I remember when I first started day trading. It felt like I was in Vegas. Seriously. I felt like I just gathered all my pay slips and cashed in all my paychecks and went straight to Sin City. I mean, what could go wrong, right?
Well, the problem with day trading is that it’s very easy to lose money. I’m sure I’m not really saying anything profound or earth-shattering here. You probably already know this first hand.
However, it really is very easy to lose money with day trading because you feel like you are just making trades on impulse. Sure, you can see some patterns but, ultimately, it all boils down to your gut feelings. It all boils down to whether you get a hunch or not. You start listening to that internal intuition and then you just click on that Buy button or that Sell button and hope for the best.
I don’t mean to diminish day trading here. This is definitely not one of those negative articles on day trading, but I just want to keep it real because the longer you keep your head in the sand regarding what you’re actually doing, the longer you will take from actually making money from day trading. It’s time to get real.
You have to look at yourself and at what you’re doing and be completely honest. Are you just taking shots in the dark, and crossing your fingers and hoping to get lucky? Are you operating with the assumption that somehow, some way things will work out in the end and you will find extra dollars in your bank account?
Well, if that is your “grand strategy,” you might as well as drop everything now. Seriously. You’re not investing. You’re not trading. You’re not doing anything except positioning yourself to lose possibly large sums of money. Stop it. Don’t do it. Don’t even get started.
Unfortunately, a lot of people insist this becomes a long-drawn-out and all-too-painful experience. They bleed red financially for a long, long time until that light bulb goes off and they start seeing the glimmers of a strategy. They keep at it while the losses just keep on piling up until finally they reach a point where their wins outnumber their losses. They keep at it until they can predictably win.
This sounds like an optimistic story and it really is, but the problem is not all of us have that much money to waste in a long-drawn-out day-trading learning curve. Not surprisingly, day trading for beginners can be quite an ordeal.
It’s like a financial, emotional and psychological roller coaster. You make $5,000 one day, and you’re at the top of the world. You’re like Leonardo DiCaprio in the movie the “Titanic”. Nothing can stop you. Then, you hit a snag, and you lose $3,000 in a day, and it seems there is no hope. If that day is followed up by another $3,000 loss, it becomes bleaker and bleaker.
You don’t have to go through this process. While day trading can be rough on your nerves, it doesn’t necessarily mean that you have to do things this way. Again, day trading for beginners does not have to be some sort of punishment or some sort of long-drawn-out, excruciating experience.
To improve your game or to step it up to a whole other level, you just need to achieve one fundamental initial realization. You have to wrap your mind around the fact that banking on that one solid trade is not worth it. If you have this idea in your head that you only need one $100,000 a day and you’re good to go, I’m sorry but you’re just fooling yourself. That’s not how the real world works.
Sure, you’ve heard of anecdotal stories of day traders hitting six figures or even seven figures in a day, but they don’t tell you the rest of the story. They don’t tell you what happened before and what happened after that magical day. It may well turn out that they’re losing thousands upon thousands of dollars every single day until they hit at one-million-dollar trade in the black. That does not make those painful days go away. It definitely doesn’t vaporize all that red ink. Do you see where I’m going with this?
So, it’s much better to get that idea of one solid head or one solid trade out of your mind. Instead, focus on day trading as making a living off multiple trades. These may be small trades, these may be percentage trades but what matters most is that you’re making multiple trades. This is the key because if you’re able to turn the corner here, then there is hope for you.
However, if you remain stuck on that idea of banking on that one solid trade, day trading is going to suck for you. Seriously. There are no two ways about it.
Day trading for beginners such as yourself does not have to be an ego-crushing experience. You just have to stick to a win percentage and cut. I know this is easier said than done, but if you find the discipline and the focus to do this, you will succeed. What do I mean by this?
Well, if you say that your win percentage is 2%, if you get into a position and the stock hits a 2% appreciation, you’re out. It doesn’t matter whether it’s shooting up like a rocket and by all indications, it looks like you’re going to double your money, you’re out. If you’re able to do that, you will make money in the long run.
Now, it’s very tempting to wait it out. It’s very tempting to wait it out. It’s very tempting to hope against hope that once it reaches the 2% loss threshold that it will bounce up like a rubber band, and you will end up with a plus two.
Well, anybody’s entitled to wishing and hoping, but that’s not the strategy. You have to cut. This really all boils down to overcoming your impatience. Stocks rise and fall all the time. The key is to exit when it’s time. You cannot allow yourself to get so impatient that you basically leave before you appreciate or you hang on too tightly when the stock is actually going to drop like a rock. Set a goal and stick to it.
Again, this is easier said than done, but if you pair this with multiple trades, eventually, you will develop a thick enough financial skin. You’ll get used to it. It’s only a matter of time. Sooner or later, whatever the market does, you will get used to perform based on your goals. Stick to a percentage and cut. That’s the bottom line.
If you’re able to do that, you will make a living off day trading. It may not be a spectacular living at first, but the more you develop the expert day trader mindset, the more you will be able to see opportunities and stick to them. By being methodical, patient and focused, you eventually will be able to write your own checks.
Yes, that’s how powerful this could all be. It’s really rough at first because day trading for beginners is essentially a battle with yourself. You have to overcome your fear, and you have to get past your greed.
Recommended Read:
Day trading is not for everyone but this book, based on hard-won personal experience, gives you the information you need to see if day trading is good personal option for you on your journey to financial freedom and security.
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