My Story – Why I want to Day Trade. And what’s significant about $25,000?

Who am I? You can call me J2DT. That’s not my real name, but at least for the time being, I prefer to remain anonymous. I am an executive at a SMB (Small & Medium Business) in my forties with no formal training in the financial markets. I love what I do for work, and have no intention of swapping my day job to trade stocks for a living.

I am neither rich, nor do I come from a rich family. My parents worked hard to put me through college, and I work hard every day to give my family a comfortable life. Like most middle class Americans, I have to think before I spend, I have some revolving credit card debt, I have to pay to day care, hospital bills, etc. Money that I make from trading stocks will help us with those, or to save a little for a rainy day.

I opened my first brokerage account with Robinhood in 2017 with $10. It sat there for two years before I ever made a trade. And the few trades I made two years later in 2019 were with first with 10s and 20s and then a few hundred dollars. I also opened a brokerage account on Webull because everyone was talking about it. It all seemed fun, but it was like playing roulette. Prices went up and down for no reason it seemed, and companies that I knew and trusted in the real world would sometimes have crappy stock prices. It made no sense. Around the holidays, I withdrew all my money into my checking account because who had time to gamble.

I’m not sure what happened, but in January 2020, I found myself increasingly curious about stock trading. I started to watch some videos on YouTube, and put in a couple thousand dollars into Webull and a couple thousand into Robinhood and decided I’d see if I could get rich quick. No, I couldn’t. But, I realized that I could slowly but steadily grow my money if I was methodical and didn’t just buy and sell stocks for companies with cool names.

February and March were my first two full months of regular stock trading, which I define as multiple daily transactions. It went from being a curiosity, to a hobby, to a passion. I started studying things more, waking up early to trade stocks before work and staying late to trade some more after work.

During these two months, I’ve had my fair share of ups and downs. I had my beginners luck, felt invincible and then got my comeuppance. I made – and make – mistakes, and made an effort to remember them so I wouldn’t make them repeatedly. At some point, I started writing down my lessons learned, trade by trade, especially where I lost money. Then I started to write down my lessons when I could have made money but didn’t. Or worse, when I had made the money but let it slip because I didn’t lock in my profits.

I’ve found that the moments where I snatched-defeat-from-the-jaws-of-victory hurts a heck of a lot more than when I lost money because of a bad trade. Two such unforgettable non-trades in the first two weeks of trading in 2020 were a $5,000 profit that shrunk to just a couple hundred dollars by the time I sold it. And a $1,500 profit that ended up as a $300 loss by the time I sold it. It was gut-wrenching.

And it taught me very important lessons: I am not invincible. And it’s not my money until I’ve taken the profit.

As I started trading more regularly, I quickly became aware of some realities: If I wanted to maximize the return on my investment with a small account, I should focus on short term trades (day trades, overnight swings) instead of long term trades (where you buy and hold stocks for many days, weeks, months, or even years).

Making a 5%-20% per trade with multiple trades a day or a week could make me more than putting my money into a month long trade that would grow it by 10%.

I also realized that for my goals, I would get a lot of benefit if I woke up early for the Pre-Market hours, and kept an eye on the market in the After Hours session.

But the most significant lesson I learnt was that the best opportunities for make a profit happened without warning. Even when you know a stock will increase in price, you can’t always predict when it will happen, and how long that window of opportunity stays open. Sometimes, it’s a matter of minutes within which that window opens and closes.

To catch those opportunities (usually called scalps), I needed to have day trades available. And to make enough of an impact from these scalps, I needed to be able to invest a meaningful amount of money on these trades.

Like most people, I started with a cash account. To me, that just meant that I was trading with my money, not with borrowed money.

But soon, I realized that even though I had money in my account, I couldn’t just day trade stocks at will. On Webull, I had to worry about something called Settled Funds (not sure what that means? No worries, I will cover that in a post soon). On Robinhood, they didn’t have that. But they limited me to 3 day trades in a 5 day period.

Violate these, and I would get punished with Good Faith Violations or get marked as a Pattern Day Trader. I wouldn’t be able to day trade any more. And the only way to permanently shed these restrictions once and for all was to have a brokerage account with a balance of $25,000 or higher.

Without enough day trades, the only way to regularly trade is to buy stocks today that I want to sell tomorrow. This means that each day, I have to spend time to find stocks that will potentially move up AND make sure that I’m not buying at such a high price that I either make very little money or lose money. And it doesn’t always go right. So there are many instances of two steps forward, one step back.

Overall, I’ve been able to grow my brokerage account balance, but there have been many missed opportunities even when I’d spotted them far ahead in advance. For instance, when a stock has good news late in a day, it starts to rapidly climb in the After Hours session. By the time you realize it, the stock is trading quite high. Jump in at that moment, and you have a limited amount of profit you can make. Ideally, you want to wake up the next morning and try to buy it on a dip. But if you’ve used up your 3 day trades, you can’t buy it and sell it the same day, and there’s no guarantee that the stock won’t hit it’s high and fizzle out by the end of that trading day. So you’re stuck between a choice of a small profit or no profit.

So I set myself a target of $25,000 with daily and weekly profit goals. And once a month, I add some money from my bank account to help move things along. At this point, I’m about halfway there. And if things go to plan, I may reach my goal in the next 3-4 months. Frankly. to account for the ups and downs from trades, I’ll likely want to have at least $26,000 to $30,000 as a cushion.

Reaching the goal will give me the freedom to buy and sell stocks when the opportunities present themselves, and not buy into bad positions and gambling that something will happen.

As the lessons from my bad and good experiences started to add up, I knew I had to write them down. It could either be in a diary where nobody but I would benefit from it. Or I could do it in a public forum where others could also benefit from it.

This is the journey that I’m sharing with you. I think others in my shoe come to the same realization sooner or later. If that’s you, follow me on this journey and I promise to share what I learn on my way.

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