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Elements of Successful Trading

Quick disclaimer
I had an awesome run and exploded like never before, got on the right side of some sick moves and nailed it. I used several elements in my trading better and I want to go over what helped me go parabolic these last months and maybe you can grab a few golden nuggets from this blog. After all I want to see a lot of you succeed and if I can assist in any way that would make me happy.

Element 1: Patience

Lately it’s been about patience and having the right entries, shorts or longs, take your pick. I’ve found myself ignoring the first 5-10min of the stock market open. If I don’t see anything I like, I sit on cash all day. We don’t need to trade every blipping day. Be patient, and wait for the right move. Over trading is a bitch so stop doing it in this choppy market. Forcing in this market does not help, the right trades will always come along, just have to wait for it.

One good example is this guy I know named @NasdaqCowboy on twitter. He waits for the right setups then bamm nails it. If he doesn’t see anything he like he takes off.

Element 2: More is Less, Less is More

Above I talked about patience and knowing when to hit it or quit it lol, but in all honestly knowing when to size in the right trade can be very profitable

I’ve found myself sticking to 1-3 stocks a day and I wont shy away from that. It has improved my winning average and has improved my profits. More focus = better trading. Sometimes to let a stock workout we need not focus on it, but this market is nuts. A lot of traders out there scalp many different stocks, I’ve reduced my scalping. I now look for the bigger picture moves.

This doesn’t mean go all in and hope for the best. Means trade the size your comfortable with and be patience and respect your stop losses

Element 3 : Sizing In and Sizing Out

My bread and butter trading style. As you can see in this intra-day chart, I shorted FEYE twice. I took this trade Nov 5. I shorted with the anticipation of 30 fail and added at 29.5 because it failed to hold there. I covered half at previous high support line and the rest where it broke out from. This is one example of my trading style.

Sizing in and out has greatly improved my trading both more profits and better win ratio. I suggest you learn how to do this if you have a bigger account. For those with small accounts this can be difficult to do.

Element 4 : Top 5 traders = You

Another thing that has improved my trading was getting to know top traders. I have a group of close traders I talk to daily. We go through trades together. Remember your bank account reflects the top 5 people you hangout with. Truth. Don’t like it go complain to mama. Lets say you hangout with a bunch of people who want to go on vacation, bam you are more then likely to join. Now picture all those you hangout with making crazy amounts of money? Bam your chances of making more money increases. Why? Because they influence you.

If you hangout with a bunch of people who talk about improving themselves but yet take no action, I bet you’re in the same boat.<

Focus on yourself as much as you can. Don’t be worried if Trader A makes a shit ton of money. His lifestyle may not reflect yours and he may have a bigger net worth that allows him to make more $. Don’t get caught up in his profits, you are your own worse enemy. Don’t get caught off guard taking larger positions or trying to be someone your not. People want to do what I do, but you have to understand it too. I’m willing to loose XXX amount to make this amount. Remember if you loose XXX amount can you afford to pay your bills next month? If not don’t take the same size.

Remember be careful who you trust and who you hangout with. You may wind up like that person or worse. Show me your friends and I’ll show you who you are. Simple but true words.

Element 5 : Walk In, fuck shit up, walk out

Did you ever see the picture of the cat I posted? Truth be told its not a joke. When you walk in and do great, why stick around and trade more? Greedy? Go out relax, reset, workout, be ready for tomorrow again. No need to over trade.

If I have a great morning I’ll leave and go workout, hangout with family or friends. Trading is stressful, why prolong it?

Element 6 : Great brokers with crazy borrows

Ebola? Where? That’s right. To my knowledge many brokers did not have the borrows on these stocks. My broker had the borrows and I am forever in there debt. I took a 65k account too nearly 300k in Ebola Madness month. So find the right broker, remember your broker should be your friend and not a blood sucking machine. Find one with great customer service and ask what they can do for you.

Element 7 : Mental and Physical workouts

Trading sucks the soul out of you, be ready for it. Prep Prep Prep!

You have to be ready ahead of time. Sleep well, meal prep just in case your stuck in a trade and don’t have time to cook, and make a schedule for the gym. Stressful job requires a stress relief.

Do something small everyday that can help you improve over a long time.

Read a book, study up, do math problems, just do something that keeps your mind sharp. Board games, doddle jump, strategy games, you get the point.

Element 8 : Belief vs Conviction

When you’re in a position in the market, traders seem to believe the setup is going there way, when they take a position. Belief can get you killed and can destroy your career. Instead of beliefs have conviction. Conviction puts facts behind your trades. If there are no facts, there is no edge whatsoever. Consider the difference.

I was leveraged into an OTC stock called FNMA at the beginning of this year. Account Value was 75k or so. I had 35k shares with an average of $4.5 and the stock was trading at $3.3. My belief was the stock had to bounce hence add add add on the way down the next support line was $2.3 if it had hit that my account would have been gone and today I wouldn’t be here. Straight up gamble and no conviction. I added on the way down due to a belief it would bounce. Recognize the difference between a conviction and belief its paramount to your success.

Element 9 : Practice makes perfect

I often get the question, “Do you think I should start out paper trading?” My answer will always be yes. Some traders my not agree with me here, but here are my point.

– Would you let your son/daughter take out your car before they take a written exam on the rules of driving? Same point here. Why trade real money when you first start out? You need to get a hang of things first

-You can see what potential gains and potential losses look like when they happen via paper trading.

-Paper trading helps you determine what type of trader you might be off the bat and will also help you determine where you will stand once you do the real thing

A newer trader should defiantly trade smaller size at the beginning and yes some brokers charge high fees for small accounts and its really unnecessary and unethical but you have to deal with that nonsense. When you start getting a hang of things don’t just jump a flight of stairs. Slowly increase your size.

Fact. The day you start trading your belief is so high but yet your skill levels or so low this can hamper you down. You need to practice till both reach the same level.

If you belief is damaged get yourself motivated. I’ve been so far in the dumps that the only thing that pulled me out was, “If that guy can do it, so can I.”

Element 10 : Pay attention

I’ve seen it time and time again someone goes short or long and doesn’t cut the loss. You choose to ignore the signals and go short add add add or long and the same result. Losses turn ugly quick. I have a few fresh ones that I added to and kept adding into it. http://profit.ly/1MpujI http://profit.ly/1MpvkT & https://twitter.com/DerrickLeon719/status/540923827169923072. I also had some trades I added into go south and then comeback. I was down 32k the other day and came all the way back to end green. Its easier not to add to losses and a have a stress free life. @Modernrock preaches this all the time.

When your trading make sure you pay attention to news feeds for your stock. A great follow on twitter is @markflowchatter aka T530, he’s legit. He’s saved my ass a few times

Element 11 : Trust/confident in right plays

This is where most traders fail to stay confident. You see a nice trade line up and you say to yourself I’ll short/long small and you sell quickly because you loose your confidence. If you see a trade line up respect your plan. Don’t sway from it. If you say I’m gonna risk 1 to make 2 and you sell at the 1 mark. Guess what? Your risk was 1v1 not 1v2. Have confidence.

@Siricor, has really exploded this month. He only trades certain setup hes comfortable with and it has turned out well for him. He trades only what hes good at. Ever heard the expression, “Why would I change something that works?” True stuff here. I’ve been asked multiple times, “Why don’t you move to options?” I give that same answer each time.

Congrats @siricor for your biggest trading day!
https://twitter.com/siricortrader/status/544545328146706433

Here are some examples of my confident plays

https://twitter.com/DerrickLeon719/status/529657311606734848

https://twitter.com/DerrickLeon719/status/525625024737468417

https://twitter.com/DerrickLeon719/status/524577176356945920

https://twitter.com/DerrickLeon719/status/544505157090701313/photo/1

Element 12 : Tools

Invest in your education. Businesses invest millions to educate their employees. Trading is your own business, but no one will invest you in, you have to invest in yourself to become successful. There are many tools out there I use http://bit.ly/1wtUbJV. They’re huge if you want to surf through the learning curve.

A great service is Stock Horizon.The gazer gives real time alerts and price targets. There average is over 75% win ratio. Highly recommend this. http://bit.ly/1mJeops

For daily scanners I use Finviz.com and for daily scanners I use Equity feed. Imo Equity Feed is the best intraday scanner out there.

Element 13 : This is a business not a lotto ticket

Ah yes, “The get rich quick scheme.” Like most of your so called opportunity businesses. Need I say more?

Some of you are treating this like a gamble. Its not, there is actually strategy behind this. Now I’ve been insulted before like many of you have. “Isn’t trading a gamble?” hmm isn’t the 40/40/40 plan a gamble? Everyone in a different career will always have something negative to say about some other career and if that’s their thesis, ignore and block that person. They will do you know good in life. Except if they’re your in laws then your $%#$ed

Now the get rich quick crap. I see newer traders lose all their money and seen some make a lot of money and then loose it. Hmm? Ask yourself is this a business? or a hobby? If its a hobby GTFO your gonna lose a lot of money.

Point A- Treat this as a business and not a play thing
Point B- Invest in your business
Point C- Plan Plan Plan

If you own a business and you have an employee who is a terrible, emotional, insecure, and unpredictable, what do you do? Fire him!!! Some of you need to fire yourselves. No joke. Some of you just need the learning curve like any other employee. Some catch on quick, some slower and some just never. Some of you need to cut your trading losses and move on. Sorry if this is to hard to handle. For those who are actually working there asses off, studying, reviewing, asking the right questions and putting in the hard work its all a matter of time before you hit it big. If you ask me a question in chat. I can determine the type of trader you are buy your question. Think I’m joking? I got a question the other day, “What does a wash mean in a stock or r/g move.” I felt insulted.

I really hope you grasped something here that will help you in your trading, remember be patient and things will come in due time. Have a great year.

Derrick J Leon

 

 
 

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