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Knowledge

Our team feels in addition to alerts and breaking news having a strong knowledge base give a trade the edge needed for a competitive marketplace.

Please keep in mind we are currently in the process of developing this section so please keep checking in while it grows! 

Trading: How To Get Started

How To Get Started Trading /  Platforms mobile/tablet trading

To get started trading first you must select your broker. Before selecting your broker you need to establish What type of trading you want to do and How much capital you have to start with.

For smaller cap accounts we recommend using a cash account from WeBull as they allow you do day trade as much as you want with SETTLED FUNDS. There are many other brokers out there! 

If you have a larger account or more access to funds in the begging of your trading journey you have more options for day trading which we have listed below.

PDT Explanation

PATTERN DAY TRADER RULE
THE PDT RESTRICTS TRADERS WITH UNDER $25,000 CAPITAL IN THEIR ACCOUNTS TO TRADE MORE THAN 3 TIMES IN A 5 DAY PERIOD.
(EXAMPLE IF YOU TRADE ON MONDAY YOU WILL NOT BE ABLE TO USE THAT TRADE AGAIN UNTIL NEXT FOLLOWING MONDAY) Once you have been marked as a day trader you account typically gets suspended for 90 Days.

That is why we strongly recommend cash accounts for smaller cap accounts!

Choosing a Brokerage

  •  WeBull (Zero commission) Top rated for new traders!
  • TD AMERITRADE (COMMISSION FREE)
  •  CMEG (CAPITAL MARKET ELITE GROUP) Charge commissions but doesn’t enforce the PDT rule
  • TRADE ZERO (NO COMMISSIONS)
  • E-TRADE IS A BROKER THAT ENFORCES THE PDT AND BUT IS ALSO COMMISION FREE

 

Margin V.S Cash Account

A margin account in which the broker will give you leverage if you meet the account minimum balance, it is common to find that most brokerages will give you up to 4 -6 times the your total capital in your account. It is important to note a margin account will also allow your funds to be settled right after you sell your positions.

A Cash Account with your broker will allow you to day trade as long as you are using SETTLED FUNDS.

An example of this could be if you use $500 out of your total capital of $1000 in your account that $500 will not settle for one to two business days, so if you sell on MONDAY those $500 and your profit from that trade would be settled on Wednesday of that week. 

For this reason managing your trading funds on a cash account is important as to not miss opportunities to trade due to funds being unsettled. 

Interlinking Bank Information

Most brokers have their own time periods it takes to get your bank info linked and funded, typically it will take a few days to verify your bank account with your brokerage account.

Another option once signed up with your selected broker you will be able do a wire transfer, which has always been in our accounts here at Small Cap Alerts the next day!
For International subscribers we recommend TransferWise for international wire transfers.

Benefits of Portfolio sizing and Risk Management

We offer a risk calculator to our VIP members. It is very important to be utilizing this!
The calculator will break down your Risk VS Reward designed by active day traders!

When it comes to portfolio sizing you ALWAYS need to remember STRATEGY is everything, Once your strategy is down you can scale your position sizes up as your account grows. Paper trading is the best way to get your strategy down while working the kinks out.

Benefits of Paper Trading

KNOW YOUR RISKS: trading as decorated as it is, comes with many risks, that’s why we strongly advise you to take your time. UNDERSTANDING IS KEY There’s no rush in a marathon.
Securities can drop just as if not faster than they previously rose. as why it’s always nice to pay yourself while you are ahead! Don’t let greed ruin a perfect play! It is commonly said that stocks climb up the stairs and fall out the window

Paper trading can be utilized to learn different types of strategies in playing these stocks, once you find your strategy you can perfect it with paper trading with no risk to your hard earned money!

Risks Involved

 

 

KNOW YOUR RISKS: trading as decorated as it is, comes with many risks, that’s why we strongly advise you to take your time. UNDERSTANDING IS KEY There’s no rush in a marathon.

It is said that “stocks climb the stairs and fall out the window”‘ what does this mean? Securities can drop just as if not faster than they previously rose.

Pay yourself while you are ahead! Don’t let greed ruin a perfect play! 

Types of Traders

Long Term Trading/Investing

Long term trading can be options and stocks, mostly blue chips and bigger companies who you would want to invest into. There is a difference between this and trading!

While investing you may hold onto something for a few days all the way up to years down the road for them slow big returns!

Intermediate Term Trading / Swing Trading

A swing trade Means you will buy a security in hopes it will go down or up depending on your position. A swing trade just means you are holding that position for either a few days to a few months!

Day Trading

Day trading: This is when you will be entering a position to leave that position in the same day, Which falls under the PDT rule only if you have a margin account and

fall under the $25,000 Min in your account! opposed to a cash account who can only day trade with SETTLED funds!

Types of Markets

US stock exchange

Options are financial instruments that are derivatives based on the value of underlying securities such as stocks. An options contract offers the buyer the opportunity to buy or sell—depending on the type of contract they hold—the underlying asset.

Unlike futures, the holder is not required to buy or sell the asset if they choose not to.

OTC Stocks / Penny stocks

Options are financial instruments that are derivatives based on the value of underlying securities such as stocks. An options contract offers the buyer the opportunity to buy or sell—depending on the type of contract they hold—the underlying asset.

Unlike futures, the holder is not required to buy or sell the asset if they choose not to.

Forex

Options are financial instruments that are derivatives based on the value of underlying securities such as stocks. An options contract offers the buyer the opportunity to buy or sell—depending on the type of contract they hold—the underlying asset.

Unlike futures, the holder is not required to buy or sell the asset if they choose not to.

Futures

Futures contract (futures) is a standardized legal agreement to buy or sell something at a predetermined price at a specified time in the future, between parties not known to each other. The asset transacted is usually a commodity or financial instrument.

The predetermined price the parties agree to buy and sell the asset for is known as the forward price. The specified time in the future—which is when delivery and payment occur—is known as the delivery date. Because it is a function of an underlying asset, a futures contract is a derivative product.

Crypto

Cryptocurrency Is any virtual currency that can be transferred from one owner directly to another owner using blockchain technology

Options Contracts

Options contract definitions

-An options contract is an arrangement between two parties that grant rights to buy or sell an asset at a particular time in the future for a particular price.

-The intended reason that companies or investors use options contracts is as a hedge to offset or reduce their risk exposures and limit themselves from fluctuations in price.

-Because options traders can also use options to speculate on price, or to sell insurance to hedgers, they can be risky if used in those ways.

Options are contracts that give you the right, but not the obligation, to buy or sell a security. In essence, you purchase the option to buy (or sell) the security.


For example, let’s say you want to buy 100,000 shares of XYZ stock for $1 per share. But either you don’t have the money at the moment to buy that much, or you are nervous that the price may drop. So you buy the option to buy at $1 per share for $1,000. Now you can legally buy XYZ stock for $1 per share, no matter what the share price does; the contract lasts about a month.

Suppose a few days later, XYZ Company releases better than expected earnings and says that they have invented a machine that will solve world hunger. Overnight the stock shoots from $1 per share to $10 per share. You exercise your option and you spend $100,000 to buy $1,000,000 worth of the stock. You turn around and sell it for a $995,000 profit ($1 million – $100,000 – $1,000).

Now let’s suppose the opposite happens. XYZ Company declares bankruptcy and goes under. The stock drops from $1 per share to $0. You can let your option expire worthless, and you are only out the $1,000

Buy a call – This was our example above, you buy the option to buy at a specific price.

Sell a call – This is when you already have the stock, and you sell the option to buy to someone else.

Buy a put – This is if you own, or don’t own, the stock, and you buy the option to sell at a specific price.

Sell a put – This is when you own the stock, and you sell the option to sell to someone else.

Indicator Types

Brokerage platforms offer many time frames on their charts, you will have access to through them and the ability to go back and set up previous support and resistance lines using this graph of history!
You can access from 1 minute candle sticks up to daily, weekly and monthly charts and so on! as long as they have been publicly traded there is a history report on their movement!

Simple Moving Average

A simple moving average (SMA) is an arithmetic moving average calculated by adding recent prices and then dividing that by the number of time periods in the calculation average.

For example, one could add the closing price of the security for a number of time periods and then dividing this total by that same number of periods. Short-term averages respond quickly to changes in the price of the underlying, while long-term averages are slower to react.

Exponential Moving Average

An exponential moving average (EMA) is a type of moving average that places a greater weight and significance on the most recent data points. The exponential moving average is also referred to as the exponentially weighted moving average.

An exponentially weighted moving average reacts more significantly to recent price changes than a simple moving average

Bollinger Bands

Bollinger Bands are a technical analysis tool defined by a set of trendlines plotted two standard deviations (positive and negative) away from a simple moving average  of a security’s price, but which can be adjusted to specific preferences.

Designed to give you the investor a high probability of identifying whether a stock is oversold or overbought.

VWAP

Volume Weighted Average Price

A tool of technical analysis which shows you the ratio of a an assets price to its trade volume. it will provide you with a measure of the average price at which the security

which will inform you whether the stock is become bullish or bearish. VWAP can be added in your chart settings.

MACD

Moving average convergence divergence

Will reveal changes in the strength, direction, momentum, and duration of a trend in a stock’s price.

This can be especially useful to determine buying and selling interest. 

RSI

Relative strength index: THE RSI is used to determine whether a stock is oversold or overbought

A stock is considered overbought above 70 on your RSI indicator

A stock is considered oversold when it dips blow 30 on your RSI indicator

Level 2 Data

Level 2 data  is provided through your broker. This must have information to be in the day-trading world. Level 2 is a spread of the ask and bid of the underlying security. 

Level 2 (BID) Will provide you with the amount of shares waiting to be bought by purchasers of the underlying security.

Level 2 (ASK) Will provide you with the amount of shares waiting to be sold to purchasers of the underlying security at each specific price.

This information is important as the amount of shares on the spread shows you how many it will take to move a stock past that specific price. 

THIS IS ONE OF THE MOST IMPORTANT TOOLS TO HAVE IN THESE RAPID MARKET

Technical Analysis

  • While taking the time to make personal technical anyalsis breakdowns is not for every trader and can be more than one is willing to take on. It is absolutely essential that all traders pay close attention to breaking reports on the charting technicals of a company.
  • Listening to well versed analysts can make drastically improve your understanding as to why a stock climb may becoming to an end or just about to rally.
  • Failing to listen to technical analysis is a solid way to blow your account up quick. It’s very important to study what is working with breakouts and what is working with breakdowns (reversals)

Support

Securities will find “support in previous consolidation. Example is security (A) kept falling to $5 a share but never falls below that price catching it on its way back down to $5 could be a level of support to watch for a potential entry.
It is very important to understand support in charting and in level 2 on the bid, Example if a stock was on its way down in a dip And you notice on level a huge amount to be bought at a specific price that security may find support at that level.

As Support and resistance are very important keys of technical analysis you must always find more than one reason to enter a position!

Resistance

Resistance is where stocks have trouble going higher than a certain price. An example would be if security (A) Tries a few times in a row in previous history to break a new high of $5 and fails each time it may be a point of consideration to exit that position.
You should know the history of a stock before entering it, It is very important to be educated before risking your money!

Importance of HOD/LOD

Understanding the High of day, When a stock breaks a high of day it is a trend traders love! That’s why at SC Alerts we focus on low floats because when they break a New high of day (HOD) There is essiantely no rules to how high they can go with the right volume!

Understanding The low of day, When a stock is looking to make a new low of day you risk the chance of a sell of in which the security price action could drop substantially

Price Ranges

There are a variety of priced securities in the market, It is important to trade your preferred price range! Everybody has their own budget! You as a trader owe it to yourself to trade in your comfortable price range. Less stress is the key to success!

Impact of Supply and Demand/Float

Supply and demand As anything else in life if the people want it, the value will increase. That’s why at SC Alerts we focus on the low float plays with high volume.

Float- Is the shares available to the public to purchase.

Risk Management

While taking the time to make personal technical analysis breakdowns is not for every trader and can be more than one is willing to take on. It is absolutely essential that all traders pay close attention to breaking reports on the charting technicals of a company.
Listening to well versed analysts can drastically improve your understanding as to why a stock climb may be coming to an end or just about to rally.
Failing to listen to technical analysis is a solid way to blow your account up quick. It’s very important to study what is working with breakouts and what is working with breakdowns (reversals)

Stop Loss

A stop loss in highly recommended to new traders as it protects you in a long position if the price of a security were to fall below a previous support level you have in mind, you can also base it off how much you are willing to lose to make what you are after in profits.

An order will be executed to sell at your chosen price.

While it is extremely to protect your account from a trade going in an unexpected direction, it is equally important to not set your stop loss too tight that you do not give the stock a bit of room to breathe as it develops momentum.

Remember these work inversely when shorting a position. 

Limit Orders

A limit order is highly recommended to new traders. A limit order allows a trader to collect profits at a predetermined level. This can be placed at predetermined targets and prevent new traders from failing to exit a trade and losing all profits.

While limit orders can limit the potential profit from a trade, they work as a great way to ensure that profits are secured when a trade goes in your favor.

Limit orders can be as simple as selling the full order or selling percentages of the position as the trade progresses, while taking the chances on more potential profits with the rest of your position size. (more experienced traders)

Position Sizing

Understanding how position size works. If you buy 100 shares And the price jumps 1.00 from your entry you will have made $100 on that trade if you sold at that mark. It’s very important to start small and protect your account. Small wins add up, As your capital grows your position sizes have the opportunity to grow as well. Take it slow, it’s not a race! You are only competing with yourself!

Daily Loss Limit

You should always have a daily loss limit in your mind, don’t play catch up! if its not working for you that day take the afternoon off. Get your head clear and restart the next day you will be happier you did!

You can calculate a percentage of your investing portfolio which you can  emotionally handle the loss. The average day traders do not risk more than 3% maximum on any given trade. 

Never chase your tail, experience shows when you start digging a whole it only gets bigger. 

Paper Trading

We at Small Cap Alerts high recommend starting off using our highly profitable alerts in paper trading, as Alerts only can do so much.

With paper trading you can take risks and Jump in positions just to test out your methods and once you have figured out a strategy you can apply it to the live markets.

We also recommend joining in our webinars for new traders and traders who just can’t seem to find a strategy!

There is a reason we alert the stocks we do and it’s best you become independent so when you receive alerts you have a plan for entry and you will be well prepared to exit as well!
As mentioned before paper trading is essential to any traders strategy. As we will talk about later. Paper trading does not carry the same emotional impact that live trading provides.
Nonetheless paper trading offers the trader an experience to test and back test extensively entry and exit indications.
In addition to basic practice trading, paper trading allows the user to gain comfortability with the trading platform and develop their own unique risk management strategy.
Remember paper trading can be used to practice a variety of techniques and backtesting allows the trader to experience all market conditions prior to entering volatile small cap stock stocks.
Only perfect practice makes it permanent results!

Risks Involved

KNOW YOUR RISKS: trading as decorated as it is, comes with many risks, that’s why we strongly advise you to take your time. UNDERSTANDING IS KEY There’s no rush in a marathon.

Securities can drop just as if not faster than they previously rose. as why its always nice to pay yourself while you are ahead! Don’t let greed ruin a perfect play!

Fundamentals / Due Diligence

Reading News Articles

Reading news we put this here because in these markets news isn’t really everything we need to make sure the news we are receiving is news that is hot in the market at that current time

Understanding what is hot is huge to keeping your head above the rapid waters of the stock market.

Its important to double or triple check your news source against the other aspects of fundemental anyalisis

Understanding Earnings Reports

Companies Have to produce their earnings report on the specific date, which is accessible information to all traders.

Earnings reports directly affect how the underlying security moves that day. It is always important to brush up on previous earnings reports released, that way when new earnings reports are released you know what information is important to find quickly and apply it to the market.

Earnings Reports can be applied for both bearish and bullish markets.

Corporate News and Events

It is very important to understand what companies or doing, From SEC filings to New funding! It is very important so stay in the loop.

Positive or negative information could help a potencial investor have a better understanding of which direction and trends a security may face. 

This doesn’t need to be over complicated, remember buy the hype sell the news. Be Sure to keep in mind there is an advantage to both negative and positive information!.

SEC forms/filings

SEC FORMS: These forms are required by the SEC as typically these are changes to a company or a companies securities which will affect shareholders it is very important to understand how to quickly apply these to your fundamental analysis. 

Knowing your way around SEC filings can be overwhelming at first but knowing your way around the documents, makes finding insider transactions easy. 

Typical forms you will encounter include and are not limited to 10k filings, 8k filings and 6k filings. Each carries its own significance, but remember these forms can look lengthy and complicated. The information is easy to find and disseminate where a company is headed. 

This is an should be ann essential part of every traders routine and applied to all due diligence when formulating a hypothesis

https://www.sec.gov/edgar/searchedgar/companysearch.html 

Psychology of Trading

Routine

You as a trader need not to force these plays, trading requires you to be in the right state of mind to make the decisions you need to make in the rapidly changing markets we see today. Always trade on your time! find your sweet spot and get in that Routine!

You as a trader need not to force these plays, trading requires you to be in the right state of mind to make the decisions you need to make in the rapidly changing markets we see today. Always trade on your time! find your sweet spot and get in that routine!

Positive Rewards

It is important to surround yourself with optimistic traders! This can be a very high stress job, anything can happen losses can abruplty hit. That is all part of the game Thats why its important to be in a group of eager and optimistic traders like yourself!

We all need someone to pick us up once and awhile with some encouraging words! 

Dealing with Losses. Losses are inevitable

Understanding losses is part of the game And why loss management is so important. There is not a trader out there that can say they don’t lose the difference between their success to a trader that just can’t seem to figure out is most likely managing your losses! if you hit your daily loss limit DON’T it may be

Time to throw in the towel that day and hit the drawing boards for the next day!

Perceptual Narrowing

Narrowing down what’s IN front of you is important. If you find yourself having troubles the best advice for that is slow down! don’t focus on to much, pick one or two stocks and follow them closely. Taking one position at a time is also recommended to new traders! Don’t bite off more than you can chew!

That’s what’s useful about our services we narrow down what information is being fed to you to a certain few!

When to Holdem/When To Foldem

This runs in correlation with knowing when to call it a day. Know when to collect your pay and when to limit your losses, Its not fun to be a bag holders As these price actions can go down as fast as they go up!   

 It is very important you become familiar with the indicators used to predict sudden changes in momentum so you as a trader can independently form a hypothesis of exit or whether you should hold for high price action. 

Risks of Overconfidence

Overconfidence! This happens with everything you do in life, you start winning back to back the market is treating you great! so you decide to take a position size triple your normal position size and bam it halts down! you just lost all your hard work the past week! always stay humble we as traders need to stay in the right state of mind to make the fast paced decisions were faced with on a daily basis!

Positive Rewards

End the day strong sit back and reflect on what you did right and where you went wrong on that given day. thats why we are very active in our chat we like to help as many traders as we can get on a system where they review their trades and find out what worked and what didn’t. Its important to do this as its the start of your trading journey to find your perfect routine!

The Importance of Strategy

Luck doesn’t get you very far in the markets. Sure you can get lucky here and there, But luck or hope should never be your plan for a trade, Don’t buy to buy! having a strategy is crucial To have a successful trade. You need to understand price targets and be happy taking what you can get. Never get entitled to money you haven’t earned yet. Always have an exit planned you need to protect yourself and your money if the trade goes against you. These are all keys to becoming an independent trader!

Start with the End in Mind

Whether you are starting with a small or large account it is absolutely essential to begin with the end in mind. 
Remember starting to trade is just like starting any business. This involves a plan, beginning without a plan is planning to fail. If your planning to trade as hobby, this will be a very expensive hoppy. Does that mean your life now is 100% dedicated to trading, no; but it is essential to have trade with the end in mind, what is the end successful consistent winning trades. If your entering you need to be prepared to have losses trading to not loose will cause your account to do the same.

Money Management

This isn’t preached enough! You have leverage use it responsibly! the more you use leverage the higher the chances are of putting yourself in debt. Only trade with what you can afford to lose, Trading isn’t meant to be on your last $500 You will be making decisions based on Do or Die And that’s not a good recipe for success!

 

Never Accumulate Debt

This is very important Understanding money management. this is very important because it’s really easy to blow up your account and have to refund it 🙁 You as a trader need to calculate your risk/reward and understand there’s so many plays in a given week there’s always something more suitable for you out there!

Remember while these brokerages are easy to join, there is a reason for that. Leverage is easily extended, this is also reasoned. We highly recommend entry level traders to begin their trading careers with a cash balanced account. Using leverage is employed once strategy has been proven successful. 

When to revise your trading strategy

If it’s not working change it. Don’t be afraid to be wrong in this career field! Unfortunately trial and error is a part of trading, thus furthering the value of spending a good amount of time back testing your strategy paper trading.

Adapting is the most important thing always allow your trading game to take the necessary changes and improvements to meet your expectations of trading!

               

Setting realistic goals

Many people get into trading for an immediate life changing income, that is typically not the case, mastering the art of trading Take times As you hear many preach “It’s a marathon not a sprint”. Never rush yourself set small goals and hit them let nature do the rest 🙂

Now it's Time to Trade!

Education must be complemented with application! Time to get your feet wet in the market, for many this is an exciting moment with a lot of build up.

Before stepping into the market it is essential to familiarize yourself with 

Pre-Market

Pre-Market starts at 4am eastern standard time And goes until 9:30am We see tons of movers in Pre-market as some traders just can’t wait to start taking advantage of the rewards the market has to offer!

Bell Ring

The bell ring or open happens at 9:30 Eastern Standard time And its best to have our team of traders on your side when that bell does ring and the chaos begins!

Power Hour

Traders like to call this time of the day the “Power Hour” from 3pm Eastern Standard time to 4pm which is the closing bell for the day!

After Hours

After hours trading is also available from 4pm eastern standard time until 8pm. Stocks will also move in After hours due to the lack of volume in the market (less sellers)

Market Holiday

Except in very extreme circumstances, it is quite common that the 3 holiday weekends are the longest time the stock market goes dormant. It has been a rare occasion exchanges have closed for more than a few days in the past 120 years, this is typically associated with nation emergencies.

2020 US Exchange Calender 

  • New Year’s Day: Wednesday, Jan. 1
  • Martin Luther King Jr. Day: Monday, Jan. 20
  • Presidents’ Day: Monday, Feb. 17
  • Good Friday: Friday, April 10
  • Memorial Day: Monday, May 25
  • Independence Day: Friday, July 3 (observed, because July 4 falls on a Saturday)
  • Labor Day: Monday, Sept. 7
  • Thanksgiving Day: Thursday, Nov. 26
  • Christmas Day: Friday, Dec. 25

Trade at your own Risk

Most importantly Trade at your own risk, no one can make financial decisions for you, its upon you to accept and reach out to all available recourses to get a good understanding of the markets! never trade to get rich quick! your goal is to get past that 25K mark and be totally unrestricted to trade all day and that’s where having realistic goals and achieving them on a daily basis play a major role in a traders success!

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