What’s the best way to learn how to become a successful day trader?
To learn from a mentor who has proven a path to success…
The following list of day trading secrets is a result of lessons I have paid to learn throughout my trading career, some multiple times. The goal of this post is to give you some insight into the truths of trading and what really takes to become a successful trader.
Day Trading Secrets
The following list of day trading secrets is in no particular order. Certain truths or secrets will be more valuable to you than others depending on where you’re at in your trading career.
With that said, lets get started…
1. The “Holy Grail” Trading System
Simply put…it DOES NOT exist!
My trading career began at one of the largest proprietary day trading firms in the world. As a top trader and trainer at the firm I became friends with a number of elite traders.
Most traders at GPC were very secretive of their strategies. Can you guess why? Typically because the strategy they traded was extremely simple! They assumed assumed if other traders knew what they were doing that everyone would soon trade the same strategy, diminishing their personal edge.
This is complete BS. Most traders don’t realize that 80% of their success is a direct result to trading psychology to their and only 20% to the actual system.
Understanding this is the true holy grail of trading. The majority of successful traders trading systems are very simple. It’s the trader and his or her complexities that makes the system profitable.
There never could be a holy grail trading system due to the fact that the trading system has to fit the personal traits of the person trading it. Without this key factor, even the best trading systems can fail.
Not to say there aren’t complex systems out there that work. I have traded some of my own complex algorithms that have been very successful, but at the end of the day I still consider some of my best strategies to be some of the simplest.
2. Traditional Discipline is BS
There’s not an educator out there that won’t tell you that you need discipline to be a successful trader. While this is true, I don’t think most people try to achieve discipline in the right manner.
This is not only one of the best day trading secrets but a secret you need to experience growth and success in life.
Pure discipline should be effortless and is a result of changing the way you think as well as changing your habits.
Most people simply view discipline as the ability to say no to something or to do things they don’t want to do but know they should. They puff their chest out and just stick to what they said they would do and say, “I have discipline!”
This is the white-nuckle approach to discipline which over the long run the usually fails.
True discipline comes as a result of changing the habits and the way you think about the action that you consider undisciplined.
Consider a trader who is overtrading. They continually fight the urge to trade. In the long run this trader will fail to prevent overtrading if he doesn’t closely examine and understand what the pros/cons are of overtrading.
Another real life example is quitting smoking. I tried numerous times to quit smoking and ultimately failed using the white-nuckle approach. I’d fight to not smoke and would eventually give in.
It wasn’t until I challenged my thoughts and how I viewed smoking and replaced some of the bad habits that could induce smoking that I was able to quit. To be honest quitting when I reached this point was easy.
Whenever I had the urge to light up in the first few weeks I would examine in my head what the pros and cons were of quitting were. Even the worlds biggest idiot could tell you the pros outweighed the cons.
Eventually I realized I wasn’t giving up anything and there wasn’t a single positive that came from smoking. I also changed habits, such as going out drinking, that could lead me to starting smoking again. As a result of this method I knew I would never smoke again.
To become truly disciplined you can’t just use the white knuckle approach. You have to view the pros and cons of every decision your going to make as well as replace the habits that make it difficult for you to achieve a particular goal or status of discipline.
Finally, discipline is not a state of being. It’s something that has to be constantly worked on throughout our entire lives. It’s almost impossible to become a disciplined trader if you are completely undisciplined in other areas of your life. So time for you to start doing some reflecting and work on changing habits, resulting in more discipline all around.
3. Traders Are Hard Workers
Most people think that those who are successful at trading have simply figured out a day trading secret strategy or system. Once you have it trading and life will be easy. Place some trades and collect checks every month.
This is so far from the truth. All of the successful traders I have known are some of the hardest working people I have ever met.
Yes, for the best traders in the world trading is close to effortless. However, this doesn’t mean it doesn’t take hard work. It’s effortless as a result of all the preparation which is where all the hard work comes in.
We compete in one of the most competitive environments in the world and they’re is always someone behind you happily willing to take your place. As a successful trader you have to constantly be trying to hone your systems edge and psychologically as well.
Like any industry, the markets are always changing. Opportunities that exist today may not tomorrow. Just ask all of the floor traders as well as the prop traders before algorithms began to dominate the market. (I was one of them)
If you didn’t adapt you became a dinosaur and eventually lost your edge and exited your career as a trader.
In the last 15 years I have been trading I have had to make 3 major shifts as the markets changed.
I began my career at GPC purely as a Level II trader reading order flow. This edge began to diminish as more and more algorithms came into the market.
Next, I traded an algorithm that took advantage of price discrepancies at retail forex brokers during news events. It was extremely successful for a few years before the opportunity was arbitraged away.
Finally, I shifted to a brand new market in Index Futures which I had very little knowledge about several years ago. It took time and hard work but eventually I developed a profitable strategy.
I don’t have a crystal ball of the next major shift in the market but I keep a close eye on traders that I respect and what they’re doing. I also keep a close eye on my trade journal to notice any major shifts in performance that could be a result of my strategy and not my execution.
Don’t ever get comfortable, no matter what industry your in. Rainy days are always coming, and those who are prepared and can weather the storms are those who will ultimately succeed.
4. Plan or Fail
This really isn’t a day trading secret, it’s common sense. You have to treat trading like any other business and you have to start with a plan. Most business startups that don’t have a well defined plan fail.
Your trading plan needs to outline exactly what your trying to accomplish and how. Every single step.
Not only do you need to have a plan, it has to be backed by numbers.
Backtesting is key to building a successful strategy. First, it lets you know whether a strategy can actually be profitable! Second, it helps build confidence that will be needed during drawdowns.
Learn more about my trading plan template here.
5. Learn From Your Mistakes
Every mistake can be valuable if you choose to learn from it.
Documenting in a trade journal every single trade you take along with photos is essential to growing as a trader. I also comment at the end of everyday on what I did well and what I could have done better, along with the overall sentiment of the products I’m trading.
When I’m in drawdowns I can read my journal and see the mindset it took to bounce back in the past. Or I can read journals from great days to build confidence allowing me to realize it’s just a matter of time until I recover.
6. You Don’t Need A Lot of Money
One of the questions I am asked the most is how much money do you need to day trade. My answer is usually zero as this is how I realistically began.
When I started at GPC I traded on a simulator for almost two months prior to going live. If I wasn’t able to prove myself in a simulated environment to the owners there is no they would have ever backed me with capital.
If you can’t make money in a simulated environment why would you ever trade real money?
Even if you’re broke you can trade in a simulated environment. TD Ameritrades ThinkorSwim Platform is free and provides free real time data for every security you could want.
Once you have proven yourself in a simulated environment I’m sure you can talk to a few friends and family and raise some cash.
Once you do go live, you should start with a minimum of $3,000. Now this doesn’t mean you should quit your day job and expect live off of your earnings. It will take time to build an account of this size up. In doing so you are also more likely to value and protect your money when trading.
Finally, never trade with money that you can’t afford to lose. It generally leads to irrational decision making resulting in losses and a blown up account.
7. Accountability Is A Must
My trainer at GPC was my accountability partner when I began my career and was paramount into me becoming the trader I am today.
Research shows that having a partner or “accountability partner” can be very effective at ensuring we will actually follow through on something, not just talk about it.
Dr. Robert Cialdini, a well-known social psychologist, who has studied and written a great deal about decision-making.
His studies show that peer pressure is powerful, especially when making complex or stressful decisions. He also states that the closer you are to the person or group, the more likely you are to be influenced by them.
When looking for an accountability partnership consider the following:
- Find someone you trust that can be completely open with you. Typically someone with a different personality from you can be a plus.
- Talk to them about your trading goals.
- Get specific about your trading plan especially in terms of risk management.
- Setup regular reviews with them. When you’re new to trading it’s best if you can have a brief discussion everyday even if it’s through text, followed up by a weekly recap conversation.
Every member of JT has the choice to use me as an accountability partner as well. Obviously I have time constraints but I am more than willing to work on monthly or bi-monthly review with traders. Typically we do this in a group setting.
In the end we are much more likely to reach our goals if someone is helping us keep us on task and cheer for us along the way. Smart traders realize this and integrate this type of relationship into their plan.
8. Patience Pays
“I just wait until there is money lying on the corner, and all I have to do is go over there and pick it up. I do nothing in the meantime. Even people who lose money in the market say, ‘I just lost my money, now I have to do something to make it back. ‘No, you don’t. You should sit there until you find something.” – Jim Rogers in Market Wizards
The above statement by Jim has saved me money time and time again. Take a second a reread it…
One big mistake new traders make is over trading. When you begin trading it can become very easy to become addicted to the rush of winning and losing money. If you allow this to happen you’re no different than the addicted gambler at a casino.
You don’t have to catch every move, there will always be more opportunities. Wait until you see an opportunity that fits your strategy and plan, and then spring into action.
Becoming a better trader is a life long process that requires reflection and trying new things resulting in growth. These day trading secrets or tidbits for success will help you propel your trading career if reflected upon and implemented.
If you enjoyed this post and are serious about becoming a trader or improving your skills you should sign up to be a JT Member. Hey, it’s free… Enroll Now!
Make sure to share your thoughts and any other day trading secrets you have personally discovered!