You wake up one morning with a BAD idea – you’ve decided to start making a living by becoming a Day Futures Trader. But how can this be such a bad idea, don’t people get rich trading futures? Where did this idea come from? Have you seen one of those ‘work’ ads for 10 minutes a day and earn $4200, ‘get rich quick, never lose’? Or have you visited a chatroom and the ‘resident guru’ made it all sound so easy? Maybe the title of this article should be – How to die a painful death chasing the carrot.
Be realistic. IF systems like this were available, or if day trading was that easy, wouldn’t everyone be a rich day trader instead of being a statistic in the club of 90 percent of all day traders fail? If you can’t be realistic about it, really believing and understanding the odds against you, then you don’t stand a chance. It would be best to “give up” on this idea of day trading, and save yourself a lot of pain and money.
I’ve known and worked with many traders over the past nine years, and in that time I’ve seen unrealistic expectations and problems with their approach to trading, where people who may have had a chance to succeed were done before they started. I thought about writing a book on the subject. It would not be about how to trade during the day, but about how to learn how to trade during the day – the key word is learning NOT to trade.
It can’t just be about money
How can learning any new skill start with a total focus on the result, instead of how you plan to achieve that result? This would be no different than trying to put a roof on a house before building the walls or expecting to receive a college diploma the day classes start. Speaking of unrealistic expectations – these are impossibilities – just like any scheme to get rich quickly. However, many come to day trading as what I refer to as a “work-replacement trader,” is a “trader” that tells me the following: I know I have to spend time making a trading plan and ‘actually’ trading paper before I can start trading real money, but I can’t, I’ve just been laid off from my job and I need to trade now to make some money. There is another statistic for the 90 percent club.
When I meet a new trader who has some interest in what I’m doing, this is probably the most frequently asked question: how long will it take me to be profitable with your method? This ‘trader’ has never yet traded with real money, or lost in any ‘trading’ he has done, yet what he wants to know is how long it will take him to become profitable with his new method. My answer to such questions is to first ask my question: what do you plan to do to learn this method, how can you become profitable with any method before you learn it? I remember one particular “trader” with whom I spoke 2-3 times before joining our group. In these conversations, this trader told me how many thousands of dollars he had spent on trading systems, methods, and trading groups – it was almost as if he was ‘bragging’ about it. He had never learned how to trade and had never traded profitably. But, once again, the same question arose – how long will it take? I told the ‘trader’ my thoughts on this while saying that if this is the main concern, he will probably never learn it and really should not join the group. The ‘trader’ assured me that this time would be different BUT it wasn’t – they never studied the training materials, but every few days I would get an email asking when I thought they should start trading with real money. And there is another statistic for the 90 percent club.
Trading can’t just be about money, especially at the beginning, but really at any point in your trading career. Trading is about the process; that process is learning the method and related trading setups, creating what I call a base setup plan. Does it seem logical that you need ‘something’ to trade before you become rich in trading it? After you’ve done that, start trading on paper with this plan to get enough screen time and repetition so you can make corrections – learning your mistakes and misreadings you make in real-time. Achieve this, and then start keeping records of the profitability of your paper trading, first trading for profitability and then trading for proficiency, where you worry about the percentage of profit potential you gain, not just whether you make a profit.
How long will it take? Who knows, but there are certainly no shortcuts. It will probably never happen. Paper trading to the level of proficiency is very difficult to achieve, because “traders” are not willing to work hard enough and with the necessary commitment since there is no financial reward from paper trading. In addition, since there is also no financial risk, paper trading is quite often turned into a game and becomes a waste of time and the formation of bad habits that become difficult to change. But skip the process altogether, because you want to start making all that money that caused you to decide on a day trader to start and – another statistic for the 90 percent club.
Introduction to the psychology of trading
I would guess that most of us have had experience with some kind of real-time performance stress before. Maybe it was a college final, or maybe it was athletics-related, maybe you had to give a speech, or maybe you were in a theater production. Whatever the case may be, for me, as well as for everyone else I remember talking to, nothing even resembled the “feelings” that were “brought on” by day trading real money in real-time. My background included athletics, and I can remember pitching in a state final baseball game, and I can remember last-second free throws in basketball tournaments – it was a piece of cake compared to starting to trade real money. Nothing can prepare you for risking your money on an unknown outcome over which you have no physical control while watching the price bars suddenly start ‘ticking’ at the speed of light – with your heart pounding and your inability to sit still, your mouth dry, your palms sweaty and feeling like you’re about to throw up – etc, etc etc etc. Doesn’t that sound like fun – I bet get rich trading scheme didn’t mention any of those things.
If you’re going to go through these emotions known as trading psychology, and all the various fears and forms they can take, it will come with your preparation, repetition, and understanding of this basic setup plan, along with the knowledge that you were able to trade on paper with proficiency. No, it’s not the same as real money, and you’ll still have to get used to making trades in real-time, but at least you have the confidence that what you’re about to trade is working, and at a level beyond simple profitability. It takes time for these emotions to leave you, and maybe some will never leave you, but that’s OK. You don’t need to eliminate all emotions to profit from trading, you need to control them and have confidence in yourself that while you can’t “know” what will happen, you can “know” what you are doing and that you will act as close as possible to your intended “plan.” Does going through a learning process that involves trading on paper still sound like a waste of time? No problem – there is still plenty of room in the 90 percent club.
Work ethic and fear of failure
Again, I think about this question – how long will it take you to profitably trade with your method? I don’t know, are you going to work your hardest? Fear of failure can take many forms. What I’ve seen quite often is that this fear is related to the self-esteem of ‘traders’ – that failure at this, failure at anything, will make them ‘lesser’ people, and they can’t risk that happening. Consequently, they never work their hardest to learn how to trade. They don’t want to put everything on the line, they always hide something. Why? Because this way there will always be a “built-in” excuse for failure – IF I tried, I’m sure I could do it. The result is the same, of course, but at least they don’t have to blame themselves or take a “hit” on that precious ego. Is failing to learn to do something and being a failure the same thing? To my way of thinking, trying very hard and not being able to do something is just the way it goes sometimes. We are not able to do everything we try, no matter how hard we work. On the other hand, failure is what I described – failure because you didn’t “stand up” and try your best, instead you “held back” trying to protect yourself. If you want to learn day trading, check your ego at the door before you start – or you too can join the 90 percent club.
Do you still want to make a living in Day Trading?
Have I talked to you about becoming a day trader – do you still think this is a great “get rich quick” way to make a living? While it wasn’t my intention to change anyone’s mind, if you did, I’m glad. Yes, trading can be ‘lucrative’ and yes, you can become ‘rich’ by trading, but you have such a long way to go before that happens. Many people ‘say’ they know it, but they don’t really ‘believe’ it. They think there will be others, and they think they will be the ones to ‘bounce’ these opportunities, BUT then they don’t approach it any differently. If nothing else, it should be very clear that if 90% of all-day traders are losing, then to have a chance at success, you will have to approach it differently than the vast majority do. Go for it, BUT focus on the process, have reasonable expectations of what is involved, and then do what is necessary to learn to trade – that 90% club is way too big.