You want to learn how to day trade. And I am probably best known for turning an account with $583 15 into more than $10 million in verified and audited trading profits. While those results are not typical, they put me in the unique position to be able to break down that first day of trading in a small account and to share with you the lessons, the rules, the skills, and the strategies that you need to know in order to trade. Day one, a small account with consistency and profitability.

My goal for this episode is that you walk away with lessons you can Implement in your own trading today. Now as you may know, I'm in the middle of a brand new small account Challenge and in our last episode because we crossed over 10,000 new subscribers in this series, I said I would reset the account back to 1,000 bucks. Which means today we are back at day one of trading with $11,000 as I'm teaching this class today, I'm envisioning that you are a close friend someone I've known for a long time who's come to me for my honest opinion. You're saying Ross I am interested in learning about trading.

Obviously, you're a Trader so tell me. do I have what it takes to be profitable? So I'm going to be talking to you candidly honestly. I'm just going to put it all on the table. You might not like all of it, but it's going to be the truth.

For those of you guys that like to watch these episodes or listen to them while you're doing other things, this is going to be a great episode to tune into while you're driving while you're walking around the house. So make sure you save it. download it if you want to so you can tune in while you're on the go. So let's talk about what day trading really is.

Day trading is simply the act of capitalizing on intraday volatility. which means we need stocks to be moving. Now you could day trade Commodities You could day trade currency pairs I day trade stocks. And the reason that I day trade stocks is because their volatility to me is much more predictable.

and although I will use leverage in some cases, I don't use use leverage nearly to the extent that Traders do who are trading futures or Forex So for the most part I feel like my risk is much more contained by trading stocks. So in order for me to make money I need a stock to be moving I won't profit if the markets are completely flat. Now Some people think oh man, Ross the markets are down today. You must be red And that's not the case.

The markets can be up. They can be down, the markets in can actually be sideways, but individual stocks can still be making big moves. One of the things that you'll know if you look at my metrics is that 90% of my profit comes from stocks that are up more than 10% and 90% of my profit comes from stocks that have 500 times higher volume today than their 50-day average. So if I present those two facts to you, what would you interpret? What is that mean? Why would a stock be up 10% today? Why would a stock have 500 times relative volume today? It is most likely because the stock has some type of news and so I as a day trader am a volatility Trader And finding volatility generally means looking for stocks that have breaking news and that's what I do every single day.

I Sit down and I look for stocks that are moving if we jump onto the Whiteboard. Most stocks in the market trade within a standard deviation up or down of about 4 to 5% They rarely go up more than 4% in one day, and they rarely go down more than 4% % in one day. And so a stock that is breaking out of this standard deviation and is up even just 10% This is actually an anomaly. This is quite rare.

Out of thousands and thousands and thousands of stocks that are in this range of minus 4 to plus4 each day, there may only be 5 to 10 stocks that are up more than 10% So that means it's actually very easy for me to find stocks that I might be possibly interested in trading. All I have to do is scan the market for stocks up more than 10% It's really that simple. And then from there I sort that list by the leading gainers I like to focus on the biggest percentage gainers. Now some people might say Ross I don't know about that.

Why would you trade something that's already up 100% 200% Didn't you effectively miss the move? Here's the deal I can never predict when a stock is going to go up 100 200% I never know when that's going to happen. and I'm not the type of Trader that buys and just holds and holds and holds and hopes that I'm lucky enough to be in a position when that happens. So what I have to do is I actually have to wait for a stock to begin to make that move. And what I have found is that when a stock is up 40, 50, 100%, even 200% 300% those are the stocks that have the highest likelihood of continuing to move higher.

So one of my Motts as a Momentum Day trader is buy high, sell higher. Momentum means I'm buying buying something that is moving I'm not trying to predict when something is going to start moving I Never buy a stock that's not already moving I wait for something to begin moving and then I jump on that momentum now I Use technical analysis and chart patterns as you seeing on the screen to help me essentially understand the lowest risk place where I can buy these strong stocks. so I can get in and be in for that next leg higher or if it doesn't work so I can stop out with a minimal amount of risk. Now if you look back on the Whiteboard I've also noticed that stocks that are likely to go up 10% 20% 50% or more.

they actually all share some common characteristics. The best stocks to day trade in my experience, will have a massive imbalance between supply and demand and that's what creates the big moves. So let's first talk about what creates the demand. Well, demand is certainly created by news, but that's not the only thing that creates demand.

Why was it that Tesla went up so much between 2020 and 2022? Yes, the demand was very, very high, but it wasn't like there was news coming out back to back to back to back. What was going on was people were hyped up, people were enthusiastic people. Lov Tesla And so you need that degree of people in love with the stock, People who like the stock, People who think the stock has the potential to go higher and so there usually is a theme or a story around the best stocks each day. Typically, What? I find is the best stocks to day trade are usually the number one or number two leading percentage gainer in the entire Market What? I find is that because so many Brokers out there make money when their customers are trading, especially free commission? Brokers They get paid by the wholesalers every time you trade so they want to encourage you to trade.

They want you to trade a lot so they make it really easy for you to get kind of fomo and see stocks making big moves and want to jump in. They don't want you to lose money but they they also just want you to actively trade so they're going to show you the things that are moving and encourage you to do that to actively trade them all right? So what I have found is usually when I look at my scan each day it is position one, two, and three. These are the stocks that are going to have the most potential. These are the ones that are going to have the most eyes on them and usually number one is going to be up 50% sometimes even 100% or more.

Sometimes in a hot Market each of these top three are going to be up 50 to 100% Okay so big percentage gainers attracts attention that gets people excited thinking wow, it's already gone up 100% This could be the stock that goes up another 100, 200, 300, 400% After all, we have seen stocks go from as low as1 or2 dollar a share up to 30, 40, 50 even $100 a share in one day Traders are always looking for the next one that has that potential. Okay so as an active Trader certainly I'm looking for a stock that has news I'm looking for a stock that's moving quickly that is one of the leading percentage gainers. But why is it that some stocks with news can go up 100% while another stock with news, possibly objectively better news doesn't go up as much? This comes down to supply. That's part of the equation of supply and demand.

Supply is the number of shares available to trade. So when a company does an initial public offering, they sell a certain number of shares onto the open market. The company has issued a certain number of shares and that percentage of them is publicly available to trade and that becomes the level of Supply when a stock or a company has a very low level of shares that they've offered and Traders all of a sudden see this news and get hyped up and start buying the stock higher. There's just simply not a lot of supply relative to the demand and the price starts going up faster and faster.

And faster and faster. And as you may know, there's a mechanism in the market where you can bet against a company that's called Short Selling Traders sell shares holding a negative position and as the stock goes higher, they're at a loss and they get forced to cover their positions. That's what happened during the GameStop Saga during the GameStop short squeeze some big Traders with big hedge funds, huge accounts were short and they got destroyed. Okay, so there's another element there where when you have these small cap stocks where you all of a sudden out of basically nowhere, the stock yesterday had zero volume.

Today it has 500 times higher volume. Short sellers are totally caught off guard. The stock. next thing you know is at 50, 75, 100% Remember if you're shorting a stock at let's say $5 the most you could ever make is if the stock goes to zero.

So if it goes up to $10 11, 12, 13, 14, or 15, you're losing far more than you could have ever potentially made. Which naturally is going to force you to cover your position for a loss. This short covering amplifies the volatility. I Profit from volatility.

This is exactly what I look for. All right. So we want to see a stock that has news. We want to see a stock that's certainly up at least 10% but is regardless the leading percentage Gainer on the day, And typically that means it's going to be up 20, 30, 40, 50% maybe even higher.

We want to see the stock already has five times relative volume or 500 times higher than average. That indicates that quick surprise element. That element of surprise is what can create then The Big Short squeeze. Okay, and we also need to make sure the total number of shares available to trade is less than ideally 20 20 million shares.

When you have a stock that has, let's say, 5 million shares available to trade. and on that day, it trades 50 million shares of volume. which is very common. What that means is that all of the shares available to trade essentially changed hands 10 times in that one day.

Which means that anyone that wanted to sell the stock for a profit of you know, 100% or whatever it was, they had the opportunity to sell. And if they haven't sold, they want to keep holding. Anyone who wanted to short certainly had the opportunity to short. and now people are getting forced to cover and you get that really rapid increase in price.

This is where things get really exciting. So my five characteristics for a stock being worthy to trade: Number one: I want to see. Ideally, it's got to be up at least 10% Number Two: it should have five times relative volume. Number Three it should have news Number four: I Prefer stocks to be between $2 and $20 the lower the price in some ways, the better because it's easier for them to become a leading Gainer They're more like it's more likely for a $2 stock to go up 100% then a $20 stock to go up 100% So generally The Sweet Spot for me has been in my experience, stocks between about $5 and $10 That spot is where we see big percentage gains, but where most Brokers also allow you to trade on.

Leverage Now at the beginning of this episode, I talked about the use of Leverage of especially among currency Traders and Futures Traders and how it can be very risky. This is true. Trading on Leverage means you're trading literally with borrowed money. You're essentially using your account as collateral.

So my ,000 account is collateral and the broker allows me to borrow their money to take even larger positions. Of course, this is risky. This goes without saying. However, it's also worth noting that as day Traders the way we think about risk is a little different than someone who's holding positions for days, weeks, or even months.

Our trades are often very, very short. sometimes as little as 5 minutes or even as little as a minute or under. So for very short windows of time. I Have found that I'm able to sort of offset that.

Yes, I am taking risk by using leverage. However, I'm reducing my exposure Risk by only only holding the stock for a very short period of time. Now, if we jump onto the Whiteboard I'll show you the way it works with the broker that I'm using right now for the small account challenge that I've set up. I funded my account with $1,000 $1,000 and they offer six times leverage.

which means I can actually trade with up to $6,000 in buying power. That means if I see a stock priced at $6 a share, I could buy 1,000 shares of it. And if the stock goes up, let's say 10 cents a share, I'm locking up $100 of profit if it goes down down 10 cents a share I'm losing $100 right? So in this case, yes, am I investing $6,000 I am. But am I risking 6,000 and I would argue that I'm not risking $6,000 because I'm not willing to hold a stock to zero.

That's not something I would ever do. So let's talk a little bit more about how I'm able to trade even with a small account without blowing it up. You will not find success as an active Trader If you do not have the discipline to manage your risk, managing risk comes number one by understanding the risks in the market and then making decisions that align with your risk profile. So when I think about risk management, I'm thinking about essentially the difference between my entry price and my Max loss.

So if my entry price is $6 and my Max loss is$ 5.90 I'm risking only 10 cents a share. That's my risk. Now in order to to justify taking 10 cents a share of risk, how much profit do I really need to make? In my opinion, I should be making at least twice whatever I'm risking. So if I'm going to risk a dollar, I should have the potential to make a dollar.

So you can see right here. Risking a dollar to make $2 would mean you'd only need to be right 33% of the time in order to break even most Traders naturally are going to strive to be right at least 50% of the time because psychologically, there's something really Difficult about being wrong more often than you're right. So we strive for accuracy of at least 50% and that means we can get away with having an average winner and average loser that is closer to equal. meaning I would risk 10 cents to make 10 cents and as long as I'm write more than 50% of time, that's okay.

Having said that, it's always better to aim a little higher. And when I look at a trade I Really ask myself: does this give me the potential realistically to double whatever I'm risking in profit and if if it does, I'm very interested in taking that trade now I Want to give you a piece of recommended reading This is a book here called Thinking in Bets it's by Annie Duke She's the author and she's a professional poker player who was incredibly successful and then she wrote this book and what I really like about it is she talks about something called resulting. She talks about analyzing your trades well, poker hands. but you can apply it to trades analyzing your trades based on simply the result.

And this is a mistake that a lot of beginner Traders fall into. So if you have a bad trade then you just say it's a bad trade because I lost money. If you have a good trade, it's because you made money. But it is naturally possible to break all of your rules and still make money.

And naturally, it's certainly possible that you follow your rules and you have a loss. This can be very inconsistent and it can make it very difficult for Traders to learn and incredibly hard to maintain discipline when you get inconsist consistent results from time to time. So what I really encourage is that rather than analyzing trades as being good or bad based on the outcome based on the result, you instead go back to look at the initial decision to take the trade. What was the logic for taking a trade? did you was to begin with? Everything we've talked about so far is stock selection.

Were you choosing the right stock to begin with? If you weren't choosing the right stock to begin with, then regardless of whether you made money or lost money, it probably wasn't a good decision to take that trade. Okay, so we have to focus on the decision. and I think this is really helpful if you take notes while you're trading because it's so easy for us to, you know, look in hindsight and and beat ourselves up. but in the moment if we're saying well.

I Took this trade because the stock had news. The float was right. It met all of my characteristics for being the right type of stock to trade and it presented a chart pattern that I like. then it was a valid trade.

It was a good decision and if the outcome is that it's lost, it's okay because what you'll learn is that over over time, as long as you are consistently implementing your strategy and you're trading a strategy like mine that is proven profitable over the long term, the statistics will be in your favor. Something that I think is really important for the self-confidence of every beginner. Trader is having high accuracy and the way you have high accuracy is by making really good decisions. In The Heat of the Moment Not making impulsive decisions, not making decisions to hold losers too long or to double down on losing positions.

You have to be really focused on making good decisions. If you make good decisions consistently, both about where you get in and also where you get out, you'll find consistency follows. So when I'm talking to a beginner Trader I'm looking at Three core components of profitability. The first one is your accuracy.

How often are you right? What is your accuracy? Out of 100 trades? How many of them were winners? And for beginner Traders I Want to see this over 50% I'd like to see it around 65 to 70% That's around where I've been hovering for more than a decade of trading. So 65 to 70% is a really good sweet spot. Now something that some Traders will struggle with is they'll have really high accuracy. But it's deceiving.

It's because when they lose, they lose big and it's because they hold their losers until they turn into winners. So yes, closed trades have high accuracy, but their unrealized losses can be huge and that creates a negative profit to loss ratio. Your average winners versus your average losers. So if your average winners are $100 but your average losers are 10,000 it doesn't matter that you're right 99% of the time, you could still manage to be a losing Trader So profit loss ratio and accuracy are are sort of two sides of the same coin they go hand inand you can't really separate one from the other when you're looking at your trading metrics.

So while it's possible to have really high accuracy, it would usually come at the cost of your profit loss ratio. Look, it's okay to lose. I'm a I lose all the time and I'd like to say that I'm a really good loser because I cut my losses quickly when a stock isn't doing what I like I Get out. In the example of the first trade today of trading with $1,000 you know that was a trade that didn't really work out.

I gave it enough time to work, but at a certain point I said, you know what, it's time to get out and it's $36 What? I wanted to make on that trade? No, it's not, but it's a lot better than holding and hoping as it goes into the red and it goes deeper and deeper and deeper. Red For Traders who have been trading for a while and who are trying to improve their trading and to just tune into episodes like this just to try to get a little better. One of the things I would encourage you to focus on is accuracy. Especially if you've been in a slump and you've been losing money.

Focus on accuracy. Number one: Making better decisions. What will almost invariably happen is those outlier huge losses are going to disappear because now you've gotten yourself dialed in by taking stronger setups, choosing better stocks, choosing better patterns. So once your accuracy then improves, your profit loss ratio usually follows.

and then what comes behind that is your consistency over the last 5 to six weeks. So whenever I'm talking to a new Trader I'm thinking, well, over the last 5 to six weeks, have you been green? Have you been making money? Or have you been losing? If you're on a long trend of losing money week after week after week, there's obviously something that is not working. It may be not just that your it could be that your strategy works, but that your implementation of the strategy does not work. This is one of the challenges for me as an educator.

I can put everything on the table and I do in my Warrior Pro classes for our students, but I can't force you to follow the rules. You have to bring that level of discipline to the table yourself. For people that do, the results can be amazing, but not everyone is able to be a disciplined. Trader This is why trading is so difficult.

So we've got these three core components of profitability, consistency, profit loss ratio, and accuracy. and it's always my feeling, my gut feeling that the best place to start is accuracy, profit loss ratio, and consistency will follow. Ultimately, the way I'm able to trade even using Leverage is by being responsible by having the discipline to cut my losses quickly. Now on this trade, right here we're back in Nexi, it's up 29% We're coming into the open I put an order to buy at $19 This is called a half dooll whole dollar breakout and on this trade my timing is better.

We go up to 1940 1940 on the offer, 1940 on the offer, 1942 1940 1947 I take a little off the table here just to lock up the gain. It's nearly 50 cents a share and I actually put a new order at 1950 to add back, but I reduced the share size to 150 shares I'm willing to get back in I Want to give it a chance I see the stock has potential and I want to try to ride the momentum. but I also do not want to let it go below my entry. The bid right now is showing 1920.

The offer is showing 1937. so I've locked up nearly $90 of profit on that trade and I sold the rest, locking up just about $100 I'm now up $133.33 on day one. Now what's important to know is that my Equity my My Equity is still showing is $1,000 but my buying power is now showing $6,795 which means I can now buy a little bit more stock even intraday on the next trade this yellow arrow on the chart. This is actually showing the micro pullback where I got in, the stock is squeezing up and I jumped in and now I'm putting a new order and I just added back at $19.40 I Am now looking for this to break through the half doll of 1950.

We're up about 31% on the day the stock did sell off, but is rallying back up. You can see that on the 5minute chart as soon as this breaks through 1950. I want to be able to take a little bit of profit I put my order out at $19.67 so when it breaks through just like that, I could take the profit out and I get filled I end up leaving a little bit of money on the table by selling. perhaps too soon, but this was a great strategy to lock up profit, especially early in the challenge.

And that means here: I am three trades on day one One 8782. That's an 18% gain on day one. So when it comes to using leverage, let's jump on the Whiteboard to talk a little bit about how this works. So if I have the account with uh, $1,000 of cash, we've got $1,000 We've got six times Leverage.

Which means we've got $6,000 in buying power. Okay, so if I buy 1,000 shares of a $6 stock, I'm using the full 6,000 in buying power, right? $1,000 * $6 Okay, so if this goes up, let's just say this goes up 10% The price goes up to $6.60 I would be up $600 right? So the stock goes up 10% and my profit is that naturally times 6. Which means my account could be up 60% in one day. But this is a sword that cuts both ways.

If it drops, let's say to $5 $540 cents and I lose 60 cents. My account is down 60% in one day. So this is where risk management this would be a $600 loss. This is where risk management is absolutely critical and ultimately the problem for a lot of beginner Traders is that you haven't yet learned how to manage your risk.

so your losers are bigger than your winners. You lose more frequently than you win, And this comes down to two really key elements: Number one: you're not trading the right stocks. You're getting caught into the habit of trading lowquality stocks stocks that don't meet at least my five crit criteria for being what I would consider the best. Maybe the float's not right.

Maybe you're getting caught up in trading these large cap stocks like Tesla every day. Or you're trading s S&P Uh, contracts. You're trading option contracts or e- minis. You're getting into something that's very choppy where you're essentially trading against a computer system.

and if you've ever PL tried to play chess against the computer, you know the computer will win every single time. There are participants in the market. these high frequency trading algorithms. these big hedge funds.

They are designed to just take money out of your pocket. so you need to find those safe hold those safe corners of the market where you can capture profit consistently and you're not giving it back. So if the first element is stock selection, the second naturally is risk management, and the third is choosing strong entries. We haven't talked about that yet, but let's get into it each.

The three trades that you saw me take here on day one were micro pullbacks. So what's happening during during a micro pullback? During a micro pullback, we have a stock that is moving up very quickly it typically should If I'm even considering trading it. If I'm even looking at the chart, it should meet all five criteria of being the right stock to trade. Okay, so let's assume that it does.

It's the right stock to trade and it's moving up very quickly. Let's jump onto the Whiteboard and help visualize this. Okay, so we're moving up very very quickly. Then what happens? Well, you get to a certain point where as it's going up, buyers just start to feel like go I can't keep pressing the buy button.

it's up too much. Let's say it went from $2 down here all the way up to $3 a share. It went up 50% and let's say it did it in about 10 minutes. All right, if it went up that fast at a certain point, people are like I just cannot buy this anymore and you know what's also happening.

People who were in down at $2 or maybe even a little bit lower are saying, you know what? This could be a place for me to take a little bit of profit. So this is what usually happens as it squeezes up here. As the stock moves higher, you get to a point where the trend gets exhausted and all of a sudden the short-term balance shifts. The buyers step back, The sellers, profit takers or short sellers come in and you get this momentary correction.

You get a little pullback now. in this moment right now, we don't know if the stock is going to come all the way back down or if it's just correcting for a short moment and that's going to go back into another leg higher. Now this is a little line chart the way I trade is of course using Candlestick charts. So we have these Candlestick charts like this.

these are called longbody candles and what's very often is near the top. we get a dogee. A dogee is called a candle of indecision and that's because it opens and closes at more or less the same price which shows that there's a battle going on up at this level. Typically we'll see this after a big extension to the upside.

This is an indicator of a possible reversal but doesn't guarantee it. But what confirms it is when the next candle goes red. So we get a couple candles of pullback. What we typically want to see on a chart pattern is that on the move up here we had high volume, so the stock was cranking up on high volume and as it pulls back, the volume is light.

If this is the case, this indicates that we're just getting a short-term correction and we are not likely to see the stock go all the way back down to the previous price where it came from. So what? I'm looking at in this moment right here. I'm usually looking at the actual Ual depth of the market which shows the bids which are the buyers and the ask which are the offers and this in this uh instance from before was showing like $18.89 by $19 and I knew that1 19 was that previous high so all I needed to see were some other people step up to the plate and hit that buy button and all of a sudden it blasts through and I'm like, okay, here we go. This is giving that next wave up and I want to be in to ride that momentum higher.

So ultimately, buying these pullbacks requires understanding the psychology of the way stocks move. They don't just go straight up, they make these waves higher, they squeeze up, and then there's a little bit of profit taking. and then when you have that profit taking, people who missed the first move are looking at that as the opportunity to buy something that is still early relatively in its move. It's only on the first pullback, so this is a good place to get in.

and rather than just buying it at the high of day, they're actually managing their risk against this pullback. So their Max loss on this trade is right down here at the low of this candle. So if it pops up here and then immediately rejects back down and forms this red candle, it breaks this low and that's my Max loss. So that means while I'm trading, I'm looking very carefully at these patterns and if let's say I know that the price down there was, you know1 1850 I could be looking at1 1850 on the level two.

Now what if I'm looking at 18850 on the depth of the market and I see that there's a 10,000 share buyer at that price That now tells me that there's bid support. There's support right down at this level. It's also worth noting that a lot of stocks trade with real respect to psychological areas of support and resistance. which means if we see a stock that's squeezing up, it is very common that we'll watch the price move between these critical levels.

and we saw exactly this on Nxtp or Nexi on Nexi. As I was trading, it squeezes up to 19 and then it pulls back just for a moment and then it breaks through and goes up to 1950 right? and then it pulls back just for a moment. and then it breaks 1950 and goes up to 20. This is Classic This is that stair stepping pattern.

So rather than buying, you know literally in the middle of this candle right here. I would rather wait for this little moment of pullback and consolidation before the next leg up. So I visualized this by actually using the chart patterns. So I'm looking at the chart I see the first green candle and in real time I see the red candle form and then the next candle is green and so something that active Traders become really good at is recog izing classic chart patterns.

This there is an entire language of the financial markets. Now this may feel like a brand new language for you. You've never really looked at charts, you haven't gotten into the depth yet and that's okay. Now some of you are quite experienced with charts and you're just trying to learn more and that's okay too.

But for those who are really early on I want to encourage you by saying that this is not much different from learning a brand new language. If you trying to learn Spanish or French or Italian or whatever language you want, want to learn, how do you do that? The best way is to fully immerse yourself in the culture in in a community of people speaking the language you can only read and and and sort of. I Don't know, absorb so much from a textbook and that's one of the reasons that in my book had a day trade. The Plain Truth: I Didn't try to make this a textbook because I firmly believe that you're not really able to learn everything there is to learn about trading by reading a book.

This is a great book and in this book I Give you the 20 guard rails I Follow in my trading. This is a great book, but in order to really learn chart patterns, what you need to do is start studying them on the actual chart watching them play out. So what this means is once you get really good at recognizing these chart patterns, as you're looking at a chart, you're going to see only half of the pattern. Remember, So let's jump onto the Whiteboard.

So on the Whiteboard we're sitting down and let's just say we see this stock Nxi and it's squeezing up. We see the first green candle. Now as it's squeezing up, it's going to be hitting one of my stock scanners. So I'm using stock scanners in real time to search the entire market for that small handful of stocks that are up more than 10% that are moving quickly that have news.

So this is a tool that's giving me alerts in real time saying you know it's almost like Radars beep It's telling me something is moving. This is an incredibly valuable tool. Okay, so I see a stock hitting the scanner and there may be initially a temptation as it's hitting the scanner just to go ahead and jump in. I may be like oh my gosh.

I Don't want to miss this I'm just going to buy right here in the middle of this candle. I Get that. Temptation that's called Fomo the fear of missing out. Okay, rather than give in fomo, this is what I want to do I Want to let that first candle form I Want to watch the stock squeeze up I Want to make sure the stock Number one.

Here's my checklist: Number one: Right stock to trade. Is it the right stock? Okay, Number two can I manage my risk I Can't do that with this pattern. This isn't a pattern yet. So number three, where's the pattern? Show me the pattern.

Oops Pattern All right. So I'm looking for the pattern. So we get this move up here and let's just say it does something super classic and it runs right into a whole dollar. Let's just say it's $6 right here.

Then it pulls back just a little bit. Now this is sort of the Moment of Truth and I'll make this green candle just a little bit smaller so I can demonstrate and show you volume. So let's say the volume on this first candle looks like this and the volume on the second candle looks like this. and let's say the volume on the third candle looks like this: What do you think is going to happen next? I'm going to predict that because we have this really high volume red candle that the next candle is actually going to go lower significantly lower.

We should not have that much selling on this candle at the top. This, in order for me to feel the pattern is valid and a safe place to buy should actually be light Volume: Why The buyers have stopped buying so there's less volume? There are some people who are selling so there's still some volume, but we're not getting a massive surge of selling which would indicate Short Selling or a huge amount of profit taking from people who don't believe the stock is going to go higher. So what we want to see is high volume. On the Move Up Light Volume On the pullback.

Now on a micro pullback. This can be occurring on a 10-second chart. Uh, but it can also occur on a one minute chart. We might only have one momentary red candle before the next wave of buyers come in.

Depending on how strong the news is, will depend on how quickly the next wave of buyers come in. What we want to see is the volume is increasing even more if as it goes higher. Here, the volume initially is higher than this candle, but starts to kind of decline Like this. That is also a volume profile that's indicative of a possible reversal.

The ideal volume profile I'll draw you the the perfect volume profile and it's going to have no regard for what the candlesticks look like. This is the perfect volume profile. So big volume on the Move Up Light Volume Pullback: Even higher volume as it moves higher. Maybe four candles and a rogue up and then there's going to be again.

it's going to be volume on the pullback and then even higher increasing volume is what we want to see in order to see a stock with price action that goes up. That will not happen if this isn't happening with a volume profile. So one of the technical indicators that I use pretty much exclusively in my trading is closely looking at those volume profiles. So we want to see that Move Up Light Volume Pullback Light volume pullback next move up, punches through that level to the new high, goes up a little higher.

We can get a second pullback. but something I'll tell you is I will not trade the Third pullback What often happens by the time we're getting the third pullback up here is now: Buyers are like, look, you know we already had a good first pullback right here I got it and made money I got back in on the second pullback, but I'm not going back for the third time. We often find by the time we come up to that third pullback. That's when we start to see a longer term correction and again, maybe it bounces up a little bit here.

kind of holds. and then it starts to either curl back to the highs or sell off back down. And this pattern right here that you're looking at is called a head and shoulders pattern. That's the face.

this is the shoulder here and that's his. like really long arm and it looks like that. So that's sort of your classic. Head and Shoulders this is a self-portrait by the way.

Um, really. Inc Incred incredible body. Um, but this is a very common pattern so we want to be trading just the move up and something that I really take seriously is not overtrading a stock. You take your money, you get in, you get green and you come back and do it another day.

You do not want to overstay your welcome. You do not want to push your luck, get in, get green, and get out. So now you understand the concept of volatility and why it's so important for active. Traders You understand the right stocks to trade, You understand about risk management and you have a basic understanding of really one of my favorite ways to buy a strong stock which is to wait for that momentary pullback before the next wave up.

I would I would encourage you? This is actually another, um, another thing from um, this book right here. Annie Duke She said that when her brother was teaching her how to play Bo poker he gave her a a list of cards to play. Whenever she was dealt those cards, those are the cards she would play and she would sit the table and she' be like, well, wait I See these other people who played cards that are different from what's on my approved list, but they won the hand I Don't get it and he said, listen I gave you that list not because it's the only cards you could ever play, but because those are the setups that have the highest degree of probability. Those are the ones that are best for a beginner.

So when I'm talking about a micro pullback trading, that micro pullback trading the first pullback, which can happen on a one minute or a five minute time frame. I I Share this with you. Not because it's going to be the only pattern you'll ever see me trade, but because as a beginner. Trader In order to build confidence in order to build a track record of success, you need to focus on getting really good at just one pattern.

If you can be good at making trades on just one pattern, good at finding the setup, good at executing the trade, that can be enough to keep your head above water and survive until you thrive. Okay, that's super important, All right. So we've talked about these patterns, but what I haven't talked with you about yet is exit indicators. How do you know when to get out? Okay, this is very important.

Obviously, when we take a trade, we have a pre-established level of risk. So if in the case where I get in a stock at 19 and drops down to 1975 and I already said 1975 is my, you know, my cut, that's my hard stop then what? I'm going to do as it comes down to 1975. If I'm looking at 1975 on the bid and I'm seeing red on a tape and people selling I'm going to press the sell button now. I actually have a cell button on my keyboard I press it with two keys and I am out of a trade.

That's it. It's like I am so just ruthless about cutting those losses. Okay, so naturally we're going to cut the loss if we hit our Max loss. but I'm not the type of Trader who's going to take a position and hold until one of two things happens: Profit: Target or Max loss because there's a lot that can happen in between.

Like what? Well let's just say for instance: I get in at 19 I Think the stock is going to go to $19.50 But as it comes up to to 1925, all of a sudden on the level two shows up a huge seller. Let's just look at the Whiteboard Let's pretend that this stock has made its move right here. it did its little pullback. I'll draw that in red.

It came up here and then as it pulled back and as it came back up to this level all of a sudden. Right here we have a 100,000 share seller. All right. that is a big wall that is a huge seller is unlikely, especially that a higher price stock is going to be able to break through that on the first try.

What's most likely going to happen are early traders see it and panic sell. They're like o I better get out of the way and then people who didn't see it soon enough are exiting with everyone else and that's when you get this reversal. Now the worst case is if that seller moves their order down to 100,000 shares down here and as the stock keeps dropping, they keep moving their order lower and lower and lower. When that happens.

it's essentially could be a big hedge fund. could be an individual Trader who's pushing the stock right back down. Okay, so that happens. So if I see that the second I see it if I'm not already, if I'm in basically break even and I see that I'm out of the trade.

Okay, so let's take a pause for one second. I Think a good way to think about exit indicators is actually to flip this inverse. And let's think about what are the indicators that confirm that the trade I took is awesome that it's working. Number one: I Get in and the price goes up immediately.

Okay, so then the inverse of that is I get in And the price. Let's see. I'm just going to draw this on the Whiteboard the price. Number one stalls.

Okay, so price stalls. if I get in and the price stalls. That's not great if I get in and I see that big seller number two big seller. That's not good either.

What's another possible indicator that you know? Well, what's a what's an indicator of of something that I really like? So I want to see that the price is squeezing up I Don't want to see big sellers on the ask I want to see it just pushing through these levels. But what if we see it approaching an area of psychological resistance perhaps 1950 or 20? we may not see a big individual seller, but what we may see are a stack of sellers. So if we see a stack of sellers, let's say 10 or 15 sellers deep, all at 1950 or at 20, we're probably have to. It's going to take a little bit of effort of Traders accumulating all those sell orders before it's able to push through that price and punch through and go higher.

So if I see big sellers or lots of sellers, lots of sellers, this is going to be another indicator for me to sell. All right. So these are all exit indicators. Number four, Um, another um, exit indicator is if we have a jack knife.

I don't know if that's spelled with 2ks, but in any case, a jack knife. a jack knife is, uh, if you ever seen someone on a a diving board do a jack knife, they jump up, they go like this, and then they go like this. So when you have a stock that goes up and then goes like that in one candle, that is a jack knife and we don't like to see that. All right.

So if we see a jack knife, I get out immediately. So number five, number four, jack knife. those are all exit indicators for me. Now if I don't see any of those exit indicators, the price is not stalling, it's just going higher.

I'm going to hold the position as long as as possible. Something I never want to do is Cap My winners as an active Trader When you are lucky enough that you're in its trade and it goes up that much, you want to ride that momentum. There is a degree of luck in trading. I Mean obviously it is skill-based in order to be successful long term, but in any individual trade, you could have a trade that makes a huge move and you never really know whether or not that's going to happen.

Even if you think a stock might go up 203 cents, you don't know for sure if it will happen. Okay, so when it does happen, when you get that really big move, you want to just hold as much as you can as long as you can until you see an exit indicator. One of the things that I would really encourage all of you guys to do is to print out examples of the charts that are just like picture perfect example of perfect trades. The reason I want you to do this is because I want you to get really good at visualizing seeing half the pattern and being able to project what's going to happen next.

So what I want you to do is write down in the comments pinned in the top of the comments and Linked In The description is my ultimate getting started Kit is the beginner getting started kit that has a ton of PDFs resources that you guys can download for free. This includes my small account strategy, my micro pullback PDF which is a deeper breakdown and a resource that you can print out and have next to you and it includes these chart patterns I Want you to download it I want you to print it out and I want you to surround yourself with these patterns. immersing yourself in this community of active Traders is what it takes to learn the language of the financial markets. I find it so helpful every single day when I'm trading to be talking with other traders in in the Warrior trading chat room in the community because I get a sense of am I looking at the right stocks I think that I am but I want to make sure that other people are in agreement when you trade completely isolated in a bubble.

what you lack is the understanding of what is the general consensus. What are other people interested in right now? What are other people thinking about this specific stock? It's important to be able to take the temperature. Ultimately, when we had that crazy move on GameStop everyone was crazy bullish about it. Now when we have a situation like that, it's really important to pay attention.

This is when we can get extreme emotions in the market. extreme volatility in the market. You have to be careful. you want to capitalize on it without falling victim to it.

And that means every time you're trading, you're respecting the fundamental rules that lead to success. You're maintaining your discipline. You're understanding your risk for every single trade. If you are taking a trade and you don't know how much you're risking, you're not trading.

you're gambling. That's what separates gamblers in the market from Traders You have to understand Risk by watching this. Episode By tuning into this series, hopefully by hitting the thumbs up, you're bringing yourself some good luck. But you're also reinforcing at least to me that you are really trying that you do not want to be a statistic of another failed.

Trader So if you've made it to the end of this episode, that must mean you have really enjoyed this class. I Hope you hit the Subscribe button, hit the thumbs up and tune in for the next episode of this small account Challenge coming real soon! When I first started trading, one of the things I focused on was trading penny stocks, so that's something we're going to be talking about in the next episode should you trade penny stocks. Hm, we'll find out real soon.