Traders under 25K

M

Mr_F

I started about 16 months ago with 20K with IB (Qcharts as my feed). I then began paying a heavy price for daytrading experience. If that was not enough, the new SEC rules on PDT were implemented, which do nothing but handcuff the small traders. It actually forces the small trader to take bigger risks than they would otherwise. For example, 90% of my trades must be swing trades now, exposing me to overnight risks. In addition, this rule costs me money in missed opportunities, profits that turn into losses, and losses that turn into bigger losses all in order to avoid using a daytrade.

Well, I found myself down to approximately 8K+ about 2 1/2 weeks ago after blowing a chunk on a call strategy (the market headed in the wrong direction). I remain undaunted because I believe I have what it takes to be successful. If I can be successful under 25K, then I know I will be successful over 25K. I am now setting at 14K+. My goal is to cross the 25K threshold by year end.

I started this thread to gather insights and possible plays from/for other under 25K traders and to provide some of my own.

My strategy involves trading dumpers 75% of the time. These are stocks that tank on negative news. My rationale for playing these stocks is to minimize downside risk and profit from the markets predisposition to overreact. The one I am playing now is COF and doing quite well. The key is to pick the right ones at the right time. My other plays involve about 25 - 30 stocks (some post dumpers) I follow closely that I will do swing trades when I feel they have bottomed. If I had the resources, I would load up on OLN and FNSR right now. However, COF provides the largest potential return at the moment.

The following are some of the things I have learned for myself that I must follow:

1) The market will not get me down - I WILL WIN.

2) I must pick my plays carefully. If there are none that I feel I have an edge, I will not trade that day.

2) I expect to lose on every trade - small. I must always decide on an exit before I enter.

3) Know support and resistance levels of the market and the stocks in play including highs and lows intraday and previous days. I have become fairly adept at reading intraday S&P S/R levels.

4) If I am up more than $250, I will take a daytrade.

5) I will take a daytrade to avoid losing big.

6) If I find a play with extraordinary potential, I will press and go into margin, but I will take a daytrade and exit before the end of the day.


I would like hear from others for the under 25K traders.
 
You might want to look into trading the nasdaq 100 e-minies (NQ-on IB) or the s&p eminies (ES- on IB). You will be free of the sec pattern daytrader rules and you can also short a downtick. Just something that you might want to consider.
 
You also can trade stock and index options with IB w/o PTD considerations. Good environment to buy Puts. Start small and build.
 
in e minis ...

for most traders ...

better off swing trading using options

on QQQ if you want to spec on movements of nasdaq 100
in my opinion
 
crushed me last week

instead of having a 1500 $ winning week I only made 100-200 $

what is your winning strategy on COF ?

you bought some at $30 and held on ?

good luck .. market is quite volatile now
 
try emini or option trading

PDT rules sucks too much to a small trader....Market won't have crashed so much recently had there been more number of market players. SEC should rethink about PDT rule which has no sound basis. Instead SEC should focus more on US corporate governance, white collar crimes, etc.

Market lacks buyers, and PDT are barred from trading more than three times a week. If anyone remembers 1987's stock mkt crash, it was due to lack of liquidity. Later US congress stepped up with some measures to increase mkt liquidity by providing incentives for more market players to be in the mkt

just 2 cents
 
I too started trading with a small account ($6,800) in June and also have had to take a swing approach. So far I've been lucky in that I've been able to build my account to $11,800 without taking much risk. Specifically, I've focused 90% on going short stocks that are at key resistance levels that have weak bases. This requires a lot of patience but it has paid off so far. As an example, I went short DCX Thursday @ $47.60 with an initial stop at $48.05. If you look at the chart, it was at good resistance when I took the position (i.e. upper right shoulder of the H&S). Since I'm still in "build up" stage, I will probably leave a lot of $ on the table by covering at the neckline. My point is that I feel it can be done. I'm not there yet, but hopefully I will be by Christmas.
 
Originally posted by SethArb
crushed me last week

instead of having a 1500 $ winning week I only made 100-200 $

what is your winning strategy on COF ?

you bought some at $30 and held on ?

good luck .. market is quite volatile now
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SethArb, since I try to avoid daytrades, I enter small when I think there is a bottom. In COF my fist entry was 100 shares at $33.99, but I soon found out that was not a bottom. I waited and saw the $30 come and go and bought an additional 200 shares at $31.25 and then held for a profit. I have made 3 round trips with the last sale at $36.81 after a high of $37.20 on Friday. After that, I watched it pullback and I bought 100 shares at $36.31. Then the markets began to sell off as well as COF. I bought another 100 shares at $35.80 (I didn't cancel my order quick enough) and then another 100 at $35.21 which is the closing price. So I am setting at about $170 down going into Monday. If it appears it will go below $35 I will dump it and wait for a bottom. If it runs up first thing in the morning (which it has a tendency to do) and the market is going down I will sell and wait to get back in. If the market starts going up, I will double my position and take a daytrade when it tops out.
 
Couple dumpers I've been watching are NSIT( already hit it good) and ITRI. Keeping an eye on KO as well. We'll see what happens next week. Quote from ET chatroom (Uptick, I beleive) " Those who pick bottoms often end up with stinky fingers"
 
Be careful swing trading with the PDT rule. The avg win/loss streak inherent in this style will cream ya. In my room I have always done a mix of deep time frame position trades and 1-3 day swings. Since the PDT rules came into effect, I’ve seen my traders struggle with the “PDT death spiral”.

Small accounts and the PDT rule
Since the Pattern Daytrade Ruling took effect, a new set of challenges have been put before those with small accounts. (Less then $25,000) You are only allowed to take a very small number of "daytrades" within a 5 day period. This makes trading with a swingtrade 2 to 1 strategy very difficult. As a 2 to 1 trader you can expect an accuracy rate of 50% or so. With this success rate, 4-5 trade losing streaks are very normal. Due to the cyclical nature of trading, your biggest gains will often come after a losing streak. As a small account trader, the SEC rules ensure your failure. Since most of the profitable trades are held for several days, it seems like these rules will not cause a problem. However since most stops are taken in the same day as entry, these count as "Pattern Daytrades". When the very normal 4-5 trade losing streak hits, the PDT rules cut you off for 5 days JUST as the cycle turns and the biggest gains are available.
More...

So, this sets you up for real trouble. Your not only missing out on the nice win streaks that often come after a losing period, but it really wrecks your head as you watch the good trades go without you having just eaten a few stops. Then just as the Government in it’s infinite wisdom allows you to trade again, another losing streak rears it’s head.

I have been experimenting and trying to figure out a way to get around this stupid rule for some time. I found a nice solution about two months ago. I found a quirk in my trading I had missed that could get my win/loss ratio way up. So now, with a hit rate in the 70-80% range instead of the 40-50%, the small accounts have a much smaller chance to eat a 3 trade losing streak. About two months after the change, and folks seem to love it! It also works well for the room environment as people come and go during the week. With a higher win/loss rate, missing a trade or two is not going to make the difference between black and red ink. For instance in my best month this year before the change in strategy, I made the bulk of my profits on 4 trading days. Miss those trades and your result would have looked very different :)

So try to find a trade style with a high win/loss ratio, and just maximize the 3 trades a week you get with the PDT nonsense!

Good Luck and Good Trading!

-Bo Yoder
 
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