My Day Trading Career Plan

Lately folks have privately asked me why I trade so small even when I’m making great calls and good alerts in the chat. I question myself, even.
I’ve spent some time considering this and formulating a plan and explanation. I’m typing it out both for myself and for any new traders who are in pursuit of a plan. I don’t purport it to be the end-all-be-all. It is especially not intended to be for everyone. It is my plan.
May it serve as an example or inspiration to any who are starting or stuck on their own journey, so that they may make their own plan.

Thesis

Trading is a complex task with many moving parts that change over time. The market is a living creature comprised of millions of minds. Relying on luck in the market is a foolish move - this coming from a lucky person. In order to improve as a trader, there are technical, monetary, experiential, and psychological barriers that one must overcome. If my plan is to be functional, it must address each of these challenges.

Jamil Ben Alluch said, in The Complete Penny Stock Course, that there are three accounts:
Monetary, Knowledge, and Experience.

At this point in my career, I have a modest monetary account, an adequate knowledge account, and a growing, but minimal Experience account.

Objective

If my goal was to make money in the market right now, my apparently random successes and failures would be counterproductive to a positive emotional state. When I lost, I would feel as though I failed. When I won, I would experience the euphoria of success. It would be an emotional roller coaster as, at present, I only win 25% of my trades.

So my objective is not to win, but to make good trades, study successful patterns, and learn.

Obstacles

After paper trading until I was green 3 months in a row, and switching to cash, I was experiencing growth. March 2020 was my best month ever, but I realized in reflection that my trading was rampant and uncoordinated. Although I made money off technical analysis – which I dare say I’ve become skilled at – it was not a sustainable strategy.
So I need a sustainable strategy.

Despite having found some success, I missed out many opportunities because I could not force myself into a trade – even when I was convinced it would be a winning trade.
So I need a strategy that will help me overcome my fear of entry.

While I have built up my trading account over the last year, it is still relatively small.
So I need a strategy that will help me build my account safely.

The Plan

To help with my fear of entry, my need for a sustainable strategy (as opposed to rampant trading), and help me build my account - all while attending to my objective of making good trades – I need clearly defined strategies that I can apply to a variety of stocks. In essence, patterns that I can use consistently.

Having a few consistent and exclusive patterns will help me
1. Master a select few tools.
2. Have conviction when entering trades.
3. Exercise discipline.
4. Help me hone in on the right trades for me.
5. Prevent distractions.
6. Prevent rampant trading.
7. Give me clearly defined rules, which I can evaluate as either followed or broken.

Rules

Before I get into the patterns, let me define the rules for stocks that I will even consider trading.
These rules can be considered an essential part of each pattern. Think of it as the first part of every pattern. (And so the benefits of having consistent and exclusive patterns likewise apply to these rules.)

1.     The stock must have news the morning I am trading it.
(Except in the case of weak open red to green moves)

2.     It must be a former runner.
(Exceptions can be made for exceptionally hot stocks with a recent IPO)

3.     It must have a low float.
(Below 10 million is preferred)
(Below 20 million is allowed)
(Exceptions to be made for stocks below a dollar, but I have not formulated it)
(Exceptions to be made for ridiculously hot stocks, ie. CODX at 20.8 million float)

4.     It must have an unusual amount of volume.
(at least its average volume during premarket)
(at least twice its average after the market opens)
(Preferably at least its float, depending on time of day)

I would like to have actual formulas for the exceptions, but as we said, the market is a nebulous and evolving beast. So, while discipline is essential, so is flexibility.

 

Patterns

I will formulate, type out, and make available the following patterns and link them here, but for now, here are the four patterns that I will trade:

Morning Patterns:
Dip and Rip
Weak Open Red to Green Moves

Anytime Pattern:
VWAP Reclaim

Afternoon Pattern:
Bohen VWAP Hold

Most of these patterns are discussed by Tim Bohen in a YouTube video called "Stupid Simple Day-Trading Patterns." 
(Whenever I link to the video, profitly makes this post inaccessible to me, so you'll have to look it up yourself.)

This is where I learned them. I’ve noticed them, but hadn’t formulated them. I appreciate Tim for pointing these out to me. I am taking them for my own and adapting them to fit my trading style (and if you like them, you should do the same.)

So far, I have found the most success with Dip and Rips, but they happen a lot more frequently, so I’ve got more practice with them. They tend to run an average of 10% above high of day. VWAP Reclaims and VWAP holds tend to move an average of 30% above high of day, but they don’t happen as often.

I am lacking data on the Weak Open Red to Green moves.

Position Size

In order to contend with my fear of entry, the ensuing adrenal rush, and the resultant pain of missed opportunities, I have enacted a leveling up system for my position size.

With each pattern, I’ve started at 10 shares. 10 shares is a laughably small size and in most cases, a total loss would still be under 1% of my total account. That is an absolutely manageable risk.

With each pattern, if I successful execute and win the trade, I add 10 shares to my next trade.
If I break even, I add five shares to my next trade.
If I lose, I don’t add to my next trade.
If I hesitate, I subtract 10 shares from my next trade.

As it stands, I’m trading
60 shares on Dip and Rips
10 shares on Weak Open Red to Green Moves
10 shares on VWAP reclaims
20 shares on VWAP holds

My position sized is capped at 100 until my lifetime profit chart is green.
At the time of this writing, I am down $85 over my trading career.
(A long way up from my lowest of -$209!)

Once my profit chart is green, I’ll continue to keep my patterns separate, increasing (or decreasing) according to the plan until that pattern is at 100 shares.
After 100 shares, I’ll increase in increments of 50 and decrease in increments of 10.

As with all parts of this plan, I intend to adapt to circumstance and change depending on what is working and what is not.

My plan and its components are all written or drawn on sticky notes that are stuck to my computer so that I can glance at them any time I need a reminder.

So that’s that, then.

My logic, my reasoning, my plan.
I hope it helps!