Day Trade WarriorBusiness Plan – Trading as a Business

I want to be a Professional Day Trader What do I need to do? Just like any other profession, if you are

serious, you have to evaluate whether or not this is really a potential career path.

This isn’t a part-time hobby you do on the side, learning to day trade requires a tremendous amount of time and energy.

Write your Business Plan I don’t care if you are going to open a

professional lawn mowing business or a Day Trading business, you need a business plan.

Day Trading - Business Plan Basics What is your Strategy

Setups, Stocks Traded, etc Stats on the strategy (from papertrading) What time of day you trade?

How do you Manage Risk? Risk Reward Ratio Following the Volume What is your max loss/trade

What is your goal for next 6 months?

Trading Plan For the next three months, you must

follow a strict trading plan. You must prove to yourself that you are

successful and that you worth investing in.

You have to prove this not only to yourself, but to anyone else considering supporting you in this process

First 3 months Trade 10 times per day. Aim for 50%

success rate. Use 2:1 profit loss ratio, expect a 1.5:1

profit loss ratio average. We will build up from risking $50 per

trade to risking $200 over 3 months.

1st Month - $50 Risk You are risking $50 per trade with a

target of $125 / day profit. If you lose $125 in 1 day you are done

for the day! You want to have 4 days per week

where you hit your goal. 1 day can be your max loss. This means your weekly goal is your

Daily goal x 3. ($375)

Take 10 trades per day Risk $50 per trade. Lose on 5 trades. You are down $250. Make $75 on 5 trades, you make $375. You have a net profit of $125. You may hit a winner that far exceeds

$75 because all your trades had the 2:1 profit loss ratio, but expect 1.5:1 as your average.

Do this for 1 month Do this every day for 1 month Prove to yourself that you can choose

the right stocks, the right patterns, and consistently come out ahead.

Right now, it’s not about how much you make, it’s about building consistency!!

Month 2 - $100 Risk You are risking $100 per trade with a

target of $250 / day profit. If you lose $250 in 1 day you are done

for the day! You want to have 4 days per week

where you hit your goal. 1 day can be your max loss. This means your weekly goal is your

Daily goal x 3. ($750)

Month 2 – Double your Risk Risk $100 per trade. Lose on 5 trades. You are down $500. Make $150 on 5 trades, you make $750. You have a net profit of $250. You may hit a winner that far exceeds

$150 because all your trades had the 2:1 profit loss ratio, but expect 1.5:1 as your average.

Month 3 - $200 Risk You are risking $200 per trade with a

target of $500 / day profit. If you lose $500 in 1 day you are done

for the day! You want to have 4 days per week

where you hit your goal. 1 day can be your max loss. This means your weekly goal is your

Daily goal x 3. ($1500)

Month 3 – Double your Risk Risk $200 per trade. Lose on 5 trades. You are down $1000. Make $300 on 5 trades, you make

$1500. You have a net profit of $500. You may hit a winner that far exceeds

$300 because all your trades had the 2:1 profit loss ratio, but expect 1.5:1 as your average.

Set Realistic Goals Don’t expect to be profitable in the first

3 months trading. You should be papertrading, and

breaking even at best. Trading is a process. SURVIVE UNTIL YOU LEARN You learn by experience in this industry

Don’t Trade Real Money Don’t Trade with Real Money until

you’ve proved that you can make money with a papertrading account.

This would have saved me over $30k in losses…and I’m not the only one!

Once you are consistently making money on paper, you can transition to live trading with small size.

Trading as your Primary Income If Day Trading is your primary income

you need to speak with an account to declare yourself as a professional day trader.

This is will give you Mark to Market accounting and allows you to write off your losses, exempts you from wash sales, and is really important for professionals.

Opening an LLC Many Professional Day Traders trade

under an LLC. LLC and S-Corps are pass through

corporations, meaning the owners pay the income taxes.

The LLC and S-Corps don’t have to pay taxes on the income since it’s going to be paid by the owners

Advantage of LLC The Advantage of the LLC is that you

separate all your day trading income AND expenses in 1 account

Like any other business, there will be business expenses that are you can deduct from your income.

Typical Day Trading Expenses News Subscriptions ($100/month) Esignal ($170/month) TC2000 ($100/month) TAS Market Profile ($250/month) Chat Room Memberships ($200/month) Data Fees, NYSE, NASDAQ ($130/month) We are at $800 / month already!

Day Trading Equipment Fast Computers An Office Space (rental, utilities, etc) Fax, Printers, Phones

These are all equipment that depreciate over time and need replacing.

Accounting Pay the money to hire a professional

account to advise you on the process of becoming a professional day trader.

There are many areas where you can decrease your taxes and take advantage of programs for being a small business.

Day Trade WarriorAdvanced Level2 Techniques

Advanced Level 2 Learn to read the Level 2 and

understand buy and sell signals. Studying Level 2 can be good for

scalping and finding quick entries and exits.

Level 2 can show us where retail buyers and sellers are lining up.

Chart Reading vs Level 2 Level 2 is really important, but it doesn’t

override chart reading. As pattern based traders our first focus

is finding good patterns.

Reading Level 2

Bid Support Concepts

Showing “Fake” Orders

Showing Resistance

Looking at Market Depth

Time & SalesWatch the order flow in the Time & Sales

Large orders indicate Retail Interest

Orders in Green are at the ASK price

Orders in White are in between BID/ASK

Orders in Red are at the BID price

Time & Sales tips Pauses in Time & Sales are usually a

bearish signal for me A Heavy ASK at a key level of resistance

confirms that the resistance is real. Look for the shares to get bought and then a quick breakout over that price

Breakout Trading at key Price Points requires Time & Sales and Level 2

How to Hide Shares Using ARCA you have to display 10% of

your actual size. If you have 100k shares you can show 10k.

If you are selling a thinly traded stock, you may want to hide your shares to not scare away buyers

Market Manipulation Some traders will place extremely large

orders without the intention of having them executed.

A “fake” buy order on the bid of 200k shares could make retail traders think there are big buyers.

In reality, that order will probably be canceled before it is filled

Institutional Traders Institutional buyers may not be

represented fully in Level 2 This is one of the reasons some traders

believe focusing on Supply and Demand areas on the chart is more important than using level 2.

How to Identify Institutional Trades Intuitional trades that are executed by

an algo/computer are typically 100 share blocks.

These orders fire off rapidly and can deceive traders into thinking there are buyers/sellers.

These trades do not necessarily represent retail traders

Low Volume StocksBig Spreads are common on Low Volume Stocks

Direct Access Routing Send your orders directly to the market

maker displaying shares available on the ASK or BID for the quickest fills.

Super Smart orders in Lightspeed will send orders to multiple routes and gives you partial fills from all of them until your shares are gone. The cost is higher, but execution speeds and fill times are excellent

Dark Pools Dark Pools are where institutional

traders place their transactions These “pools” of shares are not

available to retail traders This means when a retail traders places

a buy or sell order, we won’t get access to those shares.

Some Brokers allow Dark Pool Routing

Direct Access Routing

Adding / Removing Liquidity Adding Liquidity to the Market means

you are adding shares that can be bought or sold. This would be any order that is not immediately “marketable” or filled when it’s placed

By Adding Liquidity to the Market, many Market Makers will give you ECN Rebates

When you Remove Liquidity you may get charged an ECN Fee.

Adding Liquidity Adding Liquidity to the Market means

you are improving market liquidity by adding shares.

This would be considered ANY order that is not immediately Marketable.

When you Add Liquidity, you get PAID ECN rebates. ARCA pays .005

This means if I sell 10k shares on the Ask ARCA will pay me $50.00

Removing Liquidity When you place a market order, you are

taking liquidity away from the market. Some brokers will charge you an ECN

fee for this. It may be anywhere from .0025-.01

This can be costly, but is the price to get fast executions with direct market routing

Day Trade WarriorTAS Market Profile Indicators&Hot Keys

TAS Market Profile This suite of indicators is available on

Bloomberg Terminals and is used by over 15,000 institutional traders.

It is commonly used on FOREX, Futures, and Commodities.

It can also be used on Equities

TAS Boxes Boxes – Give Support/Resistance Areas

Tas Boxes

TAS Navigator Great indicator for timing shifts in

momentum between buyers and sellers.

Look for alignment on Multiple Time Frames

1min, 5min, 15min

TAS Navigator Pink Bars = Trend Exhaustion Light Green = Strong Up Trend Dark Green = Weaker Up Trend Light Red = Strong Down Trend Dark Red = Weaker Down Trend Green Dots / Red Dots (buyer/seller

control) Yellow Dots / Cyan Dots (trend/sideways)

TAS Navigator The Navigator can help time Reversals

TAS on Reversals Reversals can be extremely powerful

moves. I look for Pink Exhaustion Bars on the

Navigator Many red candles in a row on the chart Look for Orange Candle to indicate

seller shift Buy on the break of the 1st orange or the

1st candle to make a new high

Reversal Examples

Navigator on Flags On Flags I look for the point where

momentum and volume are beginning to shift from sellers to the buyers

This is indicated by the Green Dots on the navigator bars.

Navigator on Flags

Navigator on Flags

Navigator on Flags

Navigator on Flags

Exhaustion Warning

Exhaustion Warning

Exhaustion Warning

Day Trade WarriorScanner Settings

TAS Continued A continued look and review of TAS

Market Profile Market Map Always trade a Qualified SETUP

$CNET

$MACK

$CNNX

$SWFT news

Market Map Lines Yellow Line is the Point of Control for Vol

The Blue Lines are the extension away from where the most volume is taking place.

Market Psychology The Winners Walk away The Losers Keep Fighting it Out Trading 9:30-11am is the easiest, except

for breaking news Trading out of frustration to make back

losses is a recipe for disaster.

Using Hot Keys Using Hot Keys allows very quick orders. Most Brokers provide Hot Key

configurations that you may be able to customize for your preference

Direct Access Software used by Speedtrader provides great Hot Key functionality.

Sterling and Lightspeed Pro also have good Hot Key settings

Hotkey Buying Orders

I Allow Re-Routing on my Buy Orders

Hotkey Selling Orders

Proprietary Scanners My Flat Top Breakout Scanner is one of

my absolute favorite scanners. When I designed this scanner I was

trying to picture what I see as the perfect Flat Top Setup, what are the common patterns?

Spike up, consolidation, below the highs

Extras & Links Email me with questions

daytradewarrior@gmail.com