Warrior Trading Blog

Scaling a Strategy: Meet Our Newest 100k Club Member

Scaling a Strategy

What’s up everyone. All right, so in this episode I’m going to introduce you guys to the newest member of the 100K club at Warrior Trading. His name is Jess and he’s made over $100,000 in verified profits day trading the momentum strategy that I trade every single day.

I was able to meet with him in Miami last month, he came down for our inner circle seminar, which was a lot of fun and I spent some time chatting with him. We even did a little interview, which I’m going to show you some clips of during this episode and we were talking about the process of learning a strategy, the process of getting started trading, which for him was kind of a funny roundabout way. He’s a pretty big seller on Amazon and eBay and he had a little bit of a scare. What happened to him?

I think he said he had over $1 million in inventory and his account got froze, so they froze his account and I think this was Amazon, his seller account. And so all of a sudden he’s sitting there with all this inventory, his account is locked, and the inventory is in his warehouse, he has it, but he can’t sell it. And he realized how vulnerable he was because he was 100% dependent on that platform, primarily Amazon. And so that’s when he got into trading and he started to think that he needed to diversify his income a little bit. Now he’s a really smart guy and he picked up on trading pretty quickly, but he made a lot of rookie mistakes, including one that he shares with me during our interview where he actually had a trade, he bought a penny stock and he was up over $250,000 and he didn’t take the money off the table.

He didn’t sell it, he didn’t take the profit and it came all the way back down. He took one trade that he was hoping would become this home run trade and it totally blew up. He eventually realized that to become a consistent trader, longterm, it’s not about swinging for home runs, it’s about consistently hitting base hits. And so last month he decided to do his own small account challenge, which is awesome. He was inspired by a small account challenge that I did in December, which I was in the middle of when we were at our seminar in Miami. And so what he did was he set up an account with the same broker that I’ve been using, the offshore broker. He set up an account with a little less than $10,000 in it. All right. And his goal was to see how quickly he could grow it.

In 10 days, he grew the account to over $24,000 averaging $1,400 per day. So what I asked him to do, when he shared that with me, I was so impressed that I asked him if he would do a recap of that 10 day challenge to take less than 10,000 and turn it into almost 25,000. And so he did it, he recorded it, and there’s a link right below in the description that you guys can click to watch his recap. So he’s going to break down the way he trades the small cap stocks. Now this is something that’s kind of interesting and the reason I’m down here with a pool table is I was thinking a little bit about how trading relates to pool kind of in a couple of different ways. His small cap strategy is a variation of mine. He learned the strategy that I teach in the classes.

He’s of course, watched me trading it over the last several years, he’s in the chat room. But he decided to put a little bit of his own spin on it, and he trades less than me. He doesn’t trade every single day, he’s got a very specific criteria for what he’s willing to trade. But when he takes those trades, he does really well. And the results speak for themselves, member of the 100K club, which is fantastic. And for those who are curious, the way we’ve set up the 100K club, it’s this badge of honor. So in the chat room, if you’ve made over $100,000 and you verify it with your broker statements, you get that little 100K club badge next to your name. So every time you type people know that you’re someone in the room that’s actually made some money, at least over $100,000 and hopefully you know what you’re doing.

So when it comes to learning how to trade, I was thinking about playing pool a little bit because you come down here and every now and then there’ll be someone that comes over to the house and I set the pool table. And they’ve never played pool once in their lives, so the first thing is like… they’re like which ball do I shoot at? Sometimes people… oops, [inaudible 00:04:36]. So you need first you get a little technique of how you rack it and keep it tight. And then you’ll have someone who’s like, oh, do I start here? Wrong. No, absolutely not. That’s not the way you play pool. But of course, someone who’s never played once in their life, they don’t know better. Just like someone who’s never traded once in their life, doesn’t know better when they try to trade a penny stock or an OTC stock. Those were the mistakes that I made.

So it’s a process first of learning kind of the rules of the game. How does this even work? All right, well, we start with day trading stocks of real companies listed on NASDAQ nicely. We start by hitting this ball first into another ball. You never want to get the eight ball in the pocket if that’s what you’re playing until last. These are the things that of course you learn as you play pool. And I would say like trading and like playing pool, some people probably have a natural aptitude. And you may be someone watching this video who has a natural aptitude for pool. You always been good at it, maybe it’s the math, maybe it’s the angles, a little geometry. Whatever it is, it connects or maybe you’re the type of person who you can for the life for you and win a game of pool, you don’t get it. It doesn’t feel right and trading is a lot like that.

A lot of people pretty quickly will recognize whether or not they have that sort of natural aptitude. Now if you have the natural aptitude and you feel like it’s working, then it’s a process of getting good, of practicing. So let’s go ahead and try to break this. Let’s see what happens. All right. Okay, there we go. All right, we got one in. All right, so what are we? So we’re solids. All right, so we got this guy in the pocket, number four. Good old number four. Now it starts to get into a little bit of strategy. And so I have a strategy for trading, right? I look for stocks that are moving up quickly. Jess does the same thing. We’re looking for the same type of stock. With pool, you have a strategy. So now of course it’s do you go for the easy ball, do you go for the more difficult one? How do you set yourself up for the next turn? These are the things that in my mind really relate to trading because it’s strategy and no two pool players are going to be identical in the way they play.

Probably just like chess, no two chess players are going to be identical even if one learns from another. So I think you guys will really learn a lot from Jess and get a sense of kind of his spin on the momentum trading strategy. And when it comes to scaling up a strategy, of course for me, I started in January 2017 with my tiny account, right? $583, I’ve grown it to over a million dollars, and I have proven that even with a tiny account now, although the results aren’t typical and I have a lot of experience trading, for me it was possible to take $500 and grow it first to 5,000 and then to 10,000 and then to 25,000 then to 50,000 to 100,000 and then from there it was just a matter of time before I crossed that million dollar level.

Sometimes traders will say, Ross, if you’re such a good trader, why didn’t you start with 58,000 and turn it into a hundred million? And so I’m going to answer that question, and it’s an issue of scalability. You can scale a strategy from a $500 account to a $5,000 account and even to a $50,000 account. But you will not see the same exponential growth, so in other words from $583 to a million bucks, I was trading with an average of 8,000 shares. So if I started with 5,000 with a goal of turning it into 10 million, I would’ve needed to have been trading with an average of a multiple of 10. 80,000 shares, right? Not 8,000 80,000. And if I’d started with $58,000 and I wanted to grow it to 100 million, I would’ve needed to have been trading with an average of 800,000 shares. And as you scale up you start to see diminishing returns.

And so I’ve proven that it’s not very difficult to scale from 500 to $5,000 accounts. That’s fairly easy, there’s a lot of liquidity in the market, but when you get higher and higher, your returns get smaller and smaller and smaller. In fact, they can even get to a place where they start to diminish because of slippage. So there is a sweet spot in the market, there’s probably a sweet spot with a lot of different things. There’s a little bit of a sweet spot with how you play pool, with how you play chess. And for Jess as he’s been building his strategy and kind of developing his own spin on how to trade momentum, there’s definitely been a sweet spot that he’s really found. So what I’d love for you guys to do, I’m going to put in a clip right here of me and Jess talking in Miami about his journey and his strategy. So watch this and then we’ll jump right back over here.

Well, I started a few years ago with you guys. I’ve been trading for a while now and there’s a lot of hit and miss, big gains, big losses. Yes, and my turning point was when obviously I started with you and my trades got just very refined and once they were refined, I could take those huge losses, those huge bit, those big winners and really shrink them down. And even my winners got small with small losses. And then from there I was able to focus on, okay, now I know how to take the small loss and start really accelerating my large gains.

Yeah, that’s awesome. So you joined us having three years of trial and error, and then how long did it take you after joining before you started making money [crosstalk 00:10:42] consistently?

It was about… I would still make money, but I would still lose money. And from there I probably about a year.

That’s awesome.

Maybe a year and a few months, and then I started really stacking on my profits.

Yeah, and that again is… we talk about that blessing and curse in the market. The curse is that you can spend three years struggling to make even $100 dollars a day, which feels like I’m not trying to drive a Lamborghini, I’m not trying to do anything crazy. I’m only trying to make $100. Why is it this hard? And it’s that hard because you won’t make it consistently until you’ve got consistent strategy. And then once you have it, the only difference between 100 a day and 200, or 300, or 400 is slowly increasing your share size.

Exactly.

Because now you’ve got something that’s proven successful.

A lot of people are like, oh, well I only take 100 shares, but I make a little bit on bets. You can take that and run with it, and that’s how you get to that next level. It’s just share size.

I think one of the reasons that a lot of people end up failing is because they think because they’re trading with 100 shares that they should be making $100 a day or something like really crazy. When the reality is if you’re trading with 100 shares, and you’re making $20 a day, that’s 20 cents a day out of the market. You take 1,000 shares, that’s 200 a day. You take 10,000 shares that’s 2,000 a day. And now you’re making half [crosstalk 00:12:07], right? You don’t need to be making a dollar a share out of every stock. I mean, it depends on share size, but if you’re trading with 100 shares and you make $20 a day, I know at the beginning it feels like you’re not even covering the commissions. And that’s why people often adapt a strategy for trading with a tiny account.

But essentially they’re trying to achieve something that even really successful traders don’t typically achieve, which would be a full dollar a share out of market every single day on such small size.

Yeah.

So when we were in Miami. All right guys, well, this is the day that I was really afraid of… trading a small account is really difficult, everyone knows that. I started with $520 in my account last week, a week ago, and today I had $1,100 in the account. I’d been making some good progress. The account was up over 100%, but you know what happened today? I blew up the account. I got a little aggressive. That stock I’ve been watching for the last few days, I jumped into it and first I was up $300, $400, $500 $600. And I was up to 700, I was up 800, 900, $1000, 1100 and I finished the day up $1,300. Oh, I blew up my account.

You didn’t think I really blew it up, right? I blew it up, I doubled the account in one day. I blew up my account, which was pretty crazy, right? You guys who’ve been watching the videos for a while, you know what I’m talking about. In one day I doubled my account. Now that’s speaking to the scalability in the market. I was able to double my account in one day because the account was small and the stocks that I was trading had the potential to give me that big move. So it was achievable that scalability. With a $58,000 account, would I be able to blow up my account in one day, double it in one day? Probably not without taking a lot of risk. So if you want to consistently grow an account over a long period of time, you’re not going to be thinking about what kind of penny stock can I buy at 10 cents and sell it 20 cents to double my money? You’re going to be thinking about lots of small base hits and it can be a little bit hard at first to really embrace that mindset.

But let me put it to you another way. How many $1,000 winners would you need in order to make $1 million? Do the math, right? If you make 1,000 100 times, you’ve made $100,000. You make 1,000 200 times, you’ve made $200,000. So it’ll take you $1,000 winners to make $1 million. Now, of course, in a perfect world, you would just have a thousand winning trades in a row and that would be it. The reality is that you might have four $1,000 winners and then you might have two $1,000 losses. And then four more $1,000 winners and a few more losses. It’s always a few steps forward and a few steps back. That’s how it’s always been in my career. But if you focus on base hits and you have the strategy down, you’ve proven that you’re profitable both in a trading SIM and when trading with small size, with real money, than building a career as a trader. It’s really a matter of time for all of the students that are part of the 100K club. It’s to me, not really a question of will they make $1 million trading?

It’s just when that happens, may take a couple of years, may take five years, maybe it takes 10 years, but even if it takes 10 years, that’s still them making $100,000 a year trading the momentum in the markets. So I hope that Jess’ story has inspired you guys a little bit. I’ve been so impressed with him. He’s really an incredible trader in a lot of ways he’s better than me because he’s more disciplined. I struggle with being disciplined that’s the thing that I struggled with the most. It’s the emotions, so I’m really impressed with him. I hope you guys do click that link, download and stream his recap of turning an account with less than $10,000 into 24,000 in 10 days, $1,400 a day. And he was trading small size.

So again, even if you had an account with 3,000 or 5,000 it’s not to say you wouldn’t be able to take a lot of the same trades. I mean, I trade on leverage a lot of you guys know that. I don’t think he was using much leverage during his challenge. So I hope you guys enjoy his breakdown of his small account challenge, and I will see you guys for the next episode. Of course, we’ll be back at it first thing on Monday… Actually not Monday, Tuesday morning President’s day is on Monday. All right, I’ll see you guys on Tuesday. Bye everyone. Hey, did you know that I go live every single morning between 09:00 AM and 09:15 AM to stream my pre-market watch list, subscribe to the channel, press the bell for the alert and you’ll get the notification.

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