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jjohns500

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Hey all,

I am looking for some feedback on my current situation.

I have 4 areas of income that I have been pursuing for the past 4-5 years outside of my 9/5. These may not all be fastlane at this point, however I am looking for something to relieve me of overtime hours I currently work so that I can use that time to focus on even bigger things. Basically I need to create some breathing room.

I work in the film industry and now that COVID is over and hollywood has returned to work I have more work than hours in a day. Dollars for hours. Covid decimated my industry, so I am not turning down any work that comes my way. So I am currently working 3 times what my normal work load would be. I am half freelance and half W2 depending on the project. With this work load there is literally no time left in the day to hardly sleep much less pursue another venture. I have hired an assistant to alleviate some of the clerical and mundane stressors in my day to day work. That has been very helpful. Pre COVID day trading was my secondary income which I had planned to move into full-time within the next 5 years. That all came to a halt once CA shutdown. My original plan for the next 10 years was, day trading to take the place of my 9-5, still work on selective movies each year doing what I do now, investing in multifamily real estate. None are fastlane at this point but would provide cash flow and time to pursue more. Then the shutdown and everything was put on hold. My F it moment.

Current plan is as follows. Continue in entertainment as source of income, build back day trading account by the end of the year to min 30K, and then one of the following. This is where I am hoping for some direction.

Option 1. Open a post production studio in the new town I have moved to. I currently have 4 clients lined up with work today. I know this industry very well and have tons of contacts. This however would have to become a B&M business with employees. The profit margins for what I would start out doing are very slim. I have moved back to the south east where rent and income is cheaper, so that will save me cost upfront. I could get this business up and running for very little up front investment. 10k would have me in a great spot, even 5k would be possible.

This business will have to be opened and employees trained all while Im still working 60-70 hr weeks with my current job. I believe that this would basically be a break even for me for at least 2 years. Then depending on market and future investment and expansion it could take off from there. I do believe that this would have long term viability.

Option 2. Short term rental investment. Currently I have 1 duplex that is owner financed and will be paid off at the current rate in the next 2 years. This was purchased 3 years ago and I throw all of the rental income into paying it off by 5 years. My plan would be to purchase land in Gatlinburg TN, or similar location, 1-2 acres and pay cash. I would then either build a tiny home, yurt, glamping tent, or something similar. Basically a unique short term rental. From my research properties offering unique stays in high demand areas are pulling 80% plus occupancy rates at around 150-200$ per night. I believe that I could cash flow most of this minus the property which I am estimating 50K. This could potentially bring cash flow within the first few months once systems are in place for cleaning and stocking etc.

Option 3. Take the little capitol that I currently have and focus all of my time and effort on continuing day trading. If all of my extra money went to funding my account I could potentially fund a 30K account within the next 3-5 months. I have been trading for the past 4 years and this is my primary passion outside of real estate. I understand the risks of trading and I have a trade plan that I have been implementing from day one. My trades are all based on a Risk Value and just before COVID I had worked my way up to $300 risk per trade. My plan has daily limits, drawbacks, cutoff times, etc.

Option 4. Product branding. This has always been a passion of mine and something that I would like to do long term no matter what happens with the other ventures. It is also the one I have the least experience in. I had learned a ton about this during the shopify dropshipping boom a few years ago, however I do not know viability of any of that today. I do not want to start a dropshipping store selling second rate chinese products. I want to find a product that I believe in, brand it, and build.

So these are my current options as I see them. I will tell you from a personal standpoint and a rough past 2 years, I would like to get some kind of win under my belt. I have a partner that we are both pursing similar ventures and we keep one another in check. We have made it a mission that by the end of this year we will both have broken ground one one of these options. I mean significant ground, not action faking. If you guys have any input please share. Also if Im just chasing my tail with all of this please let me know that as well. I appreciate any criticism.

Joshua
 

WJK

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I would work as much as possible in your day job. Save, save, save. Buy residential units that can and are managed so they aren't a burden on you. PAY THEM OFF ASAP! Set up as much passive income as you can. Make hay while the sun is shining on you. Cash is king, so save as many piles of cash as you can to allow you to invest in your future.
 

jjohns500

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@WJK Thanks for the reply! This is kinda my thinking as well. I do not want to get diverted into something that will potentially cost me cash flow, however my only issue is time in my career and a desire to exit sooner than later. I think that that is still possible with what you suggest. Real estate is still my top goal. The one duplex I have now is already managed by a company and my profits are still doing well even with paying for management. So any additional property I can add will also be managed as well.

I am 37. So I am behind at this point and need to do everything that I can to start moving out of my 9-5 career and into something more sustainable longterm that I can build wealth.
 

WJK

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@WJK Thanks for the reply! This is kinda my thinking as well. I do not want to get diverted into something that will potentially cost me cash flow, however my only issue is time in my career and a desire to exit sooner than later. I think that that is still possible with what you suggest. Real estate is still my top goal. The one duplex I have now is already managed by a company and my profits are still doing well even with paying for management. So any additional property I can add will also be managed as well.

I am 37. So I am behind at this point and need to do everything that I can to start moving out of my 9-5 career and into something more sustainable longterm that I can build wealth.
You're still young. You have time. Keep on keeping on...
 

Classmate

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@WJK Thanks for the reply! This is kinda my thinking as well. I do not want to get diverted into something that will potentially cost me cash flow, however my only issue is time in my career and a desire to exit sooner than later. I think that that is still possible with what you suggest. Real estate is still my top goal. The one duplex I have now is already managed by a company and my profits are still doing well even with paying for management. So any additional property I can add will also be managed as well.

I am 37. So I am behind at this point and need to do everything that I can to start moving out of my 9-5 career and into something more sustainable longterm that I can build wealth.
I would need to think better about the other options, but I don't think you are at the right moment right now to start a new business.

Although the economic recovery might be fast, and some wealth redistribution might occur under Biden, I think the tensions that exist right now both internally, and externally(USA-Russia,USA-China), are too big to determine what will happen even in the next couple of months, or the next year.

Also, when you look at the data(forget the media, entrepreneurship is misrepresented at the media), the "prime" of entrepreneurship is around 45.

Investments in real estate might follow a different logic. I don't think real estate can easily depreciate, because that could lead to serious damages in the economy.

I would try to do more networking or gain more skills to compete on the post-production scene, on how to manage a company, etc. (search for your weak points), and maybe I would invest in real estate, but a more complete analysis in the economical/political scene might be needed in the last one.
 

jjohns500

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I would need to think better about the other options, but I don't think you are at the right moment right now to start a new business.

Although the economic recovery might be fast, and some wealth redistribution might occur under Biden, I think the tensions that exist right now both internally, and externally(USA-Russia,USA-China), are too big to determine what will happen even in the next couple of months, or the next year.

Also, when you look at the data(forget the media, entrepreneurship is misrepresented at the media), the "prime" of entrepreneurship is around 45.

Investments in real estate might follow a different logic. I don't think real estate can easily depreciate, because that could lead to serious damages in the economy.

I would try to do more networking or gain more skills to compete on the post-production scene, on how to manage a company, etc. (search for your weak points), and maybe I would invest in real estate, but a more complete analysis in the economical/political scene might be needed in the last one.
Thanks for the input Classmate. I agree with you and this is one of my biggest concerns with starting a B&M business at this time. Even aside from tensions with China and Russia the entertainment industry has pretty much been subbed out to overseas countries with much lower production costs which destroys our market. The niche that I am looking to go into even 5 years ago would have been very profitable. However those jobs are no longer in the states. Then you add COVID shutdown to hollywood and entertainment industry and even the biggest studios such as Warner Bros. have done away will almost all of their in house post audio for this specific area because the studio lots are outdated and the same jobs done on lot can all be done from your bedroom. I believe under the current administration this will only get worse.

A current film I am working on I've worked with these guys for 15 years. I spoke with them about the Foley (part of the post audio) for the film. They have been using a Russian company that is doing the work for less than half the price. This is becoming the norm and I could not compete with that unless I provided something of value that would keep clients from outsourcing overseas. So that has been my focus of intent to find that thing that will keep clients here. I think a very large part of it comes down to relationships with your clients and the 4-5 clients I currently have I believe would always bring work to me over outsourcing simply because we've helped each other for many years. However, this would not apply to any new potential clients.

I like what you said about networking as well. That will be very beneficial no matter which direction I go.
 

LeszekM

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Referring to no. 1 it doesn't sound good that many clients are outsourcing overseas but.. it is also a chance for you to proof your value locally and build your brand (same as you have idea to create own product). Cheaper does not always mean better and in longterm customers should appreciate that. Can you get any feedback about these type of overseas cooperation? Maybe there are some gaps? Look for problems i.e communication, quality, time to completion and maybe you will find an area to stand out.

No. 4 If your own product resolve any issue are help people to live easier i will push it! When i read this part i feel passion in your words. I think you have some good idea in your mind!
 

Classmate

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Thanks for the input Classmate. I agree with you and this is one of my biggest concerns with starting a B&M business at this time. Even aside from tensions with China and Russia the entertainment industry has pretty much been subbed out to overseas countries with much lower production costs which destroys our market. The niche that I am looking to go into even 5 years ago would have been very profitable. However those jobs are no longer in the states. Then you add COVID shutdown to hollywood and entertainment industry and even the biggest studios such as Warner Bros. have done away will almost all of their in house post audio for this specific area because the studio lots are outdated and the same jobs done on lot can all be done from your bedroom. I believe under the current administration this will only get worse.

A current film I am working on I've worked with these guys for 15 years. I spoke with them about the Foley (part of the post audio) for the film. They have been using a Russian company that is doing the work for less than half the price. This is becoming the norm and I could not compete with that unless I provided something of value that would keep clients from outsourcing overseas. So that has been my focus of intent to find that thing that will keep clients here. I think a very large part of it comes down to relationships with your clients and the 4-5 clients I currently have I believe would always bring work to me over outsourcing simply because we've helped each other for many years. However, this would not apply to any new potential clients.

I like what you said about networking as well. That will be very beneficial no matter which direction I go.

In general (each sector will be different, obviously). It's not just a battle against cheap labor. It's a battle against automation too. In the end, only big companies win, and even they tend to agglomerate themselves in bigger conglomerates. That's not a bug of the current system, it's a feature, and you need to be aware of that. The only way you can survive long-term is by being below their shoulders.

Then there is the round-financing-almost-pyramid-scheme of Silicon Valley, supported by big banks, and in the end paid indirectly by taxes, where almost nothing matters, but speculation, marketing, and "fuggazzi"-ness. And it's honestly just networking, too. That's just luck.
 

jjohns500

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Referring to no. 1 it doesn't sound good that many clients are outsourcing overseas but.. it is also a chance for you to proof your value locally and build your brand (same as you have idea to create own product). Cheaper does not always mean better and in longterm customers should appreciate that. Can you get any feedback about these type of overseas cooperation? Maybe there are some gaps? Look for problems i.e communication, quality, time to completion and maybe you will find an area to stand out.

No. 4 If your own product resolve any issue are help people to live easier i will push it! When i read this part i feel passion in your words. I think you have some good idea in your mind!
You are exactly right and this is what is giving me any second thought on pursuing this venture. As I mentioned earlier this industry is run on networking and the relationships that you build. So that is one factor that those outsourced competitors do not have. I have very good relationships with several of the top studios, That is access to TV and Features year round. TV is where the money is made in this part of the industry because you have a stream of episodes back to back and once the workload is front run you spend less time as the episodes go on, streamlining the product.

And you are also right in cheaper isn't better and that is the issue I have seen and discussed with studios. Sure their budgets look better, but ultimately there are many things that have to be corrected later on another employees time at a higher rate per hour. If the Russian Foley crew doesn't cover what we need we have to then pay a union editor (depending on if this is union/non union show) we have to pay them union wages which is twice what the highest paid Russian wage is per hour. So all of those savings can quickly vanish. That doesn't mean that cheap labor and good labor doesn't exist; it does. It's just rare. You also have to account for the headache that incomplete work from an outsourced company causes for the supervisors. The supervisors are generally the ones making the budget allocation calls. So if they know outsourced Foley is cheap but will be a headache to deal with and fix, they will adjust the budgets to accommodate someone they trust. This is where I feel I have the opportunity.

I started my current sole prop. company very small and Ive selectively kept it small to have more control over what work I take and what clients I work with. In 15 years I have a solid network of studios and individuals who work solely with me and all TV shows/Films go to me first. I believe that that will carry over into the bigger studio. My biggest concern is, will this be profitable on a larger scale with minimum 3 employees and B&M business.

I have gotten quotes on current work that is available if I want to take it and I have gotten the prices of what has been budgeted and paid for outsourced work. Both have what I believe are thin margins, but this is where I am out of my comfort zone. I do not know enough about running and B&M business. I had a meeting with the person I am wanting to hire for head of operations basically. We ran through some rough numbers and on paper it seems promising. There is just a huge difference with me going solo and having an idea or business fail and hiring employees, renting space, purchasing equipment and committing to work with studios. That scares me a bit. I also am trying to think long term. Even if this is profitable, can I expand, is there room in the market for more competition.

This gets back to what @Classmate was saying about learning the business side more.

These are the factors deterring me from this option. The amount of work that needs to go into it upfront and long term. The potential downside financial risk. And the little proof of highly profitable long term outcome that would ultimately allow me MORE freedom to pursue other avenues. I think you could make any business break even or even slightly profitable, but at what cost? That is my dilemma.
 

LeszekM

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These are the factors deterring me from this option. The amount of work that needs to go into it upfront and long term. The potential downside financial risk. And the little proof of highly profitable long term outcome that would ultimately allow me MORE freedom to pursue other avenues. I think you could make any business break even or even slightly profitable, but at what cost? That is my dilemma.
Yes i know what you are talking about. I think it is not an easy choice, always! I experience same feeling now and i think i will share my story soon. This kind of discussion could be helpful.
Maybe you should look from another side? Don't look at the outcome but look how can you resolve any issues?
In which idea you will help people the most? You resolve their issue so they can share feedback with another? Which one could be scaled easily?
 

jjohns500

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Yes i know what you are talking about. I think it is not an easy choice, always! I experience same feeling now and i think i will share my story soon. This kind of discussion could be helpful.
Maybe you should look from another side? Don't look at the outcome but look how can you resolve any issues?
In which idea you will help people the most? You resolve their issue so they can share feedback with another? Which one could be scaled easily?
I think that you are right on this point as well. My original plan was solving an issue, or at least providing a service for something needed, however increasing scale is where things fall apart in my view. Or at least could not be easily scaled. Back to the drawing board!

I appreciate you taking the time to help out
 

LeszekM

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I think that you are right on this point as well. My original plan was solving an issue, or at least providing a service for something needed, however increasing scale is where things fall apart in my view. Or at least could not be easily scaled. Back to the drawing board!

I appreciate you taking the time to help out
That is a pleasure, waiting for any further update from your side!

@jjohns500 thanks, you have motivated me to share my story too:
 

karakoram

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Option 3. Take the little capitol that I currently have and focus all of my time and effort on continuing day trading. If all of my extra money went to funding my account I could potentially fund a 30K account within the next 3-5 months. I have been trading for the past 4 years and this is my primary passion outside of real estate. I understand the risks of trading and I have a trade plan that I have been implementing from day one. My trades are all based on a Risk Value and just before COVID I had worked my way up to $300 risk per trade. My plan has daily limits, drawbacks, cutoff times, etc.

I won't speak to your other options, as I feel others on this forum are perhaps better qualified. I am, however, well qualified to speak to your day trading option.

I'm going to tell you some things you probably don't want to hear. In a nutshell, trading profitably is possible, but it will take far longer, far more effort, and cost you (in losses) far more than you realize. I would wager, it costs far more ($ and time) than most people realize. I was once told directly, by Linda Bradford Rashke (LBR), who is one of Schwager's Market Wizards, that its takes around 4 years or more to become profitable (and not necessarily consistently profitable) day trading. I didn't believe her at the time, which was around 1999 and I was around 27, but I believe her now. I also believe it takes a full-time commitment of 40 hours or more per week, during those first 4 years to get there. This is pretty hard to pull off if you work full time, especially if your day job hours are during market hours. And this is only to get to the point where you've turned around the habit of consistently losing money. We are not going to be making a living at this point. This will take more time on top of this to start to make money enough to live on. Possibly another 2 years.

Let me illustrate my point by telling you condensed version of my story.

I have been trading a long time, though not continuously. Its been on-off-on-off during the past 28 years. During most of my history, I've been a longer term trader (ie, not a day trader).
I've had a lot of failures. In college, my first trade was in stocks in 1993. I lost 50% of my account in only a few weeks. For a poor college student, losing $600 is the end of the world. I stopped trading until 1999, long after I graduated. I also spent the intervening years learning technical analysis, coding, backtesting of trading systems, and reading every book I could get my hands on that was about trading. My other disaster was losing my entire trading account (five figures) in 2013/14 in the Mt.Gox (early BTC exchange) fiasco. I eventually did recover that money in 2019.

I've had some success with longer-term trend-following, catching the spike in gold futures in Oct or Nov of 99 (50% in a week), stocks in 2002 or 2003, shorting the broad market indexes in 2008 (15% in 4 weeks), BTC in 2013 (35% in a few weeks), ETH in 2017 (800 to over 1000% in a few weeks, but strictly by accident), BTC in 2019 (130% in 10 weeks, but on purpose).

My first foray into day trading was in 2010, where I had disastrous results. I stopped trading that year, the day I lost $3800 in ONE day. At the time, that was a HUGE sum of money for me, as i started with a $10,000 account. That was AFTER losses prior to that day. I lost around 50% of my account in total. It wasn't even due to a crash or anything - I was not trading during the flash crash that year. For me, it was simply a series of losses, and I kept increasing my size, and kept losing trade after trade. Also, I was just a couple of days after returning home from the hospital after an auto accident and I was on pain meds. Talk about dumb decisions!

For various reasons, too long and boring to mention here, I had no extra money between 2011 to 2017 for trading. I was just focused on my day job (engineer).
After my crazy, and wildly profitable adventures with trading Crypto in 2017, where I "accidentally" made $12K in only a few weeks day trading (though I wasn't actually day-trading), I decided to learn to day trade, and learn it properly so as not to repeat my 2010 disaster.
Up to this point, I guess I didn't actually believe it was possible to make so much money, on a small account, in a short period of time, except by rare Market Wizards.

Last summer, after COVID hit, I was allowed to work from home, and resumed live trading. I was invited to a trading room by another trader I know. In this room, I've seen guys make around $1600 per day, every day. The best traders I've seen make $12-15K in a day consistently, and often $100k per week. This was a HUGE eye opener for me. Prior to this, I heard anecdotal stories about guys making $250K in a day, but never saw it.

In my own account, I proceeded to make over $3000 in a couple of weeks- we had some mega volatility due to COVID. I then methodically lost the $3000 plus another $5500 over the next several months, where I, again, stopped trading live. Another failure.
I then moved to another state, and did not resume trading until Nov of last year.

So, for the past 4 years, I've been learning by paper trading, switching to live trading, losing money, learning more, switching back to paper trading, switching back to live, and very slowly, have been turning around my equity curve such that its pointing up, to the right, instead of down. This year, I had a breakthrough in my trading. Its a case of "2 steps forward, 1 back, repeat". Much like like an profitable equity curve over time, it generally is going up, but has a lot of setbacks along the way.

Lately, I've been averaging around 4.6% per day. Please understand, that these are not compound returns. Right now, I'm using a linear return curve, and I won't ramp it up until I gain more confidence in my consistency, which will take some time. So, here I am 28 years after my first trade, and I'm just STARTING to make money consistently, day-trading. TWENTY EIGHT YEARS!

I hope the horror aspects of my story have scared you. These are just some of the ways money can be lost. By far, the biggest source of losses, is myself. This is true for any trader, investor or speculator, including you. I mean your biggest problem is yourself.

The markets are designed to do the following:
1) entice people to trade, as they can see the potential of making huge profit in the price action (price movements). This is FOMO.
2) extract as much money as it can from as many people as possible. It does this by triggering your fears: fear of missing out, fear of losing gains you might already have, fear of small losses getting larger.
3) rewarding the people who can overcome the above
4) rewarding the infrastructure providers (exchanges, brokers, dealers, market makers, etc.)

People believe the markets are a zero sum game between the losers and winners. They forget that there are other players (infrastructure providers) that must also be paid. So for a trader to be profitable, they must overcome those costs as well as their own losses.

People who attempt trading also believe they are immune to the statistics that say 95% of traders lose money. They believe that they will beat the odds.

An analogy is that surveys taken of drivers show that most people think they are above average drivers. This isn't possible, by definition (by the math).

The only way I know of to beat the odds with trading is to spend YEARS LOSING MONEY trading, and learning, and you have to spend thousands of hours doing it.

My day job, which I am transitioning away from to become a full time trader, is as an engineer. I work in a very specialized niche, and its one of the hardest jobs I've ever had to do as an engineer. I've seen other engineers fail at this same job with about a 80% failure rate.

Consistently, profitable Day-trading is 2 to 5X harder.

Like most worthy things in life, there is no quick and easy way. On the surface, due to low barriers to entry, trading appears to be easy. Great traders make it look effortless, but you are only seeing them click buttons. You are not aware of all the underlying work it took to get them to the point where they can make a lot of money in a short period of time. There's an old saying: "Trading is the HARDEST way to make EASY money."
 

jjohns500

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I won't speak to your other options, as I feel others on this forum are perhaps better qualified. I am, however, well qualified to speak to your day trading option.

I'm going to tell you some things you probably don't want to hear. In a nutshell, trading profitably is possible, but it will take far longer, far more effort, and cost you (in losses) far more than you realize. I would wager, it costs far more ($ and time) than most people realize. I was once told directly, by Linda Bradford Rashke (LBR), who is one of Schwager's Market Wizards, that its takes around 4 years or more to become profitable (and not necessarily consistently profitable) day trading. I didn't believe her at the time, which was around 1999 and I was around 27, but I believe her now. I also believe it takes a full-time commitment of 40 hours or more per week, during those first 4 years to get there. This is pretty hard to pull off if you work full time, especially if your day job hours are during market hours. And this is only to get to the point where you've turned around the habit of consistently losing money. We are not going to be making a living at this point. This will take more time on top of this to start to make money enough to live on. Possibly another 2 years.

Let me illustrate my point by telling you condensed version of my story.

I have been trading a long time, though not continuously. Its been on-off-on-off during the past 28 years. During most of my history, I've been a longer term trader (ie, not a day trader).
I've had a lot of failures. In college, my first trade was in stocks in 1993. I lost 50% of my account in only a few weeks. For a poor college student, losing $600 is the end of the world. I stopped trading until 1999, long after I graduated. I also spent the intervening years learning technical analysis, coding, backtesting of trading systems, and reading every book I could get my hands on that was about trading. My other disaster was losing my entire trading account (five figures) in 2013/14 in the Mt.Gox (early BTC exchange) fiasco. I eventually did recover that money in 2019.

I've had some success with longer-term trend-following, catching the spike in gold futures in Oct or Nov of 99 (50% in a week), stocks in 2002 or 2003, shorting the broad market indexes in 2008 (15% in 4 weeks), BTC in 2013 (35% in a few weeks), ETH in 2017 (800 to over 1000% in a few weeks, but strictly by accident), BTC in 2019 (130% in 10 weeks, but on purpose).

My first foray into day trading was in 2010, where I had disastrous results. I stopped trading that year, the day I lost $3800 in ONE day. At the time, that was a HUGE sum of money for me, as i started with a $10,000 account. That was AFTER losses prior to that day. I lost around 50% of my account in total. It wasn't even due to a crash or anything - I was not trading during the flash crash that year. For me, it was simply a series of losses, and I kept increasing my size, and kept losing trade after trade. Also, I was just a couple of days after returning home from the hospital after an auto accident and I was on pain meds. Talk about dumb decisions!

For various reasons, too long and boring to mention here, I had no extra money between 2011 to 2017 for trading. I was just focused on my day job (engineer).
After my crazy, and wildly profitable adventures with trading Crypto in 2017, where I "accidentally" made $12K in only a few weeks day trading (though I wasn't actually day-trading), I decided to learn to day trade, and learn it properly so as not to repeat my 2010 disaster.
Up to this point, I guess I didn't actually believe it was possible to make so much money, on a small account, in a short period of time, except by rare Market Wizards.

Last summer, after COVID hit, I was allowed to work from home, and resumed live trading. I was invited to a trading room by another trader I know. In this room, I've seen guys make around $1600 per day, every day. The best traders I've seen make $12-15K in a day consistently, and often $100k per week. This was a HUGE eye opener for me. Prior to this, I heard anecdotal stories about guys making $250K in a day, but never saw it.

In my own account, I proceeded to make over $3000 in a couple of weeks- we had some mega volatility due to COVID. I then methodically lost the $3000 plus another $5500 over the next several months, where I, again, stopped trading live. Another failure.
I then moved to another state, and did not resume trading until Nov of last year.

So, for the past 4 years, I've been learning by paper trading, switching to live trading, losing money, learning more, switching back to paper trading, switching back to live, and very slowly, have been turning around my equity curve such that its pointing up, to the right, instead of down. This year, I had a breakthrough in my trading. Its a case of "2 steps forward, 1 back, repeat". Much like like an profitable equity curve over time, it generally is going up, but has a lot of setbacks along the way.

Lately, I've been averaging around 4.6% per day. Please understand, that these are not compound returns. Right now, I'm using a linear return curve, and I won't ramp it up until I gain more confidence in my consistency, which will take some time. So, here I am 28 years after my first trade, and I'm just STARTING to make money consistently, day-trading. TWENTY EIGHT YEARS!

I hope the horror aspects of my story have scared you. These are just some of the ways money can be lost. By far, the biggest source of losses, is myself. This is true for any trader, investor or speculator, including you. I mean your biggest problem is yourself.

The markets are designed to do the following:
1) entice people to trade, as they can see the potential of making huge profit in the price action (price movements). This is FOMO.
2) extract as much money as it can from as many people as possible. It does this by triggering your fears: fear of missing out, fear of losing gains you might already have, fear of small losses getting larger.
3) rewarding the people who can overcome the above
4) rewarding the infrastructure providers (exchanges, brokers, dealers, market makers, etc.)

People believe the markets are a zero sum game between the losers and winners. They forget that there are other players (infrastructure providers) that must also be paid. So for a trader to be profitable, they must overcome those costs as well as their own losses.

People who attempt trading also believe they are immune to the statistics that say 95% of traders lose money. They believe that they will beat the odds.

An analogy is that surveys taken of drivers show that most people think they are above average drivers. This isn't possible, by definition (by the math).

The only way I know of to beat the odds with trading is to spend YEARS LOSING MONEY trading, and learning, and you have to spend thousands of hours doing it.

My day job, which I am transitioning away from to become a full time trader, is as an engineer. I work in a very specialized niche, and its one of the hardest jobs I've ever had to do as an engineer. I've seen other engineers fail at this same job with about a 80% failure rate.

Consistently, profitable Day-trading is 2 to 5X harder.

Like most worthy things in life, there is no quick and easy way. On the surface, due to low barriers to entry, trading appears to be easy. Great traders make it look effortless, but you are only seeing them click buttons. You are not aware of all the underlying work it took to get them to the point where they can make a lot of money in a short period of time. There's an old saying: "Trading is the HARDEST way to make EASY money."
Karakoram,

I really appreciate this length and informative response. Thank you so much for taking the time to share this with me. I would love to pick your brain on a few things if you ever have time!

Speaking directly to the trading option: Trading has not been an "option" per se for me in the last 10 years or so, it has been my end goal. I grew up with a family friend who was a successful daytrader and from an early age I admired what he did and it just peaked my interest more than anything else had. So I fell in love with it. Starting about 11-12 years ago is when I really took a deep dive in and began to learn as much as I could. In the beginning I had no idea what I was doing, I had 3 news stations running, screens and charts all over the place, however I didn't know the most basic things about it. Thankfully at that time I was only paper trading. I found little to no success in the first year of paper trading while still working fulltime in film industry.

My passion for it never left, and although things got busy with my career, I was still learning as much as I could any free moment I had. For the next 4-5 years I continued to read, research, learn, and watch as much as I could and also trade patterns with swings. That allowed me to still do my normal career and also focus on trading as well. As time went on I knew my career was not for me long term, and I knew the only way out was trading. Around that same time I found this forum and MJ's books. Once you take the redpill there is no going back! So I knew working in the film industry as an employee was never going to get me where I wanted to be. So that is when things changed in how I approached not only stocks and trading but all areas of building wealth and making income. I turned my focus off of making my career any better. I have already reached about as high as I can go where I am so any extra time spent is waisted. I went full bore into trading at the end of 2016. I partnered with a very close friend who was on the same journey and over the next 3 years he and I attacked this thing every single hour of the day.

All that said, your statement about traders be profitable is exactly what I started to learn then. I knew I was looking at minimum of 3-5 years before I might even break even. I found some courses which helped me tremendously, and like you I also joined a successful trading room. See profitable guys on real time really puts things into perspective. Starting the end of 2017 early 2018 that is when I went "fulltime" trading. I had a written trade plan and my number one goal was to protect my account. Even though I was still paper trading I treated it like a job. I followed my rules and plan, tracked all of my trades, and continued to search for more education. By the end of 2018 I was trading about break even with a risk of $50 per trade at the time. I had worked up from $5 per trade with rules in place if I had too many loses my risk level would be dropped. 2019 I had earned the right to move my risk to $100 per trade and this is where things started to work out for me. Mid 2019 I was profiting consistently. Now, I know this is still paper trading and when real money is in place you have an entire diff set of emotions. THis is why I engrained into myself sticking to my plan.

I was just about to go live with a 30k trade account when I was faced with divorce. Then COVID. Then hollywood shutting down and my career halted. So that is where I am with that today. This won't be my first endeavor into trading, and I am still actively trading daily with a very small cash account. I still believe that I have at least 3 years ahead of me once I go live with a fully funded account. This has always been my longterm plan, so why not get going sooner than later? Im asking that in all sincerity. Im trying to make smart moves and listen to the wisdom of those who went ahead of me. As I said, I'de love to be able to ask you a few questions at some point if you ever have time. Or even let you review my trading plan and see if you see any holes in it.

Thanks again for all that you said.
 

karakoram

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I'd be happy to review you plan. Are you mean-reversion or trend-following? I'm mostly trend-following. This is far more difficult to do on the day timeframe due to large number of false signals (noise). Most of the guys I trade with are mean-reversion. I typically catch "trend days" and they typically try to fade them.

Let me ask you about your available resources (time):
After COVID hit last year, I was laid off from my engineering job. At the time, my employer and other companies expected a deep recession. As most people know now, manufacturing did not go into a recession. A few months later, my prior employer approached me again to resume doing the job I was doing for them. I agreed, but with some changes. I would be an independent contractor, rather than an employee. They would hire the services of the LLC I would set up, rather than me being a w-2 employee. I would also take over the manufacturing of the parts I designed for them. This is feasible for me personally, because when I was their W-2 employee, my prior employer did not do the actual manufacturing in-house. I designed stuff for them and I managed the projects of having the stuff made. It was all outsourced to China and sometimes local machine shops. After I set up my LLC and became an independent contractor, I figured I would just do the same thing, and outsource the actual manufacturing, but I would still do the design work.

So, fast forward today, and I now do a combination of engineer consulting and manufacturing (in China). I service my prior employer and I service the customers of my former employer, so I don't need to do any marketing, (though I probably should). I'm currently making more money than I did as an employee, but more importantly, I'm structured such that I can day-trade 8:30am CDT to 3:00pm CDT (stock index futures exchange Regular Trading Hours or RTH). I do engineering at night. This is the reverse of what I had before when I was a W-2 employee (engineering at my day job, and trading at night).

Can you structure yourself to have the time to day-trade your chosen markets?
If not, you have a couple of options: trade longer term ie "swing trading" or trade the FX markets - consider the currency futures as a better alternative to FX.

One other thing to note: day-trading may not be the most profitable way to trade, in a general sense. Long term Trend-following with pyramiding and concentration of capital into the most trending markets is the quickest way to make a lot of money trading. Trend-following in this sense is weeks to months in a trade (not the day-long trends I mentioned at the top of this post).

However, it requires a certain level of minimum capital, because you would be required to trade multiple futures (commodity) markets, looking for a trend to show up. The really big trends are infrequent, and you cannot rely on them for regular income.
Most of the time, you would be losing money as markets don't trend most of the time. If you have a small account, like 50K, you can expect to lose half of it before catching a really big winner. See the link about food for thought below.

I'm day-trading for now for a couple of reasons: lower margin requirements during RTH, and because I need to learn how to get better entry and exit timing, and knowing when to cut losing trades. My plan is to build up enough capital that I can diversify into to the big trend-following with pyramiding/concentration of capital method. Day trading is mostly linear. Trend-following in this way is exponential, but requires six figures to get started. May require 7 figures.

Here's some food for thought: %%title%% %%page%%
 

jjohns500

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I'd be happy to review you plan. Are you mean-reversion or trend-following? I'm mostly trend-following. This is far more difficult to do on the day timeframe due to large number of false signals (noise). Most of the guys I trade with are mean-reversion. I typically catch "trend days" and they typically try to fade them.

Let me ask you about your available resources (time):
After COVID hit last year, I was laid off from my engineering job. At the time, my employer and other companies expected a deep recession. As most people know now, manufacturing did not go into a recession. A few months later, my prior employer approached me again to resume doing the job I was doing for them. I agreed, but with some changes. I would be an independent contractor, rather than an employee. They would hire the services of the LLC I would set up, rather than me being a w-2 employee. I would also take over the manufacturing of the parts I designed for them. This is feasible for me personally, because when I was their W-2 employee, my prior employer did not do the actual manufacturing in-house. I designed stuff for them and I managed the projects of having the stuff made. It was all outsourced to China and sometimes local machine shops. After I set up my LLC and became an independent contractor, I figured I would just do the same thing, and outsource the actual manufacturing, but I would still do the design work.

So, fast forward today, and I now do a combination of engineer consulting and manufacturing (in China). I service my prior employer and I service the customers of my former employer, so I don't need to do any marketing, (though I probably should). I'm currently making more money than I did as an employee, but more importantly, I'm structured such that I can day-trade 8:30am CDT to 3:00pm CDT (stock index futures exchange Regular Trading Hours or RTH). I do engineering at night. This is the reverse of what I had before when I was a W-2 employee (engineering at my day job, and trading at night).

Can you structure yourself to have the time to day-trade your chosen markets?
If not, you have a couple of options: trade longer term ie "swing trading" or trade the FX markets - consider the currency futures as a better alternative to FX.

One other thing to note: day-trading may not be the most profitable way to trade, in a general sense. Long term Trend-following with pyramiding and concentration of capital into the most trending markets is the quickest way to make a lot of money trading. Trend-following in this sense is weeks to months in a trade (not the day-long trends I mentioned at the top of this post).

However, it requires a certain level of minimum capital, because you would be required to trade multiple futures (commodity) markets, looking for a trend to show up. The really big trends are infrequent, and you cannot rely on them for regular income.
Most of the time, you would be losing money as markets don't trend most of the time. If you have a small account, like 50K, you can expect to lose half of it before catching a really big winner. See the link about food for thought below.

I'm day-trading for now for a couple of reasons: lower margin requirements during RTH, and because I need to learn how to get better entry and exit timing, and knowing when to cut losing trades. My plan is to build up enough capital that I can diversify into to the big trend-following with pyramiding/concentration of capital method. Day trading is mostly linear. Trend-following in this way is exponential, but requires six figures to get started. May require 7 figures.

Here's some food for thought: %%title%% %%page%%
Now I am learning things I did not know. I had never even heard of means-reversion trading. Now I have some homework to do! My day trading strategy is trading gap ups in after hours or premarket. Stock XYZ gaps up and breaks out of previous resistance then it is added to my watchlist for the morning. Once the market opens I am looking for a buy setup on my gap list. I do not trade without a pattern and I am looking for 1-20 minute trades. Currently I am set up to trade shorter time frames due to external forces, job, single dad, etc. So I trade the time frames that work best for my schedule.

It's funny that you bring this up. This is exactly how I structured my trade plan. Covid definitely threwa wrench in things however. Pre COVID I was in a place with my career, similar to where you are now. I went from employee to contractor which allowed me more flexibility in the work I took on and allowed me to make more profit. I was still in CA at that time and was up at 5, on the charts by 5:30-6 and ready trade the open at 6:30. I usually would trade until around 11-12. There were days that I could trade all day if I wanted to, however my trade plan calls for limited trades under limited circumstances. I have a 3 loss per day rule and do not trade after 3 losses. I have a 3 win rule that if I win 3 trades with no loss I am free to trade until I take a loss. So with these rules in place it would be rare to spend all day trading.

My current situation has changed, drastically, however only temporarily. I work in the film industry and when COVID hit Hollywood was shut down and a large portion of it still is. I usually have 2 TV shows running at once, which is 2 fulltime jobs for most people, however I can do it in 1. When we got shut down I had no work for a full year and some change. It devastated me. Add in a divorce and cost of attorney, selling homes, etc I left CA completely broke. Luckily Hollywood opened back and I have taken on the equivalent of 3-4 fulltime jobs. I moved to GA broke, moved in with some relatives for short time, and now my daughter and I are finally getting back on our feet. My work pays very well so luckily I have a big shovel to get out of this hole. So for now, I have my blinders on cranking out as much work as I can. I work from 6am-10-11pm 7 days a week. This will only be temporary. This is also a huge wakeup call in regards to CENTS.

Right now my goal is to have my 30K trade account funded by the end of the year at the latest. Right now I have zero dollars in the market for simply lack of time to trade. I could be swing trading, however with the current work load I have I do not want to add more to my plate than neccesary, especially trading since there is a high demand on emotions, or the control of them. Running on no sleep and redbulls seems like a recipe for disaster on a bad trade.

I agree with you completely and Day trading is only one of the beginning tools I will be using long term in the markets. Hopefully it will become the least used tool. Building capitol is my number one goal aside from protecting my account.

Thanks for the article! I will check it out on my lunch break! And again I appreciate the time you spend responding.
 

karakoram

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Something you might want to research:

Trend following is also known as long volatility. A corollary is buying options (long option premium).
Mean-reversion is also known as short volatility. The corollary is writing option premium (selling options).

These two types of strategies are the inverse of each other.

If you are really sophisticated, you can merge the two strategies. Its possible to trade them simultaneously, but its very complicated to do so, and they can give conflicting signals. Creating algos of each type and combining them is one solution to help simplify the conflict.

Breakout trading is a type of long volatility. IE, you are "buying" volatility. Traders that "fade" (do the opposite) breakouts are looking for reversion to the mean.

To clarify, a trend following strategy will tend to tell you (signal you) to buy as prices move up, and sell when prices move down. If the signal works out (the trade moves into profit), you would sell or exit the trade at a higher price (if you entered by buying) or sell at a lower price (if you entered a short).

Mean reversion tells you to buy low and sell high, or sell short high, and buy low.

At first glance, mean reversion seems to make more sense, but there's a catch.

Depending on what timeframe you are looking at, be it seconds, minutes, hours, days, weeks, months or years, the market can be in different "modes". It can be in a trending mode or a mean-reversion mode.

Let's say, for example, that the market has been bouncing up and down between a high point and a low point for the past several days, and you are a swing trader. The obvious thing to do is sell the highs and buy the lows (mean-reversion). So you do that, and for a few more days, this is working for you and are are posting back-to-back winners. Your % of winning trades is around 70-80%. The obvious thing to do is increase your size on each subsequent trade.

Then, one day, on a market high point, you sell, but instead of falling, as it did the previous 6 or 8 times, the market continues rising. Remember, you just put on your largest short position so far during these up and down swings. But this time the market keeps going up. Your mean-reversion strategy keeps telling you to sell short. Your losses become HUGE because the market REALLY takes off. It "breaks out" of the range it was in the past couple of weeks. Soon, your losses on this single trade greatly exceed all of the winnings of your prior 8 trades. The strategy, overall, loses money, but hey, your win % is still around 70%!

OK, so maybe mean reversion isn't the way to go. Maybe you would rather be a trend-follower. Well, there's a price to pay.
In the same scenario above, we are buying the highs, and selling the lows. Our win % is down to 20%! (we "win" only 2 out of 10 trades).
We keep losing money, trade after trade! The losses are not account killing, but we are down 20-30% in account equity by trade number 8.
Trade number 9 signals, and we can't take the signal, because we just lost 8 trades in a row. The market takes off to the upside and we missed it because we did not put on the trade.

Unless you can overcome this mental block, you won't profit by trend following. In this scenario, you MUST take trade #9, because the winnings from that single trade will pay for ALL of your prior losing tradings, and give you some profit on top of that.

Notice I said above "depending on what timeframe". You have to determine what time frame you are trading and look at your signals within the context of a higher time frame. Really sophisticated traders diversify timeframes. This means they can trade multiple time frames in any given market, even when the signals conflict with each other. They "net out" the resulting signals. Uusally helps to create algos to do this, and net out the trades.
 
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karakoram

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Also, another thing to bear in mind (I will keep posting these little tidbits as I think of them):
You cannot know which "mode" the market is in until after the fact. You never know when a trend move will show up. Most of the other traders I know are mean reversion because the markets tend to be in mean-reversion mode most of the time. They figured out a way to survive and get out of the way when a major trend move does show up. They miss out on trend days or they try to trade against the trend, as they are fishing for the bottom of the move, or the top of the move.

I've heard Market Wizards describe mean-reversion as "picking up nickels in front of a steam roller".

From the way I describe it, you might think "Are they foolish, are they idiots? Don't they see the big move?" They are not idiots. Remember, that the markets tend to stay in mean-reversion mode 80 to 90% of the time. They have taught themselves to trade profitablty during those times, and they step aside when the monster moves happen.

I'm a trend follower. I tend to lose MUCH MORE often than I win. I am teaching myself to survive (not lose too much money) during the mean-reversion mode, so I can profit during trend mode, but I MUST pull the trigger when the big moves happen. These are the times at look the scariest. They look like this: The market has been chopping around (stuck in a trading range) for a while. Suddenly, it shoots upwards and no one knows why. The market is now at ALL TIME HIGHS. No one has ever seen it at such a high price. It looks like it could get slammed down at any moment, because there is NO REASON for it to go this high. ALL of my trader buddies start shorting it expected it to crash.

This is the point where I BUY and BUY as much as I can. F'ing scary? You betcha. You might say: "But Karakoram, you are supposed to 'buy low and sell high' - that's the only way you can profit on price fluctuation. If you pay the highest price ever seen for XYZ, you could be over paying."

Yup. And if trend-following trading were easy, everyone would do it.
 

jjohns500

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Also, another thing to bear in mind (I will keep posting these little tidbits as I think of them):
You cannot know which "mode" the market is in until after the fact. You never know when a trend move will show up. Most of the other traders I know are mean reversion because the markets tend to be in mean-reversion mode most of the time. They figured out a way to survive and get out of the way when a major trend move does show up. They miss out on trend days or they try to trade against the trend, as they are fishing for the bottom of the move, or the top of the move.

I've heard Market Wizards describe mean-reversion as "picking up nickels in front of a steam roller".

From the way I describe it, you might think "Are they foolish, are they idiots? Don't they see the big move?" They are not idiots. Remember, that the markets tend to stay in mean-reversion mode 80 to 90% of the time. They have taught themselves to trade profitablty during those times, and they step aside when the monster moves happen.

I'm a trend follower. I tend to lose MUCH MORE often than I win. I am teaching myself to survive (not lose too much money) during the mean-reversion mode, so I can profit during trend mode, but I MUST pull the trigger when the big moves happen. These are the times at look the scariest. They look like this: The market has been chopping around (stuck in a trading range) for a while. Suddenly, it shoots upwards and no one knows why. The market is now at ALL TIME HIGHS. No one has ever seen it at such a high price. It looks like it could get slammed down at any moment, because there is NO REASON for it to go this high. ALL of my trader buddies start shorting it expected it to crash.

This is the point where I BUY and BUY as much as I can. F'ing scary? You betcha. You might say: "But Karakoram, you are supposed to 'buy low and sell high' - that's the only way you can profit on price fluctuation. If you pay the highest price ever seen for XYZ, you could be over paying."

Yup. And if trend-following trading were easy, everyone would do it.
Karakoram, thanks again for the great info! And my apolgies on the delayed response, It's beem a hectic week.

I def have some homework to do on both of these topics and from what I can tell I seem to do both at varying times, obviously not intentionally or knowingly. Breakouts are one of my main patterns that I trade so I am very familiar with this hower tying it in to these topics is all new to me.

As for time frames I have a straight forward method that I use for day trades. I start my day looking at charts on the daily. That is where I will pick my watchlist for the morning. Once I have my list together I will then go back and go from daily to lower timeframes like 4hr or 2hr, then zoom in further to 5 min and finally 2 min. I usually am trading on 2 min charts since I am only looking for very short term holds. Obviously when trading on 2 min chart youre still accounting for everything on the daily and hourly timeframes. I am looking for volume at a breakout point, or continued volume after a gap up or down.

lol I love when people just say buy low sell high. Well if it were that easy to know we'd all be rich an trading which your point proves that precisely with a breakout into all time highs. That is one of my favorite trades to take because you have wide open sky above. As long as volume it there I will almost always take those trades.

So how do you manage your losses? Are you using stops? and if so, how do you determine where you place them? I know there are many people with many diff strategies on this so I always like to hear how others do it. For me at this point, on a 2 min chart, If I find the breakout my entry is just above the highest green bar and my stop will be below the lowest red bar of that particular move. IDK if that makes sense or not. Anyway, the location of my stop then determines my share size. Lets say I trade on a $100 risk for example. If my stop is .50 then I divide my risk by the stop and get 200 shares. So the most I will loose is 100, that also limits your wins as well but for me I prefer to NOT see large losses mentally. Maybe one day I will be able to stomach those lol. So one the stock moves up 1R (1 risk level .50) I then move my stop to breakeven. My initial goal is 2R, or in this case 1.00 target.

Im going to take a deep dive into this information this weekend and get some more clarity on it. Are there any resources that you would recommend? Books, videos etc.

Thanks again for all the info! You've given me plenty of homework!
 

karakoram

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So how do you manage your losses? Are you using stops?
yes

and if so, how do you determine where you place them?
Stops are based on a logical place on the price history chart.

I know there are many people with many diff strategies on this so I always like to hear how others do it. For me at this point, on a 2 min chart, If I find the breakout my entry is just above the highest green bar and my stop will be below the lowest red bar of that particular move. IDK if that makes sense or not.
Yeah, I'm not quite sure I understand where you are placing the stop - you could post a screenshot of a chart. Post one for a long trade and one for a short trade, and that should clarify things - picture worth 1000 words kind of thing

Anyway, the location of my stop then determines my share size. Lets say I trade on a $100 risk for example. If my stop is .50 then I divide my risk by the stop and get 200 shares. So the most I will loose is 100, that also limits your wins as well but for me I prefer to NOT see large losses mentally. Maybe one day I will be able to stomach those lol. So one the stock moves up 1R (1 risk level .50) I then move my stop to breakeven. My initial goal is 2R, or in this case 1.00 target.
Yeah, that's a concept that a lot of traders use. I use something like this as well, in concept. In the speed and heat of day trading, I don't have time to calculate it precisely, so I do the same thing in a loose sense. Also, this concept was popularized by Van Tharp, especially in his book "Trade Your Way to Financial Freedom" and in his "special reports" or books on Position Sizing (aka money management). This is especially true of the concept of "R" or risk unit. A risk unit is dollars you are willing to risk per trade. Just an additoinal comment about R: R can change during the life of the trade. Many traders like to move their stop as the trade progresses in their favor such that the risk keeps getting smaller, to the point where they are "risk off" or the stop is now at breakeven. If the trade keeps moving in your favor beyond that, the question you have to answer is: "now where should my stop be and what is my risk level?" At this point, you are risking open profit.

Tharp makes the point that risking open trade profit is the path to making more money trading. I'm not so sure.

Im going to take a deep dive into this information this weekend and get some more clarity on it. Are there any resources that you would recommend? Books, videos etc.
The Tharp books I mentioned are good to have, but remember that Tharp himself is not a trader.

I can recommend a lot of books, no so much for trading methods or systems, but more for how to think like a profitable trader. Some books I think are good books contain systems or methods that are out of date now. The books are still worth having for the wisdom, and for the mind set needed to trade the systems in the book (if one of the following books has system rules). Use them as a starting point, and update the systems they contain. The reason systems stop working is two-fold: Markets drift, things change (such as the recent closing time change), and traders discover the method listed in the book, and enough trades use the same method, it losses effectiveness.

Books I recommend:
Reminisces of a Stock Operator (fictionalized biography of Jesse Livermore)
I recommend any books that interview traders, such as ALL of the Schwager Market Wizard's books.
Secrets of the World Cup Advisors 2004
Market Beaters by Art Collins 2004
Any and all books by Art Collins
Any and all books by Bruce Babcock
Pit Bull by Martin Schwartz
Live the Dream by Profitably Day Trading Stock Futures (1995) Gary Smith
Alpha Trader: The Mindset, Methodology and Mathematics of Professional Trading (2021)
Day Trading With Short Term Price Patterns and Opening Range Breakout - Crabel

Not books:
Chat with Traders podcast (just google search it)
TradingSchools.org
peterlbrandt.com
 
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