Are you Realistic About Your Trading Profit Expectations?

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Money is usually the first thing that drives regular working folk into thinking about trading, which is fine. Then it turns to the freedom trading can bring.

Imagine waking up on your own time, working from literally where ever you want, deciding your own salary etc.

Obviously its enticing, but the out of all those reasons, i truly feel one of the most dangerous beliefs in trading is the belief that everyday will be a 75% gainer, or 100% gainer.

This belief usually stems from 2 major issues.

1.) Watching “Professional Traders” rave about there huge percentage winner.

This can be misleading because what people often do on social media is only post the good times, such as good winning trades. We rarely ever post the bad things, like a huge trading loss.

What this does to a beginner trader is it gives the illusion that you can only make money from trading and take no losses. It also gives the illusion that you can trade and only be making huge percentage gainers.

This is a very dangerous belief because it gives the trader unrealistic expectations when they hit the market. Its one thing to expect huge returns and only make “regular” returns. Its another problem when you expect to make huge returns and not lose, and then lose.

2.) Trading In Hindsight

I’m still guilty of doing this, but I have it more under control now. Lol.

This is where you look at a huge percent gainer from the past, and say “OMG, If I just bought 10,000 shares at $1.50 and sold right at the top…download

I WOULD MAKE OVER $100,000…

Ya, well your math would be correct, but the chances of you being able to hold 10,000 shares from bottom to top is not realistic. I’m not saying its impossible, but I have yet to see someone play a move like this perfectly WITH big size.

Most people wouldn’t even be able to hold through all those gains with 500 shares.

Its important to avoid thinking about hitting stock scenarios perfectly because these types of trades don’t happen that often. The trades that will take you to the next level will always be the most consistent trades you make.

They are the foundation of your trading profits, while huge percetage gainers are nice, they usually won’t turn you account from $10,000 to $250,000.

It will usually be the smaller gains that you rack up day in and day out that will reach you to your account profit target.

 

 

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What 4 Reasons Cause Traders To Blow Up There Account?

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The dreaded account blow up. There may not be a worse event in trading stocks than to to run your account into the ground.

On the outside we think “that will not not happen to me” or “they are stupid to let that happen”. Well it can happen much more easily to any trader than you think.

It is essential that traders are always in a position to take a trade. Blowing up an account not only means losing a great portion of your account value, but it usually means a trader can’t participate in any more trading activity, thereby letting other great trades slip away.

I’m going to share the 4 main reasons why traders blow up their account so that we can be more aware of the scenarios that we are in, and hopefully prevent a blow up from ever happening.

1.) Addictive Trading.

This can also be referred to as over trading, but on a more broad sense, any type of trading that is done compulsively, or with no control. This is dangerous because of how quickly the losses will sneak up on you.

My first blow up account was do to me over trading. The worst part of it was that I didn’t realize how much I truly lost  until it was all said and done.

In total I lost about $700 dollars on a $1,200 account, in one morning, over the course of 5-6 trades I should have never taken in the first place.

Over trading was one of the factors that caused me to blow up, but there was another factor..

2.) Revenge Trading.

This is the main factor that caused me to blow up my account, and also a major cause of many beginner traders blowing up there account.

For me, it all started with a trade I held overnight. I was up about $30 dollars and was trying to close my position (with a terrible broker) and it took about 3 minutes to fill. My trade then closed out with a -$30 dollar loss.

I was so upset that my I just went from green to red just based on a ridiculous fill time. So I quickly tried to find a trade I could get into to make up the loss that I just took.

Well I took another loss which made me even more irate, then quickly jumped into another trade, with more size to try and make up for both losses…

Long story short, a $30 loss turned into a $700 loss by the end of the day….

That’s the cost of letting your emotions rule your trading.

3.) Trading Too Much Size

This is the main reason that kills the account of an intermediate trader. Someone who has been somewhat successful with trading and is now consistent.

He or she thinks they are so consistent now that they should now increase the amount of size they use by a drastic amount. For example, 1,000 shares to 7,500 shares.

They often do this without realizing that increasing size by this much isn’t as simple as they assume it to be.

There is an huge increase with P&L gains or loss, which can shake you out so quickly because you are only used to seeing your unrealized loss at  -$100 dollars when the stock goes down $.10 cents.

But now you are seeing an unrealized loss of  -$750 dollars if you now use 7,500 shares.

There is also slippage. So you can fill 1,000 shares at $5.00 fairly easily. It gets harder to get the exact same price for all 7,500 shares.

All these things play a factor in blowing up an account because if you are in a position with much more size than you are used to, then there is a high probability that you will panic and let emotions begin to do the trading for you.

You see a huge unrealized loss and start to think, lets let it come back, and because its bigger size, each down tick adds on to that panic, until…….BOOOM, 50% -100% of your account is gone.

Some will say that sounds exaggerated and it sounds to quick.

That’s how quickly it can happen, my friends.

4.) Poor Risk Reward.

There is a reason why real traders say you have to have at least a 2:1 Reward/Risk Ratio. it means you can have 2 losing trades and make 1 winner and it covers the losses.

What happens when a traders Reward/Risk ratio is off. He/She is now fighting to stay alive.

So many new beginner traders do it. We cut our winners quickly because we are happy just to be in the green and we fear it being taken away.

And on the other hand we let our losers run because we don’t want to take the loss and we pray that the stock will turn back in our favor.

This scheme will ultimately only return bigger losses than your wins which , if not changed, will blow up your trading account over time.

 

 

 

 

 

How Stock Traders Can Make Millions With Minimal Trades

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So this post is mostly to change the perspective of what we look at when we trade, especially the way we think of trading profits.

I’m going to put this spreadsheet out first, and then explain why I think its important to look at trading profits the way that its laid out in the spreadsheet.

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Now obviously there are going to be people who are going to say “THAT IS UNREALISTIC” and “YOUR GOING TO HAVE LOSES”.

Obviously your going to have losses when trading. Your most likely not going to be going all in on all your trades, and obviously your not going to hit your profit percentage every single time. 

I know, I understand. Now that that is out of the way, let me break down why I truly believe this chart is important.

When I  look at this chart, the number one thing that comes to my head is..

How little trades it took to get to those high profit numbers. I believe this is important because so many of us traders over trade, even when we think we’re not. 

The reality, it truly doesn’t take that much trades to get to the desired target you want.

I believe it is more about patience however. In that spreadsheet it shows that it took only 30 trades to get to get to to pretty ridiculous numbers, with varying percentage gains of course.

This is the power of..

Sticking to your setups, that also give you great risk reward. The reason why the numbers increase so quickly is not because there are a lot of trades being taken, its because when a trade is taken, the return is bigger than a usual day to day return.

So, you can try to take 10 trades a day and make $5,000 in a month, going back and fourth from winning trade to losing trade, which is fine.

Or, you can try and snipe those easy trades, those easy set-ups that don’t arrive as often as the everyday plays, but can provide huge returns.

I personally prefer sniping trades. For me, its less stressful and more rewarding. I don’t like being the trader who has to try and $.15 – $.20 cents on a position everyday. The sniper method is more calm and relaxed. Simply waiting for the opportunity

Would you rather chase around mice everyday to kill and eat?

Or would you rather sit up at the hill top with a sniper and patiently wait for a big herd of deer to cross your path. You don’t need to kill many, just one. Because that one will do much more for you than a months worth of mice you caught.

The other important aspect is having profit targets on every trade that make the “hunt” worth it.

Find plays that will pay out big if they go in your favor, and simply cut them when they don’t. Just because you have a bigger profit target in terms of where your exit is on the chart doesn’t mean you have to risk more capital.

You have the option to hunt “big fish” so you don’t have to stress about hunting everyday, Or trade everyday, as long as it fits your personality.

Obviously this is just my advice. If your personality is to scalp 50 times a day, I am not knocking that at all. As long as it works for you. I just think that a lot of beginner traders don’t truly understand that in trading, less can be more.

Much more than we think…

Why You Are Not Consistent With Stock Trading, And How We Can Fix It

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One the benefits of trading is that we can work from the comfort of our own home on our own time. We can wake up in our underwear,get a cup of coffee, and not stress about an hour commute in traffic on the way to a 9 to 5 job.

But having this much comfort and accessibility can also be a detriment to our trading career in the long term.

I have personally done this myself, and can attest to how poorly it cam affect your trading if your “freedom” is not tamed.

For example, when I got too comfortable with trading I would roll out of bed at 9:00 Am, rush to get everything set up, such as my broker and scanner platform.

At first I thought I could pull this off, but I quickly humbled with loss after loss. It was self evident that it was a direct correlation with me not having a plan prior to trading.

It was also do to me not having the same routine everyday that ensured consistency overall.

You can’t expect to live an inconsistent , out of order life but trade consistently and execute plans to perfection.

So in this post I am going to go over some questions that each trader should be asking of themselves to help ensure consistency and hopefully make you a better trader because of it.

What Time Do You Wake Up Each Morning?

If you cant answer this, it is a major problem, since the time you wake up is your first trial of consistency.

The time you wake up should somewhat reflect what type  of trader you are. For example, a lot of scalp traders can get away with waking up at a later time because they are less worried about pre-market and market sentiment. (I still recommend every type of trader know is familiar with both.

What Do You Eat For Breakfast In The Morning?

Diet will become a key role in how you trade because it can effect your mood.

Do you wake up and eat unhealthy foods riddled with grease, unhealthy fats and low nutritional benefits??

Foods like this will often leaving you feeling sluggish and fatigued (which has personally happened to me on many occasions.)

I would wake up and the first thing that would enter my stomach was left over pizza and a sugary soda. This automatically gave my body an insulin spike, and then when 9:30 EST time came (Market Open) I was crashed on the couch dead asleep.

In my opinion the food you eat in the morning should be on the lighter side, so that it doesn’t send your insulin out the roof and come crashing down later.

I usually start off with water and a smoothie made with bananas, different berries, a pinch of cinnamon and nutmeg, low sugar vanilla yogurt, almond milf and spinach.

When I drink it I feel full, but it doesn’t leave me feeling tired because it doesn’t have as much sugar as other fast food “smoothies”.

I also gain confidence knowing that I am continuously fueling my body with good healthy foods , and in return I know my body will pay me back for it.

Just the same as when you give your sports car the best fuel and tires available, the car will most likely give you optimal performance. Now you have more confidence because you know you get out what you put in.

Do You Exercise Before You Trade?

I love getting in a good workout before a trading session. Not something that is too taxing on the body that will make me tired throughout the day.

Enough exercise to get my body loose and gets the blood flowing.

For me personally it is a away for me to release any tension I may be carrying, as well as a release for emotional stress.

By the time I get home I definitely feel more calmed and focused on the next task.

Are You Taking The Time To Meditate/Pray etc??

Whatever your “thing” is, I firmly believe in mental exercise. This usually helps me with better decision making as well as sticking to my game plan, especially in high times of stress.

Do You Have A Consistent Gameplay Session? (Trading Plan)

By this I mean when its time to do your scans are you just picking high of day plays and that’s it?

This will usually cause inconsistency because there really is no in depth plan there.

A better plan would be to have a handful of stocks you selected either last night or pre-market, and decide first why these stocks are on your watchlist.

After you, you draw your trendlines. This makes it easier during the trade to see Support and Resistance instead of entering the trade and then trying to find support and resistance.

Then select which stocks have the best opportunity.

Now check if there is any news that will influencing the stock or will influence it later.

Set your profit target,entry point,and stop loss. Doing all of this will take tremendous stress off trading because you are almost making each decision mechanically.

Imagine trying to make trades on a whim, with barely any plan. You would basically be trading off of pure emotion which is the last thing you want to do.

When you ask yourself the 5 W’S (Who, What, When,Where, and Why), I want you to be able to answer each one of them with a distinctive answer for each W.

For example…

Who is trading them (think of volume, relative volume, float and short interest)

What stocks do you plan to trade? (Off of your watchlist or scans)

When do you plan to trade them (What time frame do you want to take action/entry price/exit price)

Where (At what price levels/where is support and resistance)

Why do you want to trade this stock (Why are you entering? Gap fill? Support and resistance play? Break out? News? )

The more you can answer these questions when asked of you as well as making your daily habits more consistent, the more you consistency trading wise should increase.

Have a wonderful day traders!

 

The Best Technique Professional Traders Use To Enter Orders

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I have no intentions of click baiting any body ever, so believe me when I tell you, this tip literally changed the way I traded for the better.

Most of the experienced traders use this tactic but as beginners its never brought up for some reason.

As a beginner trader or even intermediate trader we often get caught up with what broker to use, how much commissions are going to cost, which setups will be the best etc.

And those are all important factors to go over. But the step I’m going to talk about shocked me because it made so much sense but no a lot of people i followed would really use it.

To cut to the chase….Its Scaling In To Your Position.

Now some will say “OK, I’ve heard of that before, this isn’t new”. I am not here to claim that its new, only that its unspoken about.

Lets talk about why scaling in to your position is so important.

When we are ready to take a position we often think of entering how whole position at the exact price that we want. For example…

“I want to buy 2,000 Shares at $5.00 dollars  for a whole dollar break.” That’s all good and dandy, but the problem with this approach is that the setups that we are use to are not always exact.

So that price could actually go to $5.25 and then go back in your favor. However, most people would usually get shaken out well before it gets to $5.25, since there all in with there size.

I am going to give an example of a trade I did this week where I got stopped out because I couldn’t tolerate the draw down.

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As you can see above, I entered at $13.68 with half of my size because I got F.O.M.O (FEAR.OF.MISSING.OUT.) and wasn’t prepared.

I quickly shoved the order in, and because of that, when the price went against me, I had a big draw down for my position.

So I exited, just for it to top out $.20 cents above my exit and swing back down in my favor.

To make matters worse, it hits my profit target. This would have been a $500 dollar profit minimum, and a $1,000+ dollar profit if I had got my all my size in with a SOLID ENTRY.

Now, how should I have gone about this?

First things first, I should never have dumped half my size into the stock, especially at a price point that wasn’t close to the best price.

I should have started with 100-200 shares max. This would have allowed me to be involved in the trade but not sacrificing so much. I would be able to let the trade play out.

If I was only 200 Shares in and the stock hit 14.08 (where I originally stopped out), I would have been down -$80 dollars instead of -$200 dollars. This would allow me to continue to add as long as the stock was still showing signs of a reversal.

Second thing I would have done differently was start scaling in short on the pops, instead if on that dip. That’s was F.O.M.O (Fear.Of.Missing.Out) will do. All of your rules tend to get thrown out the window.

Remember, Buying dips or shorting pops will add to your profit and reduce your loses. See the post I had on that.

https://traderjournaljourney.wordpress.com/2018/08/30/1-tip-that-will-amplify-your-trading-profits/

Being able to scale in will give you a much better entry most of the time because you have multiple chances to get a better price. That’s the key.

You throw your starter order out, maybe its a good entry, maybe its not. It doesn’t matter, you have 3-5 more tries to get a better price average. That’s the beauty of it.

And because you have multiple tries, you will be less stressed and less tense about entering the position.

This is just the beginning of me speaking about scaling in, that’s how passionate I am about it.

Take care for now, and I hope this helped!

If you have any questions, feel free to leave a question in the comments, or email me.

Have A wonderful day!!

 

 

 

 

1 Tip That Will Amplify Your Trading Profits

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As we traders try to find any advantage to take home more profits, its important to realize that every second matters when it comes to getting the price and entry you want.

One mistake that we all have made as beginner traders is to do the opposite of “Buy the Dip, sell the rip” or “Buy Low and Sell High”.

It all sounds very simple, however in real time it is not that simple. When you are trading real money your emotions will often want to take over your rationale.

What really happens is you see a stock you are interested in and you say “oh my goodness i love the way this is setting up.” Now its time to enter, but….

You hesitate. You want to see more confirmation.  Maybe just a little bit more. The price you were suppose to enter is now leaving you and each tick that is  going in the favor that you wanted is now making you do the following…

1.) Make you feel bad about not entering when you should have

2.) Makes you feel more confident in entering because it continues to move in your favor

3.) F.O.M.O (Fear of Missing Out). You now regret not entering + you feel that the stock will continue to go higher. you think “why would I sit out of this trade when its doing what I want it to do”

What then typically happens is the stock you now enter late into now reverses, whether it be a pullback or a straight dump. This now makes you nervous especially if you have big size on.

More often than not, you will be shaken out of the trade for a loss. Then to make matters worse, the stock you now exit out of now reverses to go back in your favor.

Typical, right.

These 3 reasons in my opinion are the main reasons why so many new traders end up buying at the top.

I have done it plenty of times as a new trader so don’t feel bad. We were all new at some point.

The main key that was explained to me was that …

We do this because it is human nature to want to see confirmation first before we take risk. So when we see the stock continue to climb without us, the more tempting it is for us to jump on late.

Perfect example: Bitcoin at $17,000-$20,0000.

Now, whats the solution?? Buying at the times when its uncomfortable.

Simple but difficult at the same time.Let me explain some more.

When you have a stock that you are interested in and you want to buy it,  the best time to my is usually during a pullback. That means when the stock makes its move upward in a volatile manner , you don’t buy into that move.

You buy the pullback because it is literally buying at a better price. That is the way you have to think.

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In this picture above, you will see where I recommend to buy and where not to. In the moment it will be hard to buy the dip for beginners , but think about it like this.

In the first area there is a difference of .37 cents from the the top at $2.00 from the bottom of the pullback to $1.63. If you bought the top with 5,000 shares and were waiting for it to come back above 2 dollars, that pull back would have made a draw down of -$1,850 dollars.

Ouch. -18.5% On your position. (5,000 Shares X $2.00 = $10,000….($1850/$10,000) X 100 = 18.5%

Compare that now, if you Bought at $1.70 for 5,000 shares. The most you would have been down would have been $350 dollars.

Also, if the stock still went lower, maybe $1.50 lets say.

You still would lose less money than the person who bought at the top, since you average price is lower.

Buying dips or pullbacks will literally make you more money if the stock goes in your favor, and still save you more money if the stock goes against you.

It just takes time to get use to it, but overtime it was one of the most beneficial things you can do to enhance your trading.

 

5 Ways To Tell You Are Using Too Much Size When Trading

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Either you just started trading or you have been at it for awhile and you are feeling confident. You have been consistent and you feel like its time to increase your total size count. Going from 100-300 shares to 1,000 -2,000 shares or something along those lines, right?

Because why not? If you can make $200 consistently then why can’t you start making $2,000 right away?

What are we waiting for?

This has come across my mind before, and probably any other trader who has had some success with smaller size and wanted to start making big money.

Unfortunately there are flaws with this type of thinking.  So much goes into increasing size, especially if its by a drastic measure.

Here are 5 ways you can see that you are using too much size

  1. If You Are Uncomfortable Hitting the BUY/SELL Button.                                       

This was a big tell for me in my trading. Its not just about being nervous about hitting the button, it was when i saw the perfect entry that i wanted, or perfect set up, and hesitated because I was afraid of putting on all that size.

But when I used 100-200 shares, there was no hesitation at all. This really because I new that i could actually tolerate the loss from a 100-200 share loss, if I were to lose. This leads directly to point number #2.

If You Cant Allow Your Stop Loss to Hit/ Adjusting Stop Loss.                             

This can be another indicator that you have on too much size. Having your stop loss hit is part of trading. No matter what, you are going to take losses over time.

If you enter trades with a predetermined risk set  and move the stop loss lower to avoid taking the loss, it often means you can’t stomach the loss because of the size you are using. Leading to point number #3.

If you are not Truly Accepting The Risk You Set.

Don’t lie to yourself and say that “you accept the risk” if you are constantly moving your loss and holding losses farther than anticipated. The reason us as traders set risk is so that we keep our losses small as well as keeps us protected.

Anytime you set your risk for a trade, YOU NEED TO TRULY BE ABLE TO RISK IT.

Which means, if you truly can’t stomach a $200 loss, you need to be using less size so that you have more room to less the stock play out. Using less size will also take a less emotional toll on you when you lose.

When you lose $20 on a trade, can you sleep at night? Most likely. Because you can live with a $20 loss and go into the next trade unfazed. That’s TRULY accepting risk.

If the amount you risk is NOT proportionate to your account size.                 

These are related to the other points , but not he same. If you see a quality trade, quality setup, perfect entry. It can be tempting to “go all in”.

However, even some of the best trading setup ups fail. No strategy is 100% guaranteed.  So what happens when your $10,000 account is now down $3,000 because you went all in.

And when it was time to get out, you only then realize how much of a loss to your account 30% is. So most people hold longer, and longer , and longer. -40%, -60% etc. All that work gone just like that.

If the loss if not proportionate to your account, think twice before sizing up so much.

You want to take the trade off as soon as the trade starts going in your favor.

This one is my favorite believe it or not :). Its my favorite because it shows me how backwards we think in the moment of having big relative size in a trade.

We hold and hold the loss lower and lower because we are afraid to realize the loss, but when we have a lot of size on and the trade works out on our favor, our emotions cause us to exit early.

The complete opposite of what we were suppose to be doing; Keeping losses small, Letting winners run.

We do this because as soon as we put on a trade that we feel is a lot of size, we are already fearful. So as soon as its starts to work out we think “thank God, let me get out before this turns against me”.

Again, ask yourself, “Would I be doing this i had 200 shares in the trade instead of 2,000 shares??” Answer, Most likely not.