Day Trading is a very, very difficult thing to undertake. Anyone who has attempted to trade for any amount of time has questioned whether or not Day Trading was actually feasible at one point or another. Hitting “the wall”, taking another loss, or missing a big move takes a toll, but it all is worth it in the end. I can assure you.
I have been Day Trading for over 6 years now in different markets, and have just completed a full year of day trading profitably. I took an account with $2,200 dollars on January 28th 2021 and have now grown that account to over $40,000 (it is now February 6th 2022). It was not easy to say the least and there were many times a big losing day would cause a lot of stress and weigh on me. On my path to profitability, I have learned so many valuable (and expensive) lessons which I share with you all below.
Do not expect any strategies based on technical analysis though. I cover these in depth in my other posts, courses, and YouTube. Most of the things I learned about profitable Day Trading are more about self-care and discipline.
#1 Take Breaks – You can burn out very quickly especially when you are newer to trading. This past November, I was working twelve-hour nightshifts for my “day” job, but the market was very volatile, presenting a lot of trading opportunities. I thought I could at that time trade for six hours after nightshift, scramble for a quick nap, and then do it all over again. Looking back, I realized how quickly I went from motivated to sputtering on fumes. Overall, I ended up suffering from unnecessary losses. This is not healthy nor conducive to ones Day Trading business. I remember when I was first starting — There was so much information and excitement to learn, but your brain cannot grasp so much at once. There is data to suggest that the brain can only focus for 90 minute periods at a time, and that more breaks result in better decision-making. I highly suggest treating trading like a job – time block and schedule breaks in your Day Trading or market study. This will keep you balanced and better able to manage whatever the market sends your way, as well ensuring your brain is retaining what you are learning. There are also some tricky ways to take breaks from the screen, but still learn about the market. Take time to read some of the best Day Trading Books out there on your breaks (my opinion of course) : Reminiscences of a Stock Operator by Edwin Lefevre, or Trading in the Zone by Mark Douglas.
#2 Have A Daily Routine – This is a simple way to maximize your efficiency and well-being. I used to sit at the trading desk for the entire day. This is not only unnecessary, but can cause problems, even leading to more losses than gains. I would suggest creating a daily routine and encourage yourself to cushion your trading with healthy daily habits. Keeping our minds and body healthy are essential for our ability to handle stress, allowing us to then make balanced and un-emotional trading judgments. My current daily routine involves time for the gym or a walk, as well as reading or meditation, along with time with my family. I also ensure that I am not in my trading area after a certain amount of time which can lead to other unnecessary losses or bad Day Trading habits like the one I will discuss in the next topic.
#3 Do NOT overtrade – A good daily routine should help prevent this so as long as you are disciplined enough to walk away from the trading desk. I believe this may be the easiest thing a trader can do to sabotage his or her results. I had this problem and still tend to take trades out of habit rather than strategy. I was sitting around the desk all day and when the boredom strikes, we tend to “poke” around the market. This is the first sign that its probably just best to take the rest of the day and get some things done around the house, or pick up a hobby that takes you away from the desk. Overtrading is a very expensive bad habit, especially if you pay commissions. The longer we continue overtrading out of habit, the harder it is to un-train ourselves. In your routine, commit to a cut-off or walk-away time. In my case, once I have also hit a personal goal for the day, I shut it down.
#4 Manage Your Risk – This one should be obvious, but it can be a struggle. This starts with incorporating tips 1-3, and then adding in analysis. This comes mostly from any data you have collected or mathematical starting point you pre-calculated. How you trade, size of capital, and percentage of gain or expected gain should be taken into account. Essentially your “Trading Plan” should have risk parameters outlined. Make sure that when starting out you understand this: most likely your win rate percentage will be 30% or less so make your risk plan based off of this to maintain longevity until your win percentage increases above 50%. Risk parameters and a good strategy will help protect you from poor trading decisions. I did these calculations and had the data, but when I was in a Trade, I would get absorbed by the excitement of the market and my benchmarks, strategies, and limits would too easily go out the window. Having done analysis retroactively, sticking to my risk limits and strategies would have prevented $30,000+ of losses.
#5 Analyze/Track/Journal – This, and this alone, has made me a better Day Trader by leaps and bounds. Information is power, and the ability to look back at your data objectively is crucial. There are many methods you can use such as Tradervue, which has a free membership for those that are not trading massive volume per month. There is also just using a regular writing notebook and excel spreadsheets. I honestly use all three. While Tradervue is essential for the statistical analysis, I wanted to track other data as well. The newest addition I have added this year is just a writing notebook. This allows me to make notes on any other variables that might impact my trading – my headspace that morning, how I felt about the market conditions, how rested I am, or other circumstances and outliers that may have affected me that day.
These are the practices I recommend that enable me to bring my best to the trading desk every day. Regardless of what works best for you, create habits and rituals that allow for you to manage and regulate the stress, risk, and emotional variability that comes with devoting yourself to Day Trading. It is a Grind, but it doesn’t have to grind you down.