 Hello there everyone and welcome. I wanted to do a video on return on investment and risk reward and day trading because this is two separate things that I wanted to review for a lot of people that have been asking me questions lately. My name is Melissa Armo and I own the Stockswush. If you have any questions, you can email me at melissa at thestockswush.com or call me at 929-3200-GAAP. You can also follow me on Twitter, Facebook, YouTube and Skype. So I want to use this one trade example to just show you risk to reward versus return on investment for day trading because a lot of people don't understand what exactly day trading is because they've never done it before, which I totally get. So let's just look at this. This is tea. You see tea closed here the night before. Around 3430-ish. Boom. Gapped out in the morning. Around 3290, whatever. So I focus on gaps. This is the golden gap. Tea. AT&T is the stock. Tea is the ticker symbol for the stock. If you're interested in learning my method, you will learn what gaps to choose to trade and in what direction. So I prefer to short. So tea was a short. So when you're looking for trading profits, you're looking for what? A return on investment? Yes, in one sense, but you have to look at what your expectation is because it's very different than if you deposited money in a savings account, in a certificate of deposit, in a bond, okay, or an IRA, for example. So you are looking for a quick return. You're putting the money in a brokerage account. They're giving you margin or buying power leverage and then you're turning it over each day based on whatever you have deposited and your margin, okay. But the best way to look at day trading is really risk to reward because you're taking the amount you're risking, whatever that monetary amount is, $100, $200, $500, $1,000 and you're looking to turn that around. But that amount could be different per day of the cost. And just listen to me, the cost at the broker, because why? I'm going to go back here. Not every stock costs the same. So tea, if you shorted tea, and I'm just going to make it really easy. If you shorted tea at 33 bucks a share, that would cost you what? Well, it depends how many shares you take, but you times the amount of shares by the cost of the stock, which in this case in tea will be $33. I'm just going to make it really easy. But if you took 100 shares of tea at 33 bucks a share, you would need $3,300 in buying power in an actual day trading account, wherever you would trade. Okay. So if you're looking for return investment, you're looking at that. But if you took the trade in tea, how much money could you have made really looking at the dollars and cents risk, which is what we're going to look at right now. So here we're going to look at two examples, one advanced trader and two beginner, because I know there's a lot of different people out there. So if you took the entry at 32.69, this is a call in tea, stat which 32.80, 10,000 shares, what if you would have risked what? $1,110. What does that mean? It means that the trade would have failed, which it did not. But if it had, you would have lost $1,110 bucks. It worked. But if you had lost that's what your cat would have been, you know, depending on your slippage, because we use stops exit 32.25. That's not a big move. But for tea, you know, you have to understand the stock tea doesn't have monster moves. This is was really good move in tea profit would have been what $4,400. That's a really nice profit in something actually at this price point and with the risk. Okay. Now just follow me here. So tonal shares you took in the tea. If you did that trade was what 10,000. Buying power require was what 326,900. Okay. Cash required in an account, which if you had a retail account four to one would have been what 81,725 approximately. That's what you would have needed to take that trade with 10,000 shares in a retail account profit would have been what 4,400 bucks. Okay. Rich reward would have been right four to one. Why? Because you risked $1,100 and made 4,500. So that is really, really good. So if the train had failed, okay, which it did not. I'm going to go back to this here. Do you see it was a short the stock drop, but the train had failed. You risked 1,110 bucks. That's all you would have lost. Okay. Instead, the trade worked. You made 4,400. But the cost to take the position because the stock price was, you know, 32 something in the entry price was more than 1,110. But that, but if the trade failed, which just didn't, but I'm just telling you, if it did, you wouldn't have lost that. And this is something I don't think a lot of people understand about day trading. That's why using margin leverage is so advantageous. Okay. That's the best word I can describe it. It's advantageous to use leverage because you don't need $326,900 in real cash to take the position. You only needed it on margin. Assuming you wanted to take 10,000 shares of this, all right. But your percentage of return investment, if you look at it like that in T for that trade would have been what? 5% per day. 5% of what? 4,400 is 5% of 81,725. Now, if you had a prop account, it's called a proprietary day trading account. If you want more information on that, you can email me. You can Google it, read about it. You would have needed $32,690 in cash. Okay. Your profit, same, same trade, same entry. So it makes it 4,400. Percentage or return investment is what? It's more, it's 13%. Because you need as much cash. Okay. Now, let's just say you couldn't afford any of that. All right. You're just started out, you're a beginner. You take 1,000 shares, same trade, same entry, same stop. Share quantity is different. Same exit. All right. You risked $111 profit, 440. Great. Okay. That's a good decent profit. If you can make $400 a day, you've got a decent week. Okay. Tonal shares, though, for this one is 1,000. Buying power required $32,690. In a prop account, you get 10 to 1 leverage. Usually, could be less, could be a little bit more. You would need, needed 8,172 profit, 440. Rich reward is what? 4 to 1. You risked 110, you made 440. Percentage of return and investment of the 8,000 plus is what? 5%. In a retail account, in a prop account, you only needed $32,669 profit is 440. Same. We turn our investment, though, as 13%. Okay. Does everyone understand? So, you get more than double if you go to a prop place. You don't have to, though. And there's pros and cons. And it depends what kind of platform you really feel comfortable with and what you want to use. But the bottom line with this is that you can make money day training. You do not have to have an exorbitant amount of money to day trade because you can get something called margin, buy, and parallel leverage. You have to understand what that means. You have to shop it around to see what the best fit for you is. And if you can do this, you can open up a brokerage account and trade. But you've got to have a system to follow. And that's what I teach in my Golden Gate course, like in the T. Okay. To know that T was a good short. And to be able to take 10,000 shares of it, or even 1,000. All right? At the end of the day, if you want to day trade for living, you have to think about whether or not you want to do this for yourself. You will be working for yourself, relying on yourself. There's some kind of, you know, independence that's required. You have to be an independent thinker to do this, to work for yourself, to have the financial freedom. And everybody says they want it, but are they willing to do the things necessary to get to that point? What does that mean? Spending money, opening up a trading account, spending money on a class like mine to learn a strategy so that you can profit day trading. Okay. There are commitments required, but if you are willing to do all that it takes, which is less than really what I find most people think is necessary, you can be successful in the market. Or you can work for someone else. I mean, really, as you know, the world has so many different options out there, but I'm telling you that the nice thing about trading gaps specifically, which is what I do, is that they're done very, very early in the morning. You can also work from home when you do this. And that's a positive thing as well. You can be anywhere in the world and do it. So I teach a class, it's called the golden gap course. If you're interested in more information, email me at Melissa at the stockswish.com to sign up. Next class is July 21st and 22nd, 9 to 5. Class to the class is 54.99. Email me if you'd like to sign up. The class is online. You can be anywhere in the world and take it. I also teach the trends class. This is about swing trading overnight's long-term trends and stocks. You get half off if you do this at the same time as the golden gap course, 59.99 for both. Email me if you'd like to sign up or want more information at Melissa at the stockswish.com. Have a great, great week, everyone.