Tag: tricks of the trade

  • How to Increase the Number of Trades Per Day?

    How to Increase the Number of Trades Per Day?

    How to Increase the Number of Trades Per Day?
    Your strategy limits how often you day trade, overtrading can happen when you take more trades than your strategy allows.

    By Guy Avtalyon

    I heard so many times this question: How to increase the number of trades per day. I’ll tell you something that may surprise you. You don’t have to trade every day, not even every week. So how to make consistent gains? Actually, you can generate even better profits if you don’t trade frequently. For that to achieve you don’t need to manage numerous open positions and spend days in front of your computer.Ā 

    Surely, you’re waiting for me to tell you about the special secret.

    If you stay long enough, you’ll see!

    Firstly, you can trade stocks on how often you want but in a non-margin account. Of course, you don’t have a non-margin account otherwise you wouldn’t ask this question.Ā 

    So, you’ll have to trade under the rule known asĀ  ā€œpattern day trading ruleā€. What does it mean? The number of your trades is limited if you don’t use your cash account. On the other hand, if you use cash or a non-margin account you can trade as many times as you want. However, if you use a margin account it is allowed to trade three times every day for a five day period. If you are smart you can extend this number to four. For example, to avoid this rule you can buy the stock at the end of the trading day and sell it the day after. In this way, you’ll hold stock for less than one day but you’ll have more trades.Ā 

    How often to trade stocks?

    This Day Trading Rule will limit you. Keep in mind that the number of trades means the number of transactions, not the number of different companies you trade.Ā 

    The day trading rule operates by identifying some traders as ā€œpattern day traderā€. Such traders must have deposited $25,000 in their accounts. The good news is that you don’t need to cover this amount in cash only, you can use other securities also. But if you don’t use a margin account this rule cannot be applied to you. If you’re in cash,Ā 

    you don’t need to comply with this rule, of course.Ā 

    But, what is smart to do? What is the reasonable number of trades per day? How to increase the number of trades per day? First of all, if you have less than $25 000 the reasonable decision is not to use a margin account. In this way, you’ll reduce the risk. If you’re a beginner it is smart not to use leverage. Just take care that some mistakes can wipe you out completely and trading with leverage is one of them.

    However, it is a completely different situation if you have experience but not enough capital. If you want to avoid the day trading pattern rule you should do the following.

    Tricks on how to increase the number of trades per day and more often trade stocks

    Open added accounts. This is the easiest way. For example, you can open three different accounts to execute day trading. This strategy is one of the tricks actually. I already mentioned that the rule can limit the number of transactions per account. But if you have several accounts you can trade more often and you’ll not be flagged as a pattern day trader. You can make 15-days transactions from 15 different accounts.

    Well, the problem could be how to open multiple accounts in your name. Well, don’t do it. Open different accounts in the name of your family members, for example. It is completely legal for you and your family members to have trading accounts with the same broker.Ā 

    Well, if you don’t trust your family, there is still a chance to open multiple accounts with different brokers. That’s how you can overcome the problem of ā€œpattern day trading ruleā€.

    But be careful, this can’t last forever. It’s a matter of time when the brokers will start to control you. The consequences aren’t pleasant. They could increase the minimum collateral limit even if you use your cash account or other non-margin accounts. Their limitations can be tied to social security numbers or they can request to connect the biometric information for using these accounts.

    Therefore, if you want to be a daytrader and break the limited number of trades per day you’ll need to have some other tricks in the pocket.

    Trade in the markets outside your country

    The day trading pattern rule is required by American regulators like FINRA and the SEC. Hence, this obligation does not surely hold true in stock exchanges out of the US. You can look at some foreign markets and exchanges. Many of them don’t have such rigorous demands. Well, you can’t just jump into another market, you’ll need to examine it first. For example, things like taxes and legal issues, liquidity and risk matters, etc.

    So, you may find another way often to trade stocks when you want a day trade but your capital is below $25.000 which is required in the US. These that I presented you are just a few strategies on how to avoid pattern day trading rule.

    But frankly, this rule is helpful to both traders and brokers. It decreases the risk for both sides.Ā 

    The pattern day trading rule appeals to traders that use a margin account and only on the territory of the US. If you trade out the US market you don’t need to respect this rule. Also, you don’t need to follow this rule if you’re a cash-based trader.

    How to increase the number of trades per day? I hope you got some clues now. Just, keep in mind any combination of selling, buying, or shorting a stock within one day can be recognized as day trading.

    Keep the balance in the number of trades

    Day trading is the most fascinating and queried trading style. In day trading you have to close all positions before the end of the trading day. The benefit is that you’ll avoid the overnight gaps. But is it a real benefit? No matter how day trading may look lucrative it has drawbacks too. Let’s ask the stats for help. The stats say that almost all returns in the stock market over the 20 years and more, come from overnight gaps. If you remove the risk and you don’t want to have a market gap against you, you’ll reduce the profit chances. Some traders wrongly believe that under-trading is better than overtrading. This is a mistaken opinion. If you have a winning strategy, then by bounding trades, you decrease your chances of success. Think about that.

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  • Tricks of The Trade

    Tricks of The Trade

    Tricks of The Trade
    Don’t eve try to find or use tricks in the trade, here is why.

    By Guy Avtalyon

    There are no tricks of the trade. You will find no hacks or cheat-sheets. All you can find are countless strategies to choose from depending on your trading style and many wise practices to follow.

    In short: Learn before earn. Whenever it seems something is very obvious, first see how theĀ market is behaving before making up your mind to go long or short. Start with paper trading. Learn Technical and Fundamental analysis. Access your risk ability and only take positions in which you are comfortable with possible loss.

    After many hours and a lot of coffee, we had one conclusion: There are 3 types of trade. You have to choose your strategy. If you make the right pick and learn a lot you have a chance to become a master in it.

    At first, you should get theoretical knowledge about the market.

    Educate yourself and read special books. Read blogs. You can find a good piece of advice there. Make out a trading strategy or taking an already working one (find it on the Internet), test it, and see how it works. Try to master it. But donā€™t go away from its rules (you can change the rules, of course).

    Practice. You need practice. Start with a demo account. All of them are free and you can get even several accounts from different brokers to compare them and find the best one for you. Then continue with trading real money, decide what strategy is yours, and start making money!

    Remember, that you should keep in mind all the tips or tricks of the trade which you will learn from literature. You will have to make all your decisions logic and automatic. After some time, when youā€™ll be experienced enough, you should feel the ground. Meet your losses and wins as a lesson.

    Define your goals and choose a trading style

    It is important to have some idea about where are you going. You have to have clear goals. Then check your trading method is capable to achieve these goals. Each trading style has a different risk profile. That requires a certain attitude and approach to trade successfully.

     

    You have to be sure your character fits the style of trading you deal with. The mismatch will lead to stress and definite losses. Learn and practice.

    It is better than trying to find tricks of the trade.

    Take this small tip regarding calculating expectancy:

    Expectancy is the formula you use to determine how reliable your system is. You should go back in time and measure all your trades that were winners versus losers. Then determine how profitable your winning trades were versus how much your losing trades lost.

    Take a look at your last 10 trades. If you haven’t made actual trades yet, go back on your chart to where your system would have indicated that you should enter and exit a trade. Determine if you would have made a profit or a loss. Write these results down. Total all your winning trades and divide the answer by the number of winning trades you made.

    Choose an appropriate trading platform

    Choosing an online broker seems like a simple process. But in reality, it can be a nightmare because finding the right broker is not easy. In the very beginning, you want to be sure that the broker has the right credentials, understands the market, has similar wealth-building beliefs as you do. The most important question is about what type of trader you want to be. Are you an active trader or buy-and-hold investor? Whatever you are, it will affect your choice of broker. If you are a buy-and-hold investor and invest in index funds, making a few trades per year, fund selection may be more important to you than low transaction fees. If you like to trade off of Fibonacci numbers, be sure the broker’s platform can draw Fibonacci lines. These are the best tricks of the trade.

    Choosing a respected broker is of main importance. Researching the differences between brokers will be very helpful. You must know each broker’s policies.

    Have a plan before executing a trade

    You donā€™t need a million bells and whistles to make money, just one simple tactic that works. One of the biggest problems a trader faces is bridging the gap between trade planning and execution. Getting from a strategy looking good on paper to real-world trading performance is what itā€™s really all about. Without question, all the planning in the world will not do you any good if you canā€™t execute and reap the benefits of your work. Wins and losses come in a random distribution. It is not unreasonable to sit through a series of losing trades even if you did everything according to plan. One issue to consider is that people arenā€™t particularly confident in what theyā€™re doing and this can be rectified with a little guidance.

     

    Understanding what it is that you are trying to achieve and what constitutes reasonable results can go a long way towards settling nerves and allowing a trader to execute how they have planned to do so. Clarity of mind and consistency of approach will help you to start to realize the potential of your strategy.

    OK, there is one trick of the trade: ā€œone punch, one kick.ā€

    The idea is to accomplish the job as quickly as possible with very minimal effort. Ā Find your edge in the market, a technique that works and sticks to your plan. If you donā€™t have a strategy then you shouldnā€™t be on the battlefield. Traders who execute random orders without a plan usually lose their money. Who needs a flying roundhouse kick, when a straight stomp to the knee will incapacitate your opponent with one simple move.

    Trade quality over quantity

    One general mistake is the need to always be in a trade. Some traders get whiplash by chasing the market during choppy conditions. Advanced traders are very picky about when to pull the trigger.

    Most of the time the markets produce a 50/50 possibility for success. You want to be patient and wait for trades that have a higher probability than a coin toss. The trick of theĀ trade is to find good trade setups not treat the markets as a roulette table.

    That said, even quality trades have an element of chance, therefore you always need to have an exit strategy to manage risk.

    Traders tend to make money when the markets are inefficient unless youā€™re running an algorithm that scalps a flat market, stay away from choppy or stable price action. Only trade in market conditions that are conducive to your particular trading strategy.

    As we said before, there are noĀ tricks of the trade. Trading is an art. The only way to become skilled is through consistent and disciplined practice. That’s the trick of the trade.