When people talk about traders… they think we’re staring at the screens all day… mashing our keyboards and always trading in and out of stocks to make money.
Sure, some traders are like robots, and don’t get up unless they need to use the restroom…
… but what happens if you don’t have a large trading account (over $25K)…
… you can’t really buy and sell stocks dozens of times in a day.
Well, there’s something known as the Pattern Day Trader (PDT) rule.
If you’re a trader… that could be either your worst enemy… or your best friend.
You see, those with small accounts tend to think they have to be trading all the time…
… while those who embrace the PDT rule have the upper hand.
You see, with the PDT rule… you’re only allowed to buy and sell a stock in the same day… three times within 5 trading days.
So off the bat, I know to only want to trade my best ideas.
It’s not about the number of trades or how active you are that dictates how much you can make in the market.
When you have a small account, the quality of the trade matters more.
Quality Over Quantity
Let’s face it… trading is exciting, and it’s really easy to fall in love with ideas and get into a lot of trades… thinking they’ll all make money.
But more times than not… you won’t have an edge in those trades.
Would you rather have 10 mediocre trades?
… or …
Would you rather have 1-2 really good trade ideas where you have an edge?
I’d take the latter.
For example, since I’m limited by the PDT rule… I’m only looking at a handful of stocks every day… so I know I can have anywhere between 3 to 6 really good ideas… I’m not looking at dozens of trades and getting affected by the noise.
When I find my A1 setups… I put them on a watchlist and walk through those ideas.
Now, I actually send out video watchlists to my clients so we can actually game plan and take into account the PDT rule.
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Basically, going into the day… we know exactly which stocks to look at… rather than scrambling and just trying to find day trades and what’s moving.
Now, most of these ideas involve my simple-to-follow chart patterns.
I know exactly where I’m going to get in… stop out in case things go sour… and take profits.
In other words, I have a clear game plan and just have to execute.
You see, when you plan in advance… you can actually weigh your risk-reward and have your profit potential in mind… and there are no real surprises.
For the most part… I keep my stops pretty tight, and I’m looking for 10% – 20% winners… but that’s just me…
Since I’m doing a small account challenge, I know that just focusing on hitting winners is a lot easier than going for home runs.
Not only do I know my risk-reward and profit potential… I have a workaround for the PDT rule.
For example, Neovasc Inc. (NVCN) was one trade that I had on my watchlist that I sent out to clients.
I planned the trade… and all I needed to do was execute.
Here’s the chart I was looking at.
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Basically, I noticed some bullish price action… and saw some levels above. Additionally, the stock was making a move late in the day.
Now, I actually bought it after 3:30 PM…
… you might be thinking, Jeff did you plan on selling just before the market closed?
Heck no… I didn’t want that trade to count towards the PDT rule.
At those levels, the stock offered great risk-reward… and there was incredible upside potential. However, I was only looking to capture a small portion of the potential move and stick to my plan.
I was actually looking to hold this stock at least into the next day.
You see, when you buy a stock in the afternoon and sell the next day… or days later… it actually doesn’t count towards the PDT rule.
So when the stock got around my entry area… I let clients know I was getting into NVCN.
Check the timestamps…
… the very next morning, the stock was within my target zone… and I locked in a 10% winner.
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I’ve actually been able to pinpoint the most opportune times to be in the market… and my clients can enjoy the benefits of full-time gains… while trading part-time.
Now, if you want to learn how to lock in gains like these and build your account up… then check out this 5-Step Plan here.