Tools I use to be a successful trader

To be a successful daytrader you need to have a full set of tools at your disposal. Some of these tools can be costly others are free. There are so many different brokers, chat rooms, screeners to choose from it can be hard to find the best ones.

First lets talk about brokers. When I started trading at 18 I opened a scottade account. With all of the advertising and 7 dollar trades it seemed to be the obvious choice. They do not allow shorting for stocks trading under 5 dollars. At the time that didn't bother me as I didn't want to mess with cheaper tickers anyway. Over the years scottrade has always provided me with great service and a extremely low commission rate. Much lower then the advertised 7 dollars. A good chuck of my net worth has been made with scottrade. About a year or so ago their borrows started to get weak and maybe 6 months ago they started restricting volatile stocks from shorting. Guess where I make all of my money, yep volatile stocks. As of late scottrade has been my least used broker and I even consider closing it today. I would not recommend it to a short biased trader. If they take away their restrictions I would use them again. They are good if you want to place a large order and don't want to worry about ecn fees.

Lets talk about my best broker today Centerpoint. I started opening ETC 2 years ago. I was pleasantly surprised with their borrows and the ability to short tickers of any price. I'm not a big penny stock trader but I do play a lot of stocks between 1-5 dollars which scottrade does not allow. The customer service at Centerpoint is hands down the best I have ever received. There are countless times I have been boating, hunting, shopping or just away from my computer and I place an order over AIM. Tremendously helpful! One thing I was not used to at the time is ecn fees. If you are taking liquidity these can add up fast! After a while I learned to add liquidity most of the time and actually get a rebate for doing this. After a year with centerpoint using ETC I opened a Wedbush account. There are times ETC will restrict a name from shorting and that's where Wedbush comes in handy. Also with Wedbush I have never been bought in before T+3. Overall the customer service and borrows I get at Centerpoint make this my go to broker. Fees can add up quickly for borrows and taking liquidity. I consider this a cost of doing business.

Third I use Etrade for some long term positions that I have. I'm also on a negotiated commission rate there. I use this account infrequently mainly to just have extra BP if I need to box shares or just need extra cash. I do not recommend Etrade for daytraders.

I have used Interactive Brokers in the past but closed the account due to their horrendous customer service. If you plan to trade with IB, make sure you are ok being on hold 20-30 min waiting for an answer to your question. Even with the poor customer service their borrows are decent and they are a great option for long term borrows if you need them. Im considering re-opening an account

I used speedtrader with great success for 2-3 years but when they went to COR clearing I left. COR was hands down the worst clearing firm I have ever been with. Horrible borrows, huge maintenance requirements and they would always give me a margin call and want me to deposit more cash. To me, COR was literally a nightmare. Even though I loved speedtrader, I decided to close the account. Speedtrader had excellent customer service and very aggressive commissions. Today they have ETC and I would recommend them again. I already trade with ETC and centerpoint so I have no re-opened with them yet. 

Next lets talk about my screeners. Finviz is by far the best screener that I have found. My daily scans consist of the biggest daily, weekly and monthy gainers. Obviously if you know how I trade I'm looking for a parabolic move or over-extension to short. With finviz you not only get the scans but you also get a corresponding chart to go with each ticker. This cuts down tremendously on time. Before I found finviz I would have my scanner load the results and I would have to put each ticker into bigcharts to get a look at the chart. With finviz all of that is taken away and my scans are now completed in about 1/4 the time.  A few times a week I go over the biggest daily, weekly and monthly losers as well. With the bull market we have had the past few years I haven't used this much. Here are some of the scans I use. Daily gainers, here, weekly gainers here and monthly gainers here

I also use Equityfeed for intraday scanning. I just started this a few months ago and I haven't familiarized myself with all it has to offer yet. The main reason I got it was to find big intraday moves. What I'm looking for is big moves in the 5, 10 and 30 minute time frame. This screener is mainly just used for intraday scalping. They have raised their prices to 250 a month but for me it is well worth the money.

Next lets discuss chat rooms. I have used 3 in the past which I will not mention but only stuck with one of them Investorsunderground. There are so many reasons I recommend this service. First of all Nate the head trader has a method very similar to mine. He is definitely more versatile then me but I'm trying to catch up. He goes long, short, trades nasdaqs otc's you name he trades it. If you want to learn it all he is the best. The room is probably the best I have found to share momentum stock ideas and it is very timely with news releases as well. First thing I do when I power up my computer each morning is to log into chat and see what is going on premarket.  Not only is the chat room very beneficial but the webinars are great. I haven't caught as many webinars lately as I have wanted because of time but hope to start getting back to them. The other thing I like about this room is the friends I have made. I chat daily with other great traders and sharing ideas is extremely helpful. Lastly Nate makes himself available daily to chat with his members one on one. The small cost for this chat room pays for itself time and time again. I also recommend Nates trading DVDs found here 

As most of you know I'm almost strictly a technical trader and do not trade news very often. Again a lot of news is mentioned in the I/U chat room. I hope to get into news and fundamentals a bit more and from chatting with some very good traders it seems tradethenews, briefing and flyontheway are probably the best for breaking news and staying on top of upgrades/downgrades.

When I really got into trading about 8-9 years ago I would simply search for the cheapest brokers and any free content that I could get my hands on. I quickly learned that the cheapest is not always best and you get what you pay for. The services that I use today are well worth the money and pay for themselves time and time again. 

So I've gotten a few requests to talk about risk management. To me this is one of the most important if not the most important part of trading. Controlling your risk and capital is vital to any daytrader. 

For me I actually go into each trading day fearing losses. With so many tickers and setups to trade the last thing I want to do is put on a trade where the odds are not greatly in my favor. I try to avoid boredom trades at all cost. Also when I put on a trade I usually like to be in the green immediately. If I place a trade and I'm immediately red it usually means my entry was not that great. There are times though when I'm building a position and I don't mind a trade going against me for a short while. 
Sometimes when things are slow it is very hard to be patient enough for the perfect setups. By having a mentality and thought process that fears to lose money it helps me only place trades where I'm very confident I will be successful. 

After trading for nearly 10 years I know I can make money in the market. I know those golden setups will occur that just seem almost too easy. The problem is sometimes those setups do not happen all that often. Sometimes great trades can occur daily or weekly. Other times you may have to wait a few months for them. Again when I talk about great setups for me personally it is PLUG at 11 DGLY over 30 ISNS over 9 ect. These are setups that I have a fair amount of confidence in and where a majority of my money is made. 

So with that being said let's talk about risk management. I have already stated I go into each trading day fearing losses. This helps me wait for the good setups and avoid boredom trades. Being that these perfect setups usually do not happen on a daily basis that means you are now looking for secondary trading ideas or maybe even scalping. Now when I say scalping I do not mean trying to make .05 on a trade. Maybe 50 cents or a dollar depending on where the stock is trading. My risk management is different depending on how great of a setup it is. If it is a normal day and I'm just trying to scalp something my max loss might be 500-1000 dollars. If I see a stock like ISNS at 9.50 which I believe has a great chance of moving 1-2 dollars on the downside I may risk 5000 or maybe a bit more. The amount of money you are willing to risk all depends on your account size and the potential reward.  Also for me to minimize my risk it is not uncommon for me at all to get in and out of a trade 3-4-5 times before it finally cracks. Again by having a mentality that fears losses I try to never let a trade get out of hand. If I start to get squeezed and I don't feel comfortable I just get out. I can always re-enter when the stock starts to show weakness. Yes sometimes I pay a few more dollars in commissions then I would like but it has saved me from some massive losses.

Take ISNS for example I was short 25K sept 2nd at 4 dollars. It started to run on significant volume over 4.20 and even though I hated covering for a  5k loss I did. The next morning it opened over 9 and almost hit 10. That's when I shorted again and held for some decent gains. Even though I felt strongly it was a good short near 4, the price action told me otherwise and I covered to re-short much higher. So many traders have blowups because they are too stubborn to take a small loss and it ends up wiping them out. I try to never let my emotions get in the way. No matter what you believe about a company good or bad, price action tells all. If you fight the trend you will lose.

To summarize a few points, your risk all depends on the potential reward and account size you are dealing with. I personally will not let any loss be greater then 10% of my account size. If I take a big loss like that I almost consider calling it a day and coming back the next morning with a fresh start. The last thing I want to do is feel forced to make back the money I just lost. That can be dangerous and the losses can snowball from there as you are not thinking correctly. In this business if you do not have good risk management you will not last long as a trader.

Background of trading

First if you don't know who I am or my background check out this interview I did with IUchat. Second I was not an English major and was not the best student in school either so please cut me some slack with my writing skills and grammar 

 I have been trading about 10 years and have made a little over 5 million in that time frame. About half of that is verified here on profitly. I do not say this to boast or brag but to inspire new traders and say yes a decent amount of money can be made in a short time frame. I have a background in accounting and also my MBA. Depending on time I hope to write a blog maybe once a month. I'm married with a 20 month old and one on the way so if I do have free time I try to get away from the computer.

 On this first short blog I will not get too in depth on any one subject.  I will try to give an overview of my trading style and some on my background. I started trading early in college. I would spend countless hours studying charts trying to figure out their patterns. I would also read tons of financial news and study longer term methods in the market. With my lack of patience and love of a good adrenaline rush I knew short term trading was for me. Sure I have some money in longer term stocks and mutual funds today but let's face it that is the boring way to make money. I opened my first brokerage account when I was 18 and had to have my mom co-sign with me to open a margin account. At the time I started I only knew of buying stocks and I was not very successful. That didn't deter me very much because I knew someday I would find my niche and there was a lot of money to be made trading.

After slowly losing my stake each year I would work over the summertime and save a few thousand to start up again during the school year. After 2 years or so I figured out the concept of shorting and my first trade on the short side was a company that put out a bogus PR and ran up around 200%. I got in at the right time within a day it got halted. When it re-opened a month later I almost tripled my money. I knew from that point on my niche would be trying to short these parabolic moves. The next 8 months or so were simply unbelievable and the finale ended with a company called empire resources. Damn what a great chart. The original 5k I started with was now 1 million dollars. I felt I was on top of the world at that point. I was just about to graduate college and had a million dollars.

 Even though I had learned so much in that year I still had virtually no rules at all. I was trading so wild and reckless I was bound for a setback. Refusing to wire out profits and trading on margin, usually going all in on most positions I was just asking for a blowup. That summer was extremely tough for me losing around 500k. The feeling of being on top of the world just a few months earlier was now crushed. Luckily I finally came to my senses and still had around 500k. I immediately wired 400k to my bank account and started over trading with 100k.    My first lessons even though painful and very expensive were instilled in me at that point. Position sizing not over trading and taking profits are so important to a successful trader. In my interview with IUchat I mentioned that I had no service or mentor at that point in my trading career. Everything I learned good and bad was on my own. Sure the summer of me losing 500k is just a distant memory today but boy back then what a benefit it would have been to have someone like Nate investorslive to smack some sense into me and instead of a 500k learning experience maybe it would have only been 100k.

The past 3-4 years I feel even though I still have a ton to learn I have instilled a good set of rules and principles to my trading. Even though I have enjoyed some success there is no way I could have done it on my own. First of all I'm part of the great community of traders with investorslive chat room. The benefit of being able to chat on a daily basis with other great traders has definitely taken me to the next level. Even though most of my knowledge was self-taught the advantageous of a trading community are very beneficial. I also am extremely grateful for my parents and upbringing. Even though my family was not the most affluent when I was growing up my parents always made sure my sisters and I went to the best schools and had the best education possible. My parents would always sacrifice for themselves to make sure we had everything we needed. Even though I've had some success in the market I still consider myself a student and I'm constantly trying to learn and better my skills. I hope you have enjoyed this first blog and I look forward to writing more in the future. Some of the topics I will get more in depth are as follows. If anyone has a specific topic not mentioned let me know and I may add it to the list if enough people request it.

*The rules I trade by

*The tools I use ie brokers, chat rooms ect

*The stocks I trade and how I find them

*My strengths and weakness as a trader

*Take a recent winner I have and discuss my entries, exists and thought process