I Reset My Account to $2,000 (AGAIN) Webull Challenge Ep 1 transcript

I have just reset my account back down to $2,000, which means my brand new small account challenge begins right now. For this challenge, I'm doing things a little bit differently, and the broker I'm using is Weble. You can see my new account right here with $2,000. I have taken zero trades in it this year. This is a brand new account. It's got no history. So, we're starting from scratch. And for this small account challenge, I chose Weble because it was the broker that you guys were asking me to use during my last small account challenge.

So, thank you for the suggestion, and if you want to see me use a different broker in the future, throw it down in the comments below, and I will take that into consideration. So, for this small account challenge, because it's a cash account, I'm going to focus on taking one trade a day. That is the small account way. So, the way a cash account works is that you've got your cash balance, and although you can day trade as much as you want, there is no pattern day trader rule on a cash account, you can't take any more trades once you've run out of buying power.

So, the way it works is that if I buy, let's say with a $2,000 account, 1,000 shares of a stock at $2 a share, that's going to use all of my buying power. So, $2 a share times 1,000 shares, that's 2K, and that means once I close that trade, I can't take any more trades until tomorrow. I've got to wait for that trade to settle overnight. Now, that's a real pain if you're trying to day trade. The good news is that FINRA, the regulator of the US markets, just this past month has approved a change to the pattern day trader rule, an amendment, for the first time since it was first put into place in 2001.

And the rule change states that the new pattern day trader minimum will be not $25,000, but just $2,000. So, whatever I do during this small account challenge with $2,000 in a cash account, I would be able to do at a much faster rate when this rule change goes into effect. So, that's [snorts] something to get excited about. Okay. So, the goal for me each day is to find just one really good quality setup, and that means I'm going to be focusing on finding stocks that meet all five pillars of stock selection.

I'm going to walk you through what each of those pillars are as we get into today's episode. Now, for those of you guys who have been tuning in to this whole series of small account challenges, this is my third one this year, and all of the profit that I make during this small account challenge will get donated to charity. So, this year so far, we have already donated over $133,000. I wrote a check for $60,000 to the Boston Children's Hospital, St.

Jude's Children's Hospital, and I did a donation to the Aspen House in Colorado, which is a home for adults with disabilities. So, we're trying to pay it forward, and you guys can help me double the donation because for everyone that hits the thumbs up on this episode right here or subscribes to the channel from this episode, I'm going to add an extra dollar to the donation. We're going to do a dollar-for-dollar match.

So, whatever I make, you can double that match with your thumbs up and the subscription. So, thank you guys for subscribing the channel. Thank you guys for hitting the thumbs up. Let's raise some money for charity, and let's learn a little bit more about financial literacy and how to trade the markets together. So, here's the game plan for today. I'm going to walk you through five steps that I'm going to be taking to grow this small cash account.

Step number one will be choosing the time of day and the market. Step number two is setting up our scanners. Step number three is picking my favorite candlestick patterns. Number four is following the rules of the trading plan, and number five is analyzing performance. Everything that I share with you today has been data driven. It is all based on the strategy that I've been trading full-time for more than a decade. So, let's go ahead and jump in to the first step, which is choosing your market.

Now, if I'm going to be honest, choosing to trade stocks for me, it wasn't even a choice. It's just naturally what I what occurred to me, what I thought of. In fact, I've got a picture of myself right here. This is in middle school, which is when I was really first introduced to the market as part of a semester where we were taught how to trade stocks using pretend money as an exercise in learning basic arithmetic. And so, you know, I actually have a quote that this is a picture of me that a friend took, and he said, "20 years from now, Ross will be living in New York City and working on Wall Street." That was a prediction made in the late 1990s when I was still in middle school.

For some of you guys who are perhaps international, you may say, "Well, why should I trade the US equities market when instead I could trade forex, or I could trade maybe cryptocurrencies?" And although you're welcome to trade forex, and you're welcome to trade cryptocurrencies, one of the reasons that the US market is so popular is because of the amount of liquidity. There are billions and billions of shares traded every single day on the US stock market, which means for you as a small retail trader, there's a lot of opportunity because that liquidity means it's very easy to buy, and it's very easy to sell.

And it's also matched with a nearly equal amount of volatility. So, things are moving. You don't make money buying something at five and selling it at five, and that's just fine because we have stocks nearly every single day that are going up 20, 30, 40%, sometimes 100%, 200%, or higher. Why does that happen? Because these stocks have breaking news. So, for me, choosing to trade stocks was really never a question. I know that some people are attracted to different instruments in the market, and and you're welcome to trade whatever you'd like.

But for this small account challenge, I will be trading stocks, focusing of course on stocks listed on the US exchange. Now, step two, let's talk about setting up those scanners. So, the scanners that I'm using are searching for the types of stocks that I've historically made the most money on. Scanners are a tool that support trading within your strategy. Now, there are times that people have said, "Ross, I'd like to see you do a small account challenge without using scanners." And some people say, "Ross, I'd like to see you do it blindfolded." Or "Ross, I'd like to see you do it trading on your iPhone in a Starbucks on Wi-Fi." And while those are all very interesting suggestions, they certainly would make it a lot more difficult.

Scanners are one of the most valuable tools. It's like asking a carpenter to build a piece of furniture without using a saw, or without using a hammer, or without using nails. I'm not saying it couldn't be done. If anyone could do it, it probably would be me. But why make it harder on yourself than it needs to be? So, I think for a beginner who's saying, "Oh, I want to get into trading, but I can't afford tools." It's like, "I want to be a carpenter, but I can't afford a hammer." Well, then you should probably save some more money because to be honest, if you really want to make a good attempt to be a carpenter, you got to have the right tools.

Now, at the end of the day, you don't have to use the most expensive tools out there. There are some basic ones that you can use that will get you by while you're just getting started. But you do need some way of finding stocks that are moving. So, the tools that I'm using, as you can see right here, are Day Trade Dash, and this is the software that I've developed with my development team right here at Warrior Trading.

For those of you guys tuning in, you want to use it for 20 bucks for the next 2 weeks, I'll put a link in the description where you can do the 2-week trial. So, for 2 weeks for $20, you can get a sense of what it's like to use this software. My guess is that you're going to love it. Now, what this software is doing is it's searching the entire market in real time for stocks that meet these five pillars of stock selection.

Remember, in order for a stock to make a big move, we need an imbalance between supply and demand. Now, I'll show you a couple of clips here of some pretty impressive P&Ls that I've had. $98,000 on the day. How is it possible that this stock could go from less than $2 a share to over $17 in one day? Nearly 1,000% gain. It's got breaking news. This is a biotech stock right here that had breaking news, and that's what sent it up that fast.

It was an incredible day. Here's another day, over $107,000 of profit. Here's another day, $116,000 in profit. What is allowing these stocks to go up 50, 75, 100% in a single day? It's breaking news. So, these are the types of stocks that I'm going to be looking for. They need to have an imbalance between supply and demand, and that imbalance comes from initially the stock having news. Now, when we're scanning the market, what these scanners are going to look for are stocks that have five times above average volume today, stocks that are already up 10%, stocks that have news, and stocks that are priced between two and 20.

Now, this is going to be perfect for my small account challenge, and to be honest, I'm going to be focusing on stocks that are on the cheaper end of this range. And when it comes to supply, supply is represented by the number of shares available to trade, and I'm going to be focusing on stocks with a float of less than 20 million shares. However, in a colder market, I tend to focus on stocks with a float of less than 5 million shares because during a colder market, lower supply with even a medium amount of demand can still create a little bit of a move, whereas a higher float, higher supply, even with high demand during a cold market, things don't always get going.

So, my best bet for the first few days, and probably the first week, maybe 2 weeks of this small account challenge, will be to focus on stocks between $2 and $4 with a float of under 5 million shares. As long as that stock has a breaking news catalyst, that's going to be what I focus on. Now, one of the reasons that I really like Weble is because out of the box, it is one of the best trading platforms that are offered by commission-free brokers.

It is way better than thinkorswim, it's way better than Fidelity, it's better than Robinhood, it's better than E*TRADE. I mean, it is it is really a solid platform, and you don't have to pay extra money for it. Now, if you want NBBO data, you will have to pay an extra, I think it's $10 a month. That to me is negligible. So, out of the box, Weble is a really good platform. Now, I've done these broker comparisons where I've funded accounts with dozens of different brokers to test them out and to give you guys reviews, and when you look at this, the ones that perform the best all charge commission.

And the first one that is truly free is Weble. The the the best one that is free is Weble. And then below, you've got Trade Station, you've got Moomoo, Schwab, E*TRADE, Interactive Brokers, Fidelity, Robinhood, and and these ones just they don't even compare. So, I really like Weble. Now, we'll talk about this more during episode two of the small account challenge, which will come uh Monday after I've taken my first trades.

But, just to kind of put it out there, Weble is really terrific software. However, when it comes to scanning, they don't have scanners, but they do have screeners. So, what a screener is is essentially giving you a top list. So, if you go to the widgets, you can go to all widgets, and you can type in screener here. And what it'll do is it'll let you search for stocks that are within certain parameters, and those will update periodically, but that's not going to give you the audio alert of when a stock meets your criteria.

So, it's something you've got to manually refresh and constantly be looking at, which again, it's not to say that you can't do that, but it's really designed more for building uh I I would say building a a watch list rather than actively trading. So, for my purposes, and you can see create watch list here, I'm not going to try to use the Weble screener for this uh purpose, and I would actually jump out of this uh widget right here, and I would go into one of the layouts.

So, they've got these customized layouts here where you could load either a screener that's already sort of well, a little bit preconfigured, or you can go and load markets. And when you load markets, for instance, I'm going to close this and then open up the markets, then you can look at the top gainers. So, this is just going to give you a list of the top gainers. It's fairly basic, but it's a starting point that again can work for free.

It's not perfect, but if you're on a budget and you're trying to work within these confines, then you know, you use what you've got. So, I would suggest that as a starting point, but if you really want those real-time alerts and the audio notification and everything else, then using a more sophisticated scanner is going to be a a must-have. Okay. So, step three is picking your favorite candlestick patterns that you're going to use to trade on each day.

Now, I have very specific patterns that I use in my trading, and I've got dozens of different patterns that I could choose from, but for this small account challenge, I'm going to focus on the pattern that has the highest probability, and that will be trading my bread and butter pullback pattern. So, what I look for is the price to make a rapid move up just like this, and I look for that dip. Now, while the price is making a rapid move up, it's going to come to my attention because why?

It's going to be hitting my alert scanner right here. So, this is my scanner that's producing the audio alerts. So, I've got the audio alerts all set up here. So, I'm going to hear when the stock is hitting a new high, I'm going to click on the ticker, I'm going to pull it up, and I'm very quickly going to be able to recognize whether or not this is giving me that pullback. So, the way the pullback forms is first, you have the surge up, which is when the stock is hitting the scanner, then you have the pullback, and this is the opportunity after it hits the scanner for you to do your due diligence and confirm that the stock meets all five pillars of stock selection.

Do I like the price? Do I like the catalyst? Do I like the float? Now, assuming, of course, that you pulled it off of your scanners, then it's going to meet all of those anyways. And so then at that point, you're doing a little bit more of analyzing the daily chart, checking the position of the 200 moving average, checking the position of the MACD, and then as it's squeezing up, waiting calmly for the pullback. So, this is where I'm going to get my account ready, and all I'm going to do is I'm going to sit here as this is happening, I'm going to type in the ticker, so, you know, whatever it is, I'm going to type it in here, and I'm going to basically say, all right, I'm ready to go.

All I need to do is press the buy button. The buy button for me is shift one. So, I'm going to focus on my entry right down here, executing with that hot key, and then boom, we get that first candle to make a new high. Awesome. I'm looking for the retest to the high of day right up here, this level. If we get that squeeze, then hopefully, I'll be able to lock up a nice 10% return on a trade. My goal for the small account challenge will be, if possible, to grow my account 10% each day.

Okay. So, now if we look at this chart, I want to ask you, should I buy right here? Now, you're probably looking at this and saying, "Ross, this is a no-brainer. You you should have bought right here. You got that nice pop, and you should buy right here." And if you said that, you'd be dead wrong. Here's the problem. You missed looking at the MACD. Everything looked good on this except for the MACD. So, the volume was good, high volume buying, nice rally up, and I would have definitely bought that pullback right there.

The MACD was open, although it was coming down a little bit, it was still open. We had more buying on the green candles than we had selling on the red candles. The volume surged up here, and then we pulled back, and we kept pulling back, and we pulled back a bit more than I would typically like. 1 2 3 4 5 6 7 candles pulling back, and that caused the MACD to flip from positive to negative, and that was the technical indicator that told me not to take this trade.

If you do not know how to use the MACD, I have other episodes right here on YouTube where I will teach you how to trade using MACD. It is a really important indicator. So, I'm going to be giving you my commentary in real time while I'm doing the small account challenge. For all of you guys doing the 2-week trial, you'll be able to listen over my shoulder, you'll be able to watch and actually see my P&L right on the screen.

So, you'll see me getting in, getting out, and you'll hear me talking about what I'm looking at and what I'm looking for. So, in that case right there, that was not a good entry. What about right here? Well, now the first thing you're looking at, I'm sure, is the MACD, and you can see that it's about to cross into the negative, and so you would be correct in saying I should not buy that. While it popped up momentarily, a momentary pop like that is not going to be enough for me to grow the account.

I need to be trading big moves like this, and they're not going to happen when the MACD is negative. All right. Now, what about this one right here? So, here we had a nice curl early. That would have been a fantastic pullback. Rallies up, pulls back, goes sideways, pops up. Is it an entry right here? And the answer, you bet, is a no. We don't buy that. The MACD is negative. It's not well set up. What about this? MACD is positive, so I should buy it, right?

Wrong. Not even close. Okay. What's the problem here? We've got too much selling. Look at this volume. We've got too much selling. So, you know, it can look easy, but then you spend some time getting into these charts, and you realize there are these nuanced details that you got to be able to focus on, and this is what I help you guys understand every day while I'm trading. So, what about this one? Now, this looks pretty good.

Is this a trick question? The MACD is open, the volume profile looks pretty good. It's not a trick. This is a good setup, and that's type of trade I would love to take during the small account challenge. Getting in at five and having it go up $2 a share? Fantastic. What about this one? A nice rally up, a little pullback. This right here is definitely an entry. Oops, I well, I I I assure you this is right here definitely an entry, and you can see there it goes.

There's the squeeze. So, I would love to catch a trade like that. How about this one? PRFX. Squeezing up, pulling back. First candle makes a new high, and it surges higher. The only problem with this one and some of them is that they may be a little too expensive for the small account challenge for me. Now, in this case, you've got a big rally, we need to pull back, and the problem is when you have that topping tail that you can see right here, that topping tail, it's high volume and a topping tail, we often call that a volume top, which means it's indicative of a reversal.

So, even though we'd like the idea, usually, unfortunately, unless you were already in it, you're going to miss that move. Okay. Step four, here is my trading plan for you. The strategy overview will be trading momentum on the leading percentage gainers each day on the front side of the move between 7:00 a.m. and 10:00 a.m. That is when historically, I make the most money, and that's based on more than a decade of trading metrics I have in this software right up here, which I'll show you in a moment.

The type of stock I'm going to be trading is stocks between $2 and $20. Again, this is going to be verified by all of my metrics, which support that's the price range where I do really well, and which is most suitable for a small account, especially on the lower end price uh range. I'm going to focus on trading stocks that have five times relative volume, up at least 10%, floats of under 20 million shares. Within that range, there will be stocks that are even juicier, and I'll be more aggressive on those.

The stock should be in the top three leading gainers each day. I'll focus on buying the first pullback when the MACD is positive. My daily profit target is to grow the account by 10%, and my max loss is 10%. Share size will be a calculation of stock price, buying power, and the ability to keep the risk uh less than 10%. And the goal is to continue to continue to focus on 10% growth in one day as long as I'm growing the account.

So, that's going to scale to a certain point, and then once the account gets, you know, up over 10, 15,000 dollars, I may not be able to hit 10% um even on decent days. Now, the reason that cash accounts are riskier is because you feel you only have one good trade each day. And so, you're putting all your eggs into that one basket, and you really can't scale into trades or into the day because you run out of buying power.

And FOMO and emotions can be overpowering because if you miss what you feel like was the best setup, maybe you hesitated on it, you weren't sure cuz you know that one trade has to count, so you skipped it, then it goes, then you feel FOMO, you overcompensate by jumping in the next one, but it's not as good of a setup, and all of these emotions come back to the fact that you're restricted to only trading with your cash balance.

I'm a big advocate of settlement margin, which would be a $2,000 that you can day trade in an unlimited amount of times because the trades settle instantly. I respect that leverage is risky. You should not use leverage as a beginner, but you should be able to have at least a settlement margin. And so, I'm really glad that FINRA, the US regulator, has approved the amendment to change the pattern day trader rule. Cash accounts really create an unintended consequence, which is emotional hijack among traders who are focused on trying to grow the account, but have to work within the confines of the buying power running out each day.

So, for me, I'm going to focus on one trade a day. While it's true that I could take 10 small trades, it's going to make more sense for me to focus on one trade a day in the small account, and then spend the rest of the day trading in my main account. Because whenever I do a small account challenge, it's an opportunity cost. I'm not focusing on my big account, and that can cost hundreds of thousands or even millions of dollars in a very short period of time.

So, I'm going to do one trade a day in the small account, and then trade in my big account for the rest of the day. During each of those trades, now if it's a really good setup, I might trade it in both accounts at the same time. That's a little bit tricky. I don't always do that well. It's kind of like trying to juggle, but if it's a really fantastic setup, I and I think I can make money on it, then I might try to. Now, I will utilize the majority of my buying power for that one individual trade using 10% risk.

Because I'm not using leverage, my total downside is limited. Now, one of the reasons that I am an advocate of one trade a day is because it also forces you to spend time focusing on best quality setups and really analyzing your metrics. So, one of the things that I've done with my students at Warrior Trading is I put them on the one day one trade per day challenge, and then I have them give me their metrics. And so, these are some students who have completed this phase focusing on just one trade a day, and I love seeing this.

Now, of course, there are some that take two trades or maybe three periodically, but for the most part, focusing on just one good setup is really good discipline. Get in, get green, get out. And when you start locking up two, three, four, six, eight consecutive green days, that is a huge confidence booster. Now, if you watched the episode I talked about where I talked about the five reasons why most traders fail, one of the things that I focused on was the importance of building a track record because that track record becomes your source of self-confidence.

And traders who are confident perform better. So, to build your confidence, you got to start practicing, and there's no better place than to do it in a simulator, and then trading one trade a day in a cash account. Now, I'm going to give you guys the link to download the small account worksheet and my trading plan as a PDF. So, if you want to practice the small account challenge side by side with me, you're welcome to jump in and and give it a try.

And I encourage you to practice this, but of course, use a simulator as you're learning a new strategy. Now, step five is to analyze your performance. This is critical. You have to be able to look back. It's just like the football coach recording a game so he can go back and do the post-game recap and say, "Here's where you screwed up, but here is where you did really, really well." You need to analyze your performance in order to understand what you're doing really well, and also what needs improvement.

The critical metrics dashboard of the things that I look at are accuracy, which is a target of 75%, your profit to loss ratio, which should be two to one, average winners twice average losers, your performance by price range, your performance by hold time, your performance by float, your performance by percent percentage gain of the underlying instrument, your performance performance by relative volume, and your performance by share size.

If you went through all of this and you identified that you lose money on stocks that are above $20, that would give you very actionable information to stop trading higher priced stocks. If you saw that you lose money for instance on stocks that have higher floats, that would give you actionable information to stop trading those stocks. But if you don't look at your data, you'll have no idea what you could do to improve your trading.

Now, if you're using our simulator at Warrior Trading, we actually aggregate all of your data so you can see your metrics built right into the platform so you can see what you're doing that needs improvement and what you're doing that's working really well. I do these performance reviews daily, and I also do them at the end of each week for a week over week comparison, and I do them at the end of each month for a month over month comparison so I can make notes about areas for improvement for the coming month.

Now, the question that I'm always asking myself is, "How do I position myself in today's market? Is today the day to be aggressive, or is this the time to be conservative?" If it's a hot market and the probability is in my favor that I'm going to perform well, then I should take as many trades as I can, and I should take as big of share size as I'm comfortable really with the downside risk of. Now, if the market is cooler, should I take a ton of trades?

No, I should batten down the hatches. I should be more conservative, and I should wait it out. Now, it may be that during parts of this small account challenge, the market will be very hot, and it may be that the market is a little bit colder, and that's not going to change the fact that I'm limited to one trade a day. That's all I get. So, one trade a day, doesn't matter hot, doesn't matter cold, it's going to be one trade a day until the account gets bigger.

But for me, and really for all of you, you've got your current reality of where you are today, and you've got the desired reality of where you want to get to. And the only way to get there is to always be improving. Sim trade, review metrics, make some changes, sim trade, review metrics. Once you're performing well in the sim, you flip the switch and trade live with real money, and you continue that process of reviewing your metrics and constantly trying to improve your trading.

So, for those of you guys ready to take the leap, the link for the two-week trial at Warrior Trading will be pinned at the top of the comments and in the description. I encourage you to join and practice in the simulator as you're testing out these new strategies. And the next upload you're going to see right here will be day one of this brand new small account challenge. Remember, all of the profits get donated to charity, and you guys hitting that thumbs up and subscribing to the channel will help us double that donation with a match.

I'm going to put a link here to my full-length training on how to grow a small account, and I'll put another link right here to the five reasons why most traders lose money so you guys can check those out as well.