Let me start by saying there are a lot of myths and misconceptions out there about day trading and what it takes to be a successful day trader. There are so many that I can’t cover them all here.
What I can do, however, is set you on the right path.
In this post I’m going to cover the four biggest things that you can do right now to build a foundation for repeatable day trading success. These secrets have the power to change your trading whether you are a novice or a grizzled market veteran.
But before we get to that, there is something we have to get out of the way first. If you want to skip around this resource, you can do so with the links below.
You Won’t Win Every Trade
Let's get this out of the way--you won't win every trade. It’s impossible. Logically I think many people know that but for whatever reason it just doesn’t click with them.
You can’t be 100 percent right with a trading strategy and that is a problem for many people. The most important thing you can do is lean into that uncertainty, put it to bed, and get serious about making money.
We’ll discuss that part in a second.
I’ve been a trader for a long time. I’ve been calling my own trade room for over 15 years. In that time, I’ve logged tens of thousands of hours in front of charts with my money in the market.
I’ve developed my own winning trade strategies that have sold in over 100 countries. I say these things not to brag but to drive the point home that if there was a way to win every trade, I sure as hell would be doing it.
I had this epiphany myself and it absolutely transformed my trading. When I realized that day trading success is a numbers game that’s about putting the odds on your side, that’s when everything changed for me.
You have to lose some trades to win even more.
Day Trading Is Kind Of Like Fishing
If you're hungry, you put the bait on the hook. You throw the hook in the water and if you catch a fish, great, you eat. And if you don't catch a fish, maybe it gets away with your bait. Well, you’re still hungry so it’s time to put another hook in the water and keep fishing.
That's kind of what trading is. A lot of people who haven’t accepted that day trading success doesn’t mean winning 100 percent of their trades are prone to making bad calls. Once a fish takes the bait and gets away, they quit. The fisherman leaves with their bait and their hook. What they don’t realize that just under the surface fish are swimming around just waiting for a hook to land next to them.
To bring the metaphor home, if you gave up fishing the first time a fish got away with your bait, you wouldn’t be a very good fisherman would you? The same goes for day trading. Continuing to put hooks in the water—learning from your losses and trading smarter—will get you closer to the results you are looking for.
When you go fishing you understand that there is a give and pull. You understand that there will be steps forward and steps back. If you want to fill a bucket with fish you know that three steps forward and one step back is still a win. If you are persistent, intentional, and diligent you will have a bucket full of fish.
Let’s take a look at four key ways in which that persistence, trading with intent, and diligence pay off for day traders. Hopefully at the end of this you will have a better understanding of my trading philosophy. If nothing else, you will have a window into a really helpful trading mindset that will set you up for success no matter what strategy you use or approach you take.
The Power Of Why
In my search to simplify and distill what it takes to be a successful trader down to the most fundamental concepts I have arrived at a trading theory I call The 12 Powers Of Successful Trading.
These twelve concepts are what I believe to be the basic building blocks that anyone can use to find success day trading. I’ll go over four of the essential powers here but it is so hard to say that any of them are more important than any others. Each one has a role to play in making up a winning trading mindset.
Be sure to request your own free copy of the full 12 Powers Of Successful Trading using the form at the end of this post to get the whole picture and build your own ironclad day trading foundation.
Now, on to the main event.
The power of why is such a simple concept but it has proven time and time again to be a thorn in the side of many, many traders. I have even seen experienced, successful traders trip over this basic concept. It is really important for new traders to get this right at the beginning of their trading journey.
Ask yourself this simple question: why are you trading in the first place?
People will look at me like I’ve got a screw loose when I ask them this. They’ll tell me “I’m trading to make money.” Well, yes, obviously, but the number of times I hear that versus the number of times I see people making decisions that run counter to this objective only reinforce my belief that this is the first and most vital point any new trader can learn.
Seriously, if you take anything away from what I’m sharing here today don’t forget the power of why.
Successful traders trade with a plan. They are continuously testing their plans, studying wins and losses, and adjusting when necessary. When I ask someone why they are trading it's because I see them failing to do the things that we know make money day trading.
If we know that trading with a plan is the not-so-secret secret to success, then when traders accept random trades outside their plan what is their real objective?
When traders put their needs before their trades, why are they trading? It’s not to make money—we know what makes money. If you’re a trader who is taking trades that don’t fit into a system that is proven to make money, then you’re not really trading to make money.
You’re trading because you like the thrill of gambling (not a good approach), because you are putting your needs in front of the needs of your trades, or because you are trading out of fear or greed. In some cases, you may think you are trading to make money but your actions (and your results) would indicate otherwise.
The Power Of The Trade Plan
The next power answers the obvious question: how do I make money trading? If you have set your intention and you are committed to making money as the why of everything you do, the question shifts from why to how.
The answer lies in the power of the trade plan.
Trade plans are the next logical step to fulfilling the trading why of making money. The beauty of a trade plan is that you can reduce all your trading decisions to a series of parameters. Start time, a stop time, specific goals, a particular trading method--everything that you could objectively define before executing the trade.
The key word here is objective.
It's not some random John Wayne shooting from the hip trade decision. It's a decision that has been clearly explained, vetted, and defined beforehand that is ready to be used in your trading sessions.
Armed with a trade plan you can test and model how it might work “out in the wild” so to speak when you are ready to put real money on the line. The great thing is you can make sure it is ready to make you money before you ever have to risk even a cent in the open market.
There is a problem though. This is usually where I lose people. A lot of people don’t want to take the time to set up a trade plan. They don’t want to test and they don’t want to take the time to validate their approach. Many of the people I talk to can’t wait to get started and they are ready to dive right into trading.
I have one message for those people: refer to the first power!
If you’re not acting with intent and setting making money as your objective—the power of why—then your chances of success start dropping off dramatically. You’re not stacking the odds on your side.
If you were fishing, you’d be throwing hooks in the water without bait or you would be using the wrong kind of bait for the species of fish you’re trying to catch.
Doing this in the markets means you’ll catch a lot of losing trades and you will get discouraged. Not to mention burn cash needlessly.
You Can Fix This
If you’ve already started trading and this has already happened to you the good news is that you can fix this.
It’s time to ask yourself that all important question—why are you trading?
If you haven’t started day trading yet, beware. Sometimes people start trading because it's exciting or maybe they want to prove how smart they are. Sometimes people want to feel like they are part of an exclusive community or maybe they’re just bored with vanilla stock investing.
This may not be something people realize consciously but a need to self-validate permeates a lot of the things we do. Trading is no different. It is essential that you clear away the clutter and focus on trading with intention.
Repeat the mantra “I am trading to make money; my trade plan will make me money” over and over into a mirror if you have to.
Whatever it takes to get out of your own way.
One of the reasons the power of the trade plan is so powerful is because of the utility of a trade plan. A trade plan is a proof of concept, a validation tool, and a risk mitigation method.
Test it, use it, and embrace it. Follow your trade plan and trade with the intention of making money. Do not trade to win 100% of the time. Not only will you be disappointed when you suffer inevitable losses, but you are playing a game that can’t be won.
One quick note about risk. In trading, as in life, nothing is guaranteed. Your trade plan needs to be maintained to stay effective and it won’t win 100% of the time. Sadly, as we know, there is no approach that can deliver winning trades 100% of the time. If anyone tells you otherwise, run very fast in the other direction.
They have barrels of snake oil they are trying to sell you.
A Quick Point About Day Trading Losses
This leads me to a point about losses.
Another reason the trade plan is such a powerful weapon in a trader’s arsenal is that it helps put losses in perspective. If you have a trade plan that you are continuing to test and is making money any losses you incur don’t sting as bad as they might if you are “trading from the hip” and spraying your trades all over the place.
After all, why would you get discouraged in such an enviable position? Even with losses here and there you have a plan that has been thoroughly tested and that is proven to make money. You can trust yourself and your trade plan to make up losses and continue to grow your account.
The concepts of trading with intention and of following a trade plan to keep your money as safe as possible with a validated method aren’t complicated. In fact, they’re really simple. By following these two simple—and very powerful—guidelines you are already putting yourself head and shoulders above other traders.
The Power Of Quitting
Speaking of simple concepts, the next power I want to discuss here is the power of quitting.
So far we have asked ourselves why we are trading (to make money) and we have answered the question of how we’re going to go about doing that (with a tested trade plan). Let’s talk about quitting.
When you were in Little League your coach told you that no one likes a quitter. The same goes for learning an instrument or joining any after school club. This is a good message to help teach children the importance of perseverance but it doesn’t serve us well in the world of day trading.
One of the trading sermons you will always hear me preaching is that to make more money you are better off trading less. I know it’s counterintuitive. It sounds like a paradox but let me explain.
Here when I say “quitting” I’m not telling you to throw up your hands and give up the first time you experience a loss. Quitting is nothing more than stopping for the day once you have hit your goals. Or, to put it another way, stopping when your bucket is full of fish.
Let me say it one more time for the people in the cheap seats.
You don't have to keep trading once you have hit your goal for the day. A lot of people think that you have to trade more to make more money and that's not true. It’s something that a lot of new traders assume, which I can understand, but I see experienced traders who fall prey to this popular misconception as well.
Making lots of trades doesn't automatically mean you will make money.
You could make money that day, but spray and pray trading is unsustainable. Despite a lucky day here and there losses will pile up and you’ll be out a lot more money in the long run. Plus, as your trading frequency increases, so do the trading commissions you are hit with. Some platforms offer limited free trades, free trade types, or commission rebates, but the fact of the matter is trading more often can get expensive fast.
You make money by hitting your goals and following your trade plan. Sure, I’ve been trading for over twenty-five years, but I don’t want to spend all day at my computer. My trade plan is really simple. I want to get my winner and be done. Then I can shut down my computer and enjoy my life.
Quitting Simply Means Keeping More Of Your Money
As your account grows, you can set up similar trades—or even the exact same trade—with more contracts attached to them. This way you are scaling your goals, minimizing the risk to your money, and sticking to the system that you have proven can bring success in the form of a high win rate.
The power of quitting, of trading less and stopping when we hit our goals, is a way for us to keep the money we make and not give it back to the market. Put simply you are making more money using the trades you know have a high chance of winning. It’s an approach that prioritizes the quality of the trades you execute over the quantity of trades. It’s a powerful way to make more money while trading less and protecting your money in the process.
The power of quitting underscores the need to not try and take too much from the market. To not put our personal needs in front of the needs of our trading and to not trade from a place of greed or fear. It’s a great nugget of wisdom that can really help you reframe the way you think about trading success and how to achieve it.
Again, I want to stress that the power of quitting, like the other powers I talk about here, is about stacking the odds in our favor.
It’s about arming ourselves for the best chances of success we can conceivably have. This helps us build the foundation of trading with the firm intention of making money. There is no system or strategy that will ever, or could ever, result in a 100% winning trade rate.
The Power Of Being The CEO
As I mentioned, we’re skipping over some of the twelve powers to highlight the ones I think are most important to share with beginners, but keep in mind that there are more than we’re covering here, and they are all important in their own way.
The twelfth power, the power of the CEO, is a statement about how—just like the CEO of a business—you should look at the big picture with your trading. This is true whether you are making trading your full-time source of income, whether you are just hobby trading, whether you are a pro or a novice.
Even if your trading isn’t your job it is important to think of it as a business in the same way that a CEO would.
When you start doing this you can really start pulling all of the elements together that are covered in the other eleven powers. This is important because it allows you to remain objective, remain in control, and build your trading strategy from the ground up with a focus on what really matters.
Imagine that your trading is a business and each trade is a transaction. New businesses have a lot of expenses they must cover at first, right? A new business owner understands that the money will come in time and eventually the business will break even.
Until that point, the business will be in the red.
Likewise, your trading will also get to a point where profitable trades become more commonplace. Additionally, if a business has a bad day they don’t close up shop and leave town. They open up for business the next day with the expectation that more transactions (trades in the case of a trader) are on the way. With a properly-tested and proven tradeplan you can put this same principle into practice.
A business has a business plan that they have studied, put into action, and researched to determine whether getting started was a good idea in the first place. For you, that’s your trade plan.
Any successful entrepreneur will tell you that a good business plan doesn’t just collect dust in a drawer at your desk. It is adjusted as the business grows and overcomes challenges. The same goes for your trade plan. That’s your business plan, that’s your blueprint for success.
No More Fishing, Now We’re Dry Cleaning
Let’s pick a business at random. Think of your local dry cleaner.
The first day they opened their doors, there were probably no customers. But, that’s barely a setback. The owner has a plan and has done the research. They’ve tested their market just like a trader tests their trade plan. Even though there is no money coming in yet the owner understands that they have to follow the plan to make a profit.
Once word gets around the cleaners start doing more business little by little and the business grows. Eventually the business breaks even then starts becoming profitable. What happens one day if someone comes in screaming the red wine stain on their shirt is still there after they paid? This customer is upset and threatening to take their business to the competition.
What do you think the owner of that business would do? Would the CEO of a business throw up her hands and give up?
Of course not.
The dry cleaner will try to fix the situation and maybe they can’t--maybe they lost a customer. But they will definitely figure out what went wrong so that it doesn’t happen again.
This is the same as a trader who finds themselves on the losing side of a trade. Someone who isn’t seeing the big picture might throw up their hands. They might lose hope. Worse, they might try to make up for the loss by ignoring their plan and getting greedy.
That’s a big mistake. In trading and in business.
Another way this big picture CEO mentality is really helpful for traders can also be exemplified by our fictional dry cleaner. Let’s say the cleaners open up Tuesday and they just don't get many customers. That’s a day when the expenses are higher than the income.
But that’s a Tuesday.
A CEO knows that that doesn’t mean close shop Wednesday because Tuesday was bad. The cleaners know that the business is going to come in on Friday and over the weekend and they'll make their profit for the week including the bad Tuesday.
If you take this big picture approach and treat your trading like the CEO of a Fortune 500 company would treat their business you will already be in a better place than 95% of the traders out there, and your chances of success are going to skyrocket.
The Bottom Line
To recap, accept that you can’t win every trade. Seriously, if you skipped everything else here and jumped right to the conclusion, if you look at nothing else on your screen right now, this is the big one.
This one minor mindset adjustment can make or break the future success of your day trading career.
A successful day trader is one who stacks the odds in their favor and accepting that it is impossible to win 100 percent of trades already increases your odds.
Next, obey the power of why. Ask yourself why you are trading, and be honest with the answer. If you want to make money day trading, commit to making that your intent. Doing this further stacks the odds in your favor. It is critical that you hold yourself accountable and ensure that your actions are in alignment with your reason for trading.
No matter what you say, think, or feel it's your actions that must align with your trading why.
Don’t underestimate the power of a trade plan. Take the time to test, refine, and prove your trade plan. If you do this, you guessed it, you’ve stacked the odds in your favor.
The same goes for the other two powers listed here. Obey the power of quitting and understand that executing more trades doesn't mean more money in your pocket. Focus on high quality trades over a high quantity of trades.
Approach day trading like a CEO who leads a business and take a step back from your trading days. What would a CEO do? Would they shutter their company after one bad day of sales or would they figure out what went wrong? Maybe nothing went wrong at all and it just wasn't your day—whatever the case, taking the long view and trusting in your proven tradeplan will keep you on the right track.
The four powers I discussed here are really important but the reality is that the other eight are really critical as well. The power of structure (power number seven) is a really important way to set up your daily trading sessions and get the most out of your trade plans. Combined with the commitment to adhere to impartial trading—obeying power number ten, the power of mechanical rules—helps keep you focused and helps keep you making money.
Each concept that is covered in my 12 Powers of Successful Trading builds on the concepts that come before it and when you trade with the 12 powers on your side you are really stacking the odds on your side.
Use the form below to request your own free PDF summary of the 12 powers and start trading the right way today. I truly believe that this is the best starting point for new traders or the perfect remedy for experienced traders who aren’t happy with their results and want to return to the basics.
Trading, like all market exposure, carries risk. Losses may exceed deposits. No strategy can eliminate risk or guarantee returns. Past performance of any person, strategy, or trading approach do not in any way ensure future returns.