
The margin is only bad if you let it get out of control. Also, it is impossible to short without margin and shorting is vital if you are going to be consistently profitable in the long term. Most people say shorting is more risky but if you short properly, managing risk with stop losses just like when you go long, then there is absolutely no difference between shorting and longing in terms of risk. I don't generally recommend swing shorting for beginners, only because news releases can make things really ugly, but in general, trading on margin and shorting is fine as long as you are smart about it and you understand it (which is not that hard with a little reading).
Edit: To clarify, most of the risk associated with margin comes when people get greedy. If you have a $10k account with 10:1 margin on it and you dump $100k into a stock and risk $2,000 to make $4,000 sure you could make 40% on your account but you could also lose 20%. It makes much more sense, especially with a small account, to trade w/ a reasonable amount of margin so that you can maximize your gains without destroying your account w/ too much risk. This is also just personal opinion. Whether or not trading on margin is a bad idea really depends on the person. I know people who have 50:1 margin and trade 100% in cash, and people who have like $5k and trade as if they have $100k cash rather than $95k of it being margin, lol. It all depends on your personality and how well you understand the risk you're taking.
Fair enough. That is true. In my experience though I have only in very, very rare cases seen a stock double in an overnight session unless it was a penny stock or something very thin being pumped. In the stocks I generally trade I almost never see that. While I do see large gaps I don't really trade stuff that tends to gap more than 100%.
Edit: BTW, it's worth noting that nothing in the market is guaranteed. I believe that if you trade with the fear of losing 100% on an investment overnight you are, in general, being a bit too paranoid. Yes it happens, and it blows bigtime when/if it does, but it is not common enough to really worry about IMO. Just something to be aware of.
Usually the broker. If you lose too much, they will do a margin call, which basically means they can protect themselves by forcing you to sell your positions to protect their money if you're investing with it.
This risk is generally mitigated though. I trade on margin every day but I am still only risking a very small percentage of my capital on each trade. If I were to hold trades for longer term timeframes, I might worry more about margin calls but still, in most situations you are going to be pretty well protected by stop losses unless the stock is making huge moves of 40%, 50%, 100% etc which is not all that common in the names I generally trade. In my experience I have not seen margin calls until people have lost like 70-80-90% of their account values on a single trade already. If you can't cut your losses before that point you probably should not even be trading :)
On Fannie and Freddie I never touch them as they are super thick and riddled with manipulation. There are certain stocks I just do not trade and those are two (FNMA/FMCC)
ARIA is actually another on my ban list. Don't know anything about it fundamentally but statistically I have lost money almost every time I traded it so I just don't anymore.
ZGNX is a great trader. I actually recently bought 2500 shares at $3.59 average (building on a 500 share swing I held from $3.35 the day before) but like a fool I sold it flat after it didn't immediately take off. I caught the top of that recent GIANT 5m share block buy and it killed my average price so since I did not want to risk $800-1000 on the trade I opted to exit flat when it didn't go right away. I don't really know anything about the company itself but I have traded it several times over the last couple years and it usually behaves pretty predictably, so I like it for day/swing trading.
When I got serious about day trading I started with $10k and traded through a prop firm (as an independent contractor so I was working on my own and only received whatever money I made, no paycheck or boss). I did that because it offered me 10:1 leverage and good trading software (DAS Trader Pro). Once I had the cash built up from that I opened a $25k ameritrade account and now I use that ... I bailed on the prop firm because their software was $125 a month and thinkorsim through TDA is free.
Yes to both questions. I generally get up around 8:00am EST and do a quick breakfast and shower, maybe go for a run or get outside to do something active. Then I will go through Yahoo Finance inPlay (finance.yahoo.com/mp) and scan for any major news headlines (earnings misses/beats, FDA news, etc). I go through the stockmarketwatch.com premarket section (Link to thestockmarketwatch.com and look at anything that is gapping up or down and use finviz.com to determine why they are gapping. This gives me a bunch of ideas for the day. Also, I usually have a small watchlist prepared from the night before, which is prepared with a scanner I use called StockFetcher (www.stockfetcher.com). I pay 8 bucks a month for that (super cheap actually for how powerful it is!)
Right at 9:30 I am mostly just watching stuff. I seldom trade the first 15 minutes only because it is way too volatile and it is difficult to determine a pattern in only 15 minutes. After 9:45 I will look to see if any of the morning gappers held their gaps and perhaps find a couple trades in those ideas. I also have alerts set at various prices from the night before which will be triggering the whole time giving me ideas.
After the trading day, I usually just shut down and forget about trading for a while and then later at night I go back and upload all my stuff to tradervue.com and put in comments/details about why I took the trade, where I bought/sold, if it was a gain/loss, etc and post it publicly on twittefacebook. This keeps me honest and makes sure I am always on my game.
Also, each morning I am usually watching my open swing trades to make sure there is nothing crazy going on with them and I will usually sell into morning spikes to book profit on those and possibly re-enter later on to add back to my full position size.
Finally, every once in a while (maybe once a month) I will just wipe the slate clean, eliminate my entire watchlist, and build a totally new one just to keep my mind fresh and eliminate any bias I have developed toward individual stocks.
I always check to see when earnings are, and make sure that there are no major catalysts coming up (FDA panels, upcoming contract renewals, etc). I also go back on the chart for a year and look at all the major moves (gap ups, gap downs and big spikes/drops in price) and research why they moved, so that I can react quickly if I happen to see something similar happen. For most of my swing trades I don't tend to care much about fundamental stuff (PE Ratio, income, etc) because they are not long-term enough for that stuff to make a difference. I am a 98% technical trader, but definitely do pay attention to fundamental catalysts like earnings and things of the like.
One other thing is I will use sites like tickerspy.com to check the performance of the overall sector, and keep the general market (SPY) in mind as there are good and bad times to swing trade so I don't want to be swinging long when the market is going down and vice versa, in general.
The "I'm cheap and don't wanna spend any money" (aka me) answer is to hit up investopedia.com. Everything you should need to know to get started is there, you'll just need to find it all yourself. You need to learn (at a minimum) order types, commissions, different types of trading, margin, and risk management. I teach all this stuff in my course and it's super cheap relative to the other crap that's on the market so feel free to hit me up via my website and I will hook you up w/ a discount code if you want. Let me know if you have any other questions!
Funny you should ask that - you are one of many who has asked me that very same question and the short answer is I have no idea, because I don't like anyone else touching my money, lol.
I believe through any retail broker (scottrade, etrade, ameritrade, optionshouse, etc) you can probably get a dedicated licensed broker to invest for you while you do nothing but your returns in that situation are probably going to be minimal after the broker takes their cut and also all the commissions/fees and probably a service fee for the service itself. I really don't know though, so that's something you could ask a local branch or call one of the retail brokers and see if that is a service they offer.
I just have never done it because I always wanted to do things on my own so I understood exactly where my money was going and knew that I wasn't being ripped off.
Thanks Joewith! It is definitely not for the faint of heart. I have had many people tell me I swear at my computer a lot when I'm trading, haha, as if that's going to make a difference. For me it is all about the challenge though. I love the challenge and the fact that if I fuck up it is 100% on me, and I can't blame anyone else!
To answer your question: It is not my plan but I do believe it is possible. I actually, right now, make less money than I did when I worked full time, but I am a lot happier because I have the freedom to do whatever I want whenever I want. In the future I do anticipate being able to far surpass my old level of income but I don't expect to be filthy rich. I would like to see my business grow to $1m+ within a few years and see annual trading profits in the $250-500k range on average, but I have a long way to go to get there. Before I left my job, my best month was September of 2013 in which I made $19.5k on a $25k account which was pretty awesome, so I know it is possible to do amazing things with this profession if we just work hard and manage our risks well.
First, make sure that you REALLY can afford to lose that money. If you can that's great! The best way to get your feet wet is to just dive right in. Risk management is key. You can learn technical analysis pretty easily and use it to identify support/resistance levels on the chart. Always make sure that your risk is at a maximum, 1/2 your potential reward. This will make sure that if you take 100 trades, you lose $50 50 times and make $100 50 times, you have $2500 in loss against $5,000 in reward or a net profit of $2500 (less commissions).
Basically, do not assume that trading is a get rich quick scheme. If you do you will blow up your account faster than you can blink. Trading is a numbers game. Manage your risk and understand what you're investing in and always have a plan to enter AND exit the trade. If you trade with no plan you are doomed.
It's great you're starting to invest as young as you are. If you're a disciplined, controlled individual you will find this is a fantastic way to make extra money and possibly even make a living. Check out my website and look into the Fundamentals of Active Trading course...it might be perfect for you for right now. Email me from the contact page if you decide you're interested and I'll hook you up w/ a discount code.
Yep! I use Thinkorswim from TDAmeritrade currently. Here is an analysis of four platforms I have used w/ their pros and cons: Link to www.greenbartrading.com
I use Thinkorswim through TD Ameritrade. I also have used Lightspeed, Scottrade Elite, and DAS Trader pro. I did an analysis of those four here: Link to www.greenbartrading.com
I haven't heard of Cobra Trading, but I also know Interactive Brokers is very popular for day traders and active traders.
I use index funds as a guideline for what to do in my day trades and swing trades. Most of the professional, full time and well-managed day traders I know are significantly outperforming the index funds. Personally, I don't know if I am because I have not been doing this professionally long enough to have the data to decide. I would say that most of the traders I know are definitely not inline with the market, but are proportionately in-line. For example, if they generally outperform the market, they will outperform it even more when the market rips, and if they generally underperform the market it will get even worse when the market starts to tank. I personally specialize in high-momentum stocks (stuff that is moving on earnings, news, fundamental catalysts), and many of those stocks simply do not care what the market does. They are going to go up (or down) regardless of the market because the volume and the feagreed/euphoria surrounding the news/catalyst outweighs general market sentiment.
I assume you're referring to things like bitcoin. If not, I don't even know what a cryptocurrency is, lol. If so, I don't know anything about trading them nor do I care to. Like you said, they are extremely volatile and way too risky. I stay away from very risky investments like penny stocks and bitcoin and try to trade only things that have decent liquidity, are easy to get into and out of, and that are not going to be too susceptible to manipulation by people with way more money than me.
Yeah it is fascinating. I actually have a buddy who recently randomly threw $1k at bitcoin on the news that Congress was planning to make it a real currency (or something like that?) and tripled his money in three hours, haha. Fun stuff, but way too crazy for me.
Haha! Actually, I only have one monitor :) That setup that you see in the link in the main post is all I use. I flip between the trade tab where I actually click buy/sell and the charts tab which has three different charts on it (a daily, a 30 min and a 5 min chart) as needed. Generally, since I am day trading and not investing, I only care about the 5 minute chart for snap decisions. I will look at the 30 min and daily to find ideas and identify support/resistance levels on the chart but when I trade, probably about 75% of my time is spent on the screen you see which can all fit on a 15" laptop!
I do have a 24" external monitor which is usually what I'm using, and occasionally I'll open my laptop to throw up my google chats w/ other traders so I don't have to hit alt+tab 8 million times throughout the day. lol if I did have a fancy monitor setup though, I would definitely show it off!
I rebuild my watchlist every night and mark stuff that I think is ready the next day. For any given day I usually only have 5-6 stocks that I am watching very closely. The rest are just kind of there as "back of my mind" ideas for later. At the end of the day if something didn't go then I will keep it on the list to stalk for a while and use those items if I run out of ideas during the day, to see if there are any opportunities in stuff I had been watching a couple days earlier. Then I usually wipe the whole thing clean and start over about once a month as it crosses 40-50 symbols because that just gets annoying and too much to manage. Interesting question about the wifi - yeah slippage can be annoying if I don't have a good connection, but I usually account for slippage in my position sizes so that if it slips a few cents it won't break me. If I have a slow connection I will usually scale back my risk and be more selective due to the added risk of disconnections, slippage, etc. That used to happen to me all the time at work: I worked in a lab where I couldn't have my cell phone and I'd be in a trade with no stop loss set (since I didn't want to get wicked out!) and the internet connection would randomly drop and I'd have to run out of the lab to get my phone and put in my stop loss or sell from my phone, lol. It cost me a bunch a couple times, so I started to take that into account when trading.
I also know traders who only trade 1-2 stocks and just know them so well that they can hit them over and over and make money for years. Those are a special breed of trader, IMO, and I would probably get bored out of my mind trading the same symbol every day lol.
I do find technical analysis to be reliable. It is a self fulfilling prophecy in a large way so it doesn't really provide any sound long term strategy but for short term strategy it works great. I use probably 98% technical analysis in my trading. EDIT: To clarify I mean that technical analysis is not a reason to make a long term investment in any one stock or financial instrument. However technical analysis can be used to make consistent short term gains over the long term.
I've never traded options. I hear they are great for reducing risk and capitalizing with a small account but my philosophy in the market is to do what works until it doesn't work anymore. For me, trading equities has worked well so I'll keep doing that until it doesn't. Maybe someday I will get into options, but I have no plan to do that currently.
Haha it's a personal thing I guess! I guess it could be nice to trade the same company over and over again but I like the excitement of finding new ideas all the time and the challenge of learning about different companies and how they behave in the market. I have even traded some companies that turned out to be total frauds and it's funny to me because I look back and see that almost all my trades in them were shorts and when they finally get crushed I am like HA! I KNEW IT!
Really interesting stuff. Perhaps in 30 years I will lose faith in technical analysis as well. Really though, I am pretty confident because more than I trust technical analysis I trust my risk management skills, and they, not technical analysis or fundamental analysis or economic analysis or anything else, are what ultimately make me my money.
Last updated: 2014-01-23 23:41 UTC This post was generated by a robot! Send all complaints to epsy.
Talk to an Accountant and understand the tax implications - if in Canada there are none and if you are indeed Canadian then continue reading the next steps, otherwise do not any of the below and immediately seek out a Financial Advisor with the following qualifications - CFA and/or CFP - these are the highest and most ethical financial advisory designations. Next make sure that they are Fee-only, i.e. you pay them only for the advice, they DO NOT get paid for selling you stuff and so they won’t. I won't lie to you a million is not a lot in the fee only world, but is the minimum entry level and you do not currently have any really complex stuff for them to advise on so should not be too much trouble to get one to take you. They should typically charge you for 10 hours of work to get an investment plan setup for you.
Rank the order all of your debts from highest to lowest. Any loan, credit card etc. that you have that is higher than 3%, payout in full. If you do not like the idea of debt whatsoever, then feel free to just pay them all out.
Destroy all of your credit cards, you truly do not need them for anything now anyhow, you can use a debit card/line of credit going forward.
Go to a bank with the winning check. Deposit this check into a SAVINGS account. Ask also to have a small Line of Credit set up on the account for ~ 5,000. This is your new credit card if you should ever need funds for an emergency. You should not pay more than Prime + 3% or around 6 to 7% for the line of credit if you should ever draw/borrow on the line of credit. If you ever need to use the line of credit, you can do so from your debit card as the line of credit will be attached to your bank account seamlessly. DO NOT USE IT unless you have an emergency or are buying an actual asset.
Look online for a discount brokerage service that also has live support. I personally use Qtrade as it is excellent and also have friendly staff that will walk you through anything.
Start reading all of the stuff that they have on opening accounts and the type of accounts that you can have. In the end you will want to open a Canadian Equity Account - do not open a margin account or an option account or any fancy crap. You will also want to open 1 additional account, a TFSA account.
Deposit the full amount from your bank account into the discount/online brokerage account minus 6 months expenses. So if you think you spend currently about 2,000 a month and you deposited 1,000,000 into the bank account, then leave 12,000 in the bank account and deposit 988,000 into the etrade/online brokerage account.
Once you have deposited the funds into the etrade account, it will take a day or two for them to clear and show up in the brokerage account. Once the funds are in the brokerage or stock account, look up TFSA on the internet and look for the Canadian Revenue site - here it is http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/tfsa-celi/menu-eng.html Find out from the site what a TFSA is and also where you can look up how much room you have to contribute - if in doubt ask the accountant how to do this but it should be easy enough to do. Whatever the amount is, transfer from your online brokerage account to your online TFSA account the full amount - I imagine it should be around 15000.
Invest the funds. This is a really important point here and where most folks will fail. Never look at the price of the investments again. Never deviate from what I am about to tell you, never listen to anyone who has any vested interested in screwing you out of your money ever again. That said, you will focus investing on BLUE CHIP CANADIAN DIVIDEND stocks, except for your TFSA where I will allow you to buy non dividend stocks - what is a dividend? basically the company pays its shareholders a portion of the profit every 1, 3 or 6 or 12 months depending on the stock. Dividends are not taxed as much as interest income or salary/employment income, that is why you do not want bonds or GICs or interest crap.
If you want talk to that fee-only CFA financial advisor and have then make you a blue chip dividend paying list of recommendations or you can do the following: $100,000 of BCE-TSX it pays around 4.5% dividend and has always paid it. You would enter this as an Equity trade in your Qtrade/online brokerage account. If you are unsure how to do this, you can ask them in person to help you do this, but it should be easy enough. you should be buying around 1800 share at 56.00 each. Next buy 100,000 dollars of Royal bank of Canada (or TD or Scotia or one of the big 5 Canadian banks, doesn't matter) the stock symbol is RY on the TSX or Canadian market. should be around 1300 shares at 75.00 each. the dividend is around 4% Next buy 100,000 dollars of Suncor Energy SU on the TSC Canadian exchange should be around 3000 shares at 36.00. the dividend in around 3% I think you get the idea, so I will just list the next purchases - all are on the TSX or Canadian exchange as follows: 100,000 Sun life ~ 2800 shares at 37.00 about 4% dividend yield. 100,000 Potash Corp ~ 2500 shares 42 about 4% dividend yield. 100,000 TransCanada Pipelines ~ 2000 shares at 50 around 3.5% div yield 100,000 Thomas Reuters Crop ~ 2000 shares at 48 around 3% div 100,000 Fortis ~ 2500 shares at 38.00 around 3.5% div 100,000 SPX-TSX REIT symbol XRE-T ~ 5500 shares around 4.5 % div 100,000 Canadian Utilities ~ 2500 shares at 45.00 2.5% div This will give you a diversified portfolio of the largest Canadian companies with a long history of dividend payouts.
DO NOT SELL any of these stocks until you are market savvy, which for most folks will never happen so... From the above you will earn around 4% in dividends. Most dividends pay quarterly so you will get 'paid' into your brokerage account a div payment every 3 months on the whole, but of course each will pay at a different date. What I am trying to say here is plan your budget/spending around 3 month cycles rather than what you do now, ie weekly or monthly. That is why you are leaving 6 mnths expenses in your savings account, 3 months for emergenices and 3 months to get the cycle started.
And this is IMPORTANT - dividends are tax advantaged, that is, you pay less tax on income earned from dividends than from interest or employment. however you do not pay the tax when you earn them!!! Therefore you must NOT spend all of the dividend income. you may only spend whatever your accountant estimates that your income will be for the next year, so I would say do not spend more than 60% of the dividend income for the year. In other words, this portfolio will generate 40,000 a year - only spend 25,000 of it as you will have a large tax bill at the end of the year come tax time. Once you have a handle on the taxes, next year you can adjust your budget accordingly, but MAKE sure to plan on making the maximum contribution to your TFSA plan EVERY year about 5,500.
Once you have made all of your 10 investments, you can then switch to the TFSA account and buy 3 or 4 mid-cap growth stocks. you can go ahead and invest in US companies if you want but these stocks are meant to be held for a long time so buy quality growth stocks. Quite frankly you can just buy another 300 shares of BCE to keep things simple for the first time.
Ok now that you have your investments set up, you are done for now. Here is what you do from now on, let's say today is February first: 3 months from Feb 1st - on May 1st - you will log into your Qtrade account. you will see that you have investments and cash in the account. you will then transfer whatever cash funds from your Qtrade account to your bank account. You will transfer all but $200.00 as you should make sure you have a bit of cash in there just in case there is some sort of transaction of account fee you forgot about. There should be around $10,000 in the account at this time, but it does depend on where you are in the dividend payout cycle so there may be less than that. From here on out it is up to you, I would personally log into my Qtrade account every month, so June 1st, then July 1st etc. and transfer any of the cash from the Canadian Equity account (except 200!) into the bank account. After a year or so, you will get an understanding of how much you get each month - as it will vary! and can budget more carefully. When you transfer the funds back into your bank account, you will then need to remember that a portion of those funds are to PAY TAXES next year. If you like, you may want to set up a savings and chequing account. The Line of credit will be setup/attached to the chequing account and that account is your spending money. The savings account is for taxes to be paid next February when you file your tax return. Simply take 40% of whatever you transfer from Qtrade into your chequing account and transfer it into your savings account. If you follow the above advice, you will make around 40,000 a year, you will be able to spend 30,000 of it after tax (but just spend 25,000 the first year! - remember you will have set aside 12,000 off the start anyhow - 6,000 for first 3 months expenses and 6,000 for emergencies -, but you want to make sure you have the tax set aside to be paid April 2016.) Of this 30,000, 5,500 MUST go into the TFSA and be invested - maybe year 1 buy more BCE, then year 2 buy more RY or buy google or apple but only with the TFSA funds - do not buy crap! This will then give you ~25,000 a year to spend + 5,500 in savings in the TFSA and should set you up for life. NEVER look at the 1,000,000 again - EVER. This money is not touchable; this is as the rich say, the principle. You can only spend the dividends/interest you must NEVER touch the principal. Over time you will see that the value of the investments will go up. In 30 years you should have an investment portfolio of around 7 to 8 million. You will also have a TFSA (which you pay no tax on anything in) of around 1,000,000. You will also see that your income from the dividends will go up each year, basically you will see a 'raise' each year of around 8 to 12% so in 10 years the income stream from dividends will have twice the buying power that it does today. If you want to help anyone out, then you do so from the dividend stream/cashflow only! and only after you have set aside the money to pay the tax next year and after you have set aside the TFSA funds.
The good thing is i dont manage other people's money, all i do is teach lessons i've learned over 15 years...ignore my rules at your own risk, nobody forces u to learn them...
I was the #1 ranked short bias hedge fund for 3 years and then tried investing as i got too greedy...overall made 2%/year over 4 years, still #1 ranked in my category, see details Link to tim.ly i accept your apology for your laziness.
Yes i've traded bear markets, i made my 2nd million dollars 2000-2002, u have a long comment but u didnt bother researching me so i have no time for lazy people, sorry!
Because i expose scams and those scammers spread lies...already sued one penny stock promoter and won, but their skillset is spreading misinformation on the internet so it works well to smear me...but they couldnt stop Link to tim.ly or Link to tim.ly and as i create more millionaires, more people will realize i'm 100% right...until then let the haterade flowww.
Focus on volatile stocks and realize my top student started with just $1500 and turned it into $1.71 million in 3 years...anything is possible if u study and work ahrd.
Its Etrade PRO but I don't recommend them -- I only use them as I'm superstitious and have made too many millions of dollars with them over 15 years...Otherwise I'd recommend Link to stockstotrade.co as it has great scanning/screening tools too.
No stress if u stick to rules...i didnt have rules at first and that was stressful...i didnt have a mentor either...luckily for u with me in the picture u now have both :)
I am more aggressive in my trading when my account is small, I'd use 30-50% per play but watch the play like a hawk...for example I shorted ARTX yesterday at 4.50, today it dropped to 3.90...if i had $15k I would've shorted 1,500 at 4.50 and tried to cover at 4ish today to lock in $750 profit...then rinse and repeat and gradually grow the account.
I was hoping that would happen when I first got into teaching so I could get more sleep! Sadly only a few people take the time to learn...I also buy and am up 100% in 4 months in 2014 mostly buying too.
Teaching vs trading is something like 10-1...the cool thing is EVERYONE wants to be rich, the sad part is not many are willing to study hard to get there.
There is no set maximum or minimum, every play is different...just gotta be comfortable and understand your risk/reward BEFORE making the trade and then stick to the rules during the trade.
As I say in my Link to timothysykes.com DVDs, I try to think of myself as a retired trader who only comes out of retirement for the perfect setups when I know I'll feel guilty missing...otherwise I'm retired ALL the time, understand?
Just the latest stock market sector craze, little different from nanotechs, 3d printing oil, gold, ethanol, alternative energy...pump and dump, NOT longterm holds.
Need a little guidance about PDT/Multiple Accounts.
I want to say thank you for this subreddit it has taught me a lot. I have been lurking for quite some time and have 10K to trade. Here is a scenario I'm trying to see if it would work or I understand it correctly. I open up 3 cash accounts with $3,333 in each, Scotttrade, TradeKing, Etrade or any. I would like to be able to do 1 short sale day trade without being hit by the PDT margin account notice. For the next 3 days I do the same for each account. I read about how you have to wait 3 days for funds to settle which I'm confused about. Can I still short sell the next day or wait 3 days again or I'm not understanding how a cash account works? How do day traders get away short selling within a hour than? Does PDT affect all stocks on the account if I decided to do 3 different short sale stocks that would hit my limit right? Sorry for all the questions, but I tried searching and came up with different answers. Thank you for any help! Edit: PDT = Pattern Day Trader
For each trade made in a margin account, we use all available cash and sweep funds first and then charge the customer the current margin interest rate on the balance of the funds required to fill the order. The minimum equity requirement for a margin account is $2,000. Please read more information regarding the risks of trading on margin. For each trade made in a margin account, we use all available cash and sweep funds first and then charge the customer the current margin interest rate on the balance of the funds required to fill the order. The minimum equity requirement for a margin account is $2,000. Please read more information regarding the risks of trading on margin. Ordinary investing and trading accounts cost $9.99 to open as of 2014, while Plus Pro Elite investment accounts cost between $7.99 and $9.99. You need a $500 initial deposit to open individual, custodial or joint brokerage accounts as of 2014. Futures trading and forex trading accounts require $10,000 and $2,000 initial deposits, respectively. Trading on margin involves risk, including the possible loss of more money than you have deposited. In addition, E*TRADE Securities can force the sale of any securities in your account without contacting you if your equity falls below required levels, and you are not entitled to an extension of time in the event of a margin call. For each trade made in a margin account, we use all available cash and sweep funds first and then charge the customer the current margin interest rate on the balance of the funds required to fill the order. The minimum equity requirement for a margin account is $2,000. Please read more information regarding the risks of trading on margin.
What is gross margin and how to use it with etrade (5 mins)
Step by step of what gross margin and how to use it. I compare Apple and Microsoft gross margin. One trading jargon that you’ll hear very often is margin. It’s usually in terms like margin account, margin trading and even margin call. It seems a bit comp... Today we will cover the basics of margin for active traders. Using margin can be an amazing advantage but you should be aware of how it actually works to avo...
