How to Day Trade for a Living

How do you determine what retail traders are focused on and your place in that
playground?
There are a couple of ways to find your best place. One is by watching day trading stock
scanners. I explain later in Chapters 4 and 7 about how I set up my scanner. The stocks that are
gapping significantly up or down are going to be the stocks that retail traders are watching.
Secondly, it's good to be in touch with social media and a community of traders. 
StockTwits
and
Twitter
are usually good places to learn what is trending. If you follow a handful of traders, then
you'll be able to see for yourself what everyone is talking about. There is a huge advantage to
being in a community of traders, such as a chat room, and there are many chatrooms on the
Internet.
As the reader of this book, you are welcome to join our private Vancouver Traders chatroom
(
www.Vancouver-Traders.com
). We have hundreds of traders and we are talking about what is
hot today. If you’re trading completely on your own, you're off in the corner of that proverbial
playground. You're not in touch with what other traders are doing, and inevitably you will make
it really hard on yourself because you will not know where the activity is. I have tried blocking
out social media and trading in a bubble, basically doing my own thing, and it did not work.
Draw on the laws of high school survival to guide you!
A little more about what I do
: As a day trader, I don’t trade based on the company’s

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fundamentals such as product, earnings, earnings-per-share growth and financial statements. I’m
not a value investor and I’m not a long term investor. I don’t trade Futures either, but I do use
Futures to gain an understanding of the overall market direction in the near-term future. I am
also a swing trader. In swing trading, I personally do care very much about the fundamentals of
the companies I choose to trade: their earnings, dividends, earnings-per-share, and many other
criteria. But swing trading is not the focus of this book, so I won’t pursue that topic for now.
I’m also a FOREX (foreign exchange market) trader and sometimes I trade commodities and
currencies. But in the mornings, I am mostly an equities day trader and I focus on the real
stocks. The majority of day traders don’t trade penny stocks or on the over-the-counter (OTC)
market. Penny stocks are extremely manipulated and they do not follow any of the rules of the
standard strategies. We at 
www.Vancouver-Traders.com
trade real stocks. Sometimes we may
be trading Facebook (ticker: FB) and sometimes we may be trading Apple (AAPL), but we will
always be trading the stocks that are having a big day. You may be surprised, but on almost
every single day in the market, there's a stock having a big day because the company has
released earnings, had a newsbreak, or had something bad or good happen to it. These are the
fundamental catalysts that you must look for.
What does my day look like as a day trader? You will read about it in detail in Chapter 8, but a
day in my life typically starts at around 6 a.m. (9 a.m. New York time) with pre-market
scanning. I’m scanning to see where there is volume in the market. As early as 5:30 a.m., you’ll
know what stocks are gapping up or gapping down. Then I start scouring through the news for
catalysts that explain the gap. I start to put together a watch list. I rule some out and then I pick
and choose which ones I do and don’t like. By 9:15 a.m. (New York time) I am in my chat
room, going over my watch list with all of our traders. By 9:30 a.m., when the bell rings, my
plans are ready.
From when the market opens at 9:30 a.m. until around 11:30 a.m. New York time, is when the
market will have the most trading volume and also the most volatility. This is the best time to
trade and to especially focus on momentum trading (which will be explained later). The
advantage of having all of that volume is that it provides liquidity. This means there are plenty
of buyers and plenty of sellers, which in turn means that you can easily get in and out of trades.
Around mid-day, you can have good trading patterns but you won't have the volume. This
means a lack of liquidity, which makes it harder to get in and out of stocks. This is especially
important to consider if you want to take large shares. My focus has always been on trading at
the market’s opening, which is 9:30 a.m. in New York (Eastern time). I personally trade only
within the first one or two hours of the market’s opening. If you join the private chatroom that I
mentioned above, you will see that I rarely make any trades after 10:30 a.m.
On a good day I have reached my goal by 7:30 a.m. Vancouver time (10:30 a.m. New York
time) and I’m easing up. Often by lunchtime I've already hit my goal and I'm going to be sitting
on my hands unless there is that perfect setup. From 4 p.m. until 6 p.m. I am in trading courses
and we're reviewing our trades from the day.

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Why is the market at low volume during the mid-day and afternoon? Imagine you made $1,000
by 10 a.m. What are you going to do? Are you going to walk away with that profit or will you
keep trading until you lose that money? Hopefully you will walk away. Many people are
finished for the day at some point in the morning, and then they are going to go golfing or spend
the rest of the day at their leisure. But, if they have lost $1,000 by 10 a.m., those traders are
going to keep fighting it out to stay in the market. They're going to keep trading, trying to make
back what they lost. That means that mid-day trading is dominated by traders who have lost in
the morning and are aggressively trying to regain their losses. That causes a lot of volatility, and
not in a good way. That causes stocks to shoot up and down because people are going in and out
with market orders. It’s this time of day that I consider to be dominated by more amateur traders
and trading. Extrapolating from this, I go really easy at mid-day.
I avoid pre-market trading because there’s a very low liquidity as there are very few traders
trading. That means stocks can pop up a dollar, then drop a dollar, and you can’t get in and out
with large shares. You have to go really small, and you have to use such small positions that, for
me at least, it's just not worth it. If you don't mind trading in only a couple of hundred shares,
then you can certainly trade pre-market.
I live in Vancouver, Canada, so in my time zone the market opens at 6:30 a.m. (Pacific time).
This means that my days start really early. The great advantage for me is that I can be finished
trading before most of the people in my city are even out of bed. I can then spend the rest of my
day skiing, climbing, with family and friends, or focusing on other work and the other
businesses that I have. I try to hit my daily goal by 7:30 a.m. my time (which is 10:30 a.m.
Eastern time) and then ease up. You know how easy it is to lose money. Once you have some
money in your pocket, you should hold on to it.

---

Chapter 3: 
Risk and Account Management
To be a successful day trader, you need to master three essential components of trading: sound
psychology, a series of logical trading strategies, and an e f f ective risk management plan.
These are like the three legs of a stool - remove one and the stool will fall. It is a typical
beginner’s mistake to focus exclusively on indicators and trading strategies.
A good trading strategy delivers positive expectancy; it generates greater profits than losses
over a period of time. All of the strategies outlined in Chapter 7 have been demonstrated, if
executed properly, to show positive expectancy. But, keep in mind, even the most carefully
executed strategy does not guarantee success in every trade. No strategy can assure you of never
having a losing trade or even suffering a series of losing trades. This is why risk control must be
an essential part of every trading strategy.
The inability to manage losses is the number one reason that new traders fail in day trading. It’s
a common human inclination to accept profits quickly and also to want to wait until losing
trades return to even. By the time some new traders learn to manage their risk, their accounts
are badly, if not irreparably, damaged.
To be a successful trader, you must learn risk management rules and then firmly implement
them. You must have a line in the sand that tells you when to get out of the trade. It’s going to
be necessary from time to time to admit defeat and say, “I was wrong,” or “The setup isn’t ready
yet,” or “I'm getting out of the way.”
I’m generally a successful trader, but I still lose frequently. That means I must have found a way
to be a really good loser. Lose gracefully. Take the losses and walk away.
I can’t emphasize enough how important it is to be a good loser. You have to be able to accept a
loss. It’s an integral part of day trading. In all of the strategies that I explain in Chapter 7, I will
let you know what is my entry point, my exit target, as well as my stop loss.
You must follow the rules and plans of your strategy, and this is one of the challenges you will
face when you are in a bad trade. You may very likely find yourself justifying staying in