Day trading can provide significant income if you know how to go about it. However, For most traders, a lot of screen time, practice and discipline is needed in order to achieve any level of consistency.
As a day trader, I’m always pragmatic. I’m more practical than theoretic. As they say numbers never lie and so my return last month (October 2019) was a little over +210%, trading in 12 out of the possible 20 days.
The average number of trades stood at 10.8 trades per day. Average time spent on a trade = 30 minutes with an overall success rate of +81%. These are the most important stats for me as a day trader.
I know many would argue that my risk:reward is 2:1 and that this not sustainable long-term. I always enjoy constructive criticism. Being the protagonist i am, i believe that as long you have a robust risk management approach (one that adopts to the day to day changes in the markets) and solid strategy, R:R will count for nothing!
It is not always about what the books say but the reality on the ground. This explains why I achieve a success rate (Strike Rate) of 81%. Its not how big the looser is but how frequent you win in each setup your strategy gives.
So lets go straight to the facts that matter.
- Need for a Robust Strategy
The main reason traders lose is the absence of a solid day trading strategy. If you develop a robust strategy, it can be used in just about all market conditions and should inform you when to stay out of the market because the conditions are not favorable.
An effective strategy helps prepare you to take action before a profitable opportunity arises, not after. Order flow is a good concept to adopt as its leading and not lagging. Order flow day traders will say “trade what you see, not what you think”
2. Improve your Day Trading Success Rate
Rome was never built in a day they say. Totally agree. You have to put in the time and hard work. This involves publishing your day to day trading results and doing a step to step analysis of your trades. A few websites that can help you do this include: http://www.myfxbook.com
Another effective way of optimizing your results is by doing market replays and tweaking basic concepts to align things up. This is for Ninja Trader users. For MT4 and MT5 users, do back test of the pairs you traded all week.
I do this every Sunday afternoons/evenings before the market open. I never skip a week without reviewing and replaying. I always recommend that you analyze the loosing trades only and see if you would have done any better. Note down important adjustments you make on your notebook/sticky notes.
3. Be Patient with Your Work
Trading in general not just day trading is a game of probabilities. As they say no one has the holy grail (including myself). The need to remain patient as you put in the hours of work, review, review, review is very important.
The probability theory/ Law of number states that:-
“The law of large numbers is a theorem that describes the result of performing the same experiment a large number of times. According to the law, the average of the results obtained from a large number of trials should be close to the expected value, and will tend to become closer as more trials are performed.“
To remain consistent, you need a certain number of trades for your edge to play out. In this case, I recommend doing at least 100 traders (for day traders) before getting rid of any strategy. Yes, sample size matters a lot even for software developers or programmers. So don’t go too hard on yourself, spend some time and notch that 100th trade first before moving to a new strategy.
4. Be Independent
Independence isn’t taking on the world alone as many would think. Its totally different when it comes to day trading. It simply means that you MUST no longer rely on others . Embracing other traders opinions and thoughts often leads to losses. Once you have a trading method that works for you, you don’t want other people’s opinions. You do what works for you, and that is that.
Independence is about working to build your own personal toolbox, so you can remedy your own trading, instead of relying on others (who may not always be there when you need them)
I follow a simple quote that states “Take small profits and do multiple trades”. In order to remain consistently profitable day trading you MUST know when to cut a looser. PERIOD!
- Trade what you see not what you think/others think.
- Be selective, cut your losses, and let your profits run when you can.
- Prepare before trading by reviewing the Asian session (if you are based in Europe/Africa) and the Asian and European sessions (if you are based in America)
- Identify the day’s events calendar (Economic Data, Speakers, Central Banks etc).
- Review your previous weeks trades.
- Do not trade if you have not had enough sleep!
- Do not trade if you are stressed or worried about anything!
- Never average into a losing trade.
- Never reverse position. I mean, never cut a long and immediately go short. This is a recipe for massive losses over time. So called emotional/impulsive trading.
- Do not commit more than 10% of your capital to any one trade. Use Money management tools that will help you to manage your finances properly!
- If you are tired please STOP trading.
In a nutshell, day trading is not an easy art to master as some of us would make it look. It requires experience, skill, discipline and humility to be remain consistent. Following all of the above rules from this post can be a major factor determining your long term success in this day trading business.
Thats all i have for today, speak soon, stay safe and be very very happy always! 😉