Daytrading

[PHANTASM]

Hey Phan,

Thanks for taking the time to write this tut.I realize there isn't alot of people replying or asking questions but it's probably one of the best reads on F|A IMO. A cursory glance at the tutorials section would back me up on that since the only other tutorial that has more views is for reducing lag in ET.

 

While Ra. does have a point, your correct to point out the amount of money people spend going to college to get an education when in reality what you need is a moderate case of aspergers syndrome and a good internet connection.

 

Thanks again for taking the time to throw this stuff down.

 

Thanks! It's been a while since I've added anything new here, or heard anything positive.

[GoodKarme]

greatest tutorial ever ) im learning a lot and haven't passed 3rd page yet great post phan very educational and informative )

[daredevil]

greatest tutorial ever ) im learning a lot and haven't passed 3rd page yet great post phan very educational and informative )

 

Better just call him. I am soon getting into day trading.

[PHANTASM]

Today we will discuss how to make a slush fund. If you're like me, you enjoy making lots of money without doing any real "work". The first thing you need to do is apply for as many credit cards as you can. Look for balance transfer offers. Any card that allows you to transfer balances from other cards is good. Accumulate as many cards as you can, then take out in cash advances as much as you can repay with a balance transfer from a different account. You can easily get $5000 or $10,000 this way. It is important to apply for the cards that offer balance transfers within the timeframe required to do a transfer.

 

Some companies have funny rules, like you must have already had the debt before you got the card (they call it "pre-existing debt"). This is designed to prevent people like you from getting the card and then maxing out another card to transfer their money into, because people who do this tend to be "bad" customers who pay off the bill before they can raise the interest rates. Which of course, is what you should do.

 

You want to get deals on balance transfers that allow you to delay paying interest for a set time, like one year. Then they raise your interest rate up to 25% or some similar obscene amount, and they apply all your "back" interest from the initial grace period. You don't want this obviously, so you need to remember when you took out each transfer so you can pay it back in time and avoid paying any interest. The banks hate this of course.

 

So I borrowed $10,000 and balance transfered the money from another card for a $300 "finance charge" (this is 3% interest). I put the cash advance checks directly into my checking account. Nice clean free money. The money has to be paid back in one year or they stick me with 29% interest. But I'm not spending the money, I am going to invest it.

 

The next step is to have a daytrading account set up. You will have to fill out some forms, and have at least $500 to invest. The money must be in the form of a cashier's check. They will not ask you where the money originated from, as long as you have a legitimate cashier's check. Many banks will let you pay for a cashier's check in cash, provided it is not over $10,000. If you have $10,000 in cash then the government gets curious about where the money came from.

 

When you get your account set up, you should consider getting a margin account. Scottrade has a program where they will match any funds you put into your daytrading account at 8% interest. This is what I did. I put $10,500 into my account, and they are matching it, so now I have $21,000 to trade with. With a 3% APR on the first $10G and 8% on the other $10.5G (from the margin), I have a net annual interest rate of 5.5% on my $21,000 loan.

 

If you've read this tutorial you know I have a basic system that works most of the time and allows me to make 5-10% a week off my investments. Last year I was trading with ~$5000, and did not have a margin account, just a regular account. With a regular account you are not allowed to do "pattern daytrading" unless you have $20,000 in your account. I was often blocked from good trades because they kept locking me out of my account after I had made too many trades in a three-day period. A margin account allows you to trade continuously, so you can buy and sell over and over every time the stock goes up or down. You can set up "Limit Orders" that automate this process, so you don't have to worry about the stock dropping suddenly and losing all your money.

 

My plan now is to just play Citibank and aim for a 5% gain every week. With $21,000 to work with, this works out to around $1000 a week. Each 1% profit I can make is $200. So when you have more money in your account, you can get more profit on less of a percentage gain. It is a lot easier to make 3-4% consistently than 10% sporadically.

[PHANTASM]

This is from the Scottrade website, and helps clarify the rules for pattern day trading and margin accounts:

 

Day Trading

Overview

When you continuously buy and sell investments within a very short time, perhaps a few minutes or hours, and rarely hold them overnight, you're considered a day trader. The strategy is to take advantage of rapid price changes to make money quickly. The risk is that as a day trader, you can lose substantial amounts of money because no one can predict how or when prices will change.

 

 

Requirements for Accounts that Actively Day Trade

 

 

FINRA has implemented account requirements for accounts that actively day trade. The amendment updates FINRA Rule 2520. This rule sets the guidelines for investment accounts that use the trading strategy commonly known as day trading.

 

 

The amendment establishes new requirements for customers who actively day trade (known as pattern day traders).

 

 

The rules only affect customers who are classified as pattern day traders. The FINRA definition, under rule 2520, defines a pattern day trader as "any customer who executes four or more day trades within five business days, provided the number of day trades is more than 6% of the total trades in the account during that period". Scottrade defines a pattern day trader as any customer who executes four or more day trades within five business days.

 

 

In addition to this new definition of a pattern day trader, the following amendments went into effect on Friday, Sept. 28, 2001:

 

 

Higher equity requirement. The minimum equity requirement for pattern day traders is $25,000.

 

 

Clarification on the term "day trade". Redefines the term "day trade" to treat the sale of an existing position held from the previous day as a liquidation, and the subsequent repurchase of that position as the establishment of a new position not subject to the day trading margin requirements.

 

 

Day trading buying power. Day trading buying power is calculated based on the customer's account position as of the close of business on the previous day. The amendments limit day trading buying power to four times the day trader's maintenance margin excess.

 

 

Margin account requirement. All patterned day trades must be placed in a margin account. Trading in a cash account is limited to available settlement date balances in accordance with Regulation T and FINRA Rule 2520.

 

 

Scottrade is committed to assisting our customers who are affected by the FINRA rule.

 

Margin trading involves interest charges and risks, including the potential to lose more than deposited or the need to deposit additional collateral in a falling market. Scottrade's margin agreement, available at scottrade.com or through a Scottrade branch office, contains the Margin Disclosure Statement and information on our lending policies, interest charges and the risks associated with margin accounts.

[goks11]

Hello.

I wanted to ask you what do you know about :

 

http://www.forex.com

 

There you can buy/sell currency ,gold ,oil.....

 

I have been testing the demo/practice account for few days:).Have you tryed this or you just buy at scottrade?Can you buy/sell currency,gold, oil or just stock at Scottrade.

I see that they charge 7$ for every trade over internet.Other day i bought some USoil and made 150E and i recived 117E so they took 33E.Is this the same at scottrade or is always 7$.For now im just testing it a bit to see how it looks:).

 

I also found this site:

 

http://www.plus500.com/

 

Just whould like to know what you think about it since i see you do this for some time:).I just dont want to go out there and give my money away hehe.

 

Thanks for any info you can give.

 

Eh just looked again i made 150$ when converted to Euro is 117 hehe.

Edited August 3, 2010 by goks11

[PHANTASM]

Hello.

I wanted to ask you what do you know about :

 

http://www.forex.com

 

There you can buy/sell currency ,gold ,oil.....

 

I have been testing the demo/practice account for few days:).Have you tryed this or you just buy at scottrade?Can you buy/sell currency,gold, oil or just stock at Scottrade.

I see that they charge 7$ for every trade over internet.Other day i bought some USoil and made 150E and i recived 117E so they took 33E.Is this the same at scottrade or is always 7$.For now im just testing it a bit to see how it looks:).

 

 

Just whould like to know what you think about it since i see you do this for some time:).I just dont want to go out there and give my money away hehe.

 

Thanks for any info you can give.

 

 

To answer your question, no I am not an expert in forex trading, but I would not mind learning what you know.

 

The stock market, especially the big financials (AIG, C, BOA, GS, FNM, FRE, etc etc) usually are influenced by the foreign exchange markets. So a drop in the euro means good news for the dollar, which is usually good for the big fins. So I "watch" the forex markets but I don't play them.

 

Also, Scottrade always charges $7 per trade, and of course you have to pay income tax (if you're in the US it is the same rate as your wage income for short-term capital gains).

[goks11]

To answer your question, no I am not an expert in forex trading, but I would not mind learning what you know.

 

The stock market, especially the big financials (AIG, C, BOA, GS, FNM, FRE, etc etc) usually are influenced by the foreign exchange markets. So a drop in the euro means good news for the dollar, which is usually good for the big fins. So I "watch" the forex markets but I don't play them.

 

Also, Scottrade always charges $7 per trade, and of course you have to pay income tax (if you're in the US it is the same rate as your wage income for short-term capital gains).

 

 

 

Well as i said im just starting to learn about it so there is not much i can tell you about it hehe.I was hoping that you could give me some ideas:).From what i can see in the week that i been testing it you can make quick $ or lose it quick .It all depends how much you want to risk.

 

If you have 3000Euros you can buy lets say 100000Euros worth of Oil so your gain can be much bigger or lose much more heh.Its 1:33 so 3k E can buy 100k E of oil.Some go as much as 1:80 or 1:100.If you buy/sell EUR/USD then its 1:80.For starting 3k Euros you can buy 240k E.

 

http://www.plus500.com/Help/HelpIntroduction.aspx'>http://www.plus500.com/Help/HelpIntroduction.aspx

 

http://www.plus500.com/

 

Here you can read a bit about it.This is not trading only forex but other Commodity CFDs – Crude Oil, Gold, Silver, etc---Index CFD Trading - S&P 500, FTSE 100, DAX 30, etc----Shares/Stocks/Equity CFD's - Google, Vodafone, Barclays, Nokia, BMW, etc.

 

I hope you can have a time and look at it and tell me what you think.

[PHANTASM]

Well as i said im just starting to learn about it so there is not much i can tell you about it hehe.I was hoping that you could give me some ideas:).From what i can see in the week that i been testing it you can make quick $ or lose it quick .It all depends how much you want to risk.

 

If you have 3000Euros you can buy lets say 100000Euros worth of Oil so your gain can be much bigger or lose much more heh.Its 1:33 so 3k E can buy 100k E of oil.Some go as much as 1:80 or 1:100.If you buy/sell EUR/USD then its 1:80.For starting 3k Euros you can buy 240k E.

 

http://www.plus500.com/Help/HelpIntroduction.aspx'>http://www.plus500.com/Help/HelpIntroduction.aspx

 

http://www.plus500.com/

 

Here you can read a bit about it.This is not trading only forex but other Commodity CFDs – Crude Oil, Gold, Silver, etc---Index CFD Trading - S&P 500, FTSE 100, DAX 30, etc----Shares/Stocks/Equity CFD's - Google, Vodafone, Barclays, Nokia, BMW, etc.

 

I hope you can have a time and look at it and tell me what you think.

 

The links you posted say they are "not available in the US". Funny to see something like that these days. Like I am in one of those repressive countries like Australia or China or Iran where they block half the internet. Sometimes I forget I live in a police state. You get used to it I guess.

 

Anyway, yeah you can make or lose a lot more money in the forex or commodities markets. You're really trading options (derivatives), which has a lot more risk.

 

Everyone has their comfort zone for risk. Some people like the safety of bonds, or the money markets, or buying CDs (certificate of deposit). Until a few years ago "everyone" thought stocks were risky and real estate was a safe investment. Now that has flipped around completely. I find stocks to be a relatively safe investment if you do it properly with limit orders and stop orders. I don't think you can use these in forex or commodity trades. So you can't control your losses.

 

A lot of people these days buy gold, either physical gold, which has been illegal in the US since 1933 (google Executive Order 6102 sometime), or gold ETFs (exchange traded funds), or gold stock (NYSE:GLD). Personally I think gold has been overbought and isn't going up unless the US government grossly inflates their currency to deliberately devalue all the debt and unfunded obligations (Social Security + Medicare = ~$90 trillion). The only way to pay this is to do a 100:1 devaluation like Zimbabwe did a couple years ago. They call it "quantitative easing". They have been doing it slowly for decades but our global control of the oil economy actually prevents the dollar from inflating as much as it should. So we can't inflate the dollar to get out of debt without collapsing the entire global economy, and halfway through the process everyone would just switch to the euro or the yen or the yuan lol.

 

The US government has been engaging in a blatant campaign to prop up the dollar by controlling gold, oil, and other commodities, while they undermine the dollar by printing and borrowing against it. What's really going on is that the government wants to be the only ones with the power to devalue the dollar (through quantitative easing), while "they" (the Federal Reserve, Congress, etc) want "everyone else" to be unable to devalue the dollar for their personal benefit by shifting assets to gold or commodities or other currencies.

[goks11]

Damn to bad you cant use this:(.I was realy hoping you can have a look and maybe help out.They want only us from EU because we are new to this and they can take our money hehe.You from USA been doing this for some time and they dont want you .They afraid you gona make to much money:).

 

Yesterday i heard on TV that there was over 400 fires in Russia and the price of wheat whould go up but who whould think of buying it on market hehe.I looked the price of 1 unit on the plus500 it was 700$ and today was as much as 760$.

If i had put 3000Euros and whould get 150 units of it or 90000Euros worth of wheat it goes 1:33 that whould be:

 

150x60$=9000$ or am i wrong ?

 

Now that whould be nice money for 1 day:).

[PHANTASM]

Damn to bad you cant use this:(.I was realy hoping you can have a look and maybe help out.They want only us from EU because we are new to this and they can take our money hehe.You from USA been doing this for some time and they dont want you .They afraid you gona make to much money:).

 

Yesterday i heard on TV that there was over 400 fires in Russia and the price of wheat whould go up but who whould think of buying it on market hehe.I looked the price of 1 unit on the plus500 it was 700$ and today was as much as 760$.

If i had put 3000Euros and whould get 150 units of it or 90000Euros worth of wheat it goes 1:33 that whould be:

 

150x60$=9000$ or am i wrong ?

 

Now that whould be nice money for 1 day:).

 

That would be an awesome day! I don't make anywhere near that kind of money. I'm lucky to make a few hundred dollars a day.

 

This is what Citigroup did today:

 

 

I set a Limit Order this morning to buy 4000 shares of Citigroup if the price dropped to $4.03. I knew the unemployment report was coming out this afternoon and I knew the market would dive as scheduled. So I figured Citigroup would hit $4.03 (it actually bottomed at $4.02 so I could have set my limit at $4.02 and saved $40).

 

Monday I will sell it on market open. It is currently at $4.06, which means I made $120 for basically reading the news, doing ten mouseclicks and typing some numbers. For every penny it goes up I will make $40. If it reaches $4.10 by Monday morning I would make $280 instead. It all depends on what happens over the weekend.

 

I have a buddy on a trader forum who just does this same thing with Google stock. We have long complicated arguments about what is going on with the stock market. It helps to see what other people do and how they think.

[goks11]

Well i dont think this can be made every day here either:).You say your lucky to make few hundred a day well i whould be happy if i could make that every 2-3 days hehe.This kind of money( 9000$ )can be made only on some sort of crisis like this one or last year when russia closed the pipes for gas to some countrys and most EU countrys were short on gas for some time.I bet the price went up high.Also like BPetroleum crisis their shares went down now that the crisis is over they are back up much.

 

I looked at Citygroup the other day and the price didnt move at all for like few hours.So for me it whould be realy hard to make a decision when to buy since i dont know much about it.From what i saw it moves around 4.02 to 4.06.Thats not much of a diference unless you can put up more $ to make anything out of it:).

 

You said you bought 4000 shares that is 16000$.Do you have to put up all that money or is it like on forex and plus500 where you can use leverage to buy citygroup on 1:20 .

I can get the 4000 shares with only 800$ and make the same profit as you with 16000$. I know some say its more risk but i dont realy see why if you make your stop loss.

 

http://daytrading.about.com/od/daytradingbasics/a/Leverage.htm

 

With all that money you could buy other shares and make more profit.This way you have to wait for the deal to close so you can free your money to buy something else.Or maybe there is more to it that i dont know:).

[PHANTASM]

Well i dont think this can be made every day here either:).You say your lucky to make few hundred a day well i whould be happy if i could make that every 2-3 days hehe.This kind of money( 9000$ )can be made only on some sort of crisis like this one or last year when russia closed the pipes for gas to some countrys and most EU countrys were short on gas for some time.I bet the price went up high.Also like BPetroleum crisis their shares went down now that the crisis is over they are back up much.

 

I looked at Citygroup the other day and the price didnt move at all for like few hours.So for me it whould be realy hard to make a decision when to buy since i dont know much about it.From what i saw it moves around 4.02 to 4.06.Thats not much of a diference unless you can put up more $ to make anything out of it:).

 

You said you bought 4000 shares that is 16000$.Do you have to put up all that money or is it like on forex and plus500 where you can use leverage to buy citygroup on 1:20 .

I can get the 4000 shares with only 800$ and make the same profit as you with 16000$. I know some say its more risk but i dont realy see why if you make your stop loss.

 

http://daytrading.about.com/od/daytradingbasics/a/Leverage.htm

 

With all that money you could buy other shares and make more profit.This way you have to wait for the deal to close so you can free your money to buy something else.Or maybe there is more to it that i dont know:).

 

If you are good at using the news to trade options then you would be great at playing the HFT stocks too. All the big financials are HFT-dominated now, and those stupid programs mainly just read the news online. Then they buy or sell based on whatever keywords are in the news.

 

So a bad news day sends them into sell mode and a good news day sends them into buy mode. The HFTs all watch each other so when one starts selling they all do. There was a "flash crash" back in May when all the HFTs started selling at the same time this way, and the market dropped ~900 points in a few minutes. No humans needed. Like Skynet lol.

 

It's easy to exploit the HFTs once you see how they are designed. It's funny, because the HFTs were intended to exploit the "long-term investors", who aren't even around anymore, and now these HFTs are themselves exploited by news-reading daytraders. The HFTs have become the underlying structure of the market instead of something that runs on the side invisibly.

 

I haven't given much thought to trading on a 1:20 margin like an options trader.

 

Question - can you use Limit Orders or Trailing Stop Orders with options? I don't think you can, but if you could then that would be the perfect system.

[PHANTASM]

Today the Fed made some nasty noises about how bad the US economy was doing, which sent stocks spiralling downward. Luckily I had sold all my shares of Citigroup on the market open on Monday morning and was holding nothing but cash, while waiting for the next bad news flash to rebuy more stocks.

 

I have a dozen or so stocks I watch daily, and one of them made a very nice dip today. Intel dropped by 4% today due to the bad news, so I am buying INTC (Intel stock) on the market open tomorrow. I have set up a Limit Order to purchase 1000 shares at $19.80. If I don't get that price on the open, I will immediately change my order to a regular buy order and get whatever it opens at. It may go up or down a little either way, I don't know Intel as well as other stocks, but I can tell it is oversold and there is a few percent of easy money there waiting for the rebound. It will probably go right back where it was ($20.60) in a day or two, making a few percent on my investment. At least that's the plan.

 

Here is what Intel did this week:

 

 

Here I the confirmation of the order I placed today (so you know I am for real lol):

 

[PHANTASM]

It's the next morning. A lot happens overnight. Europeans and Asians are buying, people with post-market and pre-market market access make trades, millions of guys like me place orders that activate on the market open. So the prices on the open are never what they are when the market closed the day before. It can be unpredictable.

 

So, I had a Limit Order set at $19.80, expecting a modest drop of a couple cents overnight. It had closed yesterday at 19.82, and I wanted to wait until this morning to make the buy to catch any remaining drop in price. Intel stock took a plunge overnight and tanked right on the market open, along with the entire market. Even Goldman Sachs is down a couple percent. Only gold is up today.

 

I was able to buy at $19.52, instead of the $19.80 I was expecting. If I had bought yesterday I would have taken a beating, that's why we wait until the carnage is over to pick up the pieces.

 

So now I set my trails for protection. I'm giving it a wide 5% so it has room to breathe. In a day or two I should be able to get rid of this stock for a couple percent profit.

 

Cheers.