How I Trained, and How I Journeyed Closer to Wall Street
My journey began back in 1998, in sunny San Diego. I caught a free trading seminar and learned that it's possible to sit in my shorts and make tons of money online, buying and selling stocks at home. I opened a traditional online day trading account through a prominent pay-per-trade broker. Back then, I was paying about $14.99 per trade.
I also found out how easy it is to lose a lot of money very fast. I began searching for day trading academies. I purchased every relevant book I could find. I was desperate to learn how to profit consistently.
I found a three-day intensive trading program in Irvine, CA. It cost $6,500. It offered no guarantees, but the lunches were free! The trader/instructor who sold me over the phone was very convincing. He promised I would learn some proprietary information that would catapult my day trading to glorious new heights.
After the three-day program I came home to my trading station. At the time it was two laptops and a 36-inch Gateway monitor. I felt like a truly professional trader. My confidence level was through the roof.
To make a long story short, I lost so much money within one year that I had to sell my house. I also almost lost my fiancée.
I was a mess! I had to take a break from full-time day trading. I searched for some kind of small business for myself in order to pay the bills. I started a mobile car detailing business and quit actively day trading for about three years.
I did maintain my online brokerage account, and I did place several “guesswork” trades during my three-year hiatus. I never made much money, especially consistent money, until I decided to get back in again, actively trading intra-day.
It was 2004. I was finishing up my bachelor's degree in Business Marketing from San Diego State. The rigors of college were helping me become a much smarter and more resourceful person—and most of all, more patient.
I came into some money, and this encouraged me to give full-time day trading another chance. I purchased a few current day trading books, and decided to dish out another $5,000 on my second professional trading program (a different trading academy from the first one).
This program was a five-day intensive and professional trading program (or so they promised). Once again I drove up to Irvine. I expected to be taught a highly structured way of profiting consistently in trading equities.
Once again I was let down. And this time, it was even worse. The program didn't teach me anything that I didn't already know. I felt completely ripped-off.
I continued to day trade with my traditional pay-per-trade account until 2006. I was moderately successful with a pay-per-trade broker and trading platforms. The best thing I got from that period was learning how the stock market truly functions. I got to where I was trading more than four roundtrip trades in any five-day rolling period. This much activity defined me as an official “pattern day trader.” The SEC requires all pattern day traders to have at least 25K in their brokerage accounts.
I had no problem with that. My problem was the pay-per-trade commission structure. That was killing me. I was placing over 10 roundtrip trades per day. That's 20 executions per day. That translates to $200 in commission fees per day ($9.99 per trade). I needed to find a way to trade without getting charged so much per trade.
The year 2006 was key. That was when I began to seek out pay-per-trade firms with much cheaper per-trade commission costs. The lowest I found was $4.99 per trade. That was still too high.
At about the same time I'd got intensely curious about the day trading firms in New York City. Some of them offered a commission structure that was unfamiliar to me: pay-per-share. The more I researched pay-per-share, the more I knew I had to move to New York City. I found that there were literally hundreds of small, independent private equity trading floors.
They each had different criteria for entry and different capital investment amounts, but they all had the pay-per-share structure—the fees ranged from 30 to 80 cents per 100-share block traded. That translates to paying only pennies on the dollar for each trade. I only needed 100-share block trades because I was trading stocks highly priced at the time, $50–$100.
Most of the independent pay-per-share trading firms were on or near Wall Street, so I sold everything I owned and relocated to Manhattan. Now I lived 30 blocks away from Wall Street. I was blown away by those firms. They all had their own trading floors. The caliber of experience of the day traders there made me feel like an amateur. And the truth is, compared to those veterans, I was. For two years I was exposed to real day trading firms and real day traders. I learned more than I had in all years prior. Everything I know to date is in this book.
My Style of Trading: Both Intra-Day and Swing Trading—The Fusion of Both
I am defined as an Intra-day trader and a Swing Trader, but as I've mentioned before I now call myself a Fusion Trader.
Intra-day trading is the specialty of taking profits on small price changes, generally soon after a trade has been entered and has become profitable. It requires you to have a strict exit strategy, because one large loss could eliminate the many small gains that you've worked to obtain.
Swing trading is basically trading off levels found on the daily chart, much stronger levels than intra-day levels. Therefore, you allow your profits to run further because your entries are off extremely overbought/oversold price levels.
I position myself at my trade station each morning, starting at 8 a.m. (or 5 a.m. on the West Coast). I usually trade only the first two hours. But if I'm looking to enter/exit a Swing position, then I watch the charts all day. I watch and trade a max of five stocks per session (up to ten for swing).
Whenever I'm intra-day trading, I typically start my trading positions in 100-share blocks. I will allow a position to grow to 300 shares maximum (and more if it hits swing levels). On a productive day (trading all day with both intra-day and swing trades) I will place about 60 executions, or 30 roundtrip trades (when trading all my stocks).
When swing trading, the amount of shares and how many price levels I accumulate varies depending on several factors that will be addressed later on in this book.
In my program, you will be practicing and learning with one stock only. Once you're on your own, you will eventually progress to trading two, three, four, and a max of five stocks simultaneously. The more stocks you can trade, the more trades you will place, which generates more profits.
In this book you will be learning both my intra-day and swing strategy. You will find that I currently primarily trade swing levels; you, too, will eventually gravitate toward swing once you master the system after I have trained you.
The Direct Market Access Provider I Use for Order Execution and Data Feeds
I use the Lightspeed trading platform for my fastkey order execution (direct market access). Lightspeed offers FASTKEY order execution capabilities. This means you can use your arrow keys and function (Fn) keys on your keyboard to place orders (I will be teaching you the framework to FASTKEY order execution later in this book).
Lightspeed also has all the data feeds you could possibly need. It provides all the basics, such as customizable charts and analytical indicators. Basically, Lightspeed is a one-stop-shop for all your day trading needs. And of course, they are a pay-per-share commission-based brokerage firm.
Most important, Lightspeed has a pay-per-share structure. Depending on your trading activity you could be paying anywhere from 40 cents to $1 for a 100-share-block trade, great for intra-day trading.
The Amount of Capital and Leverage (Buying Power) This System Requires
As both an intra-day trader and swing trader, I enjoy a good range of trading options. The benefit of intra-day trading is that relatively little trading capital is needed in order to day trade stocks/equities. With swing trading, however, the sky is the limit. How much capital I have to invest determines the amount of shares and price level. This will be explained in greater detail in the swing section of this book.
When it comes to intra-day trading, think about it: if you're trading a $100 stock in 100-share blocks, then you only need $10,000 to trade that position. If that's not enough, then you may want to trade 5 stocks at once, and then you only need $50,000 to trade all similar positions.
Either way, you don't need hundreds of thousands of dollars to become a professional day trader. By SEC regulations, you only need $25,000 to open an account.
Here are the main benefits to being a pattern day trader:
Initially, you're given 4:1 leverage. You open your account with $25,000 and you have $100,000 in buying power.
You can place as many intra-day trades as you want.
You should be paying $1 or less on each 100-share block trade.
