Warrior Trading Blog

Day Trading Rules – How I lost $30k and Recovered

The only way to succeed as a trader is to follow your day trading rules

Instead trying to search for the Holy Grail, or give in to the urge to hold losers and sell winners, we must simply accept loss as part of the business of day trading.  We can’t fight it.

Every day trader will experience losses.  Becoming a good day trader means being a good loser.  The trick to being a good loser is learning to cap your losses at a set dollar amount and sticking with it.  The hard part is holding yourself to the rules.

Day trading requires a tremendous amount of discipline and self control.  It’s a job that will challenge you in more ways than you would imagine. In the example of the trader with a 90% success rate that was still losing money, he failed to cap his losses.

Being that type of trader is a choice.  By teaching you about profit loss ratios and the importance of capping your loses, we are empowering you to make the choice to be a successful trader.

Discipline as a Practice

In our trading courses we spend a great deal of time working with students to help them improve their discipline.

Many of our students found us after taking other courses and still finding themselves stuck in a cycle of poor trading habits, trading losses, and disappointment.  We realized that textbook concepts of trading, which are important and will be covered later on, are not enough.

Understanding fundamental concepts of trading on their own is not enough to be a successful trader.  You must also think and act like a successful trader.

This means selling losers quickly and holding partial positions of your winners as long as possible.  In order to help our students improve their ability to be disciplined we require a min of 30min of exercise and 15min of meditation every day.

I use exercise and meditation to help train my mind to cope with stress.  I personally don’t enjoy working out and I don’t enjoy meditating.  By forcing myself to do these two things everyday I am practicing discipline.

In the moment when I’m in a trade and need to make a hard decision, I need to be able to fight the urge to sell the winners too soon and hold the losers too long.

By practicing discipline in others areas of our life, we strengthen that muscle and improve our ability to maintain composure while trading.

Practicing discipline is a way of conditioning our minds to become accustomed to a feeling of discomfort.  Rather than taking steps to alleviate the feeling, we can withstand it.  When we sell a winner too soon or hold a loser too long, we are allowing the uncomfortable emotion of fear guide our decision.

Most of the successful traders I know have strict exercise regimens because it helps improve their trading performance.  We know it’s impossible to block out the emotions such a fear, they will still come up in every trader, the difference between winning traders and losing traders is that winning traders won’t cater their strategy to the emotion.

They recognize the emotion and allow it to exist without acting on those feeling.  This is a critical step in the emotional development of any trader.

I would encourage you to begin journaling on your emotions while trading.  The first step to changing your behavior is becoming aware of your emotion patterns and their impact on your trading performance.

As we discussed earlier, you can have a deep understanding of all the textbook concepts of trading but still fail because you haven’t achieved the emotional training to be a trader.  We focus on providing our students with a well rounded education that includes both textbook and emotional development.

It’s important to remember that discipline is not like learning to ride a bike, once you know how to do it you have it forever.  Discipline is very much like a muscle that can be strengthened when exercised or atrophy when ignored.

Even after years of trading I still find myself occasionally giving in to my instinct to chase a stock for fear of missing the move, to sell a winner too soon, or hold a loser a little too long.

Everyday when I trade I have to fight against my natural instincts.  Unfortunately my natural instincts do not encourage healthy trading patterns.  If I had to guess I would say almost all successful trades have spent thousands of hours training their minds to fight against counterproductive impulses.

I’m sure there are some traders that have a natural aptitude for the mindset required to be profitable, but I believe the majority of us have to really work at it.

It took me years to become successful and looking back I’ve realized it was because of the emotional obstacles that stood in my way.  I had a great concept of stocks, chart patterns, basic strategies, but I kept falling into the cycle of big losers and small winners.

It took a long time before I developed the self awareness to realize what was causing those actions.  My hope is that by reading this you will avoid the years of trial and error it took me to learn these important lessons.