March 2011

I started with $6,000 in my E*Trade account.

Simple, I didn’t. I just dealt with the ‘3 day trades in 5 rolling business days’ restriction and was really picking with my trades, only taking them when I knew the risk/reward was heavily skewed in my favor.Some people go with prop firms or offshore brokers, but at the time I really couldn’t afford to risk getting scammed as losing the $6,000 of my trading capital would have surely prematurely ended my trading career. It was just a risk, I didn’t want to take.

I was able to get above the $25,000 minimum within 6-8 months or so from just an accumulation of trading profits.

March 2014

About a year and another year to get comfortable with relatively larger size for bigger profits.

Structural Engineer

First, definitely don’t try anything stupid to get fired.

Living on the west coast where the market starts at 6:30AM PST really helps as I was able to trade the open until about 8AM PST. I’d tend drive to work for 1 1/2 hours and then load my platform on my work computer but just the L2 and have the charts on my phone. I’d also use Teamviewer to remotely access my platform from home via my phone or tablet. For extra privacy, angle your screen a certain way and/or buy an anti-glare monitor filter/protector. If your work blocks/monitors your internet, you can use your phone as a hotspot or purchase a MiFi device.

If you are on good terms with your boss, you might as well just blatantly trade on the job like i was able to do after about a year or at least bring a laptop or something and trade on that. But again, don’t do anything dumb to get fired.

I personally saved up 5 years worth of annual income but you could probably get away with 3 years of annual income saved. But I’m not a financial adviser and everyone has different circumstances and comfort levels so really think it through and consult a professional if you’re not sure because this is a HUGE decision to go from a steady guaranteed paycheck to something that is more uncertain and fickle.

A fast computer.
Multiple screens.
Backup Battery Power Supply (in the event of power outages)
Very fast internet.
Back up Internet.
Back up Computer (such as a laptop)

Home:
Intel i9 9900K Octa-Core @ up to 5.0 GHz
32GB DDR4 RAM
Gigabyte Nvidia GeForce RTX 2080 8GB (supports 4 monitors)
LG 43UD79-B 43″ 4K Monitor x 3
Samsung 970 EVO Plus 1 TB M.2 NVMe SSD
3 Additional Monitors (1 LG 27″ and 2 Dell 24″)
Logitech G710+ Mechanical Keyboard – MX Cherry Blue Switches
Logitech G502 Proteus Spectrum Gaming Mouse
Elgato Stream Deck XL – 32 KeysMobile:
ASUS RLOG-GL753VE 17.3″ Screen
Intel i7 7700HQ Quad-Core @ 3.8 GHz
16GB DDR4 RAM
Nvidia GeForce GTX 1050Ti 4GB (supports 4 monitors)
256GB M.2 SSD
ASUS MB168B+ Portable USB Monitor
ASUS MB169C+ Portable USB Monitor
Logitech G610 Mechanical Keyboard
Logitech G403 Prodigy Gaming Mouse
2x Anker Multi-Angle Aluminum Stands (to hold the portable screens)Go to my blog post about building a computer setup for links to these components as well as minimum recommended specs for those of you on a budget.

Centerpoint Securities. They have hands down the best short list with the best routes and the best customer service.

Switching to them really opened doors for me in terms of opportunities as a trader. Click here to contact my broker at Centerpoint Securities.

Please note that Centerpoint Securities is a US-based broker designed for active traders which means you need to meet Pattern Day Trader (PDT) requirements to have an account here.

I’m interested in opening an account at Centerpoint Securities but I don’t have the $50K minimum, what can I do?

Check out my broker at Centerpoint Securities.

Please note that Centerpoint Securities is a US-based broker designed for active traders which means you need to meet Pattern Day Trader (PDT) requirements to have an account here.

DASTrader for L2 and to execute orders. thinkorswim (TOS) for charting because they have awesome tools and settings and you can draw all sorts of things on them and save them and share it with others. I use DASTrader for L2 because it is much faster than TOS’s L2.For a FREE 14-Trial of DAS Trader Pro, click here: http://bit.ly/2UOv1HW

I currently use Trade-Ideas as my stock scanner. You can see my tutorials on how I set up my Trade-Ideas scanner settings here, here, and here.

I currently use Benzinga Pro as my live news feed service. They have some pretty cool features like the “squawk feature” where they have a guy that reads the news to you so you don’t have to waste precious seconds reading it yourself and also a live chat with their support them that will answer anything you ask them. So if you need to find out why a stock is moving and you can’t find the news for it, they can look it up for you or look up any fundamental information for you as well if you’re short on time.

I’m almost exclusively a scalper, meaning I’m in and out of positions sometimes in a matter of seconds. I very rarely hold positions longer than 15 minutes.

I get up around 6AM PST (9AM EST), freshen up and talk to my broker to locate shares to short for stocks I feel I need shorts for. Then I do some last minute revisions to my technical analyses and plans and narrow down my list of possible hot stocks to about 4 and then narrow it down to probably 2 before the market opens.

Yes it does take more trades to make money but the reason why I scalp is because it suits my personality more. I’m usually a very anxious person and holding positions for an extended period of time causes me to feel stressed out and since trading is already a stressful profession, it is ideal to limit stress as much as possible.  Also, knowing that trading is about finding an inherent edge and the highest percentage setups which includes limiting any random variables beyond your control affecting your position as much as possible (such as random news, analyst upgrades/downgrades, dilution, market order fat fingers, hedge fund bid props, halts, etc….), I feel it’s in our best interest to limit our exposure to all this by minimizing the duration of your time holding a position. In the end we’re trying to make a career out of this and I want to be able to have my own destiny in my hands and not leave it up to that small chance some outside event could ruin my trade.

1. “The Morning Washout Long”/”The Morning Spike/Panic Pop Short”
I usually look for a stock that currently is the “hot stock” that everyone has their eyes on. These stocks usually gap up nicely, have lots of volume and momentum, and most of the time have a history of running in the past. Typically what I look for at the open, people would often try to frantically buy and chase the stock as to not miss the trade, however MMs usually see this and they take advantage of the chasers and often pull their bids and “washout” the stock causing an immediate dip at the open and vice versa for gap downs and fast spikes. I see this as a massive opportunity to enter a position on the ensuing panic, which more often than not results in a quick reversal for a fast profit, where I typically will exit the position almost immediately. This works because the same people that chased the initial move start to panic when they realize they’re down on their position and then when the MMs bring the bids back, they chase it back again. You’re just taking advantage of the emotional traders making a poor decision. If done right, this strategy results in over a 90% success rate, but you need to practice being fast (having orders ready, using hot keys, etc…)
(Examples: https://www.youtube.com/watch?v=V5sb5H4lOU0 ; https://www.youtube.com/watch?v=jlXaJUzH8fU ; https://www.youtube.com/watch?v=nsGMxvO5d-U)2. “The Short Sale Resistance (SSR) Pop/Spike”
Similar to the “The Morning Washout Long”/”The Morning Spike/Panic Pop Short”, but this is an even higher percentage play, the only ingredient it needs for it to work is volume. SSR means shorts trying to enter a position, won’t be able to get in by whacking the bid. That makes it harder for the stock to go down and MMs typically take advantage of this by using a bid propping manipulation technique which induces some panic covering from these shorts which results in an ensuing spike. This type of trade is a very high percentage play again assuming there’s volume and no other plays cannibalizing volume from it.3. “The Late Day Panic Spike Reshort”
Stocks that have been tanking/fading all day, ideally in a slow grind death, sometimes will experience a late day spike probably induced by short covering (typically between 2:30PM EST- 3:30PM EST). The fast and more violent the move, the better the risk/reward will be. The trade is also more effective when the stock has been trading in a low volume grind because even a few small market covers will cause a fast violent pop for you to reshort back down. The stock usually comes back down where it came from since that uptick in price was just a result of a few emotional traders that wanted out.4. Any big panic washout or parabolic spike.
Any massive tank job or parabolic spike usually presents an opportunity for a quick reversal scalp but do understand that these trades, although still high percentage, aren’t as high percentage as the trades at the open because there are additional external factors and often are on lower volume than the opportunities at the open. Be mindful of playing any moves that are news driven (i.e. trying to trade SPY during FOMC), you may get stuck in an unfavorable situation as the market becomes extra volatile and unpredictable during such situations. For that reason, taking that kind of setup is not something I would recommend as I feel that it is too much of a gamble.

I’ll add more to the list of setups when I find out more, but these are my current bread and butter that accounts for most of my profits, especially the first 2.

When do those setups NOT work?

As with any strategy, nothing is 100%. Even though I say that if done right, it is 90% successful that means that 10% of the time it could be wrong. So far, I’ve encountered a few causes that result in those setups not working.

They are:
– Random News
– Dilution/Bid Propping (must be recognized by unnatural or inorganic price action on the Level 2)

If you recognize any of this, it would be in your best interest to exit your position before it gets ugly. If a stock that’s supposed bounce or tank appears to be manipulated then you’re up against some unknown force that is toying with the price action. You don’t know what their intent is behind this move. Are they trying to load up, dump shares, who knows? You have no edge here, so it’s in your best interest to not get caught in the crossfire.

(Continuing the question from above) – Likewise, same thing for shorting panic pops. How do you know it’s going to go back down? How do you know it’s not going to keep going up?

To keep things short, I don’t know. I don’t have a crystal ball nor do I have these companies’ CEOs on speed dial to give me the low down on what’s to come. Trading is a game of probabilities. You find setups that work more often than they don’t and take those trades. Even if you find a setup that works 99% of the time, it’s bound to fail 1 out of 100 times. It’s just simple mathematics. I basically just always have a plan for both scenarios: when it works and when it doesn’t. That’s it.

An edge is an advantage. In order to have a long successful career as a trading, we must only trade setups where there is an edge. The easiest way to find edge is when there is panic caused by emotional traders.

I focus on the first 2 hours from 9:30AM EST-11:30AM EST and then from 2PM EST-3PM EST. These are the hours where the highest percentage plays exist. I will only trade past these hours if there is an obvious high momentum stock that is running with favorable price action.

Low percentage plays are trades where there is a very high gamble factor or the risk is extremely high and disproportionate to the reward. A few types of trades that I feel are low percentage are:- News Driven events where a stock could turn on a dime with some random statements, tweets, counter PRs, etc…
– Trading during the dead hours (11:30AM EST – 2PM EST)
– Trading during the last 30 minutes (with the exception of there being some very high momentum stock with solid price action)
– Stocks that have high probability of halting
– Trading a ticker that has obvious manipulation (repeated bid props/ dilution, etc…)

I started off with a 1 minute chart, thinking that since I scalp fast moves, it would make the most sense. However, I found that 1 minute charts simple have too much noise and gave too many false signals. Then I tried a 5 minute chart and realized that they did not provide enough information or a full picture for my style.I compromised with a 3 minute chart and it’s worked perfectly since. I might also add, for all you math geeks out there, since 3 is a factor of 15, 30, 60, that means every 5th, 10th, and 20th 3 minute candle closes at the same time a 5, 15, and 60 minute candle closes, respectively. This makes it easier to use a 3 minute chart in tandem with the popular 15, 30, 60 minute time frames for an even fuller picture if required.

For this reason, I don’t favor a 2 minute chart, as 2 is not a factor of 15.

The only technical indicator I use is VWAP. I feel that most technical indicators are “lagging” indicators and often give false signals or contradict each other so I keep it simple in this department.

Tape reading is a relatively abstract and advanced concept with many approaches to it and thus you won’t find too much information on it. There’s no, one magic formula to mastering it. It’s just one of those things that you pick up with experience and the time it takes to fully understand it varies from person to person. A lot of my videos discuss tape reading at one point or another so watching them is a start. The best thing I’d recommend is probably to just record the action everyday and watch it on slo-mo and see if you notice any patterns.

While I do have hot keys set up (see my video regarding hot key set up for DAS Trader here), believe it not, I usually use just keyboard and mouse. I got really fast thanks to years and years of video gaming and being forced to take piano lessons against my will by my mom from the age of 4. Practice makes perfect!

No, I never used market orders. Only limit orders.

They are manually drawn in support and resistance lines using the Price Level feature on thinkorswim. See this video for how I draw them.

Set upper and lower bound to 0.

Camtasia Studio

I used to use Fraps back in the day to record my screen while gaming. OBS Studio is one that’s pretty good right now. Also VLC Player has recording capabilities as well.

Because it’s difficult to make large quick gains on them like I would on small cap low float stocks. The strategy I use is highly dependent on volatile panic moves. Although this does occur on the bigger names like AAPL and FB, it’s tough to size in enough such that you’d be able to bank several thousand bucks off of it very quickly.Not to mention these bigger stocks often have predatory HFT algos that often prey on retail traders attempting to go big. Since these stocks have really big players on them with deep pockets, they will be able to bully you out of your position with various tricks. Just think of the big stack bullying the small stack at the poker table.

There will be times when I feel it will be viable to trade these names, however. It is when the stock is trading abnormally high relative volume to normal and the direction is very obvious. In these conditions, these big players will have less power to bully others because of the significantly greater cash flow. Think of the teacher who has to watch over a group of students but now think of the same teacher who now has to watch 10x the amount of students. Going to be harder to control them all now, right? Think VRX when Ackman et. al was pumping and dumping the stock or TWTR, GPRO, FB, etc… when they IPO’d.

1) Reminiscences of a Stock Operator by Edwin Lefèvre
2) Trading in the Zone: Master the Market with Confidence, Discipline and a Winning Attitude by Mark Douglas
3) The Disciplined Trader: Developing Winning Attitudes by Mark Douglas

Check out chartgame.com. Pretty fun, free, and easy way to learn charting and it’s pretty addicting too.

I trade with a per trade structure which allows me to trade a lot of size per ticket. On top of that I’m very good at adding liquidity on my trades and getting ECN rebates which means often end the day with negative fees/commissions or essentially “getting paid to trade”. Please see my blog post about it here: http://madazmoney.com/post/ecn-rebates-getting-paid-to-trade

UVXY, when it is in play (i.e. when VIX is over 20-30), is a very liquid ETF that essentially has a ton of panic moves in it making it a dream for a scalper like me. The VIX is also known as the “fear index” which tends to go up when the overall markets are down on an extended time basis, since my strategy feeds of panic moves where people are overly emotional, it is natural for me to thrive on a ticker like UVXY which follows the VIX at a 1.5x leverage, essentially making it “panic on panic” during a washout long or panic pop situation which can happen all day long during bear or bearish markets. I even had a series of videos dedicated to UVXY here: https://www.youtube.com/watch?v=MeoEKt_PqkY&list=PL5MwJq9BkDkVB6s-sCwMCyA0QpGrOuCs_

FUN FACT: I actually haven’t had a Big Mac probably in over 15 years. I actually promote and encourage quite the opposite, a healthy diet with no junk food. I worked at McDonald’s when I was 16 in High School and after seeing what does on there, I never wanted to eat at McDonald’s ever again. The whole Big Mac thing was just an inside joke that sorta just caught on. You gotta admit though, it’s catchy and entertaining. 😉

I watch the Level 2 (bids and asks) 90% of the time while referencing the Support and Resistance levels on the chart which I am able to memorize for the most part but still have up as a “cheat sheet” of sorts. I use the Time and Sales to spot the general direction of the order flow which I can keep track out of the corner of my eye without having too much specific attention to it.

It’s on the trading Platform, DAS Trader Pro. Right-click on the Montage where it says “VWAP” and it should bring down a dropdown menu for you to select LDLU. For a FREE 14-Trial of DAS Trader Pro, click here: http://bit.ly/2UOv1HW

Mental. I believe using hard stop losses, as in leaving stop orders in the open market leaves you vulnerable to being stop hunted by the market makers and is equivalent to playing poker with your cards face up so all your opponents can see what you have.

Please refer to this official document from NASDAQ here.

You can find many live examples of how I recycle shares in several of my more recent YouTube Videos. This one in particular is a good starting point (https://www.youtube.com/watch?v=HsMzcySNtUQ).