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Momentum Daytrading Career (Results + $2,168)

Discussion in 'Trade Journals' started by Mitzter, Jun 30, 2019.

  1. Mitzter

    Mitzter Member

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    Hello everyone,

    I'm Mitchel, 29 years old and I'm from the Netherlands. Some traders might know me from the HSM boards (same username) from back in the old days.

    I have attended the 5-day challenge from Tradenet and succesfully completed this challenge. This means I have won a funded trading account with $14,000 in funds. The funds are not mine, but I won the right to use it to realize profits with it. The concept is that for every dollar I make in this account I receive 70% and 30% is for Tradenet. If the account gets a value (unrealized) of less than $13,300 then the account gets closed. Further there is no PDT-rule on it and the trading is in CFD's (on stock equivalents). For me this is a great chance to grow an account, especially because I will not risk any of my own money.

    I will be trading part time every day after I finish the day of my full time job. Because of the time difference between the US and the Netherlands, the trading hours for me are from 03:30 PM to 10:00 PM. This gives me the opportunity to catch the last 2 hours of the day to trade the markets with full focus.

    I will explain the completed 5-day challenge and my strategy in the following posts.
     
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  2. Mitzter

    Mitzter Member

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    Challenge

    I came across the Tradenet challenge via youtube. It was exactly something I needed, convincing myself that I'm ready to take my trading to the next level. Luckily it worked out well.

    These were the restrictions and goals during the challenge:
    • Trading with a funded account of $10,000
    • Minimum profit of $500 after 5 days
    • Minimum of 6 trades/orders and maximum of 20 trades/orders per day
    • Minimum profit of $100 on 2 of the 5 days
    • At least 3 active trading days
    • Maximum end of day loss of $100 including commissions
    • Maximum total loss of $300 including commissions
    • Only daytrading
    For me personally it was doable as long as you cut your losers quickly and add to your winners. That strategy made me succesful in this challenge.

    I completed the challenge in only 4 days, see below screenshot. The 2 zero days were the weekend days.

    8C908871-1FDC-4AAD-95AA-EE932596BC71.jpeg
     
    #2 Mitzter, Jun 30, 2019
    Last edited: Jul 1, 2019
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  3. Mitzter

    Mitzter Member

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    Broker

    One of the largest burdens in trading for me are the pattern daytrade rule, the limited shares that can be borrowed for short selling and the high commissions that brokers charge. Let me explain.

    With a regular margin account I get 3 daytrades in 5 rolling days. If I'm using strict risk management and get stopped out 3 times, then I'm not able to trade for the rest of the week. That’s impossible.

    In my strategies there are many opportunities long and short in the markets. In the specific strategy that I'm using stocks are difficult to short sell. It's hard to locate the shares that can be borrowed. If no shares can be located, then trading the strategy on the short side is impossible.

    Using proper risk management, being stopped out regularly, can be very costly if commissions are high. It will make the strategy less successful.

    TEFS, the broker via Tradenet, has kind of a solution for this in my opinion. Here are some of the details of the broker:
    • No locating of borrowings and no borrowing fees
    • No pattern daytrade restriction
    • 20x leverage, but with max losses
    • Commissions $0.0075 + $0.0015 routing fees per share. Minimum $0.75 flat fee per trade
    • Trading platform (DAS clone) for $15 per month
    But also:
    • Stocks under $5 are not available to trade, limiting my strategy
    • Stocks with an average volume of less than 500k in the past 3 months are often not available to trade
    • Trading in CFD's despite of stocks
    • No premarket and afterhours trading
    • Max losses, if account goes under $13,300 then I'm done
    So there are certainly positives, but also negatives. For my strategy now it's OK and we will see how it goes. In the end I'm going to trade this account, trying to profit. If I can get some large payouts, then I can switch to a broker like Tradezero or Centerpoint.

    Further CFD's work the same as stocks and you're trading the same tickers. It's easy to get in and out of the tickers, but your trades are not shown in the order book and therefore if you want to get in a position you always do this by paying the ask price. When you want to get out you always do this by exiting for the bid price. And it's not possible to trade premarket and afterhours with CFD's. In that case you never want to hold a position overnight.

    I have noticed that not all stocks are open to trade even though they are matching the above criteria of price above $5 and average volume above 500k. This is often the case when the stock moves from under $5 to above $5 during a big day. My account manager at Tradenet advised me to send him an e-mail when I notice this and he will open the ticker. I have done this a couple times already and he takes action immmediately. A couple minutes later I'm able to trade the ticker. Works fine!

    This is how my trading screen looks like. Please note this is on a 6 monitors setup.

    Knipsel.PNG
     
    #3 Mitzter, Jun 30, 2019
    Last edited: Jul 6, 2019
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  4. Mitzter

    Mitzter Member

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    Screener

    For the time being I’m using the free real time screener from Stockmaster (Iphone app), with the following parameters:
    • Price $5 - $50
    • Volume 500K - 1B
    • Market cap 0.1M - 500M
    I’m trading the largest movers of the day and also I’m looking at the largest movers of previous days to trade continuations and/or breakdowns. I’m looking for the largest movers, because these show the largest volatility and therefore the largest potential gains. This expands my selection of stocks to trade a little. Nevertheless there will be only a couple stocks in play making it easy to understand which stocks I need to focus on. Ideally I would have lowered the floats and stock prices, but this doesn’t work with TEFS. Once I switch to Tradezero or Centerpoint in the future, I will adjust this accordingly. Also then I will use their screeners

    In addition to above I also use the screener from Finviz (free delayed version), with the following parameters:
    • Price $5 - $50
    • Volume >500K
    • Average volume >500K
    • Market Cap <300M
     
    #4 Mitzter, Jun 30, 2019
    Last edited: Jul 6, 2019
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  5. Mitzter

    Mitzter Member

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    Money management

    I never used proper money management in my trading, which was one of my alarming pitfalls. I blew up many accounts, thinking it had do with all sort of things except for proper money management. After reading several books it came clear to me the major mistake I was making is not controling my risk and using good money management. I have learned to now only think about the money that I’m risking on a trade and not looking at the profits that I was about to make. This is the same principle as professionals use in their trading.
    • Account size: $14,000
    • Risk per trade: $50 (or 0.30% of account) excluding commissions and slippage
    • Position size: Proportional to risk ((stock price / stop loss) * risk per trade = position size)
    • Average up in winning positions and average out for profit
    • NEVER average down in losing positions
    I’m increasing my stop loss to break even as soon as my position starts to tick into my direction decently (approximately 5%). I’m only taking trades with a minimum profit loss ratio of 1:2, but preferably 1:5 or higher. I’m taking profits on half of my position when my first profit target is reached and I’m letting my other half position stop out, aiming for higher prices. I’m increasing my risk per trades when reaching an account size of $25,000. I will never use a market order, only limit orders (+ couple cents if needed).
     
    #5 Mitzter, Jun 30, 2019
    Last edited: Jul 1, 2019
    Onepoint272 and T0rm3nted like this.
  6. Mitzter

    Mitzter Member

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    Patterns

    I’m only focused on strategies that I can trade well and for me personally result in consistent winners. Please note that all these patterns should only be traded if the tape confirms the action.

    Fake-outs
    With fake-outs I mean false breaks of support or resistance. Fake-outs produce often the largest winners in the opposite direction as it hits many stops and adds fuel by entries of new traders. Especially around mid-day there is not much conviction because of low volume that it’s producing many fake-outs which I will take advantage of. Further a break of the high of day fails 80% of the time. Therefore it’s more common a double top forms and not forcely breaks high of day, shorting is therefore in your favor when reaching high of day.

    Open range breaks
    The first minutes of the day when the stock market opens the momentum stocks in play (gapping up) might look for which direction they will go during regular trading hours. Sometimes a gap up results in continuation upwards, but also sometimes it sells off. The channel created at the first minutes at the open is what you need to pay attention to. Trade a break-out of this channel in the same direction as the break is occuring. If the break is a fake out then reverse the position. This pattern tend to give large profits.

    Gap and run
    With this pattern we are looking for a break of the pre-market high. As soon as it breaks go long. A lot of traders are looking af this level as being the break of a high of day and therefore could give large returns. If the break appears to be a fake-out (moving back under the break out level), then go short. It will act further as the fake-out pattern.

    Flag/pennant
    This is the most traded pattern by traders of them all and has therefore the highest accuracy percentage. This is a consolidation after an upward move. Enter at the bottom of the consolidation or when the first green candle closes higher than the last red candle. This has very low risk and very high reward potential. Further it’s important that the low of the Flag or Pennant doesn’t break through the previous top. If it breaks or fades through that level then it has a very high chance that the pattern fails and will break down further. Also the Flag or Pennant should be on relative lower volume than the upward move. If it’s on high volume then it can be seen as a sell off and the move is over. Ready to get shorted.

    Support/resistance
    Regular support or restistance bounces. Mostly parabolic move (without in-between consolidation) into strong resistance level and then shorting at the resistance level. Opposite is true for sharp move into strong support level. Buying at support level.

    VWAP/EMA
    Using VWAP or EMA 9, 20, 50 or 200 as potential support or resistance. If VWAP or EMA is acting as support or resistance for a while it can be used as an entry level. If then suddenly breaking the VWAP or EMA then it’s a entry to the same side as level broken.

    Afterhours continuation (not possible with TEFS broker)
    An end of day ramp up (other than 1-candle short covering) could result in continuation after hours. Afterhours a stock moves easier because of less resistance (and volume) and therefore large potential returns.

    Of course this doesn’t mean that if I see for example an obvious Double Top, Head and Shoulders or Cup-and-Handle pattern develop that I wouldn’t trade it. These obvious patterns I will trade as well, as long as I can get good risk reward entries.

    Aside of above patterns a couple of general observations to follow:
    • When stock is breaking out you want to see everytime it dips or comes down that it’s bought up, showing long wicks in the candles.
    • When looking at VWAP, if price trends above then it has a long bias and when it trends below then it has short bias.
    • Former runner makes momentum stocks stronger, because the chart shows what the stock is capable of.
    • Open above the VWAP and EMA’s on the daily makes momentum stock stronger, because there is no overhead resistance that needs to be broken.
    • Consider an exit when the last red candle breaks low of previous green candle of the previous uptrend.
     
    #6 Mitzter, Jun 30, 2019
    Last edited: Jul 1, 2019
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  7. Mitzter

    Mitzter Member

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    Tape reading

    With the tape I’m referring to Level 2 and the time of sales. These two tools combined with technical analysis give you the edge in trading. Not much has been written about tape reading, but it’s often referred to by traders as being the reason for becoming succesful in their trading. I feel the same. This makes it a hidden treasure. I will cover below what the tape is telling me in my strategy.

    Speed
    When speed of the trades printing on the time of sales increase it’s telling me the momentum is picking up. Often it shows prints in one direction (green for hits at ask which is bullish and red for hits at bid which is bearish) telling the direction that it’s going to trade. The traders trading at this moment are chasing the stock, which is referred to as the dumb money. I will be at all times already in the stock when this speed picks up and watching carefully to take first half of my profits. This means I’m selling to the 90% of the traders that will be losing money. You ever heard of the saying that only 10% of the traders make it and 90% fails? Well, this is why! Often after this rush of green prints a bunch of (preferably large or many smaller) white prints will print on the tape. These are trades between the highest bid and the lowest ask which are trades via darkpools. This is where the big institutional money is traded. The tape slows down and red prints start to print on the tape. This is time to sell the full position. The institutions unloaded most of their shares and the move is over and/or will switch to the opposite direction. The opposite is true for a short.

    Held bid / ask
    When looking for a held bid or ask you need level 2 combined with the time of sales. Around support you need to look at the time of sales and look for trades being printed while the position of the highest bidder on the level 2 is not moving. Large orders coming through but the highest bidder is not budging, still showing the same size and/or reloading it’s share size without moving. The bid has held. This is also called an iceberg order, only the top of the iceberg is shown, the part under water is hidden. If substantial shares have been hit and the bidder is still there this is your buy signal. This is a great risk reward trade, putting your stop 1 cent under the bidder. The same applies for held ask as exit signal and the opposite is true for a short.

    The Ax
    The market maker that’s controlling the stock is called the Ax. Often this is the market maker with the above described hidden orders (icebergs) and controls the move up or down. It’s important to have the Ax on the same side as you’re trading. If you’re long you want the Ax to have held buy orders and/or showing (real!) size on the bid. When this changes or he leaves it’s time to be careful and potentially take (partial) profits. Especially when he turns on the ask with size it’s better to unload and potentially even switch to the short side.

    Slippage
    When you use market orders you basically give market makers the freedom to process your order at whatever price, as long as it’s quickly processed. This is never resulting in a great price, it’s often a couple ticks above or under last price. This is called slippage and can be seen on the time of sales with a light green print for buying on the ask and light red for selling on the bid via a market order. Often these are indications of stops that were getting hit. Stops in combination with fresh orders in the same direction adds fuel to a move and could be the start of momentum kicking in. You should be in the stock already before the speed starts hitting the tape, which comes fast after these signals.

    Block trades
    Ocassionaly you see really large trades printing on the time and sales. Like 10x as large as a normal large trade. These are called block trades and signals institutional money, which we want to be on the same side. Unlike many people think, it’s not important if the block trade has a red or green print. Because every trade has a buyer and a seller. In this case you want to wait and see which direction the stock is moving after this block trade. That’s your guidance. You want to be on the same side as the stock is trading after the block trade occured.

    Large orders and spoof orders
    This is where it gets a bit tricky as market makers are able to manipulate this aspect of tape reading. When looking at level 2 you can see large bids or large offers. This would indicate direct interest on the stock and you would think this gives you the guidance that you should take the trade before that large bidder does. You have the large bidder as safety net. Well, that’s more often wrong than right. Because why would a buyer show his hand? He want to get filled, this way that’s not going to happen. Often there is an iceberg order on the ask. The large bid is fake or the bid is there to let traders step in front to hit the ask and fill the iceberg order. You can see on the time and sales that if trades go by on the bid and the bidder stays there with it’s size, then it’s real. If the bidder then suddenly dissapears, which happens often, then it’s fake and it’s called spoofing. As long as there is an iceberg order on the other side of the large bidder, than it’s your signal you should go short. And it’s a great trade, because it’s super low risk. Put your sell order 1 cent below the iceberg order and put your stop order 1 cent above the iceberg order. You’re now only risking 2 cents on the trade, while potentially making 10 cents, 20 cents or more.

    Support and resistance
    When the stock is approaching support or resistance then it’s important to start looking at the tape. If the stock is at support you need to see that the level will be defeated. Large bids need to step in and the stock needs to tick up. You want to see a pause in red prints and see green prints flow in. The best would to see an iceberg order on the bid. Then you have double confirmation. If the bids get eaten up easily the strength is with the bears and support will break. Keep in mind stocks always follow the path of least resistance.

    These techniques you can’t use or see when trading only technical analysis and therefore it’s such a strong addition and combined giving you the edge you need.
     
    #7 Mitzter, Jun 30, 2019
    Last edited: Jul 1, 2019
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  8. Mitzter

    Mitzter Member

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    Psychology

    I previously approached the stock markets as picking stocks and riding them, especially focussed on breakouts. Sometimes this had some take aways of gambling and resulting in more large losses than big wins. This was not trading. I stayed in this spiral for quite some time, but deep in my heart the only thing i want to do is trade, for a living that is. I’m currently having a good career as a financial, but to be frank, I don’t like to be working for a boss. Being 29 years old and making €100k an annum is the only upside, but also makes the switch to full time trading quite difficult. Me and my family are kind of relying on the salary and live the lifestyle by it. But, on the other hand, this urgency helps me in the transformation to change myself as a trader. To come out of the spiral of stock picking and become a real trader. I have researched the successful traders out there, watched a gazillion number of hours of youtube videos, listened to a hefty number of podcasts and read a lot of trading books. This opened my eyes and now I do have a solid plan and am more than ever ready to hit the markets. Since I blew up a lot of accounts in the past 10 years, My wife was not that enthusiastic me trying it again. Fortunately I past the Tradenet challenge and got a decent freeroll as a starter. This is my chance to get it done. At first I will trade aside of my daily job, which is from 9.00AM until 5.30 PM (Amsterdam time), equivalent to 3.00 AM until 11.30 AM New York time. Therefore I will miss the opening trades and mostly focus on afternoon trades. Except for Thursday, which is my work from home day where I could trade more hours on the day.

    Below are some other general thoughts and reminders for trading:
    • Think about making good trades, following the rules. Not about making large profits. Good trades will end up in large profits anyways. Profits will come.
    • Many people think you need to predict the market as a trader. But not true, you need to adapt to what you are seeing with set risk
    • Don’t have to be green or right all the time to be profitable. Not willing to admit being wrong by taking loss
    • Don’t overtrade because of fear of missing out (FOMO)
    • Cut losers short and let winners run
    • Chasing will kill your account
    • Quality over quantity trades
    • It’s a marathon not a sprint
    • Don’t look at consecutive winning trades, but look at overall performance
    • Only look at your own performance, not others
    • Only trade with a plan
    • Never add to a loser
    • Take a piece of the pie, you don’t have to take the full move
    • Threat your trading as a business
     
    #8 Mitzter, Jun 30, 2019
    Last edited: Jul 10, 2019
  9. Mitzter

    Mitzter Member

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    Last Friday I had my first trading day and this were the results. I have been mainly discovering which stocks I was able to trade via TEFS. Net profit of $21, which was fine for this testing day. Aiming for higher daily gains going forward.

    upload_2019-6-30_17-29-35.png
     
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  10. Stan

    Stan Member

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    Whatever happened to this?
     
  11. Mitzter

    Mitzter Member

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    I opened this thread yesterday, this is just the beginning. The journal will be updated daily ;)
     
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  12. bigbear0083

    bigbear0083 Content Manager
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    so good to see you back @Mitzter!

    always awesome to see an old timer from the old HSM chiming back in here :D
     
  13. Mitzter

    Mitzter Member

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    Thanks Bigbear, hopefully more old HSM traders will join us! I’m here to stay this time, haha!
     
  14. T0rm3nted

    T0rm3nted Moderator
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    Welcome (back) @Mitzter. Looking forward to following along with this journal! Gotta love a nice freeroll
     
  15. Mitzter

    Mitzter Member

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    Thanks T0rm3nted! Indeed freerolls are the best, hehe! Let’s make this a great journey and especially educational for myself and the readers.
     
  16. OldFart

    OldFart Well-Known Member

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  17. AverageJoesTrades

    AverageJoesTrades Well-Known Member

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    Hey @Mitzter I remember following you back on HSM on a penny play VPCO that ended up being a 3 bagger. Will be following you here as well!
     
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  18. Mitzter

    Mitzter Member

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    Yesterday I traded a couple stocks in play. I noticed I used too narrow ranges. When the stock went into my direction I increased my stop and often got stopped out for that reason. Gross I had a decent profit, but because of the commissions I ended the day in red with -$12. Not a big deal, but next time I’m adjusting my stops only when I have more profit. Give it more room to develop. Also the stocks I traded didn’t see much continuation, but were choppy. This also makes it more difficult to take large gains out of the markets.

    632F57DA-856E-48FC-B5BA-E6F25F652E45.jpeg
     
    #18 Mitzter, Jul 2, 2019
    Last edited: Jul 2, 2019
  19. Mitzter

    Mitzter Member

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    That’s right, that was a big runner! But this journal will be less stock picking and more trading ;)
     
  20. T0rm3nted

    T0rm3nted Moderator
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    Sounds like you need a 2nd threat for more stock picking as well :p
     

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