This is going to be an intro to treating day trading like a business…looking at trading through the lens of someone who’s a profitable trader and trying to adopt that mindset, because success in trading is more than just skill and strategy. Not that those aren’t very important because they are, but it’s also about the mindset. It’s about how you approach trading, how you think about trading, how you handle the ups and downs of trading.

 

And by thinking about it from the perspective of this is a business that I’m starting essentially, it’s not any different than starting a business or opening a coffee shop or a car dealership or automotive repair shop or whatever the case is. And that helps in a lot of ways for you to be able to handle those losses a little bit better, to become less attached to them to actually detach from them from an emotional perspective.

And that puts you in the mindset, which is much more similar to those who are really, really successful. I think one of the hard things about getting started is that many of us don’t know a lot of profitable traders. We may not even know anyone at all that’s a trader. And so we’re in this place of trying to just figure it out whereas if you were going to open a coffee shop or something like that, there are certainly lots of coffee shops out there that you can base your business on and when you’re starting the process of evaluating whether or not this is going to work, you would just naturally refer to, okay, what are the things you need to do before you start small business?

You need a business plan, you might need a loan, you might need to invest in equipment or infrastructure or rent and all that stuff. But when people approach day trading, most people approach it in this very nonchalant way of, oh, I’m just going to open up my app on my phone and jump into Robin Hood or Weeble or whatever. Ah, I’m just going to take a couple trades and see if I can make a little money and then of course, they get further into it, but they started from this very haphazard spot which, ultimately, because that’s the way so many people start their career it starts them off on a bad note.

You can’t really haphazardly or in a nonchalant way start a coffee shop. Anything on that level takes a lot of planning, which ultimately, the more you plan, the more likely you are to succeed. It’s measure twice, cut once and for every … I don’t know what they say, for every hour of planning, you save yourself a day of time, there’s some ratio that people talk about especially on development projects like tech projects.

And so when we were building our new day trading chat room at Warrior, we spent a lot of time planning it and a lot of time testing different things. And we did have a couple of false starts on it but we learned that the more you plan, then when you actually sit down and start getting into it, it just makes it a lot faster, but that’s not how most people approach trading. So I see you guys getting logged in here on Facebook and YouTube. We’ve got about 500 live streaming on YouTube right now and about 180 on Facebook. So thank you guys.

Typically when I go live on a weekday … this is a Saturday. When I go live on a weekday, right around 9:00 AM, everyone knows that that’s when I stream and so on YouTube recently have five, 6000, even 7000 people live streaming which is amazing. But when I jump on here to random time, 1:30 on Saturday, I just catch those you guys who are hanging out or on your phone or on your computer or what have you.

So thank you guys who are live, I will answer some questions from those who are live. But for those that are watching this as a video on YouTube, or re-watching the live stream on Facebook, you guys can feel free to put comments down below and I am hoping that the content of this Facebook and YouTube Live is timeless in the sense that, what I’m going to talk about is relevant. It was relevant three years ago, it’ll be relevant three years from now. So regardless of when you might be watching this, I think you’ll probably still enjoy it.

So thank you guys for tuning in here today. And it looks like I’ve got a pretty good WiFi signal, which is also really nice because sometimes when I’m outside my WiFi gets a little shaky. So one of the things I’m going to talk about a little bit during this live stream as well, are the metrics of a profitable trader. And so as a comparison, at one point I was looking at buying a rental property, like a building where I would have commercial tenants and everything like that. And so as part of that process, did some research about what are good profit margins and what’s a typical profit loss statement look like for a rental property?

To get a sense of basically, does the cost of this property and the current rental rates justify this being a good investment or is it not a good investment? So, through that process, I found that there was a lot of information out there about the ratio of the value of the property, your monthly rent, and then the value of the property versus what you should expect in overhead from property tax to insurance, to maintenance, upkeep and property management and so on and so forth.

So there’s a pretty good set of data around what makes a really good rental property. All right, and so if you’re thinking about getting into it, it of course makes sense for you to research and become educated on those metrics. And then when you’re looking at a property, you can fill in that sheet. Okay, so this property let’s just say is $500,000. Okay. That’s good. The monthly income from rent right now is $5,000 a month. Okay, so that means over the whole year, brings in 60,000 bucks. Now that’s actually really good from the perspective of that’s 10% return each year, but that’s before costs.

You factor in, okay, what’s the property tax on this building? It’s 15,000 a year. What’s the insurance? It’s another 15,000. All right, so now you’ve gone from 60,000 in profit down to 30,000 in profit. All right, and then you’ve got to save some money for upkeep, you’ve got plowing, and you’ve got utility, infrastructure, boilers, AC units, things like that. And now the upkeep of those you’re coming down to maybe netting only 20,000, which on a $500,000 investment, you’re looking at a return of about 4% a year.

So that same 4% ,there might be easier ways to make 4%. Now, what’s the appreciation of the property in that area? And that’s when you can start to say, “All right, well, this might work if I could get the property for 400 grand or if I could increase the rent for the tenants,” if they’re commercial tenants and stuff like that. And so these are the numbers that you play around with. And we do essentially the exact same thing when it comes to trading. So let’s talk before we get into the metrics portion, let’s talk for a moment about treating day trading as if it is a small business.

All right, so many of you guys know I’m hosting summer school this summer for the first time ever. For those watching this months from now or years from now whatever, we’re still dealing with COVID-19. And the market as many of us know dropped 35%, is now coming back up off the low. In fact the market’s only down about 10% now off the high which is good for those of us that have long term investments, 401(k’s) etc.

But because a lot of things are still closed, and a lot of people are … unemployment is still very, very high right now. There are a lot of folks that are not going to be hitting the beach this summer. They’re not going to be traveling this summer, including me. And so I decided to host the summer school program. So, during summer school, we’re going to talk quite a bit about approaching day trading as a business. Okay, so the first layer, the first step, I would say, is the discovery or the realization that this is actually a viable business opportunity. So for instance, running a coffee shop.

Owning and running a coffee shop is a viable business. There’re other people that do it. There’re coffee shops all around the world, obviously. And so day trading similarly, is a viable business. Now, the average success rate of a coffee shop, it’s hard to say, I don’t know, the average success rate of a day trader also hard to say, because we don’t have a lot of that data. Most of that data would have to come from brokers, they’d have to release that data about active traders.

Although there have been a few studies that have gotten into that data. They’ve been, they’ve been really small sets of data. So that they’re not really super conclusive about a population or a large amount of people. But in any case, we know that day trading is a career that many people embark on and certainly can be profitable. Okay, so first step is discovery. Now, those of you guys live streaming, it’s now 720. I would like to see half of you hit that thumbs up button, I’d like to see 360 thumbs up for this live stream a little Saturday school for those of you guys tuning in. Now, you may know this already, but I don’t monetize my YouTube channel. I don’t run any ads on YouTube. But what I asked you guys to do is to give me those thumbs up and definitely subscribe to the channel if you haven’t already, because that tells YouTube that this is the place to be if you want to learn about day trading, all right, so thank you guys for doing that. And then same with Facebook.

All right, so first step of learning the trade or first step of this business is discovering that it’s a possibility and so share with a friend that it’s maybe …might be someone that’s interested in this. Now, the second step is beginning to do a little bit of due diligence beginning to do a little bit of research and understand how does this work. And one of the best ways to do that in the example of a coffee shop, is to look at a coffee shop. Okay, so you know let’s just let’s take two coffee shops for instance. Let’s take Starbucks, which is international chain, right? And let’s take Mocha Joe’s which is a coffee shop in Brattleboro, Vermont. Although it’s also a coffee shop in LA, on Curb Your Enthusiasm Larry David of course opened Larry’s latte Larry’s right next door, the spice store. So Mocha Joe’s in Brattleboro is a one shop coffee shop, they have a coffee roaster, and it’s a one stop shop. So that coffee shop has been there for maybe 30 years, maybe longer.

So they’re clearly very successful. So what is it about? And so here’s the question is, Am I aspiring to be Starbucks or am I aspiring to run something like Mocha Joe’s? Now as it relates to trading, I would say this is like looking at Goldman Sachs traders, or a average trader just trading his or her own money and doing it on their own. Okay, so I’m like the Mocha Joe’s I’m trading my own money. I’m trading … I don’t work for a big hedge fund. I don’t work at a big bank. I’m doing this for myself. So it’s important when you’re trying to get a sense of how this would work for you that you’re using a more realistic example is what you’re trying to measure against. So I’m not going to try to measure the coffee shop against Starbucks because that’s … I’m never going to own 25,000 coffee shops all around the world. I really just want to have one. All right, so what is it that has made Mocha Joe’s so successful? What is it that’s allowed them to be in business for as long as they have? Well, probably a couple things. One, great location, two, great coffee, three reasonable prices and four a really nice atmosphere where you can go and you can sit down, you could get a cup of coffee, and then you could just hang out and play chess with some friends for like six hours.

And when I was growing up in my teens, kids, adolescent teenagers, we would, go down to Mocha Joe’s and hang out downtown. It could be a snowy day outside, but you can hang out in the coffee shop with some friends. And I could walk from my house downtown in Brattleboro. So it’s a cool place to hang out. You do that when you’re young and the teenager and then you’re doing it in your late teens and early 20s. And then you see some of the folks that have been in the coffee shop for 25 years, and they’re in their 30s or 40s. And they’re still there. Okay, so if you were going to try to model a coffee shop in your town, you would probably be thinking about similar types of things location, quality, atmosphere, price, etc. And then of course, you would … after you’ve scoped that out, you actually have to look at the profit loss statement, the balance sheet, what’s the infrastructure to get started? But let’s hold on that for a second.

So from the day trading side, I want to show you guys some of my metrics here. So I’m going to do let’s see, I’m going to actually go like this, oops, sorry, like this. All right, I’ve got a couple different layouts here. So this right here, these are my metrics from 2016, 2017, 2018, 2019 and now where I’m at right now in 2020, and it’s May 30th. So I’ve made almost the same as what I made all of last year. And I still have June, July, August, September, October, November, December, I still have seven months left. So you know that I’ve got my I set on breaking my 2018 record. All right, now this is gross profit. So looking at the gross profit of a coffee shop is one thing but of course there’s overhead. So what I want to show you here are the metrics of a profitable trader who is essentially a retail trader trading his own money which is that’s exactly what I’m doing.

I trade both in a retirement account and in a traditional margin account. Now one of the things that … well I’ll talk about taxes in a second and this isn’t probably going to be like a super short YouTube Live I want to give you guys … this is going to be like a nice class. So, remind me if I don’t get … if I seem like I’ve forgotten. Let’s come back to taxes. But let’s look at the metrics here. So this of on the surface is the … this is the proof that I am a profitable trader and that I have a strategy that works. So that’s like okay, this is a coffee shop that’s been around for a while. So now let’s look a little deeper at it. Now, I take an approach with trading, which is probably not different from other businesses are or potential careers, which is that I have a niche. I have area of the market where I focus pretty exclusively. For instance, you could have people that trade Forex, we could have … cause we do.

You could have people that trade futures you could have people that trade cryptocurrency and people that invest long term and then you have people that day trade stocks, and the people that day trade stocks some day trade, the S&P 500, some trade options. Some day trade large caps like Tesla, apple, Netflix, Google, some day trade penny stocks that are 10 cents and 15 cents. And what I focus on is day trading Stocks generally between one and $10. So, what I’m going to do here just to keep us on track. And we’ve got obviously, we’re not going to talk about the Goldman Sachs traders and the big institutional traders that are out there. Those are the ones that are buying huge positions of large cap companies, they’re not trading their own money. They’re, of course, therefore very detached from profits and losses, because it doesn’t really … obviously, it affects their bonuses, but it’s not their money. So we’re going to keep focused on me being a retail trader trading my own money.

When I got started in this small business, essentially of being a day trader, what I was looking for, essentially was, I was starting my own self employment agency, and so What I mean by that is, this is a business where I do have to come in to work every day, I have to trade the market. I can’t … the business of being a day trader, it’s not a business that you could sell, because you’re of course, such a critical part of the profitability. So really what you’ve created is a stream of income that you still have to work for. And so it’s like being self employed. And that’s not from a tax perspective, but just from a mental perspective. The problem though, is that when you put your own money on the line, you put $10,000 on the line into the market to start trading as many of you may have done. What frequently happens as a beginner trader is that you will experience losses and of course you take those very personally and you feel like a failure. You feel like you’re a loser, you feel like you’re an idiot.

And you think about the traders out there that are driving the Maserati or the Aston Martin, and they’re incredibly successful, they probably work at Goldman Sachs. And they’re getting 30, $40 million bonuses and stuff like that. And that would be the Mocha Joe’s comparing himself to Starbucks and being like, Man, “I’m never going to make it. I’m never going to get there.” And so, what I realized was that for a long time in my career, as I was getting started I was thinking about what those big traders were doing. I was thinking about what people like Carl Icahn, Warren Buffett and Bill Ackman were doing, but the fact is, both their mentality and the way they approach the market and the fact that in many of those instances, they’re trading other people’s money. And they’re running trading as a large institution or hedge fund makes it almost in comparable to what I was doing.

Not only could they take positions and hold losses, they could also do complex things like, use options to hedge their trades or petition the board to sell the company. So they could make money. They have such a different place in the market. And so when I was trading stocks like apple, and I was buying options, getting in and out trying to day trade them I was thinking there’s obviously traders out there that are doing this, but many of those traders would have been working at large funds not trading their own money or small retail traders. So it took me a period of time of experiencing a number of losses, before I was able to make the realization that as the Mocha Joe retail trader, I needed to find my niche in the market. And it actually was going to be very different from what a lot of the big hedge funds and in institution traders are focusing on. And so as many of you guys may be in the same situation, I have a small account. So give me a shout of what size account you’re currently trading with or planning on trading with.

And those guys looks like we got about almost 1000 live streaming on YouTube. So I would love it if you guys who just got tuned in would give us the thumbs up here for a little Saturday school. So Jonathan says he’s trading with 1000 bucks. Baker says 1000, Richard says 500, Ron says 38,000 someone else says 650,000. Prejean said 10,000, 6000 for CJ. 12,000 for Russell, 5000 for Quintin, 1700, 2500 for Omar So certainly we’re seeing a little bit of a range 25,000 for Fred, 13,000 for Mark over on Facebook. We’ve got Broody who’s paper trading Edwin’s got 32,000. So actually some of you guys have fairly large accounts. But when I was getting started, I was trading on smaller account. And this is the problem, when you have a small account, you trade a stock like Facebook, and on an average day, Facebook might only go up 2%.

So let’s say you’ve got a $10,000 account. And let’s say you put the entire account into Facebook at the very bottom of low day, and you get out at the very top and you capture that full 2%. How much is 2% on a $10,000 account? It’s 200 bucks, but you’re never going to capture the entire move. At best you might capture a quarter of the move, or maybe a third of the move, even capturing half is difficult. So let’s say you captured a quarter of the move, you made 50 bucks. Now as a retail trader, we do have the advantage of trading if we want to with leverage. So if you took that trade that $10,000 and use four times leverage, you could have bought $40,000 worth of Facebook in this scenario. And if you got that, quarter of a percent or quarter of the 2% move, you’d be able to book about $200 in profit.

But to get to the point where you’re that dialed in on an institutionally traded stocks like Facebook, Apple or Netflix, I can’t remember a whole lot more frustrating than trying to get a really good feel for a large cap stock that will suddenly for seemingly no reason, flush down in tank in the middle of the day. Why would that happen? A couple of institutional traders and one of the big firms, it’s the sell button and dumps a large position, or all of a sudden, it spikes up unexpectedly. What happened was some institutional trader, some hedge fund, some pension fund, whatever it is decide to take a position all of a sudden it pops up. And so those stocks on average days are very difficult to trade. They don’t respect the traditional patterns. And it’s not because it’s partially because of algorithmic trading. But to a much larger extent. It’s from just so many active institutional traders getting in and out.

So I realized that trading those types of stocks, that I was spinning my wheels, I wasn’t making a lot of progress. And so to find my niche, I poured through all of my trading data. And what I discovered was that the stocks I was making the most money on, were actually lower priced stocks that were making big percentage moves. So when you have a stock, and we had one this week that went from $8 to 12, to 13, to 14 to 15, to 17, to 18 to $22 in one day, up over 300%. Now, that’s phenomenal. That’s probably not a stock that a lot of traders or investors, the big hedge funds or pension funds are going to be actively day trading. They’re not going to buy a stock that’s up 300%. If they’re already holding it, maybe they’ll sell it. But that’s not the type of risk profile that they’re usually going to take because many of them are probably trading average position sizes of millions of dollars. And you can’t take millions of dollars of stock on May dollar stock, it’s just not really feasible in most cases.

And so what I found was that those types of stocks are really popular among retail traders like us. Retail traders look for stocks that are making big percentage moves, because when you have a small account, whether it’s $1,000, it’s 10,000 or maybe it’s even $100,000, if you can capture 25%, a quarter of a stock that has just gone up 100%, that’s a 25% move. Now if it goes up 400%, you could potentially be capturing a 100% move. Buying a stock at $8, selling in at 16 and it still goes up to a high of 22, 23 24. So those are the type of stocks that I really focus on. So let’s jump back and talk a little bit about the metrics here of a profitable trader. So you can see my metrics right here. This is where we’re going to get into what looks like a balance sheet, like what I was talking about with a real estate property. So my niche is focusing on lower price stocks. So let’s go to detailed and we’ll go to price and volume. So you can see here that the majority … and this is over $2 million in gross profit. So this is a fairly decent amount of profit here and a pretty good data set. So you can see here that the bulk of my profit is actually on stocks between two and $5.

I’ve made a decent amount up to 10, and a decent amount up to 20 but above $20, the profits decrease significantly. And below $2, the profits also taper off a little bit. So I think that this is helpful in terms of, if you’re thinking about getting started trading, naturally you want to align yourself with the type of trader that you’re more likely to become. Good thing about opening a coffee shop, you want to look at coffee shops that are more like the type that you think you’re going to open. If you want to buy a rental property, you need to look at the financials of a rental property that is similar to what you’re looking at and then you start plugging in the numbers. So these right here are the high level metrics. You can hear June in the background. So these are the high level metrics, which is helpful but I don’t want to get too deep in the weeds on this just yet. Hey girl, come on. Come on, girl. Just lost her.

And so why don’t we for a second, step back off the metrics and let’s talk a little bit about the infrastructure, startup costs and things like that for becoming a trader. Goddamn. Hang on, please hold. Hey, girl. Hey. All right. Thank you. Sounds good. Come on, girl. Girl, come on. All right. All right, so I’m still on my computer. You want to talk to the camera, girl? Yeah. Okay. My apologies. I apologize on behalf of what is essentially a junkyard dog. All right. So once you’ve figured out what style of trading you want to focus on and you found a trader, whether it’s me or anyone else that you want to use as your template, okay, I want to model my strategy and my approach on what this guy’s doing, which there’s nothing wrong with. You think Mocha Joe’s is an awesome coffee shop? He can go open a coffee shop just like it in your own town.

Mocha Joe’s … I can’t imagine that they’re going to care. Obviously, you can’t name it the same thing but many of these coffee shops are all very similar. Oh, this worked really well for this one? Okay, you see that type of coffee shop is popular, I’m going to model mine after it, I’m going to take some tips from them, so nothing wrong with that. I think this what’s going on right now, these distractions, it’s just so typical of this COVID-19 period that many of us are in which is like working from home under total, very unusual circumstances. All right. So you know want to model your strategy somewhat after me, okay. So in terms of the business plan and approaching this like it’s a business. All right, so you’ve got a description of the business, I want to be a day trader and I want to trade my own money.

I don’t want to go work for a big bank. I don’t want a nine to five job like that even if, maybe there’s opportunity there, an entry level job even at a bank or a hedge fund might not necessarily be too super glamorous. So you’ve got your … you want to be a retail trader, you’ve got the description of that business. You’re thinking, okay, I want to focus on trading small cap stocks, etc, etc. Okay, so now what’s the business plan that you put together? So one of the things that I really encourage is essentially building out a business plan for day trading. And that business plan should definitely include your cost of equipment to get started. Which ultimately is a laptop, and maybe one or two external USB or HDMI monitors.

Unlike opening a coffee shop or any type of brick and mortar business, you can get started with very limited financial resources. A computer, a couple monitors, obviously an internet connection. So you need an internet service that you subscribe to. And then you need a trading platform that you’ll use. Now, all brokers offer trading platforms as part of their service, but sometimes they make you pay for it, could be anywhere from $50 to $100 a month. So you’ve got some monthly overheads just starting, and then essentially you have the cost of education and there’s two different ways to approach this. Obviously I’m biased because not only am I a trader, but I’m also a teacher. So I’ll go with the non bias route first which is, you can teach yourself how to trade. And so the process of doing that, essentially is through trial and error. Just getting into a trading account, preferably a simulator so you’re not risking real money while you’re doing trial and error, and practicing and seeing what works.

Now, I can tell you from my own experience that I did that for almost two years before I actually started to make profit on a regular basis. I would make money and then I’d give it back, and I make money I’d give it back because I didn’t have a strategy. I didn’t have a system, I didn’t have a set of rules. So two years of running a small business and having zero profit to show for it and incurring your operating costs the whole time, that’s a little bit of a scary thought. And so the alternative and this is obviously biased because I am a teacher and I’m we’re hosting summer school starting on Monday, is to join a program and to actually go through a curriculum and so if you think of wanting to start a small business as a coffee shop owner or a coffee roaster, perhaps there’s workshops that you could take that teach you how to roast coffee.

Obviously, you can get on the job training if you go work at a coffee shop. That may be appealing and maybe you already have done that. And so you want to take it to the next level and learn about roasting coffee, you maybe want to take a … how to start a small business class at a … it could even be a community college just to learn some of the basics of accounting and the finances and all that stuff. So from a trading perspective, going through a program like what we have, what’s essentially going to do for you is give you all of that prerequisite information that you need. It’s going to teach you all of the terminology around trading, it’s going to teach you the ins and outs of all the different trading platforms. It’s going to teach you the ins and outs of how to read and do technical analysis, reading charts, reading level two, and it’s actually going to provide you with the strategies that I use every single day.

So you walk away from the class with a set of strategies. It’s obviously not a guarantee that you know how to use them because you have to practice what you are learning but we help prepare you to do that by giving you access to a trading simulator. So that’s the process if you go through our program. So then as you come back to the business plan, as you are putting it together, you punch in, what is my strategy? How am I going to trade the market? And so you might say, “Okay, I’m going to be trading the same strategy that Ross trades. I’m going to trade stocks between $2 and $10.” So back to over here. “I’m going to trade stocks between $2 and $10. Generally speaking, I will …” and we can just go from this month, for instance. So this is the month of May. So $2 to $20, that’s an acceptable range. I will focus on trading primarily between what times? 9:00 AM, 9:30 when the bell rings and 10:30, 11:00 AM.

Okay, so you’ve got the price of stock you’re going to trade. You’ve got the time of day you’re going to trade. And then the day of week, I’m going to trade every day. Fine. Okay, that’s typical. Most of us do trade every day. How long am I going to hold my trades? I’m not going to hold my trade longer than 10 minutes. Unless I happen to be in a circuit breaker haul, it’s going really well. If I have a trade that’s not working, I’m going to manage my risk by cutting the loss quickly. I’m going to accept average losses of not more than $500. My profit target might be 700 to $1,000 and I’ll take 700 if the stock is showing weakness. So as part of your business plan, you outline and allocate how much you’re willing to risk, what your profit targets are, what type of strategies you’re going to have to mitigate risk in terms of … just because you say you’re only going to risk 500, doesn’t mean you couldn’t put yourself in a situation where you could risk 5000. So how are you going to mitigate risk?

And then you of course also have taking into account taxes, which we’ll talk about in a second, and evaluating both your operating costs to be a trader, which realistically for me where I’m at, I subscribe to some pretty nice charting software. It’s like $170 a month. It’s not required, but I really like it. I have my real time level two data fees that I pay to NASDAQ. Most day traders will pay those. Those are $40 a month or something like that. So I’m at about 210 a month and that’s about it. I feel like there might be something else but … so let’s just say 300 a month. So my operating cost is $300 a month. Now for every trade that I take, I may incur a commission depending on what broker I use.

So feel free those of you guys live streaming to let me know which broker you’re currently using. Let’s see, where are we at on … We’ve got about 1000 on YouTube. So thank you guys for tuning in, I hope you guys have given the video a thumbs up for our little Saturday school class. If you haven’t already, hit that thumbs up button and same with those you guys on Facebook and feel free to share this with a couple of your friends. So I’m seeing Thinkorswim, CMEG, Interactive brokers, CMEG, TD, Thinkorswim Lightspeed, [inaudible 00:39:33] Schwab, Robin Hood, Quest Trade from Canada, Charles Schwab, Weeble, IB. All right, so good. Nice. All right. E-Trade. Nice. Very good. Quest Trade, CMEG, Interactive brokers. Okay, cool. All right. So a lot of you guys are using brokers that don’t charge commissions, which is great. However, there are brokers that do charge commission and this will be … I don’t know how to draw the connection on that to the coffee shop. But the free commission brokers, just so you know, they don’t really cater to super active day traders like us.

Not that they don’t accept us as clients by any means, because of course they do. But what they really focus on are more like what we would call passive investors who might take a couple of trades, a quarter maybe a few trades a month, they’re just not super super active. So traders like that they don’t demand a lot of the platform, they’re happy if it works, they don’t really … they just have a lower standard of what’s acceptable, which ultimately makes it easier for the brokers to please them. So traders like myself, I use a broker called Lightspeed, which is there in Manhattan. And they really cater to retail traders like us. Day traders like us. So it’s … I don’t know, maybe it’s like a point of … maybe think of it as like a point of sale software, probably there’s a lot of different point of sale software that you can get to run credit cards and stuff like that. But finding a service that’s free, but then is slow and you’re sitting in the coffee shop, there’s people in line and you can only process a credit card, like once every, like minute and a half because it’s like just a slow system, and it’s free, but then there’s really a cost.

So nothing’s truly probably free in that sense. I don’t know if that’s really a good analogy, but let’s just say that it is for now. So yeah, so you’ve got your monthly operating costs and then you’ve got your initial startup capital, the amount of money that you need to fund an account. Now this is … again, I can show you just December 1st 2019. And I’m going to use the tag of CMEG because this was the broker that I used. And this right here, these are actually the metrics from my small account challenge. I’ll do net profit here. So this is $53,000. But if we look at the overview, and we look at the calendar, what you’ll see is that on day one, I had $520 in the account 520 bucks on day one, and I made $139. So from a starting balance of $520, I turned that account into 53,000 in 17 days.

So you might think, Oh gosh, I don’t want to use my startup capital to pay for nice software, or to pay for a good computer or to pay for high speed internet, or to pay for education like one of our workshops or the Warrior pro class for instance. You might think I’m just going to save all that money to trade with them. But what I’ll tell you is that in a heartbeat without a strategy, you can lose money in the market. And for every small business out there, there’s probably I don’t know, five that have failed for one that succeeds. It’s just … we know that small businesses are hard to start and day trading isn’t any different. So you really want to equip yourself as much as possible, and position yourself to be successful. And so I think from that perspective, startup capital is not the most the equation for two reasons. Number one, because I’ve known traders with a lot of … that started with a lot of money and then lost it. Because they didn’t have a strategy. And then I’ve seen traders with small amounts of money including myself that have been able to grow it because they’ve got a proven strategy.

And number two, because you shouldn’t trade with real money until you have first proven you can be profitable trading in a sim. Trade with pretend money, fake money. Or if you use a broker like E-Trade or Ameritrade trading one share, you don’t have any commissions. So just traded one share and set your daily goal at 50 cents something like totally … it doesn’t matter. It’s a tiny amount of money. But if you can make 50 cents a day with one share, what’s going to happen when you got [inaudible 00:44:38]shares? You’re going to make $5 a day. Okay, now what happens if you’ve got 200 shares? You can make $50 a day. What happens if you go up to 1000 shares? Would you make 500 a day? What happens if you go up to 10,000 shares? Right? So now those are obviously going to be some diminishing returns as you scale a strategy but I currently traded with anywhere from a low of 6000 shares to a high of 20,000, sometimes a little bit more.

And I could trade with more size than that. So, but I probably wouldn’t go a lot higher than 30,000 shares. You never know, but I probably wouldn’t. So anyways, that gives you a hopefully a little bit of perspective on how to approach the business plan. You’ve got to think about … obviously it begins with just discovering that this is a possible career and that it’s one that you feel you have both the aptitude and interest to take on opening a small business, whether it’s a coffee shop, or day trading business for yourself, is … it’s got to be something that you feel a passion for. Now, I feel like every day when I’m trading, I’m coming into the market to try to solve a puzzle. And if I solve it, I make money. And so it’s very gratifying each day to see a market where everyday little different, slightly different puzzle, but I have a system of how I’m going to try to solve it and pull profit out of the market.

So the business plan starts with a discovery then is an outline of general strategy, what you’re modeling it after. A case study of someone who has done this and is profitable that you aspire to be similar to, whether that’s me or someone else, whatever relates to you, then initial equipment and startup costs, computer, 1000 bucks, your education with Warrior Trading, the Warrior starter class or the Warrior pro classes, your … a couple of monitors your internet connection a couple of subscriptions to market data, things like that. So you’re into it with a couple thousand dollars on the low side, maybe four or 5000 on the high side, depending on you could obviously get $10,000 computer if you want to but just within range.

And then you’ve got of course, in addition at the end startup costs for coffee shop, you’ve got your initial startup cost, and then you’ve got your ongoing monthly expenses. Those even right now, for me are very minimal for the month of May. I just finished the best month of my trading career, as many of you guys know, with $225,000 in gross profit. Oops 5/1/2020 Okay, before we go before like this. All right, so this is the month of May oops, I’ve got to take my CMEG tag away. $225,000 gross profit. That’s month of my career. And you know what my overhead was? like 300 bucks. Now, I had commissions, and my commission’s were $15,000 plus 7000, which is 22,000, meaning my gross profit after commissions is about 205,000 which is still really good. And as I said, I’m willing to pay that commission, because I don’t think I would have been able to make as much as I made if I was using a broker like E-Trade or TD Ameritrade.

Not that I couldn’t make money there, but I don’t think I’d be able to make as much because they don’t provide me the tools that allow me to trade the market in the way that I trade, both with direct access routing hotkeys, and a really good low latency trading platform. So this is a month of $205,000 in gross profit. All right, so now let’s talk about the taxes. All right, so the taxes, this is a tricky one, because taxes are different for everyone, depending on where you live, what state what country then what state? Are you single, Are you married? Are you filing jointly, are you filing individually? So there’s a lot of … there’s an infinite number of scenarios. So having said that, let’s just say for instance, your goal was $200 a day. How many of you guys right now would be totally happy with $200 a day? 200 a day, if you’re doing that consistently is 50,000 a year.

All right, so let’s say $50,000 a year is your net profit. That’s after commissions, but not including your monthly overhead, but since it’s only $300 a month, you still have a gross profit. Well I’ll give you guys a second. You guys you like the idea of 50,000? Okay, I like that idea too. It’s 200 a day. That was my goal when I was getting started. 200 a day. Now, obviously, I’m averaging this year. Oops, let’s see. So my average this year currently is $4,161 a day and my gross profit is 420,000 on the year right now. So 200 a day is making 5% of what I’m making. So I’m not I’m, in other words, I’m trying to set the bar low for you guys. But at the same time, this is the blessing and the curse of the market. You won’t start making 200 a day consistently, until you have a strategy that works. Because when you don’t have a consistent strategy, what will happen is, you’ll make $200 one day, you’ll make 400 the next and then you lose 100 bucks, and then you’ll make 200 and then you’ll make 400. And then you’ll lose 900. And so you have two steps forward, five steps back three steps forward, two steps back, eight steps forward, 12 steps back, and you will generally be losing money until you’re able to minimize those losses.

But you’re not going to be able to minimize that until you’ve either gone through 12 18, 24 months of trial and error, which is what it took me or you basically have the roadmap and a template for a strategy like the one that I’m going to give you guys who are part of my classes, and you practice it in a simulator and you prove that you understand it and then, you’re consistently trading a strategy that’s already proven. So try to reinvent the wheel or, basically do what’s already been done and proven to be profitable. So anyways 200 a day $50,000 a year. All right, that’s your gross … that’s your net profit. Now, let’s say during that year, you had $10,000 in commissions. So what that would mean is that you actually made 60,000. But your net profit is 50. You don’t pay tax on the gross profit, you pay tax on the amount after commissions, which is good. All right, so that dropped you from 60,000 in gross profit to 50,000 in net profit.

Now, as a small business owner, just like a coffee shop, what are some of your business expenses? That $300 a month. All right, take that. 300 a month, that’s times 12 months you’ve got 3600. So now you go from 50,000 you drop it down to 46,400. I think that’s right. Okay 46,400. Now you’ve got some equipment. You can’t always write off equipment in one year, some of it you have to depreciate over a period of years. But let’s say you’ve got enough equipment that you can depreciate another $500. All right, so now you’re down to about $46,000 in what could be considered taxable income. Now, in my opinion, if your cost of living is, let’s say, $30,000 a year, let’s say $36,000 a year, that’s $3,000 a month, then you’ve actually made $14,000 more than you need it. So wouldn’t it have been smart if you had made that $14,000 in a retirement accounts? And so I trade in a retirement account.

So almost all of this profit this year not all of it, but maybe 70% of it is in a retirement account, which means I have no income tax on it. Now, of course, that requires you in ability to set up multiple accounts, that takes time to grow multiple accounts. So it may not be something that happens on year one. But let’s say it’s something that definitely keep in mind for the future to take a little bit of that profit each year and put it aside into a retirement account where it can grow tax free. But let’s say you didn’t do that in your first year. So you’ve got $46,000 in profit. So now the question is, what is your tax bracket? So obviously, there’s the standard deductions and things like that. Do you have dependents or again, single married filing jointly filed separately? So then you’ve got those different questions. So let’s say you’re able to get yourself down to the 25% bracket, right? If you’re able to get yourself down to that bracket that would be … I would say that would be preferable.

It’s not going to happen … mosquito … it’s not going to happen for everyone, it depends on a number of different things. But if you could do that, what you could effectively do is bring your tax rate down substantially, potentially to the point where you’re looking at owing anywhere from 5000, 6000 to 10, or $11,000 of tax on the year. Again, you’ve got a range there, and I’m sure there’s things you could do to get it lower and there’s other ways where it might be higher. So, you figure that for each month you save anywhere from 12 to 18% or so. Oh, my battery died. Hang on. Let me switch back to my monitor. That’s interesting, because the browser also stopped.

All right, hang on one second. I’m going to switch this. Sometimes I have this problem with OBS. All right, so video. I’ll just use my computer camera here for now. Deactivate, activate. Let’s see whether or not that works. That’s funny that it just shut off like that. Well, this is not going to be ideal to do it this way but that’s fine. Hang on, just move this around for a second.

Okay. All right, so I’ve got my … I’ll just put this down over in the corner so it’s not blocking too much. So I’ve got my chat feed there, I’ve got this one right here. All right, and thank you guys, looks like we’ve got about 1200 streaming, which is great. If you guys have not already hit that thumbs up button or subscribe to the channel, you should really do yourself a favor and do me the favor of doing that. So anyways, long story short on the taxes, you should … obviously I’m not a CPA, so I’m just sharing with you from my own experiences, you should contact a CPA and you should get qualified advice. I can’t give you legal advice, I can’t give you tax advice. But generally speaking, you should save aside anywhere from 12 to 18% of your profits to cover the taxes because you will have taxes, they are part of the deal.

I wish that we could get around paying taxes, but the only way to really do that would be to trade exclusively in a retirement account, which you totally can do. But then you can’t spend that money until you’re at retirement age. So that’s not going to help you cover your cost of living and ultimately, I know you guys … most of you want to trade to cover cost of living and then extra profit you’d consider once you’ve already hit your cost of living goals, looking into doing something with long term retirement. And legal entities, LLC, S corps, in my experience, they haven’t made a huge difference from the tax perspective. But again, you should speak with a CPA on that just to get clarification on what’s best for you.

So that’s in total, the business plan. And now one of the reasons that I do think it’s really important for you to approach trading as basically the same as running a small business is because of the fact that … let me see I’ve got half screen. Sorry, I just want to see if I can get my camera back up here. Let me kill that one. And I’m going to kill this one. One of them is the camera and it’s using it up so take this opportunity to show you guys my disclaimer, my video capture. With OBS, if you’re you already using the camera once sometimes it won’t let it come up again. So it’s annoying when it does that. That’s full face. That’s half display. Yep, yep, yep. Okay, so I’m going to go and add this here, video capture. Okay, there we go. All right. So copy that. Put that over here on this side. And our browser stopped. So I’ll put it right down here as well. Okay, sorry about that guys.

So anyways, yeah, from the losses perspective, one of the things that I think is really important is as I said, a lot of traders get into this habit of taking the losses super personally. And so you have a couple bad trades and next thing you know, you’re feeling terrible about yourself and you’re getting really emotional, and you start getting impulsive and reactive and all of that is what starts a downward spiral, and it can funnel really fast, where you’re just spiraling down. Now, if you can adopt the mindset of a profitable trader, then you’ll do a lot better. And so one of the things that you guys probably know at this point is that when I’m trading, I’m actually not looking at my P&L I’m not looking at my total profit and loss. So I actually don’t … now sometimes I’ll check it, but I usually don’t know exactly where I sit on a stock while I’m trading it. And that allows me to focus on trading the best quality setups, maximizing the opportunity on the stock as much as possible without getting the hang up of the implication of a potential loss.

So from the coffee shop perspective, it’s different with running a coffee shop because you don’t have a big P&L up on the top of the wall every single moment telling you, oh, I just incurred a cost of running the business. I just had to pay a utility bill. Oh, that goes down or oh, I just had a trading mistake, something like that. You don’t have that direct line to the ups and downs which is a good thing because you don’t naturally get the even ability to get so emotional about it. But with trading, you do and so you have to actively fight against that. And that essentially means coming up with strategies of what you’re going to do to get yourself in the mindset of a profitable trader. And so that can be looking at a trader like me and saying, “Well okay, what is Ross doing that’s allowing him to be comfortable taking as much risk as he sometimes takes?” We’re going to feed the fish. And this is going to give you guys a good little example of greed.

I want to show this to you because the market, as you well know, is a place where there’s a lot of fear and a lot of greed. Those are the two big emotions that drive the market. No, you should still have me. Let me just double check. Yeah, I’m still here. So let’s see whether or not … let me see on my view how this looks. By the way, those of you guys who haven’t already checked out the summer school program, I’m going to put this up here. Let me just play this.

My name is Dave, and I’m from Portland, Oregon. So I spent my entire life working day to day, 40 hours a week, and my life is passing me by and my kids getting older, and I have grandkids. So I started researching and I came up with day trading. When I came to Warrior Trading, and I’ve seen that platform and I heard Ross talk about retirement, and what’s your long term goal. And being that he was just a salt of the earth guy I had researched for about a month. And I’ve been to other sites and things I knew at that point that Warrior Trading was the place I wanted to be.

My name is Kim King. And I go by Kim K in the [Large Cap 01:03:14] room, the Warrior Trading program and all the tools and the chat rooms has really helped me be able to focus in and get a good understanding and develop a solid strategy that’s been really working for me. If you’re considering Warrior Trading, what I would tell you is that it’s fantastic. I’ve gone on other websites with other trainers and I don’t think anything is as good as what Ross and Mike and the whole chat room and all the group does. So it’s a great program. I would invest in it. You save money in the long run, time in the long run. And I could convince a friend to do it. She’s going to start after the beginning of the year.

My name is Doug. I’ve been a Warrior pro student for almost a year now and I trade the small caps. I’ve always wanted to do day trading and give it a shot. I’ve known a couple of people that have tried it. I saw a friend commenting on Ross’s chat room. And I asked him about him like, “Hey, is this a legit place to be?” And he said, “Yeah, the guy knows his stuff. I highly recommend it.” And that’s the first time I joined Warrior Trading. Ross’s teaching style is great. It’s very easy. I feel like I picked it up very quickly, the patterns and technical analysis of it all. Before I got started with Warrior Trading, I wish I would have known about it a lot sooner. I could have been doing this 5, 10 years ago, rather than just the past year.

All right. So yeah, I just wanted to show that to you. So those you guys that do want to enroll in the summer school program, summer school does start on Monday and many of you guys have already registered, but you can see we’ve got the special discounts right now for summer school. Some of you guys watching this a year from now, this may not still be valid. We increase our prices usually at least once a year. So you can see what we’re currently offering but for those right now that are hanging out with me, I do encourage you to check out the summer school program. So I want to show you the pond which I promised I would show you in my video, what was it yesterday? So now of course my big camera has died but you can see the pond here. So I was talking about how of course these fish, if I throw a couple of little pieces of food in there, it takes … so that right there is a momentum stock.

Let’s just pretend I just threw a momentum stock out there. Right now, you got stock out there right now, right there with great news. Nobody cares. Nobody seems to really be interested in it. But what you find in the market is that when one person … Well, it’s probably not one person, but when people start to notice, then all of a sudden, here comes the crowd and everyone wants to get a piece of the action. So these guys are still not quite noticing it yet. Oh, see if they pick up on that. Okay, it looks like Goldie’s coming in and there’s Cindy. Cindy’s our white fish. You can see her over there. Is that … Cindy’s short for Cinderella. Romeo’s over there with the little heart on his head. And RJ is … I see RJ coming over. There’s a Abe … Okay, RJ is the first one to get some food and here comes Goldie. Here comes another Goldie. And now it’s on. All right now the momentum is hot. Okay, I’m throwing the food in and you know what? Here’s a little piece of mulch.

I’m going to toss this in and you know what? They’re going to go for it anyways because they’re in such a feeding frenzy that they don’t know. They’ll jump at anything. And this is what we call hot market. When the market’s hot … it is right now, we’re seeing COVID-19 headlines. So stocks are coming out left and right with breaking news. And they’re squeezing up 100, 200, 300%. And traders, we’re all hungry, we’re looking for opportunities until we’re jumping on everything that moves. And then there’ll come a time when all of a sudden, things start to slow back down. For whatever reason, it just starts to taper off. The feeding frenzy ends, fear starts to sink in. A couple of those fish bit down on a piece of mulch. Ooh, that didn’t work out so well. Maybe I’m going to be a little bit more cautious. Traders have a couple of losses, we start to step back, we get a little more careful.

And that can be the beginning of a slow period, a little bit of the ebb and flow in the market, the pullback. And then before you know it, another feeding frenzy will start. It’s not realistic to expect that you’ll make the same amount of money every single day, 250 trading days out of the year. You’ll have some days where you crush it, where it’s a feeding frenzy. And those are the days where you have to be aggressive. You want to try to capture as much as you possibly can and then make sure you get enough to tide yourself over for when things slow down. And that’s an aspect of this business as day trader. It’s also probably an aspect of running a business, let’s say as a ice cream shop. If you’re in an ice cream shop in New England, you’ve got one season where you’ve got to make the most that you possibly can before things slow down, right? Summer. Because when things slow down, it’s going to be a long winter.

So with trading, it’s not seasonal, but it’s cyclical. And part of your trading plan should allocate when the market is really hot, what do I do to maximize on the opportunity? For me, I increase my share size and I start trading more. So I took more trades in the last month than I’ve taken in I think any other month. And that was the right thing to do. When the market goes through a slow period where things ease off and we’re not seeing that exuberance and those really … those big moves, then that will be a time where I will trade less, I will ease off the throttle, I’ll slow down, and I won’t be as aggressive. And that’s part of the mindset of a trader. And that can be really hard to accept at first, because you’ll sometimes feel like, I want to be making money, the same amount, every single day.

This month making $225,000, yeah that would be pretty amazing to do that 12 months in a row, but I think that that’s an extremely unrealistic expectation. You shouldn’t expect that your best month can be replicated 12 months in a row. You’ll have great months and then you’ll have slower months. As a beginner trader, one of the things that can be really hard is when you have your first slow months. Because when you have those first slow months, you can sometimes question whether or not your strategy even works. But that wouldn’t be the case with an ice cream shop in January in New England that’s on the beach. They’re not going to be surprised the business is slow. Why not? Well, because through common sense, they understand how it works.

But there isn’t really a collective’s common sense when it comes to day trading. Because this is niche and it’s not something enough people do that you can really learn a lot of common sense, just through life, the way you can with other careers. So I hope this has been helpful for you talking a little bit about how to approach trading as a business. And for those of you guys that do want to take the leap and start your own business as a trader, we’ll be starting summer school on Monday. So I would love for you guys to register. I did host a class about a week and a half ago, which was essentially the first class of summer school. So those of you guys that want to watch a replay of that class, you’re welcome to watch the replay. And during the class, I talk about the summer school curriculum, and I give you guys an opportunity to register with that special summer discount.

So if you want to watch that, you’re welcome to do that. It’ll be happening … let’s see that class is going to happen tomorrow at one O’clock. And then summer school starts on Monday. All right, so check out [inaudible 01:11:56] here. All right, so I’ll post that for you guys on YouTube. Again, those of you guys on YouTube and Facebook, throw out one last thumbs up. Looks like … how many people do we have streaming right now on YouTube? Little over 1000. Thank you guys for being here on a Saturday and tune in tomorrow, I’ll probably jump on live again. And I’ll see you guys … I’ll try to charge this battery up a little bit longer so I can keep the big camera running but it’s good to have a backup. All right, have a great day everyone. I’ll see you guys right back at it tomorrow when I jump on and then Monday morning. All right, so I’m going to put this back up here, my disclaimer and I’ll see you guys for the next episode. Bye everyone.



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