Day Trading For A Living – How To Avoid Losing All Your Money

For day traders, the most fundamental question of all is, “How can I do day trading for a living?”

Beyond all the indicators, price patterns, techniques, strategies, market philosophies … this is the bottom line. Everything else is just an end to this means.

The video below will get you started on answering that question.

You can email me at support@topdogtrading.com and I’ll be happy to show you how to get my Free Cycle Indicator to help you with your day trading strategies.

Enjoy the video and please leave your comments below.

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VIDEO TEXT:

Welcome to this video, Day trading for a living. One of the most important things when it comes to day trading for a living is managing your risk. You know, there so many people who email me saying, “Gosh! Barry I blew up my trading account. I don’t have any money left.”

They say “I’ve learned trading on my own or bought an eBook and have tried to learn trading. And now I’ve lost, you know x amount of dollars,” and the x amount of dollars is usually a ridiculously huge amount of money. You will have to guard yourself against that if you want to do day trading for a living.

You know as professional traders, yes we are interested in good trade setups and indicators and price patterns and all that sort of thing. But really above all of that, what we work with is money management and risk management to keep our losses small and make our winners big.

You’ve heard that phrase before, keep your losses small, and let your winners run. And that’s how you get a good risk/reward ratio. I’m going to give you some practical day trading tips on how to do this, because this is really what you have to do in order to start day trading for a living and make a significant amount of money consistently, and have that equity curve climb.

STEP ONE IN DAY TRADING FOR A LIVING

Let me give you one tip today. And what we’re going to do is we’ll go to this bar. So this right here by the way, don’t have time to go into what kind of setup this is, why we’re taking this, but that part doesn’t even really matter right now. So the point is, any time you find a setup that matches the trading rules of whatever method you’re trading, right this happens to be one of mine. And this is a great one.

I love this trade, it’s beautiful. And so what we’re going to do is we’re going to enter one tick above the high of this bar. And then we’re going to put our stop one tick below the low of that bar because this is a cycle low. It’s one of my cycle low patterns right there.

By the way if you’re interested to know more about this cycle indicator and the patterns that we trade on it. Feel free to send me an email at support@topdogtrading.com and I’ll let you know when the next free webinar is going to be where I give away the cycle indicator and teach you how to use it as huge step forward in doing day trading for a living.

But anyway, right now back on topic, risk management. So if we look at this, okay that’s where we’re going to enter, so let’s put a little, lets click on this. Now if you look over at the data box on the left, you’ll see that the high there is 1201.50. So these are the E-minies. This is a 2 minute chart of the S&P E-minies. So I would place a by stop at 1201.75. So that’s where we getting in. Then my protective stop would be placed at the lowest low in this cycle which would be low of the bar previous to that. 1199.75 is the low of that bar so my stop would be at 1199.50.

The spread between 1201.75 and 1199.50 is 9 ticks. Now each tick in the E-minies is worth $12.50. So therefore I’m putting at risk a maximum of $12.50 per contract. Now that’s per contract alright. If you’re only trading one contract that is your risk in trade from where you’re placing your entry to your protective stop.

PLANNED RISK VS. ACTUAL RISK

Now I have to say on the side here, just for, well for fair warning, that we don’t always get stopped out where we want to. That’s replacing your protective stop, nothing is always perfect. Stops can be, depending on what type of stop would use, limit order or whatever. if you use a market order, you may get filled but not at the price you wanted. These are all, you know qualifications for my statement here. One of the ways to help overcome that is to hedge, but again that’s way beyond the scope of this topic today. Just need to throw that in so you are fully aware of that.

So here is our planned risk. Now the key is, we want to then look at that risk based on the size bar trading accounts. So for me personally, I don’t like to risk any more than 1 or 2 percent of my entire trading account at any one given trade. So just as an example, let’s say that you only trade one contract. Then at a risk of $12.50 cents for this trade, if you would only risk 1 % per trade, if that’s what you decide to do. That’s your money management rule, and risk management rule.

HOW TO DETERMINE THE THE NUMBER OF CONTRACTS/SHARES/LOTS TO TRADE

So what I am saying here is that you really want to manage risk by looking at how much am me risking on each trade in relation to the size of my trading account. We don’t have time to do this today, but what I do is, I look at time interval like a 2 minute chart, you can do this with 1000 tick chart, whatever time interval you are using. Look at a bunch of your entries, whatever your entries are for your trading method.

And I would go through about 20 or 30 of them. And do this for each one and see what the average risk per trade turned out to be. Then use that, the average risk per trade of about 30 trade samples or more, you want to use more rather than last to get a more accurate reading. And then you’ll know okay, here is how much I can risk.

How much you can risk on each trade based on your trading accounts size, and then also perhaps how many contracts you can trade. Trading one contract is pretty hard to deal and make money. Of course I trade a lot more than that now. But just because of money management principles as are in the trade, I like to see some profits quickly, like some money, move my stocks up to break even and so from only trading one contract, I can’t really do that. I got to be perfect every single time, which is nearly impossible.

PROTECTIVE STOPS THEY DON’T TEACH YOU, BUT YOU ABSOLUTELY MUST USE

Now one last thing that’s also critical, absolutely critical. It pains my soul when people call and tell me, or email me and say, Barry, I blew up my trading account or, you know can you help me if I take your courses. Can you help me get it back or whatever? Wow. Here is the problem, they were not taught the things I teach in my courses, and that I’m teaching you right now about money management. So not only do you need to have a protective stop on every trade, you also need to have a protective stop on every day you trade, on every week, on every month, on every quarter and every year.

So for example, let’s say that in the percentages you decide are up to you. I would never, personally I would never risk more than 2% at any one trade. And then I would never put at risk more than 5% on any one given day. That’s, that even makes me nervous. 5% of my trading account on one day, that’s huge. Never, never, never. So if you get to 5% loss of your trading account on one day, you’re done, shut down. Now again, these numbers, I’m not prescribing as good numbers for you. Keep these numbers smaller the better.

And then let’s say the end of the week, you lose, you know maybe 7% would be your max. These should not be proportionate each day. You want them to be smaller. I prefer something like 1% per trade. And perhaps 3% per day. And then 5% per week, and then maybe 10% would be my maximum allowed loss for a month, and each quarter, you may want to allow 20%. Per year, you could consider 30%. The actual percentages are up to you.

WHEN YOU’RE STOPS ARE HIT, STOP WATCHING THE MARKET

These still are huge numbers. Hopefully we are not going to hit them. But they are there to protect us so that you’d never blowout your trading account. You hit those percentage losses, you’re done. Your percentage loss for the day, maximum loss percentage per day, you shut down your account, let me tell you from a practical point of view, do not sit there and watch the market. Because the temptation to take more trades is way too great. You stop, you shut down your account, you totally take down your charts, you do not look at them, you remove the temptation.

If you hit your weekly stop, say that’s, you know 5%. And you hit it on Tuesday. You are done for the rest of the week. You do not trade Wednesday, Thursday, Friday. If you’re going to watch the market, you put your account in demo mode or simulator mode, don’t even allow your order entry to be up. And then if, and the same thing applies, you get the idea. So if you lose, it might be at the end of the first week, you lost the maximum amount for the month that you have allocated for the month. Well guess what, you don’t trade for the rest of the month.

By the way, these rules apply whether you’re day trading stocks, futures or Forex.

IF YOUR DAY TRADING STOPS ARE HIT … IT’S TIME TO REGROUP

If you hit those numbers something’s wrong. Something is wrong, and there is no reason to keep trading because you’ll continue to go down the rabbit hole deeper and deeper and deeper.

So this is just one simple step, one practical simple step in preserving your money, not blowing out your trading account, not allowing yourself to blow out the trading account, and of course moving you closer to day trading for a living. And here’s the other thing, when if you hit, if, hopefully you won’t, but if you hit those percentages on any one of those, you know stops per trade, stops per day, stops weekly, stops monthly, stops quarterly, stops annual stops.

That sends you a message that something’s wrong. Something’s wrong. You need to go back and regroup. Stop trading with your money. Go back, regroup. Maybe get a coach, or mentor or at least analyzer on trading and find out what is going on. Because there is something consistently wrong. You are having a consistent problem at that point. And do not put your money at risk.

So, well that’s it for this lesson on day trading for a living. Hope you appreciated, hope you will apply it. Please for your own sake, stop sending me emails, stop sending me emails saying that you’re blowing out your trading accounts, but I mean you could do it if you want to. But I’d rather you actually apply this and say, Barry thank you. I applied these rules and guess what, now I don’t blow up my trading accounts anymore. In fact now I’m making money.

A PRACTICAL BENEFIT OF USING CONSERVATIVE STOPS AS A DAY TRADER

The other side of it, I’m going to throw this real in quick. Apart of what this does, here’s a side benefit. When you apply these kind of stops per trade, per day, per week, per month, per quarter, a side benefit that you can have is to make you more careful on the trades you take. To take what I call fewer, better trades.

When you know that you’re only going to be able to, you know take so many trades in a given period, it can, I won’t say it always does this for everybody, one of the psychological benefit that some people experience is that they get more selective and more picky and more conservative with the trades they take. And that has an extra benefit of giving you a better win loss ratio and helping you to stop over trading. Which I would guess is probably about one of the number 1 problems that I hear people having, is over trading. So be more conservative, be choosier, and as they say, take fewer better trades. And believe me, you will be happier.

Employ these recommendations and it will take you a lot closer to day trading for a living.

I’m giving away one of my favorite trade strategies. Absolutely free. It’s called the Rubber Brand Trade. And it has an extremely high win loss ratio. It’s a very simple strategy. You can learn it in about 26 short minutes. Just fill out the yellow form at the top of the side bar on the right. Once you do that, I’ll personally send you an email with first video.

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