5 Day Trading Laboratory Manual July 09

Trading Laboratory Manual
130 West 42nd Street, Suite 450 (fourth floor), New York, New York, 10036
lTel: 866-59-VELEZlFax: 646-417-6537
Rev. 6/24/08
1
5 Day Trading Laboratory
Curriculum Overview
Day One
Introduction and review of lab agenda

Review of VCM Prop Trader program
Distribute VCM Prop Trader Agreements
Review VCM Prop Trader guidelines
Review website and services
Review trading platform
Review market and stock scanning process
Scan the market for setups (every evening)
Develop watch list for next day (every evening)
Day Two
Introduction and observation of gap trades

Continue with review of trading platform
Review different routes and associated charges
Build and practice hot keys
Review market internals
Review of platform details
2
Curriculum Overview (cont.)
Days Three and Four
Live trading day with Oliver

Load Live Trading Room for observation
Scan for gapping stocks
Scan market with platform for setups throughout day
Day Five
Order type concepts and hard stop orders

Review Sample trading plan
Sample trading universe
Development of sample trading plan
Review VCM Trade Tracking Log
Review of CD contents
Review common issues/pitfalls for VCM Prop Traders
Collect VCM Prop Trader Agreements
Questions and Answers
3
Day One
Introduction and Review of Activities
Group introductions
Velez Capital Management
Purpose of the Trading Laboratory
Review of daily schedule and office logistics
Review of the curriculum for the week

Review of VCM Prop Trader Program

Trading Barriers
Support/Tools for Prop Traders
Trader Advancement Program
Trader Advancement Guidelines
Prop Trader Principles
Distribute VCM Prop Trader Agreements
Discussion of VCM Independent Trader Program
4
VCM’s Hierarchy of Needs
The Self Actualized Trader (SAT)

Trading
Mastery
Conquest of the
Seven Deadly
Trading Demons Mastery of each
Psychological Mastery of VCM’s Five
Trading Laws
Documented Live
Trading w/ a VCM Experiential Mastery ***
Trader/Instructor TM
VCM Trader Pro
Technological Mastery ** VCM Trader
Execution Skills
Hot Key Mastery
Educational Mastery *
Formal Education:
TM
VCM Trading Method
Notes:
*Trade for Life 2-Day Seminar, **1st 2-days of VCM’s 5-Day Live Trading Lab; *** 3rd and 4th day of VCM’s
TM
5-Day Trading Lab; SAT = A trader who finds opportunity money every 5 to 8 minutes.
5
Trading Barriers
Education
Continuing Coaching Support
Risk Control
Capital Restrictions
Commissions
LOSSES
Profitability Over Emotions
Sticker Shock
Trading Mentality
6
Support/Tools for Prop Traders
Access to All Services
Stock Pick of the Week
Market Analysis of the Week
Trading Lesson of the Week
Trade for Life Daily Letter
Trade for Life Intra-day Email Alert Service
Trade for Life Live Trading Room
Trade Tracking Log
Sample Trading Plan
Sample Trading Universes
Trader Interviews
Sample Trading Plans from Colleagues
7
Trader Advancement
Program
Maximum Minimum Minimum Minimum

Daily Loss Payout %
Level Lot Weekly Trader Weekly Trader Annual
Limit
Size Target
TL 10 $10 60%
1 100 $30 $30 60% $18 $300
2 200 $60 $60 60% $36 $1,200
3 300 $90 $90 60% $54 $2,100
4 600 $150 $200 65% $130 $5,900
5 1,000 $250 $350 65% $228 $10,775
6 1,600 $400 $600 65% $390 $18,900
7 2,400 $600 $1,000 65% $650 $31,900
8 3,600 $900 $1,500 70% $1,050 $51,900
9 5,200 $1,300 $2,275 70% $1,593 $79,025
10 8,000 $2,000 $4,000 70% $2,800 $139,400
11 12,000 $3,000 $6,000 70% $4,200 $209,400
12 18,000 $4,500 $9,000 75% $6,750 $336,900
8
Advancement Program Guidelines
Trader Advancement Criteria

Two consecutive weeks meeting target

Positive P/L Requirement After Level 2
Account Demotion Guidelines
Payout Percentages and Process
9
Trader Advancement Guidelines
Risk Management Controls
At each performance level, traders will be assigned a maximum lot size, a daily loss limit, and a
minimum weekly target.
Maximum Lot Size – This defines the limit for any individual order as well as the total lot size limit
for all open positions
Daily Loss Limit – If the Daily Loss Limit is reached at any point during a day’s trading, no further
entry orders will be permitted and a VCM Risk Manager will work with the trader to close all posi-
tions
Weekly Loss Limit – If a cumulative net loss greater than three times the Daily Loss Limit is
reached during a week’s trading, the account will be disabled from further trading for the remainder
of the week.
Minimum Weekly Target – This defines the minimum net weekly profit that must be achieved in
order to achieve promotion to the next performance level (see below for further details)
Trader Advancement Process
In order to advance to the next performance level, a trader must achieve the minimum weekly profit
target for two consecutive weeks.
After performance level 2, the cumulative P/L at the current level must also be positive in order to
qualify for advancement to the next level.
If a trader has a cumulative drawdown equal to twice the minimum weekly profit target at any
level, then a VCM Risk Manager will review their trading records to consider demotion to the pre-
vious performance level.
Trader Payout Rates
The percentage of profits that are paid to the trader will increase as traders advance through the
performance levels. Refer to the table for the following details:
Payout % - This defines the percentage of profits paid to the trader at each performance level.
Minimum Trader Annual – This reflects the annualized payout amount for the trader if they aver-
aged their minimum weekly profit target at each level, based on a 50 week trading year. These
amounts have been adjusted to reflect the payout after coverage of the software platform fees of
$50 per month. (Note that the software fees are only covered with trading profits, and that the
trader is not obligated to pay the fees unless the profits can cover the charges.)
10
Account Demotion Guidelines
A trader account will be demoted one level if any of the following four
conditions occur –
1. Two consecutive weeks with losses equal to or greater than the weekly profit
target for the current level, and cumulative losses at current level greater than
or equal to twice the weekly profit target,

or
2. Three consecutive losing weeks at current level, and cumulative

losses at current level greater than three times the weekly profit
target,

or
3. Cumulative losses at current level greater than four times the weekly
profit target
4. Accounts will be moved back to Training Level whenever they are currently at
Level 1 and have had four consecutive losing weeks.
11
VCM Website and Services
Locations
Events
Trader Programs
Services
Free Services
Daily Trading Letter
Intra-day Email Alerts Service
Proprietary Trading Room
VCM Scanner Pro
Resources
Downloads
VCM Traders Log In

Test Chat Room Login
12
Day One (cont.)
Review trading platform

Download platform and log in
Select password
Introduce preconfigured screens
VCM Lab (Two 1280x1024)
One Monitor (1280x1024)
Laptop (1280x768)
1024x768
Charts
Data
Timeframe
Date Range
Pre/Post Market
Study Line
Adding, removing and configuring studies
RECT
Adding new sections
Config
Label and Ruler – not needed on top
Removing Control Box and Study Info
View
Use VGrid for daily divide
Zoom
Point out up/down arrow use
Setting
Colors
Background
Load and save chart settings
Print
Volume bars
Study Line
Config colors
RECT/Config
Do not show last price
13
Day One (cont.)
Charts (cont.)
Tool Bar
Can save space without
Use up/down arrows for scale
Use Page Up/Page Down for time frame changes
Tab Control
Time frame type
Scroll bar
Save Settings/Open New Chart/Load Settings
File – Save Screen function after changes
Trading Window
Enter Symbol
Ability to scroll symbols with mouse wheel
Review Level 1 section
High-Low
Previous Close
Last Trade
Change from Close
Day’s Volume
Right Click/Quote Info
Demonstrate links to charts
Blue Message Line
Order Section to be reviewed later
Review Level 2 section
MMID – Market Maker ID
BID/ASK – Price of bid/ask
SIZE – Size of bid/ask (in hundreds)
Time and Sales

Linking to Trading Window
Price – Price of print
Shr – Share size of print (in hundreds)
T.Time – Trade time
Color coding for At Ask and At Bid (right click)
14
Day One (cont.)
15
Day One (cont.)
Market Watch
Demonstrate online help
Right click link to trading window
Review columns
Symbol
Open Change%
Last
%Change
Config
Add/remove columns
Reorder columns
Delete/Insert rows
Load/save stock symbol lists (have group save pre loaded lists)
Add/change symbols
Expand Columns
Fit In Screen
Sorting by column
Market Watch 2 – Industry Sector ETFs
Market Watch 3 – Nasdaq 100
Market Watch 4 – S&P 100
Market Watch 5 – Starter Trading Universe
Market Watch 1, 6-10 – Unassigned
16
Day One (cont.)
Top 20 List (VCM Lab page only)

Review columns
ActiveNasd
GainNasd
LossNasd
ActiveNYSE
GainNYSE
LossNYSE
Also has right click link
Make sure stock meets trading plan requirements
Tour of All Pre-configured Trading Screen Layouts

VCM Lab
One Monitor
Laptop
17
Day One (cont.)
18
Day One (cont.)
19
Day One (cont.)
20
Day One (cont.)
21
Day One (cont.)
Alerts
Trade - Alert and Trigger
Find potential trades and set alerts
Uncheck Loop
Add SecSym
Add Condition
Edit Condition

22
Stock Scanning
Start with Market Analysis

Scan for setups based on market interpretation/bias
Check Prior Day’s Watchlist
Top Down Scanning
Personal Stock Universe Scanning
Scan Favorites List
VCM Scanner Pro or other automated scanning
23
Top Down Scanning
Scan Major Market Indices
Determine Market Bias and Highest Probability
Setups for Each
Scan Major Industry Sector Indices

Look for Highest Quality Setups in Line with Market
Scan Universe Stocks in Most Promising Sectors

Look for Highest Quality Setups in Line with Market
and Sector
Top Down Scanning
24
Top Down Scanning
Top Down Scanning
25
What Is a Personal Stock Universe?
A manageable (200-300) family of stocks that meet
your trading requirements in the following areas:
Average Daily Trading Volume

Price Range
Exchange Preferences
Well-Behaved Price Charts
Distribution Among Major Industry Sectors
Why Have a Personal Stock Universe?

To become comfortable with price action of small
family of stocks
To ensure scanning across major industry sectors
Because automated scanning systems still cannot

match the eye of a trained technical analyst
26
What Is a Favorites List?
A small (10-30) subset of Personal Universe
Often focused in a few favorite sectors
Can be scanned more quickly
Can be sorted and monitored throughout trading day.
27
Stock Scanning
Start with Market Analysis

Scan for setups based on market interpretation/bias
Check Prior Day’s Watchlist
Top Down Scanning
Personal Stock Universe Scanning
Scan Favorites List
VCM Scanner Pro or other automated scanning
28
Scanning Checklist
Review Multiple Time frames
Relative Strength Against Market/Sector
Volume Confirmation
Areas of Support/Resistance
Price Void Areas
Reward/Risk Ratios
Have group build scanning page with weekly/daily/60/15
REMEMBER TO SAVE YOUR SCREEN LAYOUTS!
29
Day Two
Introduction and Observation of Gap Trades
Review of gap trade tactics
How to scan for gapping stocks
Sort Nasdaq 100 by %Change column
How to load a watch list for gappers
Observation of gap trade candidates during first half hour of market
Gap Trading
Overextension
NGB/NGS
Reversals
GUS/GDS/+BMG/-BMG
Relation to Support/Resistance
To S/R -
Overextension
Beyond S/R –
Breakouts/Breakdowns
Reversals – S/R on shorter time frames
How to Enter?
2/5 Minute High/Low
Not recommended for early levels
Later Setup on Intra-day Time frames
30
Day Two (cont.)
Continue with review of trading platform
Account Manager Window

Position Tab – Open positions
Shares
AvgCost
Realized
Unrealized
Account Tab
Realized
Unrealized
Open BP
Current BP
Tickets
Shares
+/- Liq
Trade Manager Window

Orders Tab – Open orders
X – Cancel
Status – Order status – Sending, Accepted, Cancelling
Symb - Symbol
B/S – Buy or sell
Qty – Quantity of original order
Open – Number of shares currently open
Price – Order price
Route – Order route
Type – L=Limit, M=Market, S=Stop
Shrt – Yes if short, No if long
TIF – Time In Force=time period that the order is active
Tickets Tab – Summary of all orders
Executed Beeper
Trades Tab – Detail of all order transactions
Log Tab – Log of all order actions for the day
Symbol Tab – Short availability
31
Day Two (cont.)
Global Order Defaults
Config/Default Order at top of screen
Trading Window - right click/Default Order
Make sure that Default Order section for trading Window has
“Use Global Default” checked
32
Day Two (cont.)
Order Section of Trading Window
Shares Box
Price Box
Different ways to set price
Route Box
Account Box
Time In Force
AON/ANY
Buy Button
Sell Button
SHRT Button
CXL – Cancel Last Order
DEF – Default Settings
P – Position
R – Reverse standard default
Lock Account
33
Level 2 Issues
Level 1 versus Level 2 information
Bid and Ask Sides/Buyers and Sellers
Buying versus Bidding
Selling versus Offering
Adding versus Removing Liquidity

ECN Rebates
34
35
36
37
Summary of Market Routes
Route Add Remove Route Out Comments
Good liquidity;
ARCA $2.00/1000 ($3.00/1000) ($4.00/1000)
most expensive
Same as ARCA;
ARCA= $2.00/1000 ($3.00/1000) N/A
no cross/route out
BATS High rebate:

$2.40/1000 ($2.60/1000) ($2.60/1000)
decent liquidity
Highest rebate; low to
EDGX $2.50/1000 ($3.00/1000) N/A
decent liquidity
EDGA $0.00/1000 ($3.00/1000) N/A No rebate; low liquidity
Great liquidity; fast fills;

NSDQ $2.00/1000 ($3.00/1000) N/A
no route out
Best cost; great liquidity;
NSDQDDOT ($0.275/1000) ($0.275/1000) N/A
no route
Great liquidity;
NSDQNDOT ($0.275/1000) ($0.275/1000) ($3.00/1000)
expensive to route
Great liquidity;
NSDQSTGY $2.00/1000 ($3.00/1000) ($3.00/1000)
super fast; BEST
VCM has direct line;
NY/AM ($0.45/1000) ($0.45/1000) N/A
fast fills; costly
Fastest fills offered by
NYSE+ ($0.45/1000) ($0.45/1000) N/A
NYSE; costly
38
Day Two (cont.)
Config - Order Handle
Build and practice hot keys
Config – Hot Key

58 Buy at Inside Bid Ctrl+R1
59 Sell/Short at Inside Ask Ctrl+R3
60 Buy at Ask Alt+R1
61 Sell/Short at Bid Alt+R3
51 Cancel Last Ctrl+R2
56 Cancel All Ctrl+R0
39
Day Two (cont.)
How to program hot keys

Key combinations (check keyboards)
Command lines
Explain slippage factor in Alt hot keys
Ctrl+ Adds liquidity

Alt+ Removes liquidity
Practice hot keys without execution

Display on Level 2
Monitor live orders in Trade Manager Window
40
Day Two (cont.)
Build and practice hot keys (cont.)
Practice actual trades with hot keys

Both long and short examples
Also flip sides
Slow moving stocks (e.g., JAVA) only
Monitor positions in Account Manager Window

Explain use of F9 and F11 hot keys for exits
Continue setup and review of hot keys

Load remainder of full configuration from Appendix A
Review additional hot key options
Practice additional hot keys and monitor in Trade Manager Window
Review Hot Key Terminology – Appendix B
Practice with VCM Keyboard Practice program
CTRL Hot Keys

Ctrl +
Bid Ask
(Buyers) (Sellers)
-01 +01
-03 +03
41
42
Day Two (cont.)
Review market internals

Review concept of TICK
Alerts at +/- 1000
TICK and TRIN Formulas
TICK = Number of stocks on Up Tick -

Number of stocks on Down Tick
TRIN (also known as ARMS Index) =

(Advancing Issues/Declining Issues)/
(Advancing Volume/Declining Volume)
43
TICK Principles
LEVELS:
Neutral - Between -400 and +400

Extended - Below -800 and Over +800
Extreme - Below -1000 or Over +1000
Can serve as early indicator of buying/selling flurries
Look for extreme levels after extended runs

Can set alerts for +/- 1000
Watch TICK range for general bullish/bearish bias
Watch for TICK/market discrepancies
44
TRIN Principles
TRIN is an inverse indicator
LEVELS:
Extremes - Below .20 or Over 1.80
The trend of the TRIN is more important than the level
TRIN patterns - trends, S/R levels, reversals, etc.

can be interpreted similar to those of stock prices.
In general, use TICK and TRIN as barometers for gen-

eral market pressure.
45
Day Two (cont.)
Review of Platform Details
Trade – News
Config – Linkage Loop
Tools – Mail
Tools – Market Clock
Tools – Upgrade
Practice with VCM Keyboard Practice program
Scan the market for setups and develop watch list for next day
Review and analyze overall market as a group
Have group scan for tomorrow’s watch list candidates
Review candidates as a group
46
Day Two (cont.)
Schedule for next two days:
Live Trading with Oliver

Focus on gappers for first 30-45 minutes of the day
Scan daily bias watch lists coming into 10:00
Start scanning whole market from 10:30 on
Looser loss limits
Very active trading – designed to practice hot keys
P/L for the week will be adjusted out of accounts
47
Days Three and Four

Live Trading with Oliver Velez
Looser loss limits
Very active trading – designed to practice hot keys
P/L for the week will be adjusted out of accounts
Scan for gapping stocks

Take trade if tight enough setup presents
Scan market with platform for setups throughout day
Review Sample Trades from Group
Scan the market for setups and develop watch list for next day
48
Days Five

Review concepts of scalping versus trend trading styles
Order Type Concepts and Hard Stop Orders

Review of stop, market and limit order principles
Limit Orders
Buy Limit
Sell Limit
49
Stop (Market) Orders
Sell Stop
Buy Stop
50
Stop Limit Orders
Buy Limit
Sell Stop
Buy Stop
Sell Limit
51
Day Five (cont.)
Order Type Concepts (cont.)
Use of stop market orders for stop loss

Protective Stop for Short Position
Set symbol and lot size
Set route to EDGXS (can use END toggle)
Hit BUY button
Select Market order
Specify trigger price
Click OK
Check open orders – Type column
Protective Stop for Long Position

Hit SELL or SHORT button
Select Market order
Click OK
Use of stop limit orders for new positions

Stop Entry for Long Position
Hit BUY button
Select Limit order
Specify limit price
Click OK
Check open orders – Type column for trigger
– Price column for limit
52
Day Five (cont.)
Use of stop limit orders for new positions (cont.)

Stop Entry for Short Position
Hit SHORT button
Click OK on warning window
Select Limit order
Specify limit price
Click OK
Check open orders – Type column for trigger
– Price column for limit
Use of limit orders (incl. short) for profits

Limit order for profits in long position
Set route to EDGXL
Set price field to profit target
Hit SHORT button

Limit order for profits in short position

Set route to EDGXL
Set price field to profit target
Hit BUY button
53
Day Five (cont.)
Use of range orders for Order Cancels Order setup

OCO Stop/Profit for Short Position
Hit BUY button
Select Range order
Place profit target in Low Price
Place stop price in High Price
Click OK
OCO Stop/Profit for Long Position

Hit SELL button
Select Range order
Place stop price in Low Price
Place profit target in High Price
Click OK
Set up Preferred Routes on Trading Window

Right Click – Route Configure
Preferred Routes – EDGXL and EDGXS
Toggle between preferred routes with END key
54
Day Five (cont.)
Review Sample Trading Plan – Appendix C

Sample Trading Universe – Appendix D
Starter Trading Universe – Appendix E
How to begin a rudimentary plan

Begin with what you know
Build example as group
Use Practice Trading Plan as example – Appendix F
Review VCM Trade Tracking Log – Appendix G

Review Day Trade Performance Report on Prop Reports
Demonstrate use of Trades Report on Prop Reports to load Trade
Tracking Log
55
Why Have a Trading Plan?
To Control the Emotions of the Market Day
The Concept of the Trader as Two Individuals
Turn the Idiot into a Robot
Achieve Calm through Faith in your Plan
To Develop and Document Your Approach to the Market

Do you REALLY Know Your Approach?
To Coordinate an Incredibly Complex Process

Pilots and Checklists
To Measure the Performance of Your Approach

Requires Consistency
To Refine Your Approach

The Road to Improvement
56
Planning Cycle
PLAN
REFINE EXECUTE
ANALYZE MEASURE
57
Sample Trading Plan Sections
Goals
Objectives
Assumptions
Trading Environment
Market Analysis
Stock Scanning
Pre-Market Activities
Trading Day Activities
After Market Activities
Weekly Review Activities
Lot Size/Trade Management
Money Management
Daily Setups
Trade Types
Continuing Education and Days Off
58
Performance Statistics
Batting Average -
#Winning Trades/Total # Trades
Win/Loss Size Ratio -

Average Size of Winning Trades/
Average Size of Losing Trades
59
Analysis of Trading Statistics
Trading Plan Adjustments Might Involve Shift in

Emphasis On -
Trade Types
Long vs. Short
Time of Day
Industry Sectors
Can Also Lead to Trade Management Refinements
60
Trade Management Refinement
If Win/Loss Size Ratio Lower Than Target, Consider

the Following: -

Quality of Setups/Profit Targets
Are Profits Being Taken Too Soon?

Particularly if Batting Average Still Healthy
61
Trade Management Refinement
If Batting Average Lower Than Target, Consider

the Following -

Quality of Setups
Are Stops Too Tight?

Particularly if Win/Loss Size Ratio Still Healthy
Are Profit Targets Too Aggressive?

Particularly if Win/Loss Size Ratio Still Healthy
62
Day Five (cont.)
Have group review prop report options, including Day Trade

Performance
Demonstrate how to download from Trades to Log
Review of CD Contents — Appendix H

Trader Interviews — Appendix I
Review Common Issues/Pitfalls for VCM Prop Traders
Review Download Directions in — Appendix J
Collect VCM Prop Trader Agreements
Seminar/Trading Lab Feedback Surveys:

2 Day Seminar Feedback Survey -
http://www.polldaddy.com/s/F8DE1310994E5798/
5 Day Training Lab Feedback Survey -
http://www.polldaddy.com/s/56B5269CBDA3F17D/
General Questions and Answers
63
Common Issues/Pitfalls
Risk management process and responsibilities
Focus on trading education vs. advancement

Weekly minimum, not target
Gross versus net P/L

How to access numbers through prop reports
How to estimate fees in advance
Over trading
Consider daily limits
Slow and Steady vs. Soar and Crash
64
Appendix A - Full Hot Key Configuration
25 Preferred Route Switch End
26 Switch Trading Window Home
51 Cancel Last Order Ctrl+R2
56 Cancel All Orders Ctrl+R0
58 Buy at Inside Bid Ctrl+R1
59 Sell/Short at Inside Ask Ctrl+R3
60 Buy at Ask + .03 Alt+R1
61 Sell/Short at Bid - .03 Alt+R3
62 Buy at the Market F9
63 Short at the Market F11

64 Bid 1 Cent below Inside Bid Ctrl+KeyLeft
65 Sell/Short 1 Cent above Inside Ask Ctrl+KeyRight
66 Bid 3 Cents below Inside Bid Ctrl+KeyDown
67 Sell/Short 3 Cents above Inside Ask Ctrl+KeyUp
65
Appendix B - Hot Key Terminology
ALT 1 – Buying FROM the ASK/OFFER and REMOVING liquidity

– buy the ask/offer
– buy it now
– buy it immediately
– hit the ask/offer
– take the ask/offer
– go/get long the ask/offer
– go/get long immediately
– go/get long now
– cover on the ask/offer
– cover it now
CTRL 1 – Buying WITH the BID and ADDING liquidity

– buy the bid
– bid for the stock
– bid for it now
– go/get long the bid
– cover on the bid
– bid to cover
– throw it on the bid
ALT 3 - Selling/Shorting TO the BID and REMOVING liquidity

– hit the bid
– sell/short short the bid
– sell/short it now
– sell/short it immediately

CTRL 3 – Selling/Shorting WITH the ASK/OFFER and ADDING liquidity

– sell/short the ask/offer
– get short on the ask/offer
– offer it out
– throw it on the ask/offer
66
CTRL right arrow - Selling/Shorting one cent/level ABOVE the inside ASK/OFFER
CTRL up arrow - Selling/Shorting three cents/levels ABOVE the inside ASK/OFFER

– offer it out one/three cent(s)/levels above/higher/up
– throw it out one/three cent(s)/levels above/higher/up
– sell/short it one/three cent(s)/levels above/higher/up
CTRL left arrow – Buying one cent/level BELOW the inside BID
CTRL down arrow – Buying three cents/levels BELOW the inside BID
– bid for it one/three cent(s)/levels below/lower/down
– cover it one/three cent(s)/levels below/lower/down
– throw it out one/three cents(s)/levels below/lower/down
Remember that all arrow key orders are ADDING liquidity
67
Appendix C - Sample Trading Plan
INTRODUCTION
This is a sample plan only, and is not intended to be used as a trading guide. It should
be used as a guide for the type of information that can be included in a detailed trading
plan. Depending upon the trader’s style and scope of plays, there may be greater detail
in a functional trading plan, and the specific guidelines will almost certainly vary con-
siderably. However, each of the following sections should be addressed in some form.
GOALS
To make an average weekly net return of 125% of my minimum weekly profit

target, while trading 225 days/year
To average one advancement level per month until Level 12 (at least) is reached
Tax percentage goals (consult with accountant)
OBJECTIVES
Overall batting average of 50% or greater

Overall win/loss size ratio of 1.5 or greater
Average fewer than 8 round trip trades per day
ASSUMPTIONS
Trading within the VCM Prop Trader Program Advancement Program

No overnight holds
No equities greater than $50 in price traded through Level 3
No equities greater than $100 in price traded through Level 6
68
TRADING ENVIRONMENT
Because of the wide variety of trading environments, no effort is made to provide

details for a specific setting, but rather to indicate the areas that can be ad-
dressed in this section.
Home versus trading room

Environment setup
# computers
# monitors
Television
Phone/fax
Networking
Hardware specifications
Trading software description
Stock scanning software
Market newsletter/website/chat room subscriptions
Trading screen setups
Daily sector charts
Intra-day sector charts
Sector universe charts – daily and intra-day
Watchlist monitoring charts
Trading/focus/market internals charts
Scanning charts
69
MARKET ANALYSIS
Perform the following at least every weekend:
Scan each of the following on daily, weekly and 180 minute charts:
Nasdaq Composite
S&P 500
Dow Jones Industrials
Major Industry Sector Indices
Banking Internet
Biotech Networking
Broker/Dealers Oil
Gold Semiconductors
Hardware Software
Healthcare Telecomm
Insurance Utilities
Review other market internals:

VIX
Put/Call Ratio 10 day moving averages
TRIN 10 day moving averages
Analyze significant trend lines and support/resistance areas for each of the above

Determine market/index/sector staging and bias
Review Briefing.com, Finance.yahoo.com or other market news sources for signifi-

cant economic news or earnings reports scheduled for the upcoming week
Consolidate any significant observations into market notes for the week
70
STOCK SCANNING
Weekly (Weekend)
Scan entire Personal Universe for Daily Setups and anticipatory Daily Setups
(those that may be setting up for later in the week)
Use VCM Scanner Pro to scan for setups favored for current market conditions
Develop list of all setups and anticipatory setups by daily setup type
(see Daily Setups)
Daily (Evening)
Check economic and earnings calendars for next day
Scan major indices (Dow, S&P, Nasdaq)
Check status of VIX and VXN
Scan major industry sectors
Determine bias for the next day
Scan all stocks from previous day’s watchlist
Scan all stocks on weekly setup notes
Use VCM Scanner Pro to look for daily setups in favored trade types
based on market staging and bias:
Sideways/basing: CDB/CAS
Up trend: VBS, Basing, RBI
Downtrend: VSS, Basing, GBI
Look for relative strength and/or exceptionally high volume during the last day
or two of trading
Use all of the above to develop a daily watch list for both long and short sides
Check earnings report dates for all watch list stocks
Note industry sector associated with each watch list stock
71
PRE-MARKET ACTIVITIES
Use Briefing.com, Finance.yahoo.com or other news source to review the following:

Business news
Economic calendar
Earnings reports
Upgrades/downgrades
Foreign markets
Scan Trade for Life ™ Daily Trading Letter for additions to watch lists
Log into Trade for Life ™ Live Trading Room
Scan all watch list candidates and develop final list of favorites for the day
Load long and short stock watch lists
Set alerts near entry points
Set up monitoring charts on trading page
Check for pre-market bias and overnight trading range
Search for potential opening gap plays

- Stocks gapping to support or resistance
- Stocks gapping against market
- Stocks gapping into NGB/NGS or GUS/GDS setups
- Pay particular attention to any watch list stocks that set up for
opening gap plays
Develop list of no more than five favorite opening trades

(long and short combined)
72
TRADING DAY ACTIVITIES
Keep long and short lists sorted by % change from open

Keep major sector indices sorted by % change from open
Record all trading details (entry points, exit points, lot sizes, time of day, type of
play, etc.) in VCM Trading Log throughout the day
During first 5-10 minutes:

No trade entries in first five minutes
After first five minutes:

Adjust all watchlist alerts for five minute highs/lows, if any set off
Focus on gap trade opportunities during first 30 minutes
Can enter one gap trade if appropriate set up

Position Entry Checklist:
Check for appropriate lot size and risk (see Lot Size/Trade Management)
Enter position with appropriate lot size
Set server stop order at stop price (optional)
Set alerts for points approaching stop and first target
Record trade in trading log
From 9:50 to 10:10:

Look for 10:00 Reversal Plays – enter no more than one
Look for stocks that gapped up and showed relative strength by not filling
gap when market did (or reverse for short side)
- Look for 30 minute entry as Breakout/Breakdown Play
Adjust all watchlist alarms for thirty minute highs/lows after 10:00 AM EST
Enter no more than one position during reversal period
Continue to scan for scalping opportunities in stocks turning on support/resistance

at reversal periods throughout the day
- Enter no more than one at any single reversal period
Continue to adjust alarms for open and watchlist positions
Evaluate all calls from Trade for Life ™ Live Trading Room for opportunities that
meet my trading criteria
Review Trade for Life ™ intra-day E-mail Alerts for trade opportunities
Continually monitor strong and weak sectors
Look for strongest stocks in weakest (due for rally) sectors (and vice versa)
73
From 11:15 to 1:30 (doldrums):
Scan for strongest stocks in weak market and weakest stocks in strong
market for potential market reversals
Scan for Basing Setups during doldrums
Only play noon reversals/breakouts if unidirectional market move (or very
tight market base) throughout the morning
After 1:30:
Look for Breakout/Breakdown Plays
- Showing relative strength/weakness to market
- Having based near high or low of day through doldrums
- Only take entries that hit after 1:30
Look for VBC/VSS and CDB/CAS plays at major reversal times
During last half hour of market:

Close all positions
- Consider tight trailing stop if trade moving in your direction
Daily Trade Limits –

No more than eight trades during the day
No more than one new entry at any single reversal time
No more than one reentry after a loss in a single stock
AFTER MARKET ACTIVITIES
Update VCM Trading Log for all trades

Transfer closed trades to Weekly Trading Log and Monthly Trading Log
Review all trades for the day, determining whether plan was followed to the letter
Review all stocks on watch lists, determining whether:
Any entries that should have been made were missed…and why
Any setups are still candidates for the next day’s list
Scan for tomorrow’s watch list candidates (see Stock Scanning)
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WEEKLY REVIEW ACTIVITIES
Backtest weekly trading using plan guidelines

Initiate blank Weekly Trading Log and record results for all trades if
managed strictly according to Trading Plan
Compare results with actual
Review performance records of recent trading by trade type and entry time
Consider any adjustments to Trading Plan
Use backtest technique to test Trading Plan modifications
Perform market analysis for next week’s trading (see Market Analysis)
Perform stock scanning for next week’s trading (see Stock Scanning)
LOT SIZE/TRADE MANAGEMENT
Lot Size Assumptions:

Each trade will be sized so that the financial risk, as calculated using the difference
between the actual entry and the original stop, does not exceed 1/4 of the
daily loss limit for the current advancement level
- During Level 1 only, the risk for individual trades may need to be
as high as 1/3 of the daily loss limit
Trade Selection:
Limit trade types to those defined in Trade Types section
Risk/reward ratio based on target/stop areas should be 2:1 or greater
Trade Entry:
If making an anticipatory entry with partial size prior to the full trigger price for
the setup, add liquidity with the order whenever possible

Stops:
Stops should always be determined prior to entering trade
Establish stop order at stop point once trade is entered (optional)
Set alarm for point halfway between entry and stop
- If alarm is hit, evaluate trade and reset alarm prior to stop point
Set alarm for point approaching first profit target
After two bars close above previous high, move to bar by bar trailing stop in
primary time frame
The trailing stop will be 1 cent below the low of the last completed bar
75
Profits:
At least half profit will be taken nearing a predetermined point of

support/resistance, which must represent at least a 2:1 risk/reward ratio
If trading large enough size to take profits in halves or thirds, take first profits after
a price move equivalent to the distance between the entry point and the
original stop (R of 1)
Take final profits if any combination of the following occur:
Extended 1, 2 or 5 minute bar in your favor
Volume spike after extended run in your favor
Approaching price support/resistance area
Price extended from the 20 MA and color reversal
R of 3 has been reached
The final portion of the trade (if trading in thirds) can be continued with a 20 MA
trail if there is potential for extended run
- Stop point is bar closing below (above) 20 period MA in primary
time frame
MONEY MANAGEMENT
Each trade will be sized so that the financial risk, as calculated using the difference
between the actual entry and the original stop, does not exceed 1/4 of the
daily loss limit for the current advancement level
- During Level 1 only, the risk for individual trades may need to be as high
as 1/3 of the daily loss limit
Do not enter more than one new trade of similar type in the same reversal period
Stop trading for the day if daily loss limit is reached
Whenever profit equivalent to daily loss limit is reached, do not allow P/L to go
negative for the rest of the day
Whenever profit equivalent to twice the daily loss limit is reached, take profits and
stop trading for the day
Stop trading for the week if trade losses reach three times daily loss limit
Budget for weekly living expense draw down of half of net trading profits
76
DAILY SETUPS
VCM Buy Setup/(reverse for VSS) Candidates

Bullish picture of power
Three to five clean bars down with consecutive lower highs
At least one bottoming sign
In area of price support OR
After 50% retracement in trending stock
Volume increase during final day
Climactic Decline Buy/(reverse for CAS) Candidates

Five or more clean bars down
Consecutive lower highs
Consecutive red candles
Above average volume last two daily bars
Extended away from 20 MA
NRB, GBR, WRB or Bottoming Tail
In area of price support
Basing (for Breakout/Breakdown Candidates)

Five or more narrow range daily bars consolidating at point of support/resistance
Look for tightening consolidation against consistent high (low)
Check intra-day charts for confirmation
Look for relative strength (for breakout) or weakness (for breakdown) to market
Look for supportive pattern (such as VBS) in weekly chart
Wide Range Bar Buy (reverse for Sell) Candidates

Larger than average daily bar with no more than 10% of daily range in either tail
At least second consecutive red bar
Volume increasing near end of wide range bar
Price void within wide range bar – little S/R
Red Bar Ignored (reverse for GBI) Candidates

Larger than average daily breakout bar followed by narrow range bar
Highs of two bars near equal
Entire range of narrow range second bar in upper third of large first bar range
Above average volume on large bar, quieter volume on narrow range bar
Clear air above
Breakout/down from area providing strong S/R
77
TRADE TYPES
VCM Buy/(reverse for Sell)

VBS/VSS Setup in time frame traded
Three to five clean bars down with consecutive lower highs
At least one bottoming sign
In area of price support OR
After 50% retracement in trending stock
Volume increase during final bars
Enter above high of previous bar
Initial stop below entry bar’s low
Target approaching prior pivot high
Climactic Decline Buy/(reverse for CAS)

Climactic Buy/Sell Setup in time frame traded
Five or more clean bars down
Consecutive lower highs
Consecutive red candles
Above average volume last two daily bars
Extended away from 20 MA
BT, NRB, NB, GBR, or WRB
Enter above high of previous bar
Initial stop below entry bar’s low
Target approaching previous consolidation area or 40-50% retracement
Breakout/(reverse for Breakdown)

Five or more narrow range daily bars consolidating at point of support/resistance
Look for tightening consolidation against consistent high (low)
Check intra-day charts for confirmation
Look for relative strength (for breakout) or weakness (for breakdown) to market
Enter above high of recent basing range
Initial stop below low of recent basing range
Target approaching resistance area or 2:1 reward/risk
Bull 180 Play (reverse for Bear 180 Play)

Wide range red bar on primary time frame
If next bar takes out high of WRB, enter above high of WRB
Stop below entry bar’s low
Use 8 period MA trail for target
78
Red Bar Ignored (reverse for GBI)
RBI setup with second bar in top third of first WRB
WRB should be igniting bar out of base
Enter above high of bars 1 and 2
Initial stop below bar 2
Use 8 period MA trail for target
Novice Gap Buy (reverse for Sell)

Stock should be extended to downside on daily, with WRB on last day
Stock gaps down the next day by 1% or more, to area of support
Buy above high of first five minute bar (if showing relative strength to market)
If gap right to support and primary MA, then use 2 minute entry
If initial move is to downside, look for 2 or 5 minute VBS at 10:00 reversal
Initial stop below low of day (low of first bar)
Target is prior day’s low or 10:00 reversal period, whichever comes first
Gap Up Surprise (reverse for GDS)

Stock should be extended to downside on daily, with WRB on last day
Stock gaps up the next day by 1% or more (pro gap)
If gap above intra-day support area, then use 2 minute entry
Target is prior day’s high, intra-day resistance, or 10:00 reversal period, whichever
comes first
Continuation Gap Up (reverse for CGD)

Stock should be in extended base on daily
Stock gaps up the next day above the high of the base (barely)
Use 8 period MA trail or pivot trail for target
If using pivot trail, wait until prior high taken out before moving stop
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CONTINUING EDUCATION AND DAYS OFF
Take one half day (Friday) off every week, and one full day off when weekly goal
is already met AND three consecutive daily goals have been met
Take one day off after three consecutive losing days
Continue professional education with:

Books/Journals (1/month), Seminars/Conferences (2/year), and
Live Trading Room (but with breaks)
80
Appendix D – Sample Trading Universe
Biotech (BBH)
GILD
ABI
SEPR
MLNM
AFFX
HGSI
Broadband (BDH)
QCOM
MOT
GLW
BRCM
NT
TLAB
JDSU
CIEN
PMCS
B2B Internet (BHH)

CKFR
ICGE
ARBA
AGIL
Internet (HHH)
EBAY
YHOO
TWX
ETFC
AMTD
RNWK
81
Internet Architecture (IAH)
CSCO
DELL
HPQ
IBM
SUNW
BRCD
FDRY
JNPR
NTAP
Transportation (IYT)
EXPD
CAL
JBHT
AMR
LUV
JBLU
Oil Services (OIH)

HAL
RDC
BJS
NBR
HAN
Pharmaceuticals (PPH)
MRK
BMY
SGP
FRX
Regional Banks (RKH)

JPM
USB
WFC
BAC
BK
FITB
KEY
82
Retail (RTH)
WMT
HD
LOW
WAG
CVS
BBY
Semiconductors (SMH)
TXN
INTC
AMAT
ADI
LLTC
KLAC
ALTR
NSM
MXIM
SNDK
Software (SWH)
MSFT
ORCL
ADBE
CA
INTU
BMC
SYMC
CHKP
NUAN
OPWV
Telecomm (TTH)
T
VZ
S
BCE
Q
LVLT
83
Utilities (UTH)
AEP
WMB
ED
DUK
PCG
SO
Homebuilders (XHB)
ETH
LEG
TOL
MDC
RYL
KBH
LEN
HOV
BZH
Financials (XLF)
BAC
JPM
WFC
USB
SCHW
Energy (XLE)
WMB
CHK
EP
CNX
SE
NBR
84
Appendix E – Starter Trading Universe
Biotech (BBH)
GILD
Broadband (BDH)
QCOM
BRCM
TLAB
JDSU
PMCS
Internet (HHH)
EBAY
YHOO
AMTD
Internet Architecture (IAH)

CSCO
DELL
SUNW
BRCD
JNPR
NTAP
Transportation (IYT)
JBLU
Semiconductors (SMH)
INTC
AMAT
LLTC
ALTR
SNDK
85
Software (SWH)
MSFT
ORCL
ADBE
Telecomm (TTH)
LVLT
Financials (XLF)
SCHW
86
Appendix F – Practice Trading Plan
Build long and short list and look for longer term trades
$1-2 risk per trade

Establish $1 risk fairly early
Can add up to $2 risk if appropriate
Trailing stops – pivot points with confirmation on 1 minute chart

- The shorter the time frame, the more practice with stops
- The longer the time frame, the longer the positions will last
Use hard protective stops
Use advance limit orders, or OCO, for next profit point
Profit plan:
- 1/3 at 1:1 return
- 1/3 at 2:1 return
- 1/3 with trailing stop
Move stop to no worse than BE after first profit target
Set alerts on both sides for all positions
Try to have open positions on both long and short sides of market
Restrict universe to Starter Trading Universe (Market Watch 5), with addition of gap
candidates
Will not be too concerned with patterns, so encourage the group to find trades they like
- Emphasis will be on practice following trade management guidelines and
using new order types
87
Appendix G – VCM Trade Tracking Log
88
Appendix H – Contents of Course CD
Sample Trading Plan
Sample Trading Universe
Starter Trading Universe
VCM Trading Log
Orbis Pro Trader User’s Guide
89
Appendix I – Trader Interviews
VCM Prop Trader Interview – July 2007
Can you provide a brief overview of your trading history?
I first started when I was 15/16 years old, back in 2000. The trading I did consisted primarily
of day trading and some swing trading for 8 months. There was one particular trade that took
me out of the game. I bought ELY (Callaway Golf) at 19.27 and 19.50 on 6/07/2001, and sold
at 14.25 on 6/08/2001
It was an expensive lesson to learn from the markets. With that being said, it was one of the
best lessons I’ve learned firsthand from the markets. To this day this trade has been etched into
my mind forever, and I’m generally strict with my stops as a result.
I paper traded on daily charts up to 2005 on and off in-between.
August 2005 I started day trading as a prop trader.
I started off scalp trading – Mostly LU (Lucent). I did this for about 9 months successfully.
Lucent however had a merger announcement and it never quite traded the same after that – so
I decided to move over to chart trading, with permission from the firm.
I chart traded for about 3 months, working on and developing my own trading system during
this period before I was profitable. At that point it was desired by the firm that I trade highly
liquid stocks for smaller moves but with bigger size.
I started trading MOT mainly. I traded it for 3-4 months before I was consistently profitable.
By this time, the NYSE Phase 4 Hybrid-Electronic Market was implemented, and being that I
relied heavily on reading the tape and viewing 90% of my information through level 2, it be-
came exponentially more difficult to trade MOT the same way I did.
Shortly after this, I met Oliver and my new journey began.
90
When did you start using the VCM trading methods?
I started mixing VCM trading methods with my usual trading at the beginning of
March 2007
At the beginning of April 2007 I started using VCM trading methods exclusively.
At what level in the Trader Advancement Program are you now trading, and
how long did it take from when you started the program to reach that level?
I’m currently at level 5 in the Trader Advancement Program. I started this pro-
gram on 5/14/2007 and officially obtained level 5 on 6/20/2007.
How many trades a day do you typically take, and at what times of the day?
I average between 6-8 trades per day, and on rare occasions as much as 10-12
trades, sometimes as low as 3-4 trades.
In the first 30 Minutes I focus on the gaps. This is my most profitable time period.
After this, I focus on the other setups, RBI/GBI, 20MA plays, 200MA etc…
Once the lunchtime period hits (11:15am – 2:15pm) I prefer not to trade. I gener-
ally don’t do well during this time, and as such - I would usually log off during
this time period and review my morning trades, and do something constructive
and rejuvenate for evening trading. I would log in around 1:30-1:45 and begin
sorting my watch lists for evening trades.
For the evening I focus on the usual setups and work from my sorted watch lists
(things that have the Picture of Power/Weakness) - whichever ones I like best at
the time.
91
What percentage of your trades are winning trades?
It’s hovering between 45-50% on average.
What percentage of your trading days are profitable?
Currently about 70%
What is the typical size (dollars) of a losing trade for you?
I try to limit my losses as much as possible, and as such, each loss I limit to about 10%
of my daily stop loss. So currently, I would risk $22-$28 per trade.
What is the typical size (dollars) of a winning trade for you?
My winning trades typically average about 2x more than my losing trades, $50 in this
case. Some trades make more and some less – but it averages out about twice as much
as my losing trades.
What is usually your primary time frame for your trade setups?
My favorite time frame is the 5 Minute. On mornings however, depending on the type of
gap, I might go to the 1 or 2 Minute charts for my entry, along with a few trades on oc-
casion where I see it necessary to fine tune the entry on a smaller time frame.
What are your favorite types of trades?
Gaps, Early RBI/GBI’s that are coming from the first phase of a breakout, or those that
occur after a new move ignites (I tend to stray away from RBI/GBI’s that are extended
from the 20MA), and the 20MA plays. My favorites are always the setups that trigger
from Narrow Range Bars (NRB) – this provides me with a small stop, a good profit po-
tential, and they are generally more explosive.
92
How do you typically trail your stops in a position?
I use the bar-by-bar trailing stop the majority of the time, and take profits at the targets
I pre-determine before entering the trade on the way up or down.
If a trade moves far and fast in my direction after already making a good move (usually
creating a large green or red bar with some distance from the 20MA) - I would typically
take most or all of the position off the table at the first sign of slowing momentum. Also
depending on how it does this, I might decide to move my trailing stop down to a lower
time frame instead to ensure I lock in the majority of profits if it reverses, but still give it
a chance to move further (the trailing stops are very tight if I do this).
Do you restrict your trades to a specific stock universe, price range or average daily
volume requirement?
I restrict most of my trades to stocks trading between $20-80, and 5-7 million shares (or
more) per day averaged over 20 days. I have about 35 NASDAQ stocks in my usual list
that meet these requirements.
Outside of my usual list of stocks, I would also have my list of stocks from the daily
charts that meet these requirements (NYSE or NASDAQ), sorted out for a long/short
bias on them. I would look at these stocks intra-day for trends.
I make exceptions for gap plays, providing there’s enough liquidity and it doesn’t spread
much.
Do you read the VCM newsletter or listen to the live trading room?
Absolutely! Both are excellent resources, and I’m especially fond of the trading room.
Paul’s intra-day comments are great, the aftermarket lectures he gives are very helpful,
and the ability to ask questions and get into the mindset of how a professional trader
thinks and analyzes the setups – what they look for, what they like and don’t like etc…
is invaluable.
93
How often do you get your trades from either of those sources?
Fairly often.
If I don’t have something I’m currently looking at, or no potential plays on the immedi-
ate horizon, as long as something is called out in the chat room – I’ll definitely take a
look.
If I’m not in a trade and even if I’m looking at something – I’ll take a quick look at
trades called out, and whichever one I have more reasons to take the play based on
various factors, and which I like more – I take that trade.
I don’t take plays from anyone blindly however. I simply take them as “Ideas” of things
to look at, and then make them my plays if I like it. What I mean by this is, no matter
how good anyone says a trade is, I won’t take it unless I have my own personal reasons
why I want to take the trade, and knowing how I plan to manage the trade based on my
trading plan.
What change in your trading plan or approach made the biggest impact on your
profitability?
My profitability has had the biggest impact once I started paying attention to multiple
time frames.
Taking a great long setup on the 5 Minute might fail if the 15 Minute or hourly is too
extended above their 20MA for example, or a 2 Minute setup failing due to a D20MA
on the 15 minute, or a 200MA on the 5 Minute for example. What I look for ideally, are
trades that operate in a space where there aren’t many obstructions, where things are
in its favor.
Trades won’t line up perfectly, and there will always be obstructions, whether minor or
major – but the more things I can line up in my favor, the better the odds of the trade
working. I have a 2-5-15-hourly-daily chart up for the stock I’m trading at all times.
I usually trade on the 5 Minute charts, so I’ll generally observe the battlefield all the
way up to the hourly chart, and glance at the daily just as a quick reference.
94
What else have you added to your trading approach that has helped?
Another huge factor that has affected my profitability, is the way in which I record
my trades. I modified the VCM trading log created by Malcolm – to cater to things I
would like to keep track of, and I also took Saul’s suggestion to take two snapshots of
each trade – the entry and the exit.
The trading log provides me with valuable statistics on my trading, and the snapshot
journal I keep – I can review my trades, and see how all time frames were setup at the
point of my entry, how the market was, along with many other things. This process of
recording the trades serves as a valuable learning tool for me.
The third thing will have to be Oliver’s events. Every time I see the presentations it’s
different. It’s different because each time I see the presentation, it’s from the perspec-
tive of a slightly more experienced trader, and as such I understand things better each
time. The education of a trader never ends.
Any final words of advice for other VCM Prop Traders?
I would highly suggest keeping a trading journal of your discoveries (even things you
knew already but you’ve discovered a deeper meaning for!).
The trading log from Malcolm is extremely valuable – if you record the necessary in-
formation, you will be able to view various statistics about your trading. This in turn
will allow you to view areas of your trading that require your attention, to keep track
of your most frequent trading mistakes, and what you do best at.
The most valuable learning experience will come from your trades – specifically your
losing trades. Be sure to review your trading, by doing this frequently, it reduces the
chances you will deviate from your trading plan by any great extent.
I’m a big believer of small losses. Stick with your stops! You will generally beat your-
self up more for failing to take a stop and suffering a huge loss, than you would if you
were stopped out then the trade goes in your favor. More often than not, taking stops
save me a great deal of money, much more overall than the trades that came back in
my favor and went my way after being stopped out.
95
VCM Prop Trader Interview – August 2007
I started trading after taking Oliver’s 7 day Master Trader course on April 14th
2007. Prior to that, I traded my 401K account as an amateur on an irregular basis
losing money left and right! Being inexperienced and with poor knowledge, I did
very poorly and have lost a lot of my hard earned money. I realized I needed men-
toring and guidance before I lose it all. Learning about Oliver Velez and joining this
program that enforces discipline in addition to providing knowledge and mentorship
was the best course of action I have taken to improve.
On April 23 2007, after completing the 7-day VCM Master Trader course.
I am currently trading at level 5. It took me 3 months and 9 days to reach that level.
Level 1 to 3 took the longest for me. As time progressed it took me less time to go
from 3 to 5 as I gained more experience. For example: it took me 1 month and 5
calendar days to reach to Level 2; 1 month and 9 calendar days to go from Level 2 to
Level 3. As I gained more experience, it took me 10 calendar days to go from Level 3
to Level 4, and qualified for Level 5 after 7 calendar days.
Currently I am averaging about 15 trades per day.
This number, however, has not been consistent and it varies a lot based on the type
of trades I made. For example, when I trade 5 or 15 min charts, I do fewer trades,
sometimes only 3 and 4. There were days I traded as a scalper (lower time frames)
when I made significantly more trades.
96
Most of my trades I take them in the morning and I usually stop during the lunch time
(noon until 2:15 pm). . I have experimented trading at lunch time and I found out I
don’t do well, so now I avoid trading during those hours. If I see the market is very
active in the afternoon, then I trade during those hours. After my trades I take that
time to update my trading logs and review my trades.
The number varies, but in my last statistics for the month of July I have an average of
68%.
The minimum I had for July was 50% and the maximum was 86%. I had 100% but
these were days when I made few trades only (1 to 5 trade) and did not consider them
in the calculation because they represent a small sample data.
My last statistics for the month of July I have an average of 80% gross (4 losing days
in 20 trade days) and 70% net (6 losing days in 20 trade days).
This number however, has not been consistent. In June for example, I only averaged
38%; in May 58%, and in April 50%.
This number changes based on the level I am. In Level 5 I try to keep the trade risk
for any single position under $50 as a general rule. However, when I am scalping and
trading lower time frames, I keep it much lower than that.
Around $30. However, if I am scalping, the number is usually lower.
Usually 2 and 1 minutes when scalping, and 5 and 15 min for non-scalping trades.
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Gaps, breakouts, and VBS/VSS (and like Oliver, NRB are my favorite reversal signs
because they tend to be the most powerful!). I noticed that I like to go long more than
shorting. I still have to experiment with other types of trades that have been taught to
us but I haven’t done them yet (e.g. Bear/Bull 180 among others)
Usually the VCM bar by bar method, the 20MA and pivots, but now I am starting to use
the 8MA after the trade matures.
Do you restrict your trades to a specific stock universe, price range or average
daily volume requirement?
Not yet, but I intend to as I build more expertise. Usually I trade the stocks that are
posted as bullish, bearish, and gappers every morning in the trading room by Paul
before the market opens. After the market opens I scan and monitor those stocks during
my trading day. I haven’t built a list of favorites stocks yet but I will as I learn which
type of trade and time frame I am best at.
Definitely!
Very often! (every day I trade)
profitability?
Learning to take fewer trades until I develop more winning trades, especially in the be-
ginning. After that I can increase the number of trades. Also taking smaller stop losses
until I develop more experience and improved results. I have noticed that personally if
I focus on making smaller profitable trades but consistently rather than the big home-
runs, I can do better at the end of my trading day. Also waiting for higher probability
trades where there are more reversal signs present.
98
After taking the online course several times, I was reminded that I should not antici-
pate the move of the stock but take the trade after the stock confirmed what I antici-
pated. This I added as mandatory in my trading approach.
In addition, I started paying more attention to the market, (particularly the QQQQ
when trading NASDAQ stocks) before I take my trades. I try to be in synch with the
market. Lately I have added to my trading approach the use of the 8MA as a trailing
stop.
I am still learning and making mistakes from which I am learning even more, but I can
share what has worked for me so far:
I experimented a lot and advise all beginners to do the same until you learn what you
are good at and what you like. I am still experimenting with the all the different types
of trades since I haven’t done all of them (eg. Bear/Bull 180, RBI/GBI among others).
As a beginner, any trading plan I have during a week is likely to be very dynamic and
change as I experiment with the different types of trades and trading Levels. As time
progresses, modify your trading plan to give you new different options that will give
you enough experience to learn what you are good at, but don’t know it yet. This has
worked for me.
I continue to give myself this opportunity and experience all the different types of
trades that have been taught to us. Only then I will know which type of trades I like to
do more and am naturally better at. For example, I was terrified at the idea of trad-
ing fast moving stocks (especially GAPS in the morning) or scalping using lower time
frames, but forced myself to do it after several weeks. I found out to my surprise that
over time I am no longer afraid of these types of trades and enjoy them. Also In the
beginning I only did VBS/VSS before doing breakout plays. The idea of doing all the
plays I learned right after the 7-day course was too overwhelming for me, so I took my
time to try each type at different stages of my trading learning curve, as I felt ready.
Furthermore, I figured my chance to make mistakes and learn from them are better in
the early stages when I am not as concerned about making money for a living. For ex-
ample, I tested the platform whenever I felt the need to, even if it meant losing money:
there was one day when I was in Level 2 where I lost all the profits I made that day
and ended at a loss because I was experimenting and testing the platform with using
the S-STOP and the hot-keys.
99
VCM Prop Trader Interview – October 2007
I have been trading for over a year, but I have been trading under the VCM philoso-
phy since June 15th of this year.
At what level in the Trader Advancement Program are you now trading, and how
long did it take from when you started the program to reach that level?
I am currently at level 6, and have completed the first of two weeks towards my next
advancement to level 7. It has taken about 3 and half months to achieve this point.
Anywhere from 5-20 trades to day. I usually trade from the opening bell to 10:30,
never any later.
Anywhere from 40 to 60 percent.
55%
No more then 150.00 dollars when trading 1000 share blocks
Anything over 500.00 dollars when trading 1000 share blocks
100
I focus on using the 5 minute and 2 minute charts for my entry and exits but also
look at the 15min, hour and daily for long term bias of the stock.
My favorite types of trades are novice gap ups and downs.
When you enter a gap trade, is it always over/under a 2 or 5 minute high/low, or

do you sometimes wait for a later entry to set up?
When I enter a gap trade, let’s say it has gapped down more then 50 cents pre mar-
ket, and it has clear a major support area, I will decide whether to short or long the
stock when the market opens and the stock either breaks down under the first 2 min
low or breaks out above a two min high, in either position I use a 10 to 15 cent stop.
When using a trailing stop in a position I use a few different options. I will usually
use prior highs and lows of the current or previous days, any other prior support or
resistance areas, or if playing an up trend anytime the stock violates the 20ma and
vice versa for shorting a stock.
101
Can you clarify what you mean when you say you sometimes use the highs and
lows of the previous day for a trailing stop?
When using a previous days high or low in relation to a previous stop, I will stop out my
position if a stock that I am shorting breaks out over yesterday’s high, the same applies
when longing a stock. But in more trades then not my stops are a lot smaller. My trad-
ing plan centers around taking small losses and multiple attempts on the same play,
since the commissions are cheap.
I have my daily stock lists. This consists of stocks that I am very familiar with their
trading patterns. As far as price range and volume, I normally like stocks between 80
and 100 dollars, any volume over 700,000.
Regarding your daily stock lists, is the list constant from day to day, or do you scan
for a new list each day?
My core list rarely changes. It consists of maybe 5 stocks that I know in and out. On a
daily basis I scan pre market gaps, I look at stocks in the news, stocks from chat room,
but in the end everything comes down to technical analysis.
I read and listen daily.
Anywhere between 15 and 30 percent.
102
profitability?
The biggest impact on my profitability was simply sticking to my trading plan. For me
that’s a scalping plan. Learning to take a small loss and move on. And lastly learning
to trust the trade.
So your trading plan is primarily scalping, and you are through trading one hour
into the market. What is the duration of your typical trade, and do you usually
trade multiple positions at the same time?
Well, my trading plan is the following when I scalp stocks: I enter single positions
(even though I am preparing in the near future to do up to 2 to 3 positions), I enter my
position as early as seconds after the bell if a certain stock looks extremely weak or
strong, knowing I may only hold this position for 30 seconds or if my stop is triggered.
Now, on the flip side, if the stock behaves the way that I have predicted, I will hold it
until it hits a point that I have mapped out on the chart. This could be anywhere from
30 seconds to a few 5 minute bars. I am currently trying to hold stocks a bit longer
due to the recent success I have been having, trying to stay with the 3-5 bar movement
that most stocks follow in normal market conditions.
I have had to learn to forget about previous days but to analyze each winning and los-
ing trade, what made them work and what didn’t.
Yes I have two things:

One should never get too greedy when trading.
Second is that traders must be persistent even in the face of failure.
103
VCM Prop Trader Interview – April 2008

I traded stock options for about 3 years on and off. This was really just gambling
on news, newsletters, and Investools. After losing a substantial amount of money, I
decided to seek professional help from VCM at the recommendation of a friend.

I took my first VCM trade on 8/01/2007.
It took me almost six months to reach level 8 where I have been for the last two
months—eight months total.
Generally I take about five to ten trades a day. However, when the market is slower
or choppy, I have more stop-outs and therefore take more trades.

40% (2008 average)

64% (2008 average)

$50-$150

$150-$400
What is usually your primary timeframe for your trade setups?

5 minutes

Break downs

Once I reach a target, I’ll trail it by 5 minute bars.
104
Here’s where I’ve experimented quite a bit. I started out by playing everything
under the sun, then I focused only on the Nasdaq, now I mostly play gappers. Most
stocks I trade now are between $18-$90 and at least one million shares a day in
volume.
When you say you trade gappers on a five minute timeframe, are you often
entering right off the first five minute bar, or do you wait for a later setup to
form on the five minute chart?
I wait for setups on gappers after 15-20 minutes after open. I’ve experimented
with entering after the first 5min bar, but usually my nerves can’t handle it or my
stops are too tight for the volatility. I plan to continue experimenting with earlier
moves since those seem to have the best payout when the work. I’ll have to wait
until my nerves can handle it though. For now, I’m working on building a plateau
of success before I strive for higher goals to allow me more time to digest. I still
have several bad habits I’m working to rectify before I increase my risk.
I occasionally read the newsletter. I used to participate in the live trading room,
but I wanted to find my own way. While Paul is obviously a spectacular trader
and a great asset to both VCM and new traders, I realized that his trading style
is not conducive to my personality. I have learned an intense amount from Paul
during the 6 months I listened to him trade, but I wanted to develop my own style.
However, I could not have done any of this without his direction, experience, and
knowledge. I find myself aspiring to achieve his calmness during the trading day.
The most ironic thing is that my style of trading is becoming more and more similar
to Paul’s even though I don’t listen to him. I guess his lessons have really stuck. I
do plan on participating in the room again in the near future.
Never, at least not in the last few months.
105
What change in your trading plan or approach made the biggest impact on
your profitability?
Taking smaller risk per trade. Through levels 1-6, I would take my entire maxi-
mum share size. This would cause my account and more importantly, my emo-
tions, to be very volatile. Taking smaller positions allowed me to take more
trades and forced me to make more money with fewer shares; therefore improving
my accuracy. This was challenging as I had to lower my expectations for imme-
diate and faster profits, but was rewarding since my progress was more linear and
steady.
I try to always have a hard stop in place. I find that if a trade moves against me
without a hard stop in place, I have a hard time taking my mental stop, especially
when it has moved significantly from where I was supposed to exit.

I, by no means, consider myself a successful trader yet and feel awkward filling
this interview out. It might be a little premature to seek my advice, but I hope my
words have offered some encouragement.
I would say that experience is your friend. I have traded over 2 million shares
since I started with VCM. Take as many trades as you can and learn from them.
Like many things in life, going through the motions is necessary to get real value
from a lesson, even if that means making known mistakes. The key is to learn
from those mistakes and making efforts to correct them. Once you make the mis-
take and pay the consequences, you’re more likely to remember what NOT to do
as opposed to someone telling you how you shouldn’t do it. VCM is paying your
way to make these mistakes and therefore learn, but if you worry too much about
making profits, your learning curve will undoubtedly be wider and longer.
106
Appendix J – Download Instructions
TO DOWNLOAD THE VCM TRADER PLATFORM, USE THE FOLLOWING LINK:
http://www.orbisfn.com/vcm
TO DOWNLOAD THE PLATFORM FOR THE LIVE TRADING ROOM, USE THE
FOLLOWING INSTRUCTIONS:
Velez Capital Management’s

Trade for Life TM
Live Trading Room
Thank you for enhancing your trading career with Velez Capital Management by signing up for our live
trading room. You may access the room anytime you like while a member. Our moderator is generally
talking between 9:00 a.m. and 4:30 p.m. EST, but it is best to tune in early in case there is something hap-
pening that morning. The moderator will be talking as well as typing, so make sure your sound system on
your computer is working.
The moderator will be giving written comments and talking throughout much of the day. In addition you
will find the camaraderie of chatting with other traders and sharing experiences. There is market commen-
tary, plays given in real time, analysis of plays, educational comments, lectures, and question and answer
times.
The material presented to you will change the way you think, and remove most of your prior notions about
the stock market.
Now that you have enrolled, let me welcome you to the inner circle of professionals.
107
DOWNLOAD THE ROOM
You will need to install the software needed to have the best chat room service capabilities on your
computer. The following link will walk you through the installation process…
1. Go to this link: http://www.vcmtrading.com.

2. Near the top right hand corner you will see the “VCM Traders Log In”
3. Click on that to be taken to the log in page. Here is where you will log in. If you
are a VCM Proprietary trader, use you User ID and password you currently use to log
in to Prop Reports. If you are a paid subscriber or on a free trial, use the password
you selected when registering. If you forgot the password, there is a “Forgot your
Password” link that will send your password to your email.
108
4. Once logged in, click on the ‘services’ tab
5. Here you will find information about your services account, and the links for whatever rooms are avail-
able to you based on your subscriptions. Click on the ‘Connect to Proprietary Trading Room’ button. You
will be taken to a page that will allow you to ‘Connect’. (There is also an option for a ‘Java Link’ which
should only be used if you are not allowed to install software on your computer). When you click on this
for the first time, you will be prompted to download and install the software. While following the instruc-
tions you will be asked for the following information:
Relay Server – Relay5
Room – VCMTradeForLife
The above must be entered EXACTLY as shown (capitals matter).
6. For clients running two Hotcomm rooms at the same time, (such as running the VCM Proprietary Trad-
ing Room and the VCM NewsRoom at the same time) you will need to run the rooms on different ma-
chines OR use the STANDARD/PRO version of Hotcomm which will need to be downloaded here –
http://www.hotComm.com/ftppub/hcsetupx.exe .
This will provide you with a seven day trial for free. If you wish to keep this version, you will need to pay
for the standard/pro version of the software. Instructions and rates can be found at
http://www.hotcomm.com/downloadHC.asp.
If are or become a paid subscriber to the VCM News Room, email services@vcmtrading.com to request an
unlock code to keep the license for the standard/pro version which lets you run two rooms on one machine.
7. Here are some helpful tips on using the room.
http://www.hotcomm.com/guide/CL_help.asp
109
TO DOWNLOAD THE PLATFORM FOR THE CUSTOMER SUPPORT
ROOM, USE THE FOLLOWING INSTRUCTIONS:
The following will provide you with directions for accessing the Velez Capital
Management Customer Support Room. This online room will be available for any
VCM traders requiring assistance with their trading platform or account between
the hours of 8:30 AM and 4:30 PM Eastern, Monday through Friday.
When entering the room, please be prepared to type a brief statement of your
problem. One of the assistants monitoring the room should assist you shortly.
You should also be ready to provide the assistant with your phone number in case
the issue is more easily addressed over the phone. Please be aware that you will
need to exit any other HotComm room, such as the Live Trading Room or the
Lecture Room, in order to access the Customer Support Room.
Please choose one of the following procedures in order to obtain the best
learning experience possible.
1. To access the room, we recommend that you download the full version of
the VCM Customer Support Room. This is the same software that we use for our
Trade for Life™ Live Trading Room, and will create a shortcut icon for the room
on your desktop. This will provide you with crystal clear reception and a constant
connection. To do so, please follow the VCM Customer Support Room Download
instructions below.
2. Alternate method – If you are unable to download software because you are at
an alternate location, you may also log in with the following link – no downloads
required -however, this is a Java application which may disconnect on occasion.
http://relay9.ezpeer.net/im-live/VCMSupport.htm?-rm=VCMSupport
For either method of access - You will simply be asked to supply a name that
will appear as your login name. YOUR LOGIN NAME SHOULD BE YOUR
VCM ACCOUNT NAME. This will help our staff in assisting you with any ac-
count issues. The password for the room will be “support”
The room will be open from 8:30 AM to 4:30 PM Eastern, Monday through Fri-
day. If you try to log in early and receive a message saying that the room is not
available right now, you know you have registered properly and will be able to
access the room at the proper time.
110
DOWNLOAD INSTRUCTIONS:
VCM Customer Support Room
1. Go to this link: http://www.hotcomm.com/ftppub/hclsetupr.exe

2. Click ‘Run’ when the box comes up asking “Do you want to run or save this file?”
3. Click ‘Run’ again if any security programs ask you again.
4. Read the Terms of Use and click ‘I Accept’ if you do. You must accept to continue.
111
5. The program will begin installing. Answer YES to the question: ‘Would you like to add short
cuts to your desktop for rooms that you connect often? After you have created one, just
cancel if it asks a second time.
6. The software will continue installing and it will ask you for the following information:
Room – VCMSupport
The above must be entered EXACTLY as shown (capitals matter). Click finish on the final dialogue
box.
Once installed all you need to do in the future is click on the icon that was placed on your desktop.
You should use your VCM Account Name as your ID for the room. If you have previously down-
loaded the room and used a different ID, you can change your ID after entering the room by left
clicking on your ID at the bottom of the page and specifying a new name.
Your password for the VCM Customer Support room is “support”.
112
DOWNLOAD INSTRUCTIONS:
Velez Capital Management’s
TM
Trade for Life
Training Room
The following will provide you with directions for accessing the Velez Capital Manage-
ment Training Room. The VCM Training Room is available only to VCM Proprietary
Traders. The purpose of the room is to help new traders with the transition from the Live
Trading Lab to the VCM Proprietary Trading Room. The Instructional Room will have
fewer trades per day than the Proprietary Trading Room, but will spend more time review-
ing the set up, entry, exit and trade management for each trade. There will be daily exam-
ples of trades that are stepped through on a bar by bar basis to help new traders learn how
to apply the VCM methodology. There will also be regular review of the basic platform
and trading principles that are covered in the Live Trading Lab. The primary goal of the
Training Room is to get newer traders comfortable with their platform, chart reading, and
trade execution skills so that they can move into the Proprietary Trading Room with confi-
dence.
The room will be staffed between 9:00 AM and 4:30 PM Eastern, Monday through Friday.
113
DOWNLOAD THE ROOM
You will need to install the software needed to have the best chat room service capabilities on your
computer. The following link will walk you through the installation process…
1. Go to this link: http://www.vcmtrading.com.
2. Near the top right hand corner you will see the “VCM Traders Log In”
3. Click on that to be taken to the log in page. Here is where you will log in. If you
are a VCM Proprietary trader, use you User ID and password you currently use to log
in to Prop Reports. If you are a paid subscriber or on a free trial, use the password
you selected when registering. If you forgot the password, there is a “Forgot your
Password” link that will send your password to your email.
114
4. Once logged in, click on the ‘services’ tab
5. Here you will find information about your services account, and the links for whatever rooms are
available to you based on your subscriptions. Click on the ‘Connect to Training Room’ button. You
will be taken to a page that will allow you to ‘Connect’. (There is also an option for a ‘Java Link’
which should only be used if you are not allowed to install software on your computer). When you
click on this for the first time, you will be prompted to download and install the software. While fol-
lowing the instructions you will be asked for the following information:
Room – VCMtraining
The above must be entered EXACTLY as shown (capitals matter).
6. For clients running two Hotcomm rooms at the same time, (such as running the VCM Proprietary
Trading Room and the VCM Training Room at the same time) you will need to run the rooms on
different machines OR use the STANDARD/PRO version of Hotcomm which will need to be down-
loaded here –
http://www.hotComm.com/ftppub/hcsetupx.exe .
This will provide you with a seven day trial for free. If you wish to keep this version, you will need
to pay for the standard/pro version of the software. Instructions and rates can be found at http://www.
hotcomm.com/downloadHC.asp.
7. Here are some helpful tips on using the room.
http://www.hotcomm.com/guide/CL_help.asp
115
Appendix K – VCM Prop Trader Agreement
Velez Capital Management

Proprietary Trader Agreement - Master
________________________________________________________________________
The Company and you agree that you will, as an independent contractor to the Company, select pur-
chases and sales of securities for day-trades in the Company’s account, with funds provided by the
Company (“Stock Trades”). You agree that all transactions selected by you are to be day-trades and
at no time will a security be held over-night, except under the current guidelines of the program. If
a position remains open after 4:00 pm E.D.T. you hereby expressly authorize the Company to close
any open position in your sub-account without notice. You further understand that the Company may
close your position at any price available, which may result in substantial losses to your account.
You will receive, as full consideration for your services hereunder, a percentage of the net trading
profits as detailed in schedule A attached. Such net trading profits shall be calculated on a monthly
basis by the Company, whose calculation shall be final and binding, absent manifest error. You will
be paid any net trading profits within 30 days after the last day of any month that ends with a posi-
tive Net P&L (defined below). Your relationship with the Company is that of an independent con-
tractor, and not an employee or a customer of the Company for any purpose. This Agreement may
be terminated by either of us, with or without cause, at any time, effective immediately upon written
notice given to the other party.
The Company will track within a Company sub-account that it maintains with any securities broker-
age firm that it selects (the “Company Account”), all transaction results for Stock Trades that you
select. Those Stock Trades will be tracked separately from all other activity and transactions within
the Company Account, including securities transactions selected by the Company, by its employees
and/or by other independent contractors. The portion of the Company Account so tracked, and which
holds the securities positions that you select for the Company Account from time to time, is called
the “Trader Sub-Account.” You recognize that the creation of the Trader Sub-Account is an account-
ing mechanism only.
The Company will maintain a profit and loss record on the Trader Sub-Account, reflecting all profits
and losses on the trades you make therein, net of all transaction fees, costs and expenses incurred by
the Company for such trades to be effected. The net amount of the profit and loss on the Trader Sub-
Account, as computed from time to time, is referred to as the “Net P&L.” The Net P&L will be zero
before your first trade. If the Net P&L at the end of any month is negative, you will not be entitled to
any compensation for that month, and the negative Net P&L will be carried forward to the following
month. If the Net P&L is positive at the end of any month, there will be “net trading profits,” a per-
centage as per schedule A. Each month will start with a Net P&L equal to the Net P&L at the end of
the immediately preceding month, less any distributions of net trading profits made to you therefrom.
116
The Company intends to monitor the Net P&L continuously, and will be able to ascertain at any time,
including in the middle of any trading day, if there is a negative Net P&L (a “net trading loss”). You
recognize that, as noted above, the creation of the Trader Sub-Account is an accounting mechanism
only. Therefore, it is the Company, and not you, who is the party to each Stock Trade, and, as be-
tween the parties to the Stock Trades and their respective brokers, it is the Company which is respon-
sible for such net trading losses.
The compensation that you will receive hereunder will be a percentage of the net trading profits as
per schedule A, if any. Mandatory Distributions: If you have a net positive balance in your Trader
Sub Account at the end of each Trading Month, the Trader Payout will be: (i) credited to your ac-
count; (ii) set apart for you or (iii) otherwise made available to you, so you may draw upon the Trader
Payout amount at that time. If you elect to NOT have the Trader Payout actually disbursed to you at
that time, you must give notice to the Company when you desire such disbursement. For each year,
the Net PNL for the month of the December will be made available to you on December 31. Such
funds will be distributed in the normal course, however, you may be distributed the Trader Payout for
the month of December at that time, upon written notice to the Company.
For every $12,000 of compensation that you receive, you will also receive an additional bonus pay-
ment of $2,000 from VCM until such time as your original training tuition has been completely
reimbursed.
You understand and agree that all right, title and interest in and to the Company Account, the Trader
Sub-Account and the profit and loss thereon are and shall be the property of the Company, except
to the extent that you are entitled hereunder to receive a percentage of the net trading profits as per
schedule A. Therefore, you should understand that any losses on securities transactions in the Com-
pany Account, including in the Trader Sub-Account, belong to the Company, and not to you, and so
are not available to you to offset any ordinary income or capital gains that you may earn during any
tax year.
You represent to the Company that you are lawfully able to enter into and perform this agreement,
and doing so will not result in a breach or violation of any agreement to which you are a party or by
which you are bound. You understand and agree that all software, designs, inventions, improvements,
trade secrets and works of authorship owned or used by the Company or its affiliates, and all financial
information, pricing strategies, client or customer lists, supplier lists and other information regarding
the Company or its affiliates and their respective business operations or procedures, constitutes valu-
able confidential and proprietary property of the Company and its affiliates or the persons from whom
the Company has obtained the right to use same (collectively, “Confidential Information”).
You agree that except as directed by the Company and in the ordinary course of the Company’s busi-
ness, you will not at any time disclose to any person or disseminate, directly or indirectly, for your
own benefit or the benefit of any others, any Confidential Information, or permit any person
117
to examine or make copies of any document, computer disk, or other media for the storage or ma-
nipulation of information, that contains or is derived from any Confidential Information, whether
prepared by you or otherwise. The provisions of this of this letter agreement will survive any ter-
mination of this agreement and any termination of your relationship hereunder with the Company.
You agree that upon request by the Company or in the event of the termination of this Agreement,
you will immediately turn over to the Company all documents, computer disks, and other material in
your possession or under your control that contain or have been derived from any Confidential Infor-
mation or that relate to any work performed by you for the Company, without retaining any copies of
such materials.
You represent and covenant to the Company that you shall abide by all securities laws, rules and
regulations with respect to all Stock Trades selected by you, including, without limitation, laws that
prohibit the use of non-public information in making securities transactions. You understand that the
Company is not a securities brokerage firm, and holds no license or registration from the SEC and
NASD, but is a private company engaged in trading and investing in securities for its own account.
Upon the termination of this Agreement for any reason, you immediately shall close all open posi-
tions in the Trader Sub-Account, and immediately upon doing so, shall cease all trading and other
transaction activity therein. The Company will determine the Net P&L and distribute your portion of
any net trading profits as provided in schedule A herein. You agree to indemnify, defend and hold the
Company, its corporate affiliates and their respective officers, directors, employees and sharehold-
ers harmless, from and against any loss, damage, liability, claim, cost, award and expense, including,
without limitation, reasonably attorneys’ fees arising out of or in connection with any breach by you
of your obligations hereunder, or the enforcement by the Company of its rights hereunder.
This agreement shall be governed by, and construed in accordance with, the substantive laws of the
State of New York, without reference to any conflicts of law principles. You and the Company agree
that the Company’s principal executive offices are located in the State of New York, in the County of
Nassau, and that it is reasonable and desirable to apply the laws of the State of New York to any dis-
pute between the parties hereunder. You and the Company hereby irrevocably consent to the personal
and subject matter jurisdiction of the federal and state courts located in Nassau County, in the State
of New York with respect to any action, suit or proceeding arising out of or relating to this agreement
or any of the transactions or relationships contemplated hereby.
You may not assign any of your rights, or delegate any of your duties hereunder, without the prior
written consent of the Company, which may be withheld in the Company’s sole discretion. Any at-
tempted or purported assignment in violation hereof shall be null and void.
118
Schedule A
Transaction Fees: $0.0002 per share plus/minus all ECN & exchange pass thru fees. Note
that this rate is subject to change should the transaction fees be changed
for the firm.
Data & Software Fees: $50.00 per month. Note that this rate is subject to change
should the cost of the trading platform and data feeds change for
the firm.
Trader Payout: Upon graduation of the Velez Capital Management Trainee Program
traders will begin to receive 60% of their net trading profits less monthly
data & software fees. Further adjustments to the payout percentage will
be based upon the guidelines of the Trader Advancement Program
in effect at that time.
Trader:
Name___________________________________________
Address_________________________________________
________________________________________________
SS #____________________________________________
E-mail__________________________________________
Home Phone______________________________________
Cell Phone________________________________________
Date_____________________________________________
Signature_________________________________________
Velez Capital Management LLC
Office Manager____________________________________
Date_____________________________________________
119

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Trading Laboratory Manual

Introduction and review of lab agenda

Introduction and observation of gap trades

Days Three and Four

Live trading day with Oliver

Order type concepts and hard stop orders

Velez Capital Management

Purpose of the Trading Laboratory

Review of daily schedule and office logistics

Review of the curriculum for the week

Review of VCM Prop Trader Program

Support/Tools for Prop Traders

Trader Advancement Program

Trader Advancement Guidelines

Prop Trader Principles

Distribute VCM Prop Trader Agreements

Discussion of VCM Independent Trader Program

The Self Actualized Trader (SAT)

Continuing Coaching Support

Profitability Over Emotions

Trade Tracking Log

Sample Trading Plan

Sample Trading Universes

Sample Trading Plans from Colleagues

Maximum Minimum Minimum Minimum

1 100 $30 $30 60% $18 $300

2 200 $60 $60 60% $36 $1,200

3 300 $90 $90 60% $54 $2,100

4 600 $150 $200 65% $130 $5,900

5 1,000 $250 $350 65% $228 $10,775

6 1,600 $400 $600 65% $390 $18,900

7 2,400 $600 $1,000 65% $650 $31,900

8 3,600 $900 $1,500 70% $1,050 $51,900

9 5,200 $1,300 $2,275 70% $1,593 $79,025

10 8,000 $2,000 $4,000 70% $2,800 $139,400

11 12,000 $3,000 $6,000 70% $4,200 $209,400

12 18,000 $4,500 $9,000 75% $6,750 $336,900

Trader Advancement Criteria

Account Demotion Guidelines

Payout Percentages and Process

Trader Advancement Process

Trader Payout Rates

2. Three consecutive losing weeks at current level, and cumulative

VCM Traders Log In

Review trading platform

Save Settings/Open New Chart/Load Settings

File – Save Screen function after changes

Time and Sales

Top 20 List (VCM Lab page only)

Tour of All Pre-configured Trading Screen Layouts

Start with Market Analysis

Check Prior Day’s Watchlist

Top Down Scanning

Personal Stock Universe Scanning

Scan Favorites List

VCM Scanner Pro or other automated scanning

Scan Major Industry Sector Indices

Scan Universe Stocks in Most Promising Sectors

Top Down Scanning