Disclaimer: All investing and speculation carries risk. Don’t risk money you can’t afford to lose. This content is for educational and informational purposes only. Nothing here constitutes financial advice. Consult a licensed financial advisor before making any investment decisions.
Financial alchemy is about turning time, knowledge, and other people’s money into value. For example, if your business raises $1M to start but is worth $4M post-launch, you’ve created $3M in value.
The same applies in real estate through commission-based down payments, wholesaling (getting a property under contract and assigning it to someone purchasing it from you at a higher price), assumable mortgages, or 100% financing. Always ensure your rental income covers mortgage obligations.
With a 401k and good matching, you can put away $69k/year with a $184k salary. Stick to low-fee index funds of the S&P 500 or Nasdaq 100.
Roth IRA: $7k/year contribution can grow into millions. Covered calls on index funds in retirement are a solid income strategy. Don’t gamble in your Roth — prioritize stable growth.
Individual stocks: it's amazing how well individual stocks can do, it's key to really understand that company. In 2002, I thought Amazon was merely an online bookstore (at the time, that's basically what it was; this is pre-AWS) and thought 'it's already larger than Barnes & Noble, is it just going to grow at 5% a year?' but $3300 invested at that time would be a million dollars at it's peak. Tesla is another great example, car companies have not really performed that well; but Tesla is more than just a car company or even an electric car company and it's growth would yield a similar gain.
Short-term gains via leverage (like 4x margin) can double your money quickly — but come with risk. A 25% gain on 4x leverage = 100% return. Don’t do this unless you fully understand the risks.
Keep speculation in non-retirement accounts. Use retirement accounts for long-term compound growth.
Options are not investments — they’re speculative tools. Writing covered calls against stock you own can provide income with low risk if done right. Buying options requires timing and market skill.
Learn everything you can about options before trading. Losses can quickly exceed 40% if you're not well-prepared. Certain short-term option plays—like BITX (if Bitcoin is rising), TQQQ (bullish on the market), SQQQ (bearish on the market), UVIX (betting on volatility), or SOXL or USD (bullish on chip makers)—can either become worthless or multiply rapidly during sharp moves (they usually go down later.) These instruments track daily price changes, which means they tend to degrade over time unless timed precisely. While they can offer high rewards, they are best viewed as high-risk speculation. For skilled traders, they may offer opportunities, but identifying the right moment is extremely challenging.
Sometimes missed opportunities serve as valuable lessons. For instance, a stock that appeared stable around $40 showed signs of strength, particularly as it held up during a broader market decline. However, without sufficient justification for using margin or high-leverage options, it may have seemed too risky to act at that point. In hindsight, the stock more than tripled within a month. At-the-money call options—perhaps priced around $5 per share ($500 per 100-share contract)—could have grown in value to $6,000–$9,000 per contract.
This highlights the potential value of several strategies: considering at-the-money contracts after a confirmed breakout, selecting deep-in-the-money contracts ahead of a breakout when the stock shows strength, or even utilizing margin when strong fundamentals and price action align. Ideally, a well-balanced approach might involve allocating around 25% of a core portfolio to high-growth opportunities like this, supplementing with side portfolios such as a Roth IRA (e.g., investing $1,000 annually in each of several promising stocks), a 401(k) focused on low-fee index funds, and a separate portfolio margin account for active trading.
Sometimes missed opportunities serve as valuable lessons. For instance, a stock that appeared stable around $40 showed signs of strength, particularly as it held up during a broader market decline. However, without sufficient justification for using margin or high-leverage options, it may have seemed too risky to act at that point. In hindsight, the stock more than tripled within a month. At-the-money call options—perhaps priced around $5 per share ($500 per 100-share contract)—could have grown in value to $6,000–$9,000 per contract.
This highlights the potential value of several strategies: considering at-the-money contracts after a confirmed breakout, selecting deep-in-the-money contracts ahead of a breakout when the stock shows strength, or even utilizing margin when strong fundamentals and price action align. Ideally, a well-balanced approach might involve allocating around 25% of a core portfolio to high-growth opportunities like this, supplementing with side portfolios such as a Roth IRA (e.g., investing $1,000 annually in each of several promising stocks), a 401(k) focused on low-fee index funds, and a separate portfolio margin account for active trading. In contrast, the most reliable path to long-term, market-beating returns is buying and holding leaders in growing industries—or simply investing in low-fee S&P 500 index funds. Consistently contributing to a Roth IRA (e.g., $7,000 annually or whatever the future limit becomes) and holding for the long term is the true alchemy of wealth building. Short-term speculation may turn gold into lead; long-term investing turns consistency into gold.
Developing a refined day trading strategy requires consistent execution, risk management, and an understanding of market dynamics. A strong run of profitable trades can be quickly offset by a few outsized losses, especially if those losing trades are larger than the average winners. This highlights the importance of discipline, sizing, and maintaining a strategy with favorable risk/reward characteristics.
Effective strategies often incorporate technical indicators such as ABX, RSI, MACD, candlestick charting, Bollinger Bands, and VWAP. Success also depends on selecting the right stocks and determining the type of day: whether to make a quick trade near the open, trade until around 10:30 AM, or stay active throughout the day. Long-term positions can conflict with short-term signals, so it's important to define and separate strategies. For example, a stock that holds up during broader market weakness may be worth a long-term position, but conviction and risk tolerance must match the setup. Missed entries after a dip or breakout often serve as reminders of the value of preparation and having sufficient capital, especially if planning to use portfolio margin in the future.
Accounts with over $25,000 qualify for 4x intraday margin. While this enables day trading, dropping below that threshold, even by a single dollar, can result in a same-day suspension of day trading privileges. To avoid this, it's advisable to maintain a sizable cushion above the minimum requirement.
If a system can consistently deliver a modest edge, for instance averaging a 3.5 percent profit per five trades with a 4 out of 5 win rate, returns can compound meaningfully. However, day trading remains one of the most difficult financial disciplines, with high failure rates due to emotion, lack of discipline, or algorithmic competition. For most, long-term investing may prove more effective unless a consistent and tested edge is present.
The opening minutes of the market often set the tone for the day. A strong premarket with a directional gap followed by higher highs and higher lows (or lower lows for shorts) can indicate a trending day. When breakouts occur on strong volume with clear support or resistance, the market may offer sustained opportunity.
In contrast, choppy days often feature indecisive candles with long wicks, failed early moves, and price action hovering near VWAP. If indicators like RSI and MACD are neutral or conflicting, it's likely best to take a few trades early and step back.
When there's no premarket momentum and low volume, the day may offer limited opportunity. If setups don't trigger and indicators stay flat, it may be best to avoid trading altogether.
Tools like the TICK index, VIX, and Advance/Decline Line offer additional context. A volatile TICK near zero suggests chop, while a rising VIX can support rapid counter-trades. A strong A/D line can confirm a trending environment.
Only trade when setups align. If key signals such as RSI or MACD crossovers combined with support or resistance confirmation are not appearing, it's a sign to stay patient. Forcing trades without an edge often leads to losses. Many of the best opportunities occur early; overtrading later can reverse gains.
If a clear read hasn't emerged by 10:30 AM, consider stepping aside for the day. Recognizing when not to trade is often as valuable as knowing when to enter.
For those using margin accounts that combine day and swing trading, maintaining at least 150000 dollars in total equity, with 25000 dollars in cash or cash-equivalents, is a prudent strategy. This avoids forced liquidations and ensures flexibility during drawdowns. A disciplined system, such as a Tight Base Accumulation strategy (buying breakouts from strong bases and exiting on trendline breaks), helps manage leverage and minimize exposure during uncertain conditions. Until an account reaches a size where normal volatility doesn't threaten margin calls, capital preservation should be the priority.
Identifying the best stocks to trade each day involves screening for volatility, volume, and technical alignment. Focus on highly active stocks, especially those breaking above key psychological levels like 100 dollars. Look for names that consistently appear on high-volume breakout lists and validate their historical performance with indicators like RSI, MACD, and Bollinger Bands. Stock screeners can help narrow candidates by price, sector, or momentum. Additional resources like Dan Zanger's OSB list may offer insight into stocks with strong breakout potential.