Options trading day trading strategies

Day Trading - Swing Trading Options - Strategy and Examples.

"Day Trading, Swing Trading, And Options?… Maybe !"

Have you ever bought a stock that you “knew” was breaking out of its trading range? Have you ever had to sell that stock out at the end of the day because you were unable to hold it overnight, only to see that exact stock gap open $2.00 the next day? Has missing this type of opportunity left you frustrated?

What about bottom fishing? Have you ever bought a stock on the way down, then had to sell it out at the end of the day for even-money or maybe a small profit… only to wake the next morning to see the stock gap open dollars up? Tired of watching these available profits hit someone else’s account instead of yours?

Too often, day traders and swing traders are forced out of these opportunities. Typical day traders and swing traders who look for stocks with quick, short term movements are not in the business of holding positions overnight, let alone a week or two. Therefore, the use of options is not a component of their trading strategies.

Now, however, new opportunities for profit are becoming available as many day trading firms are allowing their traders to trade options. Unfortunately, many option strategies do not apply to the quick in and out nature of day trading or swing trading.

For instance, neither day traders or swing traders are normally in a single stock long enough for the strategy of premium collection. However, there is a strategy that will provide the protection necessary for these traders to carry positions through overnight risk, fully protected, but still allow them to take optimum advantage of the two scenarios mentioned above.

As a result, you can now put dollars in your own pocket instead of watching them go to somebody else, and do so without putting your firm’s capital at risk overnight. This particular strategy is a premium purchasing strategy. It can allow day traders and swing traders the capital security to exploit two potentially explosive profit scenarios … breakouts and bottom fishing.

Since day traders and swing traders have had no reason to deal with options until now, we’ll explain options, detail a specific option strategy, and give examples of when it can be used and the outcomes that can be expected.

Options are a wasting asset, meaning they have a limited life and lose value over time. Therefore, you want to use them quickly and then sell them out to avoid as much decay loss as possible.

There are two kinds of option philosophies: premium collecting (selling options) and premium purchasing (buying options). The latter may fit into some of the strategies used by day traders and swing traders. There are several premium purchasing strategies, and each can be used in several ways.

Some are very sophisticated and take time and effort to master. Others, like the protective put, are not as sophisticated and can be learned and implemented in a reasonably short amount of time. Strategies like the protective put require a rudimentary understanding of options, as opposed to time intensive expertise.

This is because the protective put strategy is purely defensive in nature. It functions as strict hedging, not profit capturing. Profit capturing can involve more risk than a hedging position, and requires a greater level of knowledge. In the case of the protective put, the determination of when to use it is the crucial element for its success. With our focus on breakouts and bottom fishing, the “Protective Put” is the strategy we‘ll detail.

THE PROTECTIVE PUT.

The Protective Put, also referred to as the “married put,” the “puts and stock” or “bullets,” is a strategy that is ideal for a trader who wants full hedging coverage. This strategy is very effective with stocks that normally trade under high volatility or stocks that may be involved in an event-driven, high-volatility situation.

The put option gives the owner of the option the right, but not the obligation, to sell a certain stock, at a certain price, by a specified date. For this right, the owner pays a premium. The buyer, who receives the premium, is obligated to take delivery of the stock should the owner wish to sell at the strike price by the specified date. A put, strategically used, offers protection against substantial loss since the stock will be taken by the buyer before heavy losses set in.

The Protective Put Strategy involves the purchase of put options in conjunction with the purchase of stock and, as stated above, works well in situations where a stock is prone to rapid, volatile movements.

For day traders and swing traders, this strategy can allow the capital security to exploit two potentially explosive profit scenarios…. breakouts and bottom fishing. These two opportunities can be very profitable but also very dangerous. With these two scenarios, timing is the key element. Enormous profits can be had if your timing is right.

However, if the timing is wrong, the effects can be devastating. If a trader can take advantage of the full profit potential of these two scenarios without having the full risk associated with them, logic dictates that the trader stands a much better chance of seeing a substantial profit.

BUYING THE PUT.

When traders purchase a stock that they expect will make a sudden upward move, they can buy the put (protective put) to provide a proper hedge. The construction of this position is actually quite simple. You buy the stock and you buy the put in a one-to-one ratio, meaning one put for every one hundred shares. Remember, one option contract is worth 100 shares. So, if 400 shares of IBM are purchased, then you would purchase exactly four puts.

From a premium standpoint, we must keep in mind that by purchasing an option, we are paying out money. This means that our position must “outperform” the amount of money that we paid out for the put.

If the put costs $1.00, then the stock would have to increase in price by $1.00 just to break even. The protective put strategy has time premium working against it, thus the stock needs to move up to a greater degree and more quickly to offset the cost of the put.

However, the price of the put can be adjusted depending on whether it is at-the - money or out-of-the-money. The choice of whether to purchase the at-the-money put or an out-of-the-money put simply comes down to how much protection you want to have versus the amount of money you want to spend. If you are willing to spend more money for your protective put in order for it to start providing downside protection at an earlier price, then you may want to buy the at-the - money put.

However, if you are willing to accept a little more downside risk in order to save money on your put purchase, then you may want to buy an out-of-the-money put instead. It will cost less than the at-the-money put but it will start its protection at a lower price, which means you will lose more money if the stock moves in the adverse direction.

HOW THE PUT WILL PERFORM.

Let's take a look at the risks and rewards of the protective put strategy over three different scenarios. When we buy a stock, three potential outcomes exist. The stock can go up, go down, or remain stagnant.

Let's hypothesize results across these three scenarios. Say we buy the stock for $31.00 and buy the 30 strike put for $1.00. In the up scenario, we set the stock price up at $31.50. The results are that we have a $.50 gain from capital appreciation and a $1.00 loss from the purchase of the put, which when combined, gives us a $.50 loss overall.

It is important to realize that the up scenario will only produce a positive return if the stock gain is greater than the amount paid for the put. This being the case, you calculate the breakeven point for the protective put strategy by adding the purchase price of the stock to the price of the put. In our up scenario, add the stock price of $31.00 plus the option price of $1.00, and you get a breakeven of.

$32.00. So, until the stock reaches $32.00, the position will not produce a positive return. Above $32.00, the position will gain.

In the stagnant scenario, the position will produce a loss. Since the stock hasn’t moved, there will be no capital gain or loss. Also, with the stock at $31.00 at expiration, the puts are worthless. The position lost $1.00, which is the amount you paid for the puts.

In the down scenario, the position will again produce a loss. Setting the stock at $30.00, down a dollar, we have a $1.00 capital loss. With the stock at $30.00, the 30 strike puts will be worthless, thus you incur a $1.00 loss because that is what you paid for them. Your total loss will be $2.00.

However, in any down scenario, the protective put will set a cap on your losses. Let’s see how that works. We’ll set the stock price down to $28.00. Since you purchased the stock at $31.00, there will be a capital loss of $3.00. The puts, however, are now in the money with the stock below $30.00. With the stock at $28.00, the 30 strike puts are worth $2.00. You paid $1.00 for them so you have a $1.00 profit in the puts. Combine the put profit ($1.00) with the capital loss ($3.00) and you have an overall loss of $2.00. The $2.00 loss is the maximum you can lose no matter how low the stock goes, even with the stock as low as zero. This is what is meant by maximum protection.

In every protective put position, it is possible to calculate your anticipated maximum loss. You can do so by using the following formula:

(stock price minus strike price) minus option price.

For example, suppose you paid $30.00 for your stock, and you paid $1.00 for the 27.50 strike puts. Following the formula, you take your stock price ($30.00) and subtract the put’s strike price (27.50), which leaves you with $2.50. To this $2.50 loss, you then subtract the amount you spent on the option (-$1.25), which gives you a combined, maximum loss of $3.50 for this position.

This formula will work every time. Remember, stock loss (stock price paid - strike price) plus option cost equals maximum potential position loss.

Looking at the three hypothesized scenarios, we find that only the up scenario can produce a positive return, and that’s only when the stock increases more than the amount you paid for the puts. The other scenarios produced losses. If the stock is stagnant, you lose the amount you paid for the put. If the stock goes down, you lose again - but the loss is limited. It is the limiting of loss in highly volatile situations that makes the protective put an attractive and useful strategy.

PROTECTIVE PUT'S BEST SCENARIO.

A stock that has the potential to rise quickly also has the potential to fall just as quickly. A stock that has substantial potential gain has an equal potential loss. A trader choosing to buy a stock like this should have more protection to the downside, and at the same time, ample allowance for a large upside potential move. This is a perfect time to use the protective put strategy. The purchase of an out-of-the-money put will be a relatively inexpensive investment, but will provide the kind of results that will best fit a bullish lean. You will have unlimited downside protection with all the room you need for your potential run up. Of course, this comes at a price. You must pay for the protection and freedom this position can provide.

The protective put strategy, when used correctly, will allow investors to take advantage of some opportunities that could provide large potential gains without being exposed to the severe risks the position would have posed without the use of protective puts.

BOTTOM FISHING.

Use the Protective Put in the case of a stock in the process of a steep decline. Quite often, stocks experience bad news or break down through a technical support level, and trade down to seek a new, lower trading range. Everyone wants to find the bottom in order to buy and catch the technical rebound.

Although this scenario sounds good, these types of trades are risky. The risk is in identifying the true bottom. A stock that is in a free-fall or rapid decline might give a false indication of a bottom, which could lead to substantial losses. The protective put will provide protection against this kind of substantial loss.

A stock that goes through a free-fall finally “exhausts” or works through the sellers. The stock proceeds down to lower levels where sellers are no longer interested in selling the stock.

At this level, the stock consolidates and buyers move in. Because the sellers are now done (exhausted), the pressure is lifted from the stock and it proceeds up as buyers out-number sellers.

There are models that are used to calculate where this bottom may lie, commonly referred to as “exhaustion models.” The problem is that the stock, on the way down, may stop and give the appearance of exhaustion but then continue further down. If you had bought at the false appearance of exhaustion, you could be looking at a big loss.

There is a potential for a very big reward if you pick the “right” bottom. However, with the big potential gain comes the big potential loss that is common in these types of risk/reward scenarios. Here is a perfect opportunity to employ the protective put strategy!

Remember, the protective put allows for a large potential upside with a limited, fixed downside risk. If you feel that the stock has bottomed-out and is starting to consolidate, you purchase the stock and purchase the put.

If you are right, and the stock runs back up, the stock profit will well exceed the price paid for the put. Once the stock trades back up, consolidates, and develops its new trading range, the need for the protective put is over.

Use the formula for maximum loss discussed earlier. Calculate the loss in the stock and the amount you paid for the put, and add them together for your maximum loss in this position. The protective put has limited your loss.

Maximum Loss = (Stock Price – Strike Price) – Option Price.

BREAK OUTS.

As seen with the exhaustion example, the protective put strategy is best used in situations where the stock has potential for an aggressive upside move and the chance of a big downside move.

Another potential opportunity for using the protective put is in combination with Technical Analysis. Technical Analysis is the study of charts, indicators oscillators, etc. Charting has proven to be more than reasonably accurate in forecasting future stock movements.

Stocks travel in cycles that can and do form repetitious patterns. These patterns are predictable and detectable by the use of any number of charts, indicators and oscillators.

Although there are many, many forms and styles of technical analysis, they all have several similarities. The one we want to focus on is the technical “break - out”. A break-out is described as a movement of the stock where its price trades quickly through and beyond an obvious “technical resistance” or resistance point.

For a bullish break-out, this level is at the very top of its present trading range. Once through that level, the stock is considered to have “broken out” of its trading range and will now often trade higher, and establish a new higher trading range.

The “break-out” is normally a rapid, large upward movement that usually offers an outstanding potential return if identified properly and acted upon in a timely fashion. However, if the break-out fails, the stock could trade back down to the bottom of the previous trading range.

If this were to happen, you would have incurred a large loss because you would have bought at the upper end of the previous trading range. As you can see, the “break-out” scenario is an opportunity that has large potential rewards, but can, on occasion, have a large downside risk.

However, if you were to apply a protective put strategy with the stock purchase, you can drastically limit your downside exposure. For instance, say you were to buy the 65 strike put for $2.00. If the stock trades up to $75.00, you would make $9.00 if done naked, but only $7.00 if done with the protective put.

This difference is the cost of the put. This $2.00 investment is more than worth it should the stock go down. If the break-out turns out to be a “false” break-out and the stock reverses and trades down, your 65 put will allow you to sell your stock out at $65.00 minus the $2.00 you paid for the put. This limits your loss to $3.00 instead of a potential $8.00 loss. This is a much better risk/reward scenario.

Use the Protective Put when you expect an aggressive, volatile, upward swing in the price of a stock.

Purchase one put for every one hundred shares owned.

Time and price the put for the maximum protection according to your risk parameters.

Choose a put that presents the best cost for the needed coverage that fits your risk tolerance.

Get out of the put quickly to diminish the effects of time decay.

Most professional traders, including day traders and swing traders can reap huge rewards from the protective put strategy. The reason is inherent in how most traders attain profits and experience losses.

Normally, successful traders make a little money on a consistent basis. They make a little bit day-in and day-out. But when it comes to losses, they lose in large chunks. They spend a month building up profits, only to lose that money in one day (and typically with only one stock). If a trader could figure out how to avoid even a handful of those large losses, then his or her profitability would soar.

To address this issue, I strongly recommend that you leverage the protective put when buying on breakouts and when bottom fishing.

Day Trading Strategies for Beginners.

Day trading – the act of buying and selling a financial instrument within the same day, or even multiple times over the course of a day, taking advantage of small price moves – can be a lucrative game. But it can also be a dangerous game for those who are new at it or who don't adhere to a well-thought out method. Let's take a look at some general day trading principles and common day trading strategies, moving along from basic tips you need to know to advanced strategies that can help you learn how to day trade like a pro. [If you're looking for a more in-depth option, Investopedia Academy has a three hour video course taught by a 30-year veteran of the industry.]

Day Trading Tips You Need to Know.

Not just knowledge of basic trading procedures, but of the latest stock market news and events that affect stocks – the Fed's plans for interest rates, the economic outlook, etc. Do your homework; make a wish list of stocks you'd like to trade, keep yourself informed about the selected companies and general markets, scan a business newspaper and visit reliable financial websites on a regular basis.

Assess how much capital you're willing to risk on each trade (most successful day traders risk less than 1-2% of their account per trade). Set aside a surplus amount of funds that you can trade with and are prepared to lose (which may not happen) while keeping money for your basic living, expenses, etc.

Day trading requires your time – most of your day, in fact. Don’t consider it as an option if you have limited hours to spare. The process requires a trader to track the markets and spot opportunities, which can arise any time during the trading hours. Moving fast is key.

As a beginner, it is advisable to focus on a maximum of one to two stocks during a day trading session. With just a few stocks, tracking and finding opportunities is easier.

Of course, you're looking for deals and low prices. But keep away from penny stocks. These stocks are highly illiquid and chances of hitting a jackpot are often bleak.

Many orders placed by investors and traders begin to execute as soon as the markets open in the morning, contributing to price volatility. A seasoned player may be able to recognize patterns and pick appropriately to make profits. But as a newbie, it is better to just read the market without making any moves for the first 15-20 minutes. The middle hours are usually less volatile while the movement begins to pick up towards the closing bell. Though the rush hours offer opportunities, it’s safer for beginners to avoid them at first.

7) Cut Losses with Limit Orders.

Decide what type of orders you will use to enter and exit trades. Will you use market orders or limit orders? When you place a market order, it is executed at the best price available at the time; thus, no “price guarantee.” A limit order, meanwhile, does guarantee the price, but not the execution. Limit orders help you trade with more precision wherein you set your price (not unrealistic but executable) for buying as well as selling.

8) Be Realistic About Profits.

A strategy doesn't need to win all the time to be profitable. Many traders only win 50% to 60% of their trades. The point is, they make more on their winners than they lose on their losers. Make sure that the risk on each trade is limited to a specific percentage of the account, and that entry and exit methods are clearly defined and written down.

There are times when the stock markets test your nerves. As a day trader you need to learn to keep greed, hope and fear at bay. Decisions should be governed by logic and not emotion.

Successful traders have to move fast – but they don't have to think fast. Why? Because they've developed a trading strategy in advance, along with the discipline to hold to that strategy. In fact, it is far more important to follow your formula closely than to try to chase profits. There's a mantra among day-traders: "Plan your trades, then trade your plan."

Day Trading Like a Pro: Deciding What to Buy.

Day traders seek to make money by exploiting minute price movements in individual assets (usually stocks, though currencies, futures and options are traded as well), usually leveraging large amounts of capital to do so. In deciding what to focus on – in a stock, say – a typical day trader looks for three things: liquidity, volatility and trading volume.

Liquidity allows you to enter and exit a stock at a good price (i. e. tight spreads, or the difference between the bid and ask price of a stock, and low slippage, or the difference between the expected price of a trade and the actual price). Volatility is simply a measure of the expected daily price range—the range in which a day trader operates. More volatility means greater profit or loss. Trading volume is a measure of how many times a stock is bought and sold in a given time period (most commonly, within a day of trading, known as the average daily trading volume - ADTV). A high degree of volume indicates a lot of interest in a stock. Often, an increase in the volume of a stock is a harbinger of a price jump, either up or down.

Once you know what kinds of stocks (or other asset) you are looking for, you need to learn how to identify entry points – that is, at what precise moment you're going to invest. There are three tools you can use to do this:

Real-time news services. News moves stocks; subscribing to such services tell you when potentially market-shaking news comes out. ECN/ Level 2 quotes . ECNs are computer-based systems that display the best available bid and ask quotes from multiple market participants, and then automatically match and execute orders. Level 2 is a subscription-based service that provides real-time access to the NASDAQ order book composed of price quotes from market makers registered in every NASDAQ-listed and OTC Bulletin Board securities. Together, they can give you a sense of orders being executed in real time. Intraday candlestick charts. Candles provide a raw analysis of price action. (More on these later.)

Day Trading Like a Pro: Deciding When to Sell.

Before you actually jump into the market, you have to have a plan for getting out. Identifying the point at which you want to sell an investment is called Identifying a price target. Some of the most common price target strategies are:

In most cases, you'll want to exit an asset when there is decreased interest in the stock as indicated by the Level 2/ECN and volume.

Day Trading Pro Tips: Charts and Patterns.

Previously, we mentioned three tools for determining entry points – that is, deciding the opportune moment you're going to buy a stock (or whatever asset you're trading). The most technical are intraday candlestick charts. We'll focus on these factors:

There are many candlestick setups that we can look for to find an entry point. If properly used, the doji reversal pattern (highlighted in yellow in Figure 1) is one of the most reliable ones.

Figure 1: Looking at candlesticks - the highlighted doji signals a reversal.

Typically, we will look for a pattern like this with several confirmations:

First, we look for a volume spike, which will show us whether traders are supporting the price at this level. Note that this can be either on the doji candle or on the candles immediately following it. Second, we look for prior support at this price level. For example, the prior low of day (LOD) or high of day (HOD). Finally, we look at the Level 2 situation, which will show us all the open orders and order sizes.

If we follow these three steps, we can determine whether the doji is likely to produce an actual turnaround and we can take a position if the conditions are favorable.

Day Trading Pro Tips: How to Limit Losses.

Trading on margin means that you are borrowing your investment funds from a brokerage firm. When you trade on margin (and bear in mind that margin requirements for day trading are high), you are far more vulnerable to sharp price movements. Margins help to amplify the trading results – not just of profits, but of losses as well, if a trade goes against you. Therefore, using stop-losses, which are designed to limit losses on a position in a security, is crucial when day trading.

A stop loss order controls risk. For long positions a stop loss can be placed below a recent low, or for short positions above a recent high. It can also be based on volatility: For example, if a stock price is moving about $0.05 a minute, then you may place a stop loss $0.15 away from your entry in order to gives the price some space to fluctuate before it moves (hopefully) in your anticipated direction. Define exactly how you will control the risk on the trades. In the case of a triangle pattern, for example, a stop loss can be placed $0.02 below a recent swing low if buying a breakout, or $0.02 below the pattern. (The $0.02 is arbitrary; the point is simply to be specific.)

One strategy is to set two stop losses:

A physical stop-loss order placed at a certain price level that suits your risk tolerance. Essentially, this is the most money you can stand to lose. A mental stop-loss set at the point where your entry criteria are violated. This means that if the trade makes an unexpected turn, you'll immediately exit your position.

However you decide to exit your trades, the exit criteria must be specific enough to be testable – and repeatable.

The Bottom Line.

Day trading is a difficult skill to master, requiring as it does time, skill and discipline. Many of those who try it fail. But the techniques and guidelines described above can help you create a profitable strategy, and with enough practice and consistent performance evaluation, you can greatly improve your chances of beating the odds. There is one final rule we should mention: Set a maximum loss per day that you can afford to withstand – both financially and mentally. Whenever you hit this point, take the rest of the day off. Stick to your plan and your perimeters. After all, tomorrow is another (trading) day. If you want to learn proven, profitable strategies you can start using today, from an experienced Wall Street trader, then check out Investopedia Academy's "Become a Day Trader" course.

Day Trading Strategies for Beginners.

A Beginners Day Trading Guide.

Check out my 2016 Trading Statistics.

Learn my Day Trading Tips and Techniques.

You need to understand basic day trading terminology & concepts to build your foundation. You can follow me on Youtube to get Free Education! Join the community of thousands of followers on YouTube and begin studying the free content we post on a daily basis. This is the beginning of your education. You need to study the markets, analyze charts, and learn the strategies professional traders are using every day.

A day trader is two things, a hunter of volatility and a manager of risk. The act of day trading is simply buying shares of a stock with the intention of selling those shares for a profit within minutes or hours. In order to profit in such a short window of time day traders will typically look for volatile stocks. This often means trading shares of companies that have just released news, reported earnings, or have another fundamental catalyst that is resulting in above average retail interest. The type of stocks a day trader will focus on are typically much different from what a long term investor would look for. Day traders acknowledge the high levels of risk associated with trading volatile markets and they mitigate those risks by holding positions for very short periods of time.

Day Trading with Cash vs. Margin.

Trading on Margin is when you trade with borrowed money (click here to details). For example, a day trader with a $25k trading account may use margin (buying power is 4x the cash balance) and trade as if he had $100k. This is considered leveraging your account. By aggressively trading on margin if he can produce 5% daily profits on the 100k buying power he will grow their 25k cash at the rate of 20% per day. The risk of course is that he will make a mistake that will cost him everything. Unfortunately, this the fate of 9 out of 10 traders. The cause of these career ending mistakes is a failure to manage risk.

Trading with Cash is an option, but because it requires 3 days for each trade to settle most traders will trade with a margin account but choose not to use leverage. This is a risk management technique.

All Day Trading Strategies Requires Risk Management.

Imagine a trader who has just taken 9 successful traders. In each trade there was a $50 risk and $100 profit potential. This means each trade had the potential to double the risk which is a great 2:1 profit loss ratio. The first 9 successful trades produce $900 in profit. On the 10th trade, when the position is down $50, instead of except the loss the untrained trader purchases more shares at a lower price to reduce his cost basis. Once he is down $100, he continues to hold and is unsure of whether to hold or sell. The trader finally takes the loss when he is down $1,000.

This is an example of a trader who has a 90% success rate but is still a losing trader because he failed to manage his risk. I can’t tell you how many times I’ve seen this happen. It’s more common than I bet you’d think. So many beginners fall into this habit of having many small winners then letting one huge loss wipe out all their progress. It’s a demoralizing experience, and it’s one that I’m very familiar with! We will discuss in detail how to identify stocks and find good trade opportunities, but first we will focus on developing your understanding of risk management.

Every Day Trade Needs a Max Loss (Cap your Losses)

Over my years as a trader and as a trading coach I have worked with thousands of students. The majority of those students experienced a devastating loss at some point due to an avoidable mistake. It’s easy to understand how a trader can fall into the position of a margin call (a debt to your broker). The money to trade on margin is easily available and the allure of quick profits can lead both new and seasoned traders to ignore commonly accepted rules of risk management.

The 10% of traders who consistently profit from the market share one common skill. They cap their losses. They accept that each trade has a pre-determined level of risk and the adhere to the rules they set for that trade. This is part of a well defined trading strategy. It’s common for an untrained trader to adjust their risk parameters mid-trader to accommodate a losing position. If for instance they said the stop is $50, when they are down $60 they said they’ll hold just a few more minutes. Before you know it, they are looking at an $80-100 loss and they are wondering how it happened.

Learn Day Trading From A Verified Trader!

I made $94,119.54 Day Trading in just 3 months.

Learn the Top 2 Day Trading Strategies.

The Momentum and Reversal trading strategies are the #1 and #2 best trading strategies out there. These two day trading strategies are being used by thousands of our students who have participated in the Warrior Trading Day Trading Courses. In fact, in a survey of 100 of these students, over 80% are now trading profitably thanks to these strategies (click here for survey details) These strategies can be the basis for your $200/day trading plan.

We teach all the details of these strategies in our day trading course, but we also cover them in summary in several blog posts and in chat room Q&A sessions. You can read more about my Momentum Day Trading Strategy and my Reversal Day Trading Strategy. In short, both of these strategies are going to give you the framework for what type of stocks to trade, what time of day to trade, how to find stocks to trade, how to set your stop loss to have a max risk, and how to find your entry based on traditional chart patterns including Bull Flags and Rubber Band Snap Backs.

Momentum Day Trading Strategy.

Adopt a Trading Strategy & Master your Emotion.

Most of our students adopt either my Momentum or Reversal Day Trading Strategies. Once you choose the one that is a good match for your skill level, your risk management tolerance, and the time of day you plan to trade, you are ready to get started. Students in our Day Trading Course can download our written trading plan documents and I’m able to actually oversee them while they are trading.

Make a plan to trade this strategy in a Simulated Trading account for 1 month to test your skills. Your objects will be to achieve a percentage of success (or accuracy) of at least 60%. You also must maintain a profit loss ratio of at least 1:1 (winners are equal size on average as losers). If you can achieve these statistics, then you are positioned well to trade live. During the 1 month of practice, try to take 6 trades per day.

Reversal Day Trading Strategy.

Strategies for Maintaining Composure While Day Trading.

I admit that it’s extremely difficult to achieve the level of composure to sell when you hit your max loss on a trade. Nobody wants to lose, but the best traders are great losers. They accept their losses with grace and move on to the next trade. They never allow one trade the ability to destroy their account or their career. I personally focus on accepting small losses, and not letting them get me frustrated. Learning this characteristic will keep them in business as a day trader for a long time.

Your most important objective will be to follow your Max Loss rules so you never have a loss that exceeds a predetermined amount. The most important skill you need to learn is to cap your losses.

Big Winners & Small Losers requires Scaling.

Learning how to scale in and scale out of your day trades is a critical still every trader must develop. When I have winning trades, I scale out of the positions to take profits and adjust stops to break even as quickly as possible. I never hold a position that has achieved my profit target and hope for a bigger winner. The reason is because all too often the price can drop and you will end up giving up that profit. Instead, as soon as I’ve reached my first profit target (if I’m risking $100, then as soon as I’m up $100), I’ll sell 1/2 my position and set my stop at breakeven. This method of scaling out ensures small profits on all trades that move in your favor, giving you a better percentage of success.

One Students Success Story.

Hitting the Daily Goal & Profit Loss Ratios.

Lets say you take 6 trades/day with a $100 max loss and $100 profit targets. If lose on 2 and you win on 4 (about 65% success rate), and down $200 on losers, and up $400 on winners, giving you a net profit of $200/day. Ideally we want students to be risking $100, to make $200. That would give you a 2:1 profit loss ratio. Again, with 6 trades and a 2:1 profit loss ratio, your 2 losers would still be down $200, but your 4 winners would be $800 in profits, giving you a $600 net profit. With the same percentage of success, if you can increase your profit loss ratio you will make a lot more money!

Once you’ve hit your daily goal, decrease your position sizing so you don’t lose the goal. Finish the day green, and do it again tomorrow.

Maintain Your Accuracy By Being Disciplined.

As long as you can maintain accuracy of at least 60%, and maintain profit loss ratios of at least 1:1, you can be a profitable trader. Over time accuracy will improve and you will find yourself hitting winners right out of the gates. Some days you may even trade at 100% success with winners on all 6 trades you take.

If you plan to succeed, you must follow your trading plan. That means ONLY taking trades that fall into your strategy. Sometimes beginner traders start to gain confidence and then venture outside the strategy that works the best. This causes their accuracy to drop and profit loss ratios to go negative.

Focus on short term goals! You goal today is to take 6 trades, with 60%+ accuracy and 1:1 profit loss ratios. Rinse and repeat. That’s the ticket to success. Before you know it you will have 3-4 months of consistent trading under your belt.

Day Trader (Ross Cameron) on The Huffington Post.

Increasing position sizes.

For most students, once his or her accuracy has improved the next step is increasing positions sizes to maximize profits. If you’ve been trading at 65% success with 1:1 or 2:1 profit loss ratios for at least a couple of months you should be starting to feel pretty confident. Now it’s time to increase your position sizes. Since you’ve been working with a $100 max loss, you’ve probably rarely exceeded 2000 shares.

Now if we increase your max loss to $150, you can start to venture into larger size positions, and bigger daily goals. Remember that your daily goal is 2x your max loss per trade. So if your max loss is $100, your goal daily is $200. Max loss is $150, daily goal is $300. Personally, my max loss is $500 and my daily goal is $1000. I know some students who have a max loss as high as $5k/day. Even though it’s hard to imagine right now, that’s the potential of a strategy that is scalable! All the strategies we teach are scalable so whether you trade with a $5k account, a $50k account, or a $500k account, these strategies can be utilized.

What’s Next on your Day Trading Journey?

Now that I’ve taught you my 7 steps to trading success you are probably wondering what’s next! I would encourage you to join a live webinar with me so you can learn even more about my trading strategies. You can click here to join my next webinar, and make sure in the meantime you keep watching on YouTube! I put out tons of free content to help beginner traders getting started.

In Response to these awards, Warrior trading has been constantly pu in the spotlight as being an established educator in the finance sector.

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We’ve Gotten Real Results from Real People Just Like You.

$31,202.73 in profits since joining Warrior Trading. If you really want to learn from the pros, I can say from experience that Warrior Trading offers top notch training from very skilled, highly disciplined and successful instructors.

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Jeff Nelson.

Dallas, United States.

Up to $5000 in one day. When I first started trading I would have a profit of $3000 in a good month. After I took Warrior Tradings day trading course I now do between $1500 to $5000 most days.

The guys at Warrior Trading has made a course that does not only contain a great strategy but it's also explained so it´s easy to understand.

For people that are serious about their trading, Warrior Trading is the place to be.

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I'm a Veteran trader Finance Degree from OSU and always still learning books audible and purchased Warrior Trading Program so much new and useful information that I bought monthly chat to watch them apply principles they teach and to get some new fresh Ideas.

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Brian Levandusky.

Warrior Trading is without a doubt the most professional trading service/family I've ever been involved with. I have been trading off and on for over 15 years and full time for the past year and a half.

The transparency of Warrior Trading is one aspect that attracted me to them. They show you it all. They show you their losses as well as their gains. They are about showing you how to make a profit from the markets.

Alan McRae.

Trading is hard, but warrior trading makes it easier. They keep a consistently friendly atmosphere, which you will find that after trading for a few years, you will appreciate.

Traders like consistency, and when you log on to Warrior Trading you can expect the same service as the day before. There are no surprises. These things are valuable.

They quietly establish an edge, make their money, and leave until the next day. Ross and his team are good guys, and if you were to subscribe to all the different services out there and compare them for 3 months, you would see WT at the top of the list.

I've always been passionate about trading but never really imagined this passion would have turned in a real, full-time job. In fact, I've never found any service which I really felt that would help me become a professional trader.

That is, until I met Warrior Trading. In particular, Ross has been really inspirational while I'm on my path to become a full-time day trader.

I always wanted to trade stocks but I saw all those numbers go up and down and I would always say to myself " I'm never going to get this". I looked at the free Youtube videos and I was hooked. It was the best investment i ever made.

Now I know how to day trade and the scare part about it is gone, I mean, I listened to them and paid for their paper trade and now i feel confident on what I'm doing with stocks.

I really mean this, I took time to write this because I really feel it in my heart that you guys are helping me accomplish my dream and that is to be a daytrader. Thank you warriortrading.

The courses are a must for whoever would like to make day trading a career.

I learn so many ways to help me save money and make money. The day I finished the course I did not have a losing day where I lost over $300 dollars!

My worst loss prior to the course was close to $15k. Ross helps you understand how the losses happen, the psychology behind it and how to prevent it ! I feel a lot more comfortable trading, because now I understand what stocks to pick, when to get in and out and how to manage my risk!!

Moe Al khalili.

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Day Trading using Options.

With options offering leverage and loss-limiting capabilities, it would seems like day trading options would be a great idea. In reality, however, the day trading option strategy faces a couple of problems.

Firstly, the time value component of the option premium tends to dampen any price movement. For near-the-money options, while the intrinsic value may go up along with the underlying stock price, this gain is offset to a certain degree by the loss of time value.

Secondly, due to the reduced liquidity of the options market, the bid-ask spreads are usually wider than for stocks, sometimes up to half a point, again cutting into the limited profit of the typical daytrade.

So if you are planning to day trade options, you must overcome this two problems.

Your DayTrading Options: Near-month and In-The-Money.

For daytrading purposes, we want to use options with as little time value as possible and with delta as close to 1.0 as we can get. So if you are going to daytrade options, then you should daytrade the near month in-the-money options of highly liquid stocks.

We daytrade with near-month in-the-money options because in-the-money options have the least amount of time value and have the greatest delta, compared to at-the-money or out-of-the-money options.

Furthermore, as we get closer to expiration, the option premium is increasingly based on the intrinsic value, and so the underlying price changes will have a greater impact, bringing you closer to realising point-for-point movements of the underlying stock. Near month options are also more heavily traded than longer term options, hence they are also more liquid.

The more popular and more liquid the underlying stock, the smaller the bid-ask spread for the corresponding options market.

When properly executed, daytrading using options allow you to invest with less capital than if you actually bought the stock, and in the event of a catastrophic collapse of the underlying stock price, your loss is limited to only the premium paid.

Another Day Trading Option: The Protective Put.

If you are planning to daytrade a particular stock for short upside moves for the next few months, you can purchase protective put options to insure against a devastating stock crash.

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