Risk Management

You see me do it daily in chat room, but let's talk about it!

How do you determine if a trade is worth it?

When you short is the fade worth more then the perk?

Vice versa, is the long worth battling into the downside?

Here are some tips.

Tip 1) Have a 2/1-3/1 ratio or more. 1/1 ratio or 1/1.5 ratio isn't really worth it

Example -Say you buy ticker $DANG at $15.15 your risk is $15 for potential reward of hod at $15.35. 1/1.5 ratio not worth it. -Now lets say you buy it at $15 and your risk is break below $15 but reward its $15.35 thats a 3.5/1 ratio.

Tip 2) Knowing when to cut losses.

Example - If your set risk was .10-.20-.30 and so forth. Respect your rules don't add into a loser. Unless you have a final stop in play. Yes I do dip buy and say if this goes to this price I'll add but if it hits this price I'm out. - In order for you to be profitable its about your odds, nothing more and nothing less.

Tip 3) If your emotionally compromised, then cut the day short. Don't force.

Example -If you never play with size and you start to after big losses, you're #$%%^ed -Block out all emotions, don't worry about next months bills. If you do you're #$%%ed Need I say more about this Tip?

Tip 4) Plan your 3 E's -Entering -Exiting -Escaping

Tip 5) Use Limit orders vs Market orders

Tip 6) Have a Plan!!!!

See you in the chat room!

Thanks for reading,

Derrick Leon

The Learning Curve.

The Learning Curve

   This blog will be solely focused on the tools I used to become the trader I am today. A lot of you are in the Pursuit of Happiness. How many of you attain that? Well that's for you to decide. Is this a rewarding career? Heck yes it is. Was it worth the blood, sweat, and tears? Yes. People often say, "Only 10% of day traders make it, & its not worth it." This is true. Are you that 10%? Do the numbers, how many people keep the same job over a life span, how many high school & college dropouts are their? You know 10% of Americans are well off, 5% of that you have the rich and 1% of that you have the super rich. Hmm that's interesting. I hope I'm hinting something here. Day trading like many other careers has the same exact numbers of failure give or take. Are you motivated? Are you the next successful trader? Have you invested in your learning? If the answer is no, then more then likely this blog isn't for you. 

 As many of you know I started trading penny stocks. That's where I learned my support and my resistance lines. I had no idea how to read level 2 quotes, charts, or candles. I learned most of my charting skills at stockchats.com. I would highly recommend this to a new trader or even a novice. This teaches you almost everything you need to know about charts. A lot of interesting stuff in here. This my take weeks, maybe even months to get it down. 

 Paper trading, ah yes I did say paper trading. Want to invest in your education? Then this is how you start. Ever watch a 16 year old drive a brand new Corvette? I didn't think so. Why would you do the same? Get what I am hinting at? If not no worries, just blow your money on something else. I'm serious I lost big when I first started. Wish I started paper trading first. Yes its a whole different experience. Yes you can make 100k on paper, but don't brag about it like most of the furus on Twitter. Anyways once you have a 51-55% winning average on paper move onto the real thing. Hopefully you don't open 100k account your first time around. Take it easy, go small at first, then build your way up. Suretrader has a 100k demo. You can also download apps on your smart phone. 
  
  If you want to be a successful day trader. You need a level 2 pro platform hands down. Your broker should provide you with this at an extra fee. Don't trade without it. You might as well donate your money if you are trading without this 21st century tool. I use charts, level 2 montage, times and sales, news, market clock, and watch lists. If you wanna be a serious trader then buy the package, don't be the guy buying cheap oil for his car to later find out his engine is screwed.

This is a mental thing, but if your a trader and see unrealized gains behind your screen it seems like a game right? It isn't, I have $1,000 cash in front of my computer to make me realize what money actually looks like. This is a mental thing again. I use this as a reminder of what unrealized gains could potentially look like on hand. Helps a lot. 

  Ever read? If not its a good time to start. Even though the books I will recommend have nothing to do with trading, I think its paramount to your success. Books have a funny way of improving your life. So much knowledge stored on selves. Life experiences that have gone unnoticed just waiting for you to read. "You will be the same person you are today, 5 years from now, besides the books you read and the people you meet." Here is a list: The Power of Consistency by Weldon Long, Think and Grow Rich by N Hill, Rich Dad poor Dad by Robert K, The Alchemist by Paulo Coelho, and The Mentor. The list goes on. Just read. Personal development is key to your success.  

 Join a newsletter with a professional Guru. Yes a Guru is paramount to your success. Want to go skydiving without a teacher your fist time around? Yeah you'll probably end up hurt or worse. I would recommend a guru who is transparent and doesn't paper trade. A Guru who's name has been put to the test and has passed every single time. Nate at Investors Underground has it all. We have Mountain Trades aka @MoutainTrades who is a ridiculous penny guru, he runs the penny chat. A buddy of mine @stockchoices turned 5k into well over 70k in a few months learning from this guy. We have Michele aka @Offshorehunters who runs the swing room. Her calls are unreal. Yeah I made $34,000 or so on PLUG the other day, she assisted in that trade. Finally but not least, Nate aka @InvestorsLive, this guy is my mentor and friend. He has helped me in every step of the way. Yeah he did make me $33,500k on NEWL short. I had my two biggest days because of the IU community Nate has built. You have 3 services in 1. What is their to think about. He also has the best dvd out there. The dvd is worth more then advertised. Invest in your education or don't its up to you. If you do decide to sign up. I would highly suggest the elite service. Nate does video recaps that will help improve your skills as a trader. 

  Another great tool is Stock Horizon. This tool gives you real time alerts to buy or short & price targets. Even if you just watch the alerts it can teach you a lot. This tool has an 78% win ratio, sometimes higher. Steve is easy to deal with and will get back to you with any questions you have. 

 Twitter is the last tool I'm going to talk about. There are furus and real gurus on there, so be careful who you follow. This is a must though. We are in the 21st century where social media rocks. Join the flow. Join Twitter.

  If your a serious trader or want to be a serious trader. These tools should help you advance in trading. Invest in your education and don't ignore these tools by trying to save a quick buck. For every dollar you invest in your health you save 4 dollars down the road. Interesting. I'll leave you guys with that.


Link for Investors Underground 
Link for Stock Horizon 
Link for Stock Charts
Link for 100k demo



Hope this helps,
Derrick J Leon

PLUG trade today.

         This past weekend I thought about this $PLUG chart. They kept saving it. The news, upgrade and more news. It topped out at $5.25 during the first ramp. Second Ramp it rejected the 5 level. So both near b/o levels at 5 rejected. Then we got a $5 close Friday on T530 alert. Friday I was being stupid and traded poorly so took the day off and missed initial alert. Over the weekend I thought a lot of this trade come Monday. I wanted to long huge size and nail. My thought process was this, they saved PLUG 3 times from falling apart and I felt they wanted another short squeeze run and that's exactly what happened.

Here is my proof, a text to Tim aka (Atumnalcity) Mod in swing room. 

I took 10k gapper ah on Friday at $5.1 and idea was build into winner, but by the open today I was staring at a mess. I was long 40k shares at .15 ave and dipped to 5.06 I believe. I reduced my size dramatically. I panicked, thought 5 break was coming. I left 10k on, then when it ramped back and 1min candle of 1.2million shares hit. I reloaded full size 80k shares.

I hit the top sells on the first ramp and reloaded dips and started selling a bit to early, but profit taking is paramount to trading success. Their was some emotional trading involved today, I do admit that. The emotional trading came due to size. This chart should tell you what I saw in this trade. I was ready, prepared, and most importantly ready to cut losses if my plan didn't work.

This was first lock in's. 

I added then reduced on the way up. Nate said I've been getting better at longs. I think this is where my strength is at the moment. 

Thanks for reading, 

DerrickJL 

  Emotional Vs Strategic Trading 

     Do you ever catch yourself making pointless trades? Only to find yourself giving money away to someone else and/or paying your broker’s bills? In this post I want to talk about emotional trading.

    Emotional trading can be the result of a variety of factors. Some of the more common reasons are: boredom, heavy losses on the day or losses from the previous day, bad swing trades, family issues, trying to hit a quota, worrying about something, and basically anything that throws you off mentally. All traders, but especially newer traders, put themselves through some serious stress.

     So what defines good vs. bad trading? If you think you might be trading emotionally, you’re most likely correct. Before you take the trade, ask yourself: what are the odds of this trade working out? Is it worth the risk? Is it worth my time, stress and effort? If the answer is no and you’re trading the ticker anyways, you need a break and a reality check. Emotional trading can work out every once in a blue moon, but if you want to make it in this career, you need to cut that out completely. If you find yourself clicking buttons left and right, take a break. When I say take a break, I mean take a few days off. You'd be surprised how well this works. The most successful traders out there trade less and wait patiently for opportunities. You should do the same. Don’t force trades simply because you’re down or want to make money today. It won't end well: trust me, I know from experience. If you get caught with your pants down on an emotional trade, it’s better to admit defeat and call it a day. Sure, you hear stories of traders coming back from heavy losses on the day, but ask yourself: is that a healthy, consistent way to trade? And what happens if I dig a yet a bigger hole? If you’re the type of trader that feels they “must” make their money back on the ticker they lost it on, then I will wish you luck, because revenge trading rarely works out. Consistency is key.

     So what is “strategic” trading? I mentioned earlier that it’s often better to admit defeat on the day if you’re down. That said, more advanced traders and traders that are able to CONTROL their emotions (this is key) are able to trade on despite having taken losses in a previous trade, even if it was a sizeable one. They merely assess the new trade independently of the last, and if the risk/reward is good, they go for it. Unless you’re able to do this consistently, if you’re trading like crap on a certain day, just cut the day short. The markets will be there tomorrow and the next day.

     Let's put this in perspective. Say you make 20 trades a month. 5 trades a week. And let’s say you win 75% of the time, so you’re winning on 15 trades. By that math, you’re still going to be down 5 days out of the month. Now let's say you decide to PUSH on those days you’re down: now the losses become worse and it comes right out of the green days you already had or were going to have. If you had simply admitted defeat on those 5 days, you got to keep your gains on the other 15 green days. Do you see what I'm saying? It’s simple math and probabilities. I know I’m oversimplifying and it’s not always this clean cut, but what I'm trying to do is help you put this into perspective. A trader isn’t a gambler; we have BETTER odds than the casino. Use that edge to your advantage.

    One crucial concept is at the heart of “strategic” trading: add to winners, NOT losers! Have you ever heard that scared money doesn’t make money? Why is it so hard to add to a loser but not to add to winners? Have you ever asked yourself that? As traders were are so eager to take profits, but we let losses slide more than they should. If the trend is in your favor and you’re up on the position, don't be scared to add as long as the trend continues to be in your favor. I've found myself adding to winners more often now and cutting starter losses quick. It works. And let me tell you, it's easier. Yes, some of these winners may come back and you may break even, but it works more often than you might think and it’s a more “strategic” way to trade.

      Lastly, to address the “shoulda, coulda, woulda” mentality: IT DIDN’T HAPPEN, MOVE ON!!!

Please comment.
Your IU mod,
DerrickJL

The Starting Line

    Hey, guys. My name is Derrick, and I’m 22 years old. Most of you know me as “DerrickJL.” I got my start in day trading when I was 16 years old. It all started after I opened an E-Trade guardian account with my father. I started out in the OTC markets and, like most, had little to no success in the beginning. I took hits left and right and eventually decided that this wasn't for me.

   

     Over the next few months, I made some decisions about what I wanted out of life. I decided to give the markets one more chance. At the time, I was a high school dropout with no direction and no future in mind. I just wasn't motivated enough to learn and study like the others in the classroom. At the same time, though, I wanted more than just “a job.” I wanted to do what I wanted, when I wanted, and to do it with whoever I wanted. And I knew a regular job wouldn’t allow me that freedom.

     

     For my second venture in the world of trading, I joined a penny newsletter around the time that “Awesome Penny Stocks” (APS) was the king of OTC newsletters. I had had some success with their picks like NSRS and SNPK. After those picks died, I took a break from trading and spent all the earnings I had made. Then, for the second time, after a period of not doing much with my life, I decided to return to trading. This was the true start of my career.

    

     As I finally got serious and funded my Suretrader account, a stock some of you may know—SGOC—was on fire. This, I decided, was my chance to learn how to short stocks, and I decided to take a crack at SGOC. I shorted it at $2.20 to start, then it ran to $2.75: I added, and added again at $2.90 and $3… you get the idea. One day I read a random comment in the newsletter room that went, "Nate says that this is a short squeeze and probably ends up going higher." I replied, "Who is Nate?" Little did I know that this was the start of an amazing career. Nate still doesn’t know this, but I blew my account on SGOC and decided that it was time to think more seriously and educate myself further. I joined his service before the move to Profit.ly and learned a lot, but yet again I got hit again on the second run of a stock called GTIM. So there I was with a blown account yet again. So, I went back to doing absolutely nothing with my life. I finally graduated high school, and as I once again tried to decide what I was going to do with myself, the dread of trading was still there.

 
   I rejoined Nate’s service in December of 2012. I bought in for a year and I remember telling Nate, "Hey man, I plan to be here a year from now." You know what he said? He said, "Do it up." I went from making or losing $50 a day to $300 a day, then $500 a day, and I kept it going. I was on the biggest streak of my life at the time. I banked over 26k in 4 months. Then SR & STXS came along and I nearly wiped my gains out. I took the money I had left and decided once again that this wasn't for me. In October of the next year, after having dinner with Nate and a couple of other renowned traders, I decided to give this a shot again. I started a new account. I made over 6 figures in 3 months and was completely hooked. I decided to reduce my account size and invest the quick profits I had made to fund my current account in order to protect myself from myself. Fast forward through some ups, downs and everything in between and here I am.

     I’d like to give a big shout-out to everyone who has helped me so much along the way. That includes Investors Live, FreeFlow, Elkwood, Mike, Splendores, Offshorehunter, bbstock & Miles J Stoner. Also a big thanks to the new friends I have made in the Investors Underground room, like Brandon, Christian, Timothy & Emil. Happy trading, all.

Derrick