Buying Dividend Assets with Daytrading Profits – Profit Margin

When the markets started to tank a few weeks ago I realized a 10% loss on a trade which sapped nearly all of the net profits I made from day trading in 3 months. This is not as much as most people as I only bankrolled a small account. However it still hurt and was shameful. However, it enlightened me to some technical issues I had with my trades, and some other personal issues that I had to tighten up. I was glad that I learned these early on and with such a low loss.

One of the biggest issues in the lead up to the loss was the loosening of my trades. The more wins I got, the more I wanted to test things out. I was not content with the way I was trading, and wanted to learn how to let go of a trade more – to let the winners win and ride longer than I was letting them ride. For example, if I found a really good trade, I tended to hesitate a lot longer, and squeezed out just a few cents of profit per share. Or I would cut the profits short, miss a $70 monster, and captured only 10% of it.

The straw that broke the camels back was $NBR. Like always, I entried in the trade too early, and missed the low of the day. However, the intraday price eventually moved above VWAP and I could have captured $25 in profit. However, I got greedy and wanted to practice letting the trade ride, so I held it through the weekend. The next Monday, I wake up late, miss the high of the day and see that I have a $20 capital loss. I hesitate to sell – I knew I screwed up but didn't want to sell. Something in me wanted to hold and wait till it was up. But it never got there and kept falling. So I wait the whole day just to find a great exit point and minimize the loss from $170 down to $120, wiping out all of the profits I worked so hard for in the past 3 months. I exit in defeat. However, I learned many valuable things from it.

Check out this trade and more on profit.ly

The first thing I learned was discipline. Part of discipline is keeping emotions in check. I have 5 years of experience in the stock market so I largely removed most of the newbie emotions, but this trade helped me see the vestiges of emotions I had left. One thing that compounded my self preservationist emotion, of not wanting to lose money, was the faulty mindset of riding out a trade because of ill content. I was not content with my trades, and didn't like the inefficient trades I was doing. As a result, it caused me to open a door to bias. Another thing was my ego. I didn't cut my losses quick enough even though I knew it was the most rational thing to do because I didn't want to feel the shame of posting it on https://profit.ly/user/dividendraptor All these variables compounded together.

My risk management strategy evolved as a result. It was nonexistent before, only because I wasn't really keen on it. Risk to reward never jived with me, but I had a light bulb moment – Something that I knew would excite me. Although I would practice the very pleb risk to reward trade sizing strategy, I also wanted to do something non conventional –  something I wish I had practiced more diligently before. I always made it a goal to buy long term assets every week I made profitable trades, but I never stuck with it as diligently as I should have because I started getting greedy with my trade sizes. The more profitable I got, the bigger trades I could make. So I slowly stopped caring as much about long term assets and tried to bankroll larger and larger positions. Now, I decided to buy long term assets every time I made a profitable trade – no matter what.

From now on I will buy up all dividend assets with profits and increase my bankroll incrementally with the profit spread:

This Solves 2 issues:

1. Allows me to lock in profits in capital assets irrespective of gain or loss.
  • If I had bought $100 of assets prior, even if I have another $100 trading loss, I would be receiving dividend payments and the market value of such assets to cover a portion of the trading losses.
  • I would use less of the profits as bankroll to increase trade sizes as most of it would be used to pay for assets. This creates less risk and potential loss
  • This allows me to build my passive income portfolio
  • At the very least, I would have assets as opposed to large capital losses
  • I only buy assets that I research on a minimal fundamental level, predominantly on financial reports

    Watch the accompanying YouTube video on why I'm doing this in a volatile market (Coming Soon)
2. Allows me to marginally increase bankroll with a small account
  • I will only use a maximum of 80% of all profits to buy dividend producing assets.  I will bankroll the rest – Profit margin.
  • Due to bearish market indication, I will use Pattern Day Trading for intraday profits as opposed to riskier buy-hold swing trading.
  • Since I have a small account, I only have 3 PDT's available to use with 5 settlement days before each PDT is again available.

Things to work on:

  • Risk to Reward asymmetric trades, on the low end, as I tend to operate better with capturing quick profits as opposed to letting trades ride
  • Exit trades that go below x% of Risk on failed VWAP and especially on swing trades
  • Always have at least one or two of the following variables:
    • hard entry and exit price
    • hard profit % and exit % goal
    • entry and exit position of candles and line graph for the VWAP 1-minute chart

Get a Free Stock

Long-term dividends purchased with profits: 

  1. 2x $CBL 

  2. 2x $CDR 

  3. 2x $DVD 

  4. 1x $AOD

Most of these stocks were bought at all time lows with more room to dive: As interest rates hike over the next few decades and as more debt piles on by governments increasing the deficit. This is done so to dollar cost average them and either sell when they break out, or hold long term to receive stable dividends. They are low enough that they wouldn't be material, and were purchased with profit-house money. $DVD was purchased because it had good financials, low float, and does business with NASCAR. I plan on owning a racetrack in the future.

Be sure to subscribe to my YouTube channel and see me grow a small account to millions.


Buying Dividend Assets with Daytrading Profits – Profit Margin Buying Dividend Assets with Daytrading Profits – Profit Margin Reviewed by Dividend Raptor on 3:17 PM Rating: 5

No comments:

Sponsored Ads

Powered by Blogger.