Warrior Trading Blog

Red Day, But Still Feeling Positive! -$4.5K | Ross’ Trade Recap

What’s up everyone? All right, here we are, August 1st, beginning of a new month and unfortunately, I’m starting the month in the red. Today is a red day recap. But I’m not gonna beat myself up about it, I followed the rules of max loss per trade, I didn’t have any blow out losers, number one.

 

Number two, I stopped before I hit my max loss. I got really close to it, but I did stop and I was like, “Okay that’s it, I’m done.” It’s a nice feeling to not have to be held back by your broker and actually stop on your own, you know? Sometimes there’s days where it’s like, “Hold me back, hold me back, I’m going to go in for another trade,” and the broker’s like, “Nope, you’ve hit your max loss, you’re not allowed to trade anymore.” And you’re just so frustrated.

I didn’t get there. I was down 4,500 bucks and I was like you know what, that’s it, I’m walking away. I don’t need to go for trade number five, trade number six, and give up more profit. It’s not necessary. I’m just gonna walk away now. So that’s good. It’s disappointing to start a month in the red. However, remember January 1st I started, I don’t know if it was the 1st, it was the first trading day of January. I started by losing 4,500 dollars, and I finished the month up 117,000 dollars. So the first day of the month is not a bad omen. It’s actually, I would say, good luck to start in the red based on my historical track record. So this is going to be a great month, that’s my thinking. I’m going to knock on wood just to be safe.

Anyways, so we’ll break down all the trades from today in the Midday Market Recap. Any questions, any comments, leave below. Also, I answer a couple questions about taxes during this recap, and I talk a little bit about the month of June and July and August in 2016, 2017, and 2018 to talk about the differences between these years. So enjoy the recap, any questions leave them below.

All right everyone, so we’re going to break down the trades from today, but bad news, starting the month of August with a red day. So today is Red Day Recap, down 4,490 dollars. That’s not how I wanted to start the month. But you know what? That’s okay. Certainly not the first time I’ve started a month in the red. I started June 1st down 16,000 bucks, and I ended up finishing June up 36,000. So it’s a red day, but there’s always hope. I’m not going to get too bent out of shape about it.

So we can look at the trades I took today. And what you’ll see is generally today there was just no love in the market for small caps. It was like I had two small winners, and then four ugly losses, and I took the fourth trade. I usually say I’m done after three losers and I took the fourth trade and lost another 1,500 bucks. So again, that’s a tough thing because I set this rule that I won’t trade after three losses because statistically I’m just so likely to have a fifth loss, or fourth loss, or whatever it is, and today just was another example of why that’s the case. I was just sort of holding out hope that maybe this will be the one that saves the day, and that was not the right move.

So there’s the P&L, red on two names, RXII and MYO. So RXII, we’ll look at first. This one is kind of interesting because it was on the scanners as a gapper. Right at 9:25, there was news out on it. So we had news come out, the bell rings, and it dips for a second down to $1.80. And this is in one minute. It dips down to $1.80 and surges up to $2.24 And so I was like, Oh. As I saw it dip down to $1.80, I thought, okay, I can’t trade this. It’s too risky for me to get in here, so I’m just going to give it a second, and if you go back up here. So it ends up pulling back and doing a one minute micro-pullback. All right? So, the first candle making you high, that was 2.17. I got in anticipating that break, adding at 2.14 and 2.17. 10,000 shares. Target high a day. It pops up to a high of 2.24, and then it dropped all the way back down to a $1.92. I sold about 8,000 shares at 22, and I sold the rest at 97.

So on that first trade with 10,000 shares, I only made 240 bucks, only two and a half cents, right? So, that is not, that’s just not a very big winner. So, anyways, it drops down to a 1.92, and then it pops back up, squeezes back up here, you’ll see, to a 1.15 right here, and then I’m watching it, watching it, and as it curls back up right here, I got back in. So I got back in at 2.13 and 2.15 and 2.16. 10,000 shares again, and it pops up to 22, but it doesn’t stay there for more than a second, and then you can see it comes all the way back down, so it comes back down. I end up getting out of that actually with 200 dollars profit again. So now I’m up 400 dollars on the day.

And then I get back in at 221 right here because it looked like it was going to break back up over the highs, and I was thinking if it did that, I would have a chance at moving a high a day. It hit 22, and then it drops all the way back down to two dollars, and I stop out and lose 500 bucks. All right? So now I’ve had my first loss, and I just gave back the profit of the first two trades. All right? Third trade. I get back in at 21, almost literally at the same price, and this is where frustration starts to kick in. It pops up to a high of 28, and then it drops back down to 207 again, so I stop out at that again, and now I’m down 1,000 bucks on the day.

And I’m like, this is ridiculous. It then looks like it’s going to break over the highs, so I get in for the break over high a day. It pops up to a high of 36 and then drops again back down to 207. I got in at 28, 10,000 shares, and stopped out at 211. So, those, that was just, I mean, I was just like okay, guys, I’m going to be honest. I’m getting a little frustrated, right? I mean, at a certain point, it’s like this is getting ridiculous. I mean, I keep, it’s one, it’s two, and then it happens a third time, and it happened here, so basically every breakout on this stock just faded. That one faded. That one faded. That one faded, and that one faded. Those are my four entries. All right?

So, fail, fail, fail, fail. I mean, yeah, I had a small winner here and a small winner here, but then these ones were losers, so really just irritating. That’s frustrating. More than maybe losing the money, it’s just the frustration of being wrong several times in a row. All right? So, that was really annoying on RXII. I lost 3,000 bucks on it, and in hindsight what I’ve done, what could I have done differently? When it was finally breaking over high a day, typically that’s a good entry for a move up to 250. So, typically, that’s a good setup. These ones are typically good setups. This stock just wasn’t an easy one to trade. I guess that’s all it is, so bummer on that. Whatever. It is what it is. Down 3,000 on that one.

So then MYO pops up. Someone mentions hey, there was a headline on MYO. It’s squeezing up, and on this one, I should have just left it alone. I got into it because I saw it had just squeezed up from 230 up to 245, and so I was like clearly it just popped up almost 10 percent. It’s moving. So, I’ll jump in. So, I jumped in at 46 and 49 for the break over the half dollar. It hits a high of 53, and then it comes all the way back down to 30. So, I lose 15 cents on that, 10,000 shares, 1,500 bucks, and that’s my day. So, two winners, four losers, not very good accuracy, average loser about 1,000 bucks, and just wasn’t feeling it today.

So the average winners were only 200, average losers 1,000. That’s not sustainable. That doesn’t work, so today is not the day to keep trading. It’s basically just a choppy day in the market. Now, I’m still sitting up 360,000 dollars on the year. I’m basically, I’ve made almost the same amount here as of August 1st that I made in all of last year. So, at this point, I’m in really good shape. I’ve got the wind at my back. I’ve got a big cushion. I can afford to take a little bit of extra risk here and there when I have the potential for a big win, but the reality was, and I kind of realized this on MYO, this stock wasn’t going to give me the potential for a big win. The daily chart wasn’t that great, and then I didn’t really, I wasn’t really clear on what the news was, and so that was just sort of a silly trade.

But RXII initially had potential, and then it just got really, really choppy. So you see all these candlewicks, candlewick, candlewick, candlewick, it just shows the stock would pop up and fade, pop up and fade. So, you have to know when you’re hot and when you’re not, and today’s a day that I wasn’t on fire. I wasn’t having a really good momentum, really good follow through, and I don’t, I mean, I’m not looking at the market and like, oh, man, there was this great opportunity that I missed. I’m just seeing that there wasn’t a lot really moving today, and maybe I shouldn’t have been as aggressive with 10,000 share positions. I don’t know. I don’t know if that really was the problem, but whatever.

The case is now I’m down 4,400 dollars, so it’s a bummer to start the month in the red, but been there before. Not a big deal. I’m still, I’m kind of now probably break even on the week. I made 2,500 on Monday and 1,000 yesterday, so actually now I’m down 1,000 on the week. So, I got to kind of get myself in gear here, try to make back some money Thursday and Friday, but the reality is looking at my calendar, I look at this because it kind of shows me where my P&L is, where it’s been for the last couple weeks, and I can tell you just right away that momentum is not been as good for me in the last two weeks.

If I show my detail, no, let’s see. I want to show my recent, was it? Yeah, here we go. So, I had a good day last Tuesday, but basically since this day right here, things got slow. I had a day where I made, I don’t know, it was like 200 bucks or something. It’s such a small day. It barely registers. Small green day. Small green day. Small red day. I ended up being one big green day at 10,000 dollars, and then two red days, smaller green days. Yesterday was only 1,000 bucks, and now today’s down 4,000, so the context basically over the last two weeks has been, aside from this one day, choppy because look at this two week period here. Yeah, I’ve got two red days, but compared to the green days, they’re not bad.

So, here on these two days, I gave back most of that day, so I’m basically kind of flat for the last week and a half. So, what you’ll notice with trading is the ebb and the flow. If I go back here, I had a period in May, a sort of sideways price action, for me for my account, and then a big move from the end of June up to the end of July, so about a month and in that month I made, let’s see, 132 to 226, almost 100,000 dollars in the course of six weeks. Great action, but now we’re in a little bit of a sideways period again. So, this is what you have to expect.

You’re going to have these, the big leaps and then sideways, and the big leaps and then sideways, so when you’re in the sideways price action, you make money then you give a little back, and then you make a little and you give a little back, and it’s just kind of doing that a couple days or a couple weeks in a row. You just want to make sure you’re not starting to do this type of thing. That’s what you want to avoid. You want to just kind of try to keep level. Try not to give back too much profit. One step forward, one step back, one step forward, one step back until things start to open up, and then that opens up the next leg.

That’s the name of the game. You can see here from the equity, big winners back in this period, a couple big winners back in that period. Nice in this period but here was a little bit of a slow window, and this is a little bit of a slow window that’s just begun. And this is a little bit of a slow window here. It’s the ebb and the flow. You got to trade the market you’re in and not the market you want to be in. You have to remind yourself that every single day. So, red days happen, and you’re right, they happen to all of us. You can’t avoid it, but it’s important to analyze it, and to be one with the losses, to understand why they happened. Could I have minimized it? Could I have avoided it? I certainly don’t want to get myself in a situation where I’m being impulsive, having some back to back red days like this and like this, those are no fun. I always try to avoid that.

And let’s just, for the sake of looking at a horrible month, and maybe that will make me feel a little bit better about myself, 2-28-18, so we’re going to look at the month of February. This is the worst month that I’ve had in well, gosh, I don’t know, years. I finished down 10,000 dollars for the month of February, and this is what was happening. I mean, this was, it was like red, red, red. I was literally red eight out of 15 days of the month, and of course, I had my skiing accident, so I had to take this whole week off.

I was on bed rest, so I didn’t trade that week, and I had one, two, three, four, five, six, seven, eight red days. It was just a bad month. The accuracy wasn’t there. The market wasn’t hot. Whatever. And so this was a month of resting, all right? So, I lost 10 grand. Whatever, but in the month of January, let’s go back to January, 1-31. Let’s see. Oops, detail. Recent. Oops. 1-1, so January, this is what January looked like. I mean, my average was like 6,000 dollars a day. This was a 17,000 dollar day. This was a 12,000 dollar day. I had three red days, and I started the month down 4,200, almost the same as today, right?

And look, I finished the month of January with 117,000 dollars of profit. Average daily gain, 5,500. So, just because I started this month in the red, doesn’t mean this couldn’t be the best month of all time. There’s always hope. You never know. And yeah, so that reminds me, let’s look at last August just as a comparison. So I was going to do this yesterday during the day recap and I totally spaced it, so oops, 17. Okay, so just for comparison, last August overview, calendar, this was last August for me. I had a 4,500 dollar day, started red. I mean, it was not good. I had a couple of good days, but I only got to the green halfway through the month, so I finished August last year with only 5,000 dollars profit.

It wasn’t very impressive. My accuracy, 63 percent. Average losers were bigger than my average winners. I didn’t have, the biggest winner was only 5,000 dollars. I didn’t have home runs. So it was only 5,500 dollars. It was not a good month. Last July, 2017, I made 6,300 dollars. It was the same kind of thing. Now, if we go back to 16, we go back one more year, I made 32,000 dollars, right? So, August of 2016, look at August 2016 here. 31. 29,000. So, it’s not seasonal. Sometimes summer’s slow. Sometimes it’s hot, and really, this so far has been a hot summer. I mean, 15,000 dollars last month. 36,000 in June. I’m up 86,000 dollars already this summer in just two months.

So, there’s a good chance that August will continue to be pretty good. We’ll continue to see good volatility, but it is, it’s just the action of the market. We either have a really good catalyst, and we have great opportunities, and we see lots of action, or things are slow. So, whatever. Today’s a red day, but I’ve got enough trading experience at this point that I don’t really get that bent out of shape because I know I’ll make it back.

It’s just a matter of time. I mean, that’s really all it is. So, yeah, so that was the analysis of July 16, 17 and 18, August 16, 17, 18. So I wanted to answer that question. Another question someone asked me was about taxes, how do I plan for taxes, deal with taxes, et cetera. So, as a trader we don’t pay W2, we don’t pay taxes as we go. We make all of our profits, and then at the end of the year, we’re going to get a 1099 from our broker, and the 1099 will show your net profit. So, last year from Lightspeed, I got a 1099 for whatever, 350,000 dollars because I traded in a couple different accounts last year, so I got one from Lightspeed. I got one from another account, and then I had to take all my trades from Suretrader and have my net P&L from Suretrader.

So I had these three accounts, and basically what I do is I give the statements, the 1099s, just to my CPA. So, I hire a CPA, and he does my taxes for me, and so I give him my 1099s, and I have them in January, and then he’s like, okay, Ross, so I’m going to do your taxes, blah, blah, blah. Now, I, because I make more than half a million dollars a year, I’m in the highest income bracket for federal income taxes, which is just under 40 percent, which is crazy. So, I mean, it is what it is, right? So if I make 100,000 dollars, 40,000 of that goes to Uncle Sam, right? Now, I’m also in the state of Massachusetts. Massachusetts has a fixed income rate of five percent. State of Vermont was actually higher at eight percent, so I’m saving three percent in the state of Vermont.

So I pay another five percent for the state of Massachusetts. So now I’m at 45 percent income tax. However, because my business has an office in California, and we’ve got employees in the state of New York, I pay New York income tax and I pay California income tax. So I pay income tax, I file in several states because of Warrior Trading. So, my effective tax rate is like 45, 46 percent. It’s right around there, and that’s just the way it is. There’s nothing I can do about it. Even if I lived in the state of New Hampshire or the state of Florida, it would save me some. It would save me at most the five percent, six percent that I get to the state of Massachusetts, so for me, the way I deal with the taxes is, and this is, not everyone’s going to do the same thing, but I do quarterly estimated taxes, which you’re required to pay. So each quarter, I have to write a check to the state of Massachusetts and the United States Treasury for my estimated taxes.

Each quarter, I pay in for estimated, my 2018, all right? So, I just do that each quarter, and in general I don’t save, I mean, beyond paying my quarterlies, that pretty much keeps me in good shape, and I try to reinvest as much of the profit as I can early in the year, so I can make money on it, and then that gives me more money to pay taxes at the end of the year, or come the following spring. So, that’s basically, that’s the way I’ve done it. For me, last year I made 380,000 dollars day trading. I’m on W2 at Warrior Trading, so I get a W2 for my income there, so taxes are already taken out, and that was one of the nice things about starting Warrior Trading.

When you’re a day trader and you’re self-employed, you don’t get a 401K, you don’t get healthcare, you don’t get any of those things, and so if you’re able to create your own business, whether it’s trading related or it’s related to anything else, the benefit there is that now you can opt in to healthcare plans and stuff like that, but for me, I’ve got income from Warrior Trading. I’ve got income from my day trading. I get royalties on my best-selling book titled How to Day Trade on Amazon. You can see it right here. So I get checks every month for sales of the book. I’ve got my rental properties, and then I’ve got income from dividends on long term investments, so you start adding it all up, and there’s a lot of different streams of income, and I do have a lot of write offs. All of the company expenses I write off, and all of that stuff, so the cost of my fiber internet, whatever it is, 500 bucks a month for the two dedicated lines.

That’s obviously a write off through the business, operating expenses. The office space, the rental, all of that is a write off, so that obviously reduces my net income, but it doesn’t get me below the highest income bracket, right? The highest income bracket is anything more than 500,000 dollars, so from 500,000 and up, you’re in the highest income bracket, and there’s really not a lot you can do about it unless you’re going to, I don’t know, try to, I don’t know. I don’t know what you would do. I mean, I guess, some companies move their money offshore or something, but I don’t do that.

So, that’s just the way it’s been for the last two years. I’ve paid myself a salary. I’ve got my 200, I pay myself 265,000 dollars a year through Warrior Trading. That’s my salary, and I pay, that is all W2, so that comes out as I go, and then I’ve got my 300,000 plus or minus from day trading, and it keeps me going, but taxes are part of the deal. We all deal with it, and the best thing you can do is get a CPA because if you have a CPA then they just sort of take care of all of those headaches for you.

So, that’s to me what is important. If you try to do Turbo Tax as a day trader, you’re going to, it’s going to be crazy. You’d have such a big attachment, like my 1099 shows all the individual trades. It’s like 100 pages long, and my CPA, the one that I’ve had up in Vermont, it’s like 1,000 bucks or maybe 800. I’m not saying it’s cheap, but at the same time, they handle all the headaches of the taxes. They give you, they tell you this is when you pay your quarterly, this is how much you pay, and then you just do it.

And it’s like, it just makes life easier, so one of the nice things with running Warrior Trading as a business is that the profit, we reinvest into building the chatroom software. So building the chatroom software, building the new trading sim that you guys are using, those are all write offs. So it’s awesome the way there’s these incentives for companies to reinvest because those are just, you write it off against the income and then at the end of the day, you’re not paying tax on the income, and what you’ve done is you’ve created this awesome software, so that allows the business to keep growing.

And then, eventually get to a point where you have a bigger profit or you lease out the software or sell it to a bigger company, and then they’ll get the tax on a 50 million dollar sale or something like that, but in the meantime, you’re able to grow your business and do what you have to do, so there’s definitely advantages to trading through a business if you are doing things like that or you’re running another type of business. For me, when I moved back up to Vermont, I formed my business where I was doing my design work, so I set that up because I was getting paid from the company in New York City to do the project management. So, to me it was easier to have them pay me into my corporate account, and then I would write off all the expenses of my office stuff, all the things I was buying through the company credit card.

And then it was just, they were separate from my personal, so it was like anything related to business goes here. Anything personal is here, and then you don’t have to deal with individually, like line item write offs the way you would if you were trying to do it as I think a schedule C on your personal income tax, but again, like I’m not giving you advice. I’m just telling you in general what I’ve done and what works for me, so yeah, you’ve got to put some money aside. If this is your very first year day trading and you make 100 grand, you’re going to get, if you’re in the United States, a 40,000 dollar tax bill come the following year, and then once you’ve got a history of making a couple hundred thousand dollars a year, you’re going to be paying quarterly estimated taxes.

So, you’ll just keep doing your quarterlies year after year, and I actually prefer that because then come April, I’m not going to all of a sudden owe like half a million dollars. I know that I’ve been paying into the tax bill and I’m already pretty much squared away. But to each their own. Some people like to try to do the minimum estimated payment, keep investing that money, especially if they do real estate, they want to have as much liquidity as they can, but it’s just personal preference there.

So, anyways, yeah, so that’s about it for me. I just want to answer that question. Someone asked it on YouTube, so I just figured I’d go over that a little bit. We talk about taxes a little bit more in the class. We talk about LLCs and S-corps and things like that. There are advantages and disadvantages to both. I’ve done a lot. I’ve personally done a lot of research on them just through my process of trading and also the process of setting up Warrior Trading as a corporation, but I can throw out ideas from my experience, but ultimately you guys, it’s just there’s so many variables when it comes to taxes because it’s what country do you live in? What state do you live in? Are you doing other things? Is it just trading? There’s just so many different levels of the nuances that can really change what your decision would be, but …

So I don’t trade through my company. I don’t trade through Warrior Trading. I trade through my own personal account. I mean, I guess I could trade through the business but there’s no real benefit to doing it, and then I’d have to pay myself that income either, I’d have to, well, if I paid it as a W2, then I’d be adding tax on top of it because I’d be doing the Medicare and all that stuff. So, I don’t know. I just do it through my personal account, and that just seems fine. I try to keep it simple as much as I can. So, anyways, that’s about it for me. I hope you guys have a great afternoon. Any questions, any comments, feel free to leave them below, and we’ll be back at it first thing tomorrow morning. Thursday, Friday, try to finish off the week hopefully with some green trades, get back into the green, and keep making some progress. All right. Have a great afternoon. I’ll see you guys all first thing tomorrow morning.

Oh, hey. I didn’t see you there. Well, I was just working on the dream board for my next home run trade. Hopefully, it comes soon. Until then make sure you subscribe to get email alerts, any time I go live or upload new videos. Until then, happy surfing.