Tag: Day Trading (Page 2 of 3)

What Are the Best Days to Trade Stocks?

Best days to trade stocks
FrankNez options trading: Best days to trade stocks.

If you’re a new day trader and are trying to figure out what are the best days to trade stocks, then I have good news for you.

I’ve been trading options for an entire year now and have figured out which days are the safest to trade, and which days are the absolute worst.

I’m also going to go over a risk management strategy that is going to allow you to have bigger wins, and significantly smaller losses.

If you’re new to the blog, make sure you join the newsletter for more content like this.

And with that being said, let’s get started!

Best Days to Trade Stocks

Monday-Wednesday

During my journey as an options trader, I’ve learned that stocks tend to be significantly less volatile on Monday, Tuesday, and Wednesday, making them the best days to trade stocks.

These are the days where you want to take more than one trade (should your edge present itself to you) with confidence.

Sizing down during these days isn’t necessary unless your risk management strategy demands it.

You never want to overtrade as a day trader, but you should know what days have less risk than others.

How about the other days?

Here’s my personal experience.

Thursdays

Thursdays tend to have moderate risk and stocks tend to gain some volatility here, but charts are typically still very much tradable.

While day trading itself presents the trader with risk in every trade, I’m merely going over which days tend to be riskier in terms of volatility in the market.

As traders, we want to trade big price action in one direction or another and refrain from getting stuck in the chop, or from getting stopped out only to see continuation in our favored direction once we exit our position.

These anomalies usually occur due to the volatility in the market.

So, how do we avoid them?

By patiently waiting for an A+ setup or not trading at all.

Remember, cash is also a position.

Friday

Fridays tend to be the most volatile trading days of the week and could even be destructive if not assessed properly.

Most novice traders end up giving all of their weekly gains back on Friday.

In my experience, traders should not trade on Fridays unless an A+ setup presents itself.

And even then, it would be wise to downsize on this particular day.

There are far more experienced traders than I who simply take Fridays off from trading and start again on Monday.

Learning how to manage your risk on these particular days is what’s going to allow you to be consistently profitable.

Below is a risk management strategy that can help you navigate the waters throughout the week.

Day Trading Risk Management Strategy

  1. Set a fixed number of contracts to trade per new trade for Monday-Wednesday, Thursday, and Friday based on your account size.
  2. Limit your number of trades for Monday-Wednesday, Thursday, and Friday.
  3. Place a rule of when to stop trading.

1. Fixed Number of Contracts

Your fixed number of contracts is going to depend on your account size.

How do you identify how much you should risk?

Everyone’s account risk is different, but I would start trading with 10% of my account and only risk 10% of that particular trade should the market turn against my trading system.

This puts your overall account risk at 1%.

Set a rule for yourself to only trade ‘X’ number of contracts per trade for Monday through Wednesday, Thursday, and then lower your size on Friday by half.

This next part of your risk management strategy goes hand in hand with the fixed number of contracts you set for yourself.

#2. Limit Your Number of Trades Per Day

This rule is extremely important when it comes to managing your risk.

You’ll want to establish a ground rule of how many trades you’re allowing yourself to take per day.

[Ex.]

Since we know Monday-Wednesday are less volatile, we can set a max of 3 trades per day, while honoring your fixed number of contracts per trade.

Because Thursday tends to have more moderate risk, we can limit ourselves to a max of two trades on that particular day.

And with Friday’s being the most volatile day of the week, we can set a rule to only make one trade on Friday, granted that our setup presents itself to us, otherwise we don’t trade that day.

This risk management strategy allows us to refrain from overtrading on riskier days, while allowing us to potentially profit largely on less volatile days.

But the goal is to have significantly larger wins than losses, so how do we tie it up altogether?

By placing a rule of when to stop trading.

#3. Place a Rule for When to Stop Trading for The Day

Placing a rule for when to stop trading for the day is going to maximize your winning potential and minimize your losing potential.

Here’s a way you can manage your risk by knowing when to stop trading for the day:

Monday-Wednesday | 3 Trades Max

If you have two wins in a row, stop trading in order to keep that capital.

A third trade has the potential to both increase your capital, but to also eliminate your wins for the day.

If you have two losses in a row, stop trading and take the ‘L’ for the day.

While a third trade could potentially minimize your losses, the probability of accumulating even greater losses is also there.

If you have one win followed by a loss or vice versa, it’s okay to take the third trade to either end your trading day with some profitability, or minimal loss.

You may decide to not enter a third trade if after your second trade you’re still profitable or are merely facing a small loss; the choice will highly depend on whether your ‘edge’ presents itself to you or not.

Thursday | 2 Trades Max, Friday | 1 Trade Max

The same rules apply for Thursday and Friday except they are already limited to 2 trades on Thursday and 1 trade on Friday.

Since the market tends to get more volatile as the week progresses, limiting how many times you trade on Thursday and Friday will help you keep more of your gains made throughout the week.

You may decide to only trade once on Thursday and not trade on Friday.

This is good risk management as well.

By limiting the number of trades you make per day and number of contracts you take per trade on Thrusday and Friday, you eliminate big risk.

Any win you have on Thursday or Friday are merely extra gains to top off your week.

And if you have any small losses, they shouldn’t affect your bigger gains from the previous days, granted that you have a proper trading system in place.

But that’s another article of its own.

The Best Indicators to Trade SPY // Lesson.

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Here’s Why Majority of Options Traders Aren’t Successful

Options Traders
Want to become a successful day trader? Here’s what you need to know.

Majority of options traders aren’t successful, many know that.

Becoming a successful options trader is a journey in itself that requires real-world practice and experience.

The battles one fights when learning how to trade options turns into a war many aren’t willing to persevere through.

In the end, you realize the war was always you vs you.

You are always the boss battle.

This analogy depicts why only a very small percentage of options traders end up becoming successful while the majority fall.

In this article, I’m going to break down the 3 key things that make a successful trader profitable over and over again.

By the end of the article, you will have the knowledge you need to create the income and life of your dreams.

Let’s get started!

Introduction to Options Trading

If you have no clue or any idea about what options trading are, I highly recommend reading this article on what you need to know first before getting started.

The article guides beginners on what call and put options are, as well as what ITM, OTM, and ATM mean.

But if you already know the basics, let’s keep it moving forward.

Options Trading for beginners:

What Percentage of Traders Are Successful?

According to Investopedia, only approximately less than 20% of traders are successful with more than 80% of traders fail or quit.

Those who failed are those who blew their trading accounts and could no longer afford to fund them, leaving them with no choice but to quit day trading altogether.

Those who quit found day trading too challenging or never sought out solutions to the problems they were facing during the process.

Business Insider says only 6% of people who attempted to become ‘professional’ day traders actually succeed, claiming that those who fail is due to lack of passion.

That passion is what drives traders to continue to learn until they are no longer repeating the same mistakes over and over again.

But do you require passion to become a successful options trader?

The short answer is no, absolutely not.

I know options traders who earn upwards of $8K per day and trading is not their passion but rather the tool that provides them with freedom to pursue their passions.

What’s required is commitment and desire.

3 Key Elements That Creates a Successful Options Trader

Options trading: How to become a successful options trader
Options Trading: How to become a successful options trader.

The commitment I’ve put into trading options over the course of the year has allowed me to identify 3 key elements that creates successful options traders.

I’ve made a lot of money but have also taken heavy hits in the past.

Losses are part of the game, there’s no denying it.

It’s how we overcome these losses that allows us to sustain profitability.

And it’s the number of wins we have compared to these losses.

Big wins, small wins, and small losses will keep you consistently profitable, but big losses won’t.

Here are the 3 key elements every successful trader masters to create the income and life of their dreams.

#1. Finding a Trading System That Works

Every options trader takes the time to find a trading system that will make them money in the market every single time that system or setup presents itself to them.

Without a proven and ‘back-tested’ system that works, options traders will not stand a chance against the market.

Every trader has their own system, many are similar in some ways, but never exactly the same.

Some options traders enter a trade based on candlestick patterns, some based on supply and demand setups, and others on crossover indicators.

Because every person has a unique perspective, every trader will correspond to a different set of trading methods different from others.

How do you find a trading system that works?

There are two ways to find a trading strategy that will make you money.

  1. By back-testing your own unique strategy on a practice account. Find out what makes money every time and what doesn’t. Take your time before you commit to trading real money.
  2. By replicating a proven trading strategy that works from a successful options trader. Some of my readers are using my personal trading system to make money in the market. Find a trader you trust and who posts their gains for other traders to see what’s possible to achieve in the market.

A successful options trader will have their system locked down before anything.

This system will be the platform that will make you money every time it presents itself to you in the market.

#2. Trading Psychology

Trading psychology has to come next because once you find a trading system that will put you in profit every time it presents itself to you, you’ll need to understand how to execute properly and exit with profits.

Most novice options traders eventually find a trading system that works but let profits turn into losses due to a weak trading psychology.

Trading psychology often times has to do with fears in the market.

The 4 primary trading fears are:

  1. Being Wrong
  2. Losing Money
  3. Missing Out
  4. Leaving Money on The Table

These 4 primary trading fears signal painful information to our brains which often times cause traders distress in the market which leads to painful losses.

*When you are fearful, no other possibilities exist in the market. Fear blocks all available information from the market.

Here are examples of how the 4 primary trading fears cripple options traders:

Example: Afraid of being wrong: not getting out of a trade when you should; Afraid of losing money: not buying enough contracts to make a lot more money; Afraid of missing out: chasing plays; Afraid of leaving money on the table: failing to take profits.

Options traders must learn to master their emotions in order to become successful traders.

Emotions in the market will always lose, data will not.

How do you overcome the 4 Primary Trading Fears?

Afraid of Being Wrong: If you find yourself in a losing trade, you must overcome your fear of being wrong by cutting your losses. If you are afraid of being wrong, you will let your losses grow much bigger in hopes that you are right and the trade reverses in your favor. Losses are part of trading, it’s how small you are able to keep these losses that matters.

Afraid of Losing Money: Sometimes a trader might not open a trade when their setup presents itself to them simply because they are afraid of losing money. You can overcome this by downsizing the number of contracts your purchase. Conversely, some traders might only stick to the minimum number of contracts due to being afraid of losing money if they scale up just a little. Successful traders learn to trust their trading systems and manage their risk accordingly.

Being Afraid of Missing Out: FOMO, or fear of missing out, is something every trader experiences at least once. Successful traders don’t blindly jump on a trade because they missed their setup or because price is moving quickly in one direction. If their setup does not present itself to them (or they missed it), they don’t take a trade and give into FOMO. Successful options traders always follow their setup.

Afraid of Leaving Money on The Table: When traders are afraid of leaving money on the table, they let their winners become losers. Failing to take profit (FTTP) often times occurs due to the emotion of greed, of wanting more. Successful traders overcome this emotion by always taking profits. When traders learn that there will always be money left on the table, that’s when they will begin to consistently become profitable traders.

Book recommendation

A book I highly recommend reading on the psychology of trading is ‘Trading in The Zone, by Mark Douglas’.

The first chapter alone is enough to provide you with the clarity necessary to improve your trading psychology and succeed in your trades.

Now on to the third and final key element that creates successful options traders, risk management.

#3. Risk Management

Options trading risk management
Options Trading Risk Management.

Risk management is what keeps successful options traders from blowing their accounts and losing all their money.

I was scalping $1K per day and entering trades with nearly 50% of my account (1:1 ratio) and also scalping approximately $3K-$7K paper trading – so I know my trading system works.

However, when one weak entry combined with the fear of being wrong1 led to the inability to cut my losses short, I paid the price and lost nearly half of my account due to overleveraging.

I was forced to inject my account with enough cash to maintain above the minimum margin requirement if I was to continue day trading.

This loss was such a valuable lesson because it provided me with clarity I didn’t have before.

The capital in my account wasn’t set up for large trades like the ones I was making yet.

I scaled largely because my trading system worked, and I had learned to trust it despite the number of contracts I was purchasing.

I figured out how to exit my trade with profit, but the issue was that although I welcomed risk, I wasn’t managing my risk properly in comparison to the size of my account at the time.

Risk Management Lesson

I had to identify and choose one of the following:

  1. Trade at a much smaller volume, or
  2. Continue to trade with large volume, but double down on trading psychology discipline to refrain from creating big losses

But of course, the most successful traders only risk a small percentage of their accounts and gradually scale up as their account grows.

So that’s what I decided to do.

I went from trading 60-80 contracts per trade to only 10 contracts per trade.

I then printed out a scaling system to help me identify when to scale up again based on my account size goals.

This was by far the cherry on top for my success as an options trader and has been for other successful traders too.

If you’re a beginner, start with one contract and identify how to gradually scale up later on as you gain confidence in your setup, improve your trading psychology, and understand the importance of risk management.

How to Stop Losing Money Day Trading

Options trading for beginners
Options Trading for beginners

Losing money is part of the process when learning options trading.

The most successful options traders have lost a lot of money investing the knowledge in themselves but have succeeded by not repeating their mistakes.

It’s important to understand that big wins, small wins, and small losses are normal, but big losses shouldn’t be.

Successful options traders still lose money on trades but keeping them small is the key to long term success.

You can avoid big losses by finding a trading system that works, improving your trading psychology, and writing a plan for your risk management.

If you would like me to publish more articles like this leave a comment down below or join my newsletter.

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Long-Term Investing vs Short Squeeze Plays vs Day Trading

Long-Term Investing vs Short Squeeze Plays vs Day Trading
Wealth Building: Differences between Long-Term Investing, Short Squeeze Plays, and Day Trading

Today’s article is going to be extremely educational; I’m going over the biggest differences between long-term investing, short squeeze plays, and day trading.

In this article you’re going to discover what makes each one more susceptible than the other to market manipulation and overall risk.

When you’re looking to build wealth in the market, it is important to identify the major differences between the three.

Be sure to bookmark this page so you can come back to it in the future for a mental refresh.

Let’s get started!

franknez.com

Welcome to Franknez.com – join my newsletter to receive more content just like this straight to your inbox.

I’ve helped people learn how to invest in stocks, crypto, and how to day trade options as well.

My goal is to help you take your finances to the next level. Be sure to browse the blog for market news, wealth building tips, and other valuable content.

Let’s dive right into it!

#1. Long-Term investing

Long-term investing is the #1 traditional way to build wealth over a long period of time.

Investors looking to build wealth this way tend to invest in high dividend yielding stocks such as the S&P 500.

Here, an investor’s portfolio compounds over time as dividends are rolled over or reinvested back into the asset – further purchasing more stock on its own.

During the years of retirement, investors may decide to stop reinvesting the dividend and accept the dividend as cash instead.

This is how a dividend stock portfolio may yield investors with big passive income in the form of cashflow many years later.

Many of these stocks are not heavy victims to market manipulation due to the security and minimalistic risk there is to invest in these funds.

Read: The Best Dividend Stocks to Buy for Passive Income

#2. Short Squeeze plays

Short squeeze plays have a high risk/high reward ratio that has attracted many new investors into the market.

When a stock is being heavily shorted, the short interest percentage of the stocks float tends to rise.

This means that with enough buying pressure, investors may increase the probability of squeezing short sellers from their positions.

We saw this occur when AMC ran from $2 per share to $72 per share and when GameStop skyrocketed into the hundred-dollar levels.

While both these two stocks are still heavily shorted, these are just two examples of short squeeze plays where investors could have taken advantage of an opportunity to make big bucks.

Short squeeze plays are more susceptible to market manipulation since market makers tend to have a lot of control of retail investor’s orders.

They may drive share prices down by overleveraging their already bias positions, which means a lot of momentum is required for a short squeeze play to be successful.

Short squeeze plays are a form of swing trades that may last weeks to months of holding a stock before trading it for profit.

This type of investment strategy may be viewed as mid-term investing to cash in big on a rather unique opportunity.

#3. Day Trading

Day trading uses leverage as a multiplier to trade stocks in a short-term timeframe.

What makes this investment strategy attractive to most investors are the possibilities to earn massive gains in such a short period of time.

Traders are earning money whether the market is up or down through ‘put and call options contracts’.

Unlike long-term investing or short squeeze plays that have a buy and hold approach, day trading is a skill that requires focus, discipline, and a deep understanding about the psychology of trading.

Day traders can earn hundreds to thousands and even tens of thousands of dollars on a daily basis (you can view my gains here).

While day trading is mainly a form of income, traders may still allocate earnings towards long-term investments to further build their wealth.

Here’s how you make money trading the S&P 500.
Read: How to Trade Options in The Market with a 9-5

Which investment strategy is best for you?

As investors, we need to identify the best way to take advantage of the tool that is the stock market.

Long-term investors should focus on increasing their income to flood their portfolios with compounding effects.

Short squeeze traders should draw out a macro vision board to determine which path to take after short squeeze profits are secured.

Day traders would be wise to invest a portion of their income towards dividend paying assets or physical assets (such as property or a business) that will produce cashflow.

Building wealth is about having your money work for you so that you can have the time freedom to do what you love most.

If you enjoyed this article, please share it on your favorite social media platform!

I’m curious to know your thoughts, leave a comment down below.

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Read: How to Invest in the Stock Market for Beginners

How to Reach Financial Freedom by Trading

how to reach financial freedom by trading

Published by FrankNez Team.

A big part of your daily life is thinking about new ways to ensure you have financial freedom at least once in your lifetime.

It is often the most difficult part of being a whole person, but there are multiple ways to make it happen, one of which is to trade forex.

Yes, you read that correctly, trading can give you the ultimate steppingstone to your financial freedom.

The first thing you need to understand is that it does not happen overnight, it is a process that involves patience, research, and industry knowledge.

Another trick here is not to think about the individuals who get rich instantly but to rather grow your portfolio over time.

That is what is going to give you financial freedom in the long run.  

Related: How to Trade Options in the Market with a 9-5

Before you jump in, consider this

With anything, you need to ask yourself certain things, like what is compound interest?

This is the interest you earn on top of interest.

In other words, if you invest $100 and it earns 5% interest every year, you will have $105 at the end of the first year, then %110.25 at the end of the second year, and so forth.

Even in banking, it works like this, just check your savings accounts. With trading, it can work the same if you have a proper plan, now let’s dive into that plan.

Related: How to Invest in the Stock Market for Beginners

What is your end goal?

Your end goal is the number that will decide your financial freedom.

Do you want $1 million after 5 years? Or is $100 000 in 10 months more what you are after?

Whatever the case may be, you need to figure out your end goal and ensure it works for you.

To keep it simple, if you want a monthly return of $1000 per month, you need to look at certain things.

Let’s work with this and follow some tips below.

FX strategies 

Strategies are incredibly important to reach your goal, so here are a few things to consider.

The number of strategies you trade depends on how comfortable you are with trading.

But since you have a goal of financial freedom, there are three strategies you can use, they are breakouts, reversals, and trading markets. 

Also for you: Xtrade Review

Rate of return

If you are after a monthly return, then this one is for you.

So, what is it and how does it work?

This is the percentage rate at which your capital grows. In other words, where your wealth accumulates month to month.

Considering the three strategies above, and to keep it simple, say each one of them will give you a return rate of 3%.

That means that 3% times 3 strategies give you 9% every month.

Now let’s look at your capital.  

Freedom

The capital

What do you need to do to generate $1000 every month with the 9% to reach your goal? $11,000 or $1,000/9%.

What’s next? Understanding growth principles as this will help you overall. 

Understanding growth principles

A book titled The Richest Man in Babylon by George S. Clason highlights 7 simple rules of money, and this is what can be applied here.

These rules are

  1. Save money – saving money is often listed as one of the better tools to help you reach your financial freedom goal
  2. Don’t spend more than you need
  3. Invest wisely
  4. Avoid investments that sound too good to be true – chances are they are
  5. Own your home
  6. Have life insurance to protect yourself and your loved ones
  7. Gain more knowledge

You must think about how these tie into reaching financial freedom, but each of the points above will help you.

Growth principles are based on these 7 simple rules. You need to learn to save a part of your income every month.

The smallest savings requirement is around 10% of your salary, however, financial advisors encourage you to save between 25 and 30%.

Even if you need $1000 per month in return, you need to save more, in the long run, to have a higher return and inch that much closer to financial freedom.

Look at it this way, growing your capital will also increase your monthly return, so keep at it and push as much money into it as possible.  

Lastly, can I, do it?

Yes, you can.

However, a lot of thought and research goes into this.

Trading is not a get-rich-quick scheme regardless of whether some famous and wealthy traders make it seem like this.

Just like the more traditional ways to reach your financial freedom goals, you need to be patient and have a plan.

Good luck, you’ve got this!

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