How to Day Trade for a Living

Example of a short VWAP Strategy on SCTY.
At around 11 a.m., I noticed that SCTY had faced a resistance over VWAP. I shorted the stock
with the anticipation of losing the VWAP at around $23. Around 12 pm buyers gave up and the
sellers took control of the price action. I had a nice run down to $22 and covered my shorts at
$22 for a good $1,000 profit.
To summarize my trading strategy for VWAP trading:
1. When I make my watch list for the day, I monitor the price action around VWAP. If a stock
shows respect toward VWAP, then I wait until a confirmation of the VWAP break or
support.
2. I usually buy as close as possible to minimize my risk. My stop will be a break and close
5-minute chart below VWAP.
3. I keep the trade until I hit my profit target or until I reach a new support or resistance level.

---

4. I usually sell half-positions near the profit target or support or resistance level and move
my stop up to my entry point or break-even.
A similar approach will work equally as well when you short a stock.

---

Support or Resistance Trading
Horizontal support or resistance trading is my favorite style of trading. The market doesn’t
know diagonals. It remembers price levels, which is why horizontal support or resistance lines
make sense, but diagonal trend lines are subjective and open to self-deception. I therefore avoid
trend lines because, in my opinion, they are wildly subjective and result in wishful thinking and
self-deception. In fact, trend lines are among the most deceptive of all tools. You can draw a
trend line across the prices or zones in a way that can change its slope and its message. If you’re
in a mood to buy, for example, you can draw your trend line somehow steeper.
After making thousands of trades and looking at thousands of charts, I’ve come to the
conclusion that the market doesn’t know diagonals. It remembers price levels, which is why
horizontal support or resistance lines make sense, but diagonal trend lines are subjective and
open to self-deception.
Support
is a price level where buying is strong enough to interrupt or reverse a downtrend.
When a downtrend hits support, it bounces like a diver who hits the bottom of the ocean and
then automatically pushes away from it. Support is represented on a chart by a horizontal line
connecting two or more bottoms (see the figure below).
Resistance
is a price level where selling is strong enough to interrupt or reverse an uptrend.
When an uptrend hits resistance, it acts like a person who hits their head on a branch while
climbing a tree - they stop and might even tumble down. Resistance is represented on a chart by
a horizontal line connecting two or more tops.
Minor support or resistance causes trends to pause, while major support or resistance causes
them to reverse. Traders buy at support and sell at resistance, making their effectiveness a self-
fulfilling prophecy.
Using this method, every morning I shortlist the stocks that I would like to trade based on the
criteria I set forth in Chapter 4: a stock that has fundamental catalysts such as news, an extreme
earnings report or a new drug approval. These stocks are the ones that retail traders are
watching and planning to trade.
Before the market opens, I go back to the daily charts and find price levels that have been
shown in the past to be critical. Finding price support or resistance levels is tricky and requires
trading experience. If you watch me trading every morning, you will see how I place my
support or resistance lines on my Alpha Predators.
For example, let’s take a look at a SCTY daily chart without support or resistance lines and
another including the lines.

---