When I first started dabbling in day trading, I put $500 into a live trading account and placed a random trade.
Over the next few hours the price climbed and I made $4,000.
“This is easy” I thought to myself.
But over the next few days, I slowly bled the $4k down to nothing.
"This is impossible" was my next thought.
In the coming weeks I tried placing more trades on a whim, without a stop loss or any concept of risk management. I didn’t have a clue what I was doing.
I am one of those highly analytical people who see any sort of a setback as an opportunity for a challenge.
Over the next 6 years I gathered a vast amount of trading knowledge and experience. I learned professional analysis concepts of supply/demand and market profile trading which culminated with me getting good enough as a trader to land my first prop trading job.
This was my passion for the following several years until I made enough money to carry on trading with my own funds independently.
Most people start their day trading journeys just like I did – they place a random trade, eventually get slaughtered. Only then they realise that day trading is much tougher and so much more complex than they ever dreamed of. At which point most people give up, usually because they squandered all their savings in a week or two due to lack of knowledge, planning or experience.
This notion that trading is easy money is frequently perpetuated by shrewd salesmen promising quick riches and super cars, prestige, respect and power without having to spend much time learning how to trade.
Of course this is completely false. 99% of these people have never held down a job as a prop trader, nor do they know how to trade properly themselves. Most of the super cars and lavish mansions they promote in their videos are rented, leased or borrowed.
At the beginning of my journey I was eager to learn about prop trading and real risk management. I looked high and wide for a course geared towards professional traders.
But still to this day, all that was on offer were the same empty promises and the same material: moving averages, RSI, trend lines and a whole bunch of other retail tools.
Fast forward some 11 years later and I now know that these indicators should mainly be used for long term investments – they are way too lagging to be applied to day trading.
Day trading requires a lot of accuracy and relatively small stop losses. (but NOT 4-8 ticks, it's more like 20-40 ticks).
This means that you must be extremely skilled in reading and interpreting price action.
There are two main strategies used by professional traders – supply/demand and market profile. Many of us also use statistical data such as mean averages of daily or session ranges to adjust the positions to the volatility of the markets.
As a part of our professional development program on Market Stalkers E-learning portal I show you step by step the level of skills required to perform this job to a professional standard.
Learning to properly interpret price action within a framework of hard rules is even more important at times of high volatility.
Over the last two weeks, coronavirus has left a complete bloodshed behind. I’m not referring to the victims who died from the virus, but rather those who lost a fortune in the huge two week stock market collapse as a direct result of the systemic risk to the entire world as we know it.
Those who don’t know how to recognise a black swan event and adapt their trading strategy to the new volatile ranges have suffered badly.
My methodology tends to do very well in volatile markets, purely because it relies not only on a horizontal OR vertical interpretation of developing price action, but instead a combination of the two.
As such it is a rather unique style of professional analysis. It gives a complete picture across various timeframes.
I created my style of trading during the recession of 2008. After that, I honed the strategies further throughout austerity measures of multiple European countries needing a bailout. And now we're living through the coronavirus madness.
My own life has been a series of black swan events: having grown up in war-torn Yugoslavia, my mindset is to always be prepared for the unexpected. From Yugoslavia I eventually made my way to London as a wide eyed 20 year old back in 2000.
Pretty soon, I built a new life for myself. Initially as a high profile session musician, performing with artists such as Rod Stewart and Andrew Lloyd Webber to finding my edge in the markets, carving out a career as a commodities futures day trader.
Bottom line is that many people imagine how trading is something everyone can get involved in. I disagree. The personality traits required to make money with money are not dissimilar to a research scientist or a professional chess master. Even athletes or highly skilled musicians have the transferrable skills of methodical approach and self discipline that is needed to create a set of rules and then follow them indefinitely.
Anyone who even attempts to get into trading must have some sort of transferrable high level skill. In my experience, having trained over 2000 people in the last year alone, the ones who do the best in trading are people coming from engineering backgrounds, commercial pilots and former professional athletes.
While it’s not impossible to eventually develop these skills solely through day trading, you’d be looking at an uphill struggle which may take over a decade or even longer to achieve – in absence of master level skills in other disciplines.
The main reason why people fail in day trading is because their cycle of ‘learning’ looks like this:
Try > fail > try > fail > give up
Instead, the process needs to look like this:
Try > fail > improve > try again > fail/succeed > review > try again
Indefinitely. Even after 11 years in this line of work, I still review my trades to see if I could have done something better or more efficiently.
This constant desire for never ending improvement is what keeps some of us consistently profitable and able to survive (and thrive) in any market condition that the uncertainty environment of day trading throws at us.
There is no real secret to it – hard work, analytics, patience and stubbornness.
I guess the real secret is that there is no short cuts to this process. It’s a performance discipline. As such, it requires empirical data as well as droves of practical experience to form a large enough data set. You then extract the probabilities of your method from these data sets.
For most, day trading will be a rather violent and brutal path of self-discovery. For some of us it is highly transformative. No other discipline reveals your own negative personality traits like trading does. In most other jobs there is usually quite a bit of time that passes from the moment you make an error in judgement to the consequence of that error. In trading, this is almost instantaneous.
This is why trading needs to be done by emotionally resilient people who can look at themselves and their past decisions objectively. Therein lies the biggest challenge for a prospective day trader: not the vast intelligence or lack of decent trading capital.
But instead the ability to test your skills in a simulated environment and then to successfully transfer those skills to real money environment. As you make the transition, you need to ensure that you’re emotionally mature and ready to follow the rules and probability of your method, no matter what the individual trade outcome is. Focusing on the big picture and letting the compounding interest take over, while ensuring your trades have a positive expectancy is key to any good system design.
Ultimately, losing one trade or having one or two losing days doesn’t matter. All that matters in any uncertainty environment is:
Did you follow the rules?