How to Day Trade for a Living

Example of Bull Flag formation with two consolidation periods on RIGL.
This is an example of two Bull Flag Patterns. It is normally hard to catch the first Bull Flag, and
you will probably miss it, but your scanner should alert you to it. Let’s look at an example from
my scanner in this time period:
Example of my intraday Bull Flag Strategy.
As you can see, my scanner showed RIGL at 12:36:15 pm. As soon as I saw that, I realized that
there was also a very high relative volume of
 
trading, which made this a perfect setup for day
trading. I waited for the first consolidation period to finish and, as soon as the stock started to
move towards its high for the day, I jumped into the trade. My stop loss would be the
breakdown of the consolidation period. I marked my exit and entry in the picture below. As you
can see, if you had wanted to wait for a second consolidation period in hope of the third Bull
Flag, you would probably have been stopped out. That is why I usually enter the first and
second Bull Flags, but not the third one.

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Entry, stop and exit of a Bull Flag Strategy on RIGL.
To summarize my trading strategy:
1. When I see a stock surging up (either on my scanner or when advised by someone in our
chatroom), I patiently wait until the consolidation period. I do not jump into the trade right
away (you will recall that is the dangerous act of “chasing”).
2. I watch the stock during the consolidation period. I choose my share size and stop and exit
strategy.
3. As soon as prices are moving over the high of the consolidation candlesticks, I enter the
trade. My stop loss is the break below the consolidation periods.
4. I sell half of my position and take a profit on the way up. I bring my stop loss from the low
of the consolidation to my entry price (break-even).
5. I sell my remaining positions as soon as my target hits or I feel that the price is losing
steam and the sellers are gaining control of the price action.
As I mentioned, many people, including myself, buy only at or near the breakout (similar to the
ABCD Pattern). The Bull Flag is essentially an ABCD Pattern that will happen more on low
float stocks. It’s fast and it will fade away more quickly. Therefore, it is more or less a
Momentum Scalping Strategy
. Scalpers buy when a stock is running. They rarely like to buy
during consolidation (during that waiting and holding phase). These types of stocks usually drop
quickly and brutally so it is important for you to jump only when there is a confirmation of
breakout. Waiting for the stocks to break the top of a consolidation area is a way of reducing
your risk and exposure time. Instead of buying and holding and waiting, which increases
exposure time, scalpers just wait for the breakout and then send their order. Get in, scalp, and

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get out quickly. That’s the philosophy of momentum scalpers:
Get in at the breakout
Take your profit
Get out of the way
The Bull Flag Pattern is found within an uptrend in a stock. The Bull Flag is a long-based
strategy. You should not short a Bull Flag. I personally don’t trade much momentum. It is a
risky strategy and beginners should be very careful trading these. If you choose to, trade only
small size and only after sufficient practice in simulators. You will also need a super-fast
execution system for scalping.

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