TLDR;
This video provides a comprehensive guide on how to start day trading, focusing on a simple and effective strategy for beginner traders. It covers essential topics such as choosing the right trading platform, understanding different account types, managing risk, identifying the best stocks to trade, reading candlestick charts, utilizing technical indicators, and developing a robust trading plan. The video emphasizes the importance of disciplined trading, continuous learning, and adapting to market conditions.
- Selecting a suitable trading platform with simulator
- Understanding risk management and trading psychology
- Developing and sticking to a well-defined trading plan
Intro [0:00]
The video introduces a day trading strategy designed for beginners, emphasizing its simplicity and ease of understanding. The goal is to equip viewers with the basics of trading, technical analysis, and stock selection, enabling them to implement the strategy effectively. It stresses the importance of practicing in a simulated environment to test profitability before risking real money, and promises to provide simulator suggestions.
Day Trading Quiz [1:00]
The video starts with a quiz to assess the viewer's current understanding of stock charts. It presents scenarios where viewers must decide whether to buy a stock based on chart patterns and indicators like the Moving Average Convergence Divergence (MACD) and volume. The quiz highlights the importance of recognizing subtle cues and understanding the language of technical analysis to predict market movements.
The Best Brokers for Day Trading [11:00]
The video discusses selecting a trading platform, emphasizing the importance of using a simulator before trading with real money. It explains why commission-free brokers often don't offer robust simulators due to their reliance on selling order flow. Key features to look for in a broker include reliability, fast order execution, full Level 2 market data, hotkeys for rapid entries and exits, and a platform that allows simulated trading. The video recommends Thinker Swim, Weeble, and Warrior Trading as the best stock market simulators, comparing their features and costs.
Cash Accounts vs Margin Accounts [23:00]
The video explains the differences between cash and margin accounts. Cash accounts require traders to wait for trades to settle before reusing the funds, while margin accounts offer unlimited trading but require a minimum balance of $25,000 for US residents. It suggests that beginners should start with a cash account to build a solid foundation and grow their account slowly. International traders may opt for international accounts to bypass the $25,000 minimum, but this decision involves assessing risk and reward.
Risk Management in Trading [39:00]
The video emphasizes the importance of risk management in trading, highlighting the dangers of emotional trading and the downward spiral it can create. It advises trading in a simulator until consistently profitable and always knowing the exit price before entering a trade. The video introduces the concept of a 2:1 profit-loss ratio, where the potential gain is twice the risk. It also discusses breaking the negative feedback loop by focusing on accuracy, trading quality setups, and cultivating a success mindset.
The Best Stocks for Day Trading [46:39]
The video explains how to find the right stocks to trade using stock scanners. It discusses the concept of supply and demand, emphasizing the importance of identifying stocks with an imbalance between the two. Key criteria for stock selection include a news catalyst, a price between $3 and $20, a 30% increase on the day, and five times higher volume than average. The video also introduces the concept of float, which is the number of shares available to trade, and explains how it affects stock movement.
How to Read Candlestick Charts for Day Trading [59:00]
The video covers the basics of candlestick charts, explaining that they are used to view historical price action and predict future movements. Each candlestick communicates four pieces of information: the open price, close price, high price, and low price. The video explains different types of candlestick patterns, such as the doji, gravestone doji, dragonfly doji, long-legged doji, bottoming tail, and topping tail, and how they can be used to identify potential buy and sell signals.
Technical Indicators for Day Trading [1:12:00]
The video discusses the use of technical indicators in day trading, emphasizing the importance of keeping charts simple. The presenter uses moving averages (9, 20, and 200 exponential moving averages), the volume-weighted average price (VWAP), volume bars, and the Moving Average Convergence Divergence (MACD) indicator. He explains how these indicators can be used to identify potential buy and sell signals, and how he uses them on different time frames (1-minute, 5-minute, and daily charts).
Support and Resistance [1:26:00]
The video explains the concepts of support and resistance, noting that most stocks find support at the volume-weighted average price (VWAP) and moving averages (9, 20, and 200). It also discusses drawing trend lines around previous prices to understand context. The presenter shares his favorite chart pattern, which involves waiting for a pullback and then buying when the first candle makes a new high. He emphasizes the importance of setting a stop loss at the low of the pullback and targeting a retest of the high of day.
Where to Buy & Sell as a Day Trader [1:40:00]
The video discusses order execution, explaining the differences between market orders, limit orders, and stop orders. It recommends using limit orders to manage risk and control the price paid for a stock. The presenter also discusses the importance of understanding market hours and the limitations of stop orders before and after regular trading hours.
Circuit Breaker Halts [1:50:00]
The video explains circuit breaker halts, also known as Limit Up Limit Down (LULD), which pause trading in a security that trades outside a standard deviation. It details how halt levels are calculated based on the prior close and reference price, and how they affect trading during regular market hours. The presenter also discusses the auction process that occurs during a halt, and how it can affect the opening price when trading resumes.
How to Read Level 2 [2:04:00]
The video explains how to read Level 2 market data, which shows the depth of the market and provides insights into potential price movements. It discusses the bid, ask, spread, and time and sales, and how they can be used to understand order flow and identify big buyers and sellers. The presenter emphasizes the importance of watching the ask price and looking for bursts of green or red on the time and sales.
Simple Day Trading Plan [2:22:00]
The video outlines the key components of a simple day trading plan, including a detailed description of the strategy, the time of day to trade, the type of stocks to trade, the technical setups to trade, and the daily max risk and profit targets. It provides a sample trading plan that focuses on trading momentum stocks between 8:00 a.m. and 10:00 a.m., using the first pullback setup, and setting a daily max loss and profit target of $25. The video also discusses a strategy for scaling into the day, starting with a smaller position size and then increasing it based on the results of the first trade.
Scaling Up Your Trading Strategy [2:36:00]
The video discusses when to scale up a trading strategy, emphasizing the importance of building a track record of consistency before increasing share size or trading frequency. It recommends starting with one trade a day and slowly increasing share size, and then gradually increasing to two or three trades a day. The presenter also discusses the importance of having guard rails in place to protect against overtrading and emotional decision-making.
Day Trading & Taxes [2:41:00]
The video discusses day trading and taxes, explaining how most day traders overpay on their taxes due to various factors. It presents two ways to pay zero capital gains taxes: moving to Puerto Rico and day trading in a Roth IRA. The video also discusses Trader Tax Status and Mark-to-Market accounting, which can help traders maximize their deductions and avoid wash sales. Finally, it touches on incorporating day trading as a business, which can provide additional tax benefits.
Most Common Day Trading Mistakes [3:00:00]
The video concludes by discussing common mistakes to avoid as a beginner day trader. These include trading with zero strategy, lacking the discipline to follow a strategy, and comparing oneself to others. The presenter offers tips for improving discipline, such as keeping share size small, following strict loss guidelines, and journaling to track triggers that cause emotional trading.