Becoming profitable at Day Trading

Table of Contents

Becoming a better human being will make you a better trader.¹

What? #

Day trading is sitting in front of a lower time frame chart (5 mins, 15 mins) and speculating on what is unfolding in front of you. Positions are only held for the duration of the trading session.

Goal #

Be profitable.
Continuously increase the stake size (risk per point of movement in the underlying) up to 50€².

Why? #

What about day trading sparked my interest? Why did I commit to this project?

From No to 🤔 #

I had seriously considered day trading one year ago. I gave it a hard No. My aim is financial independence, not another job. I don’t want to sit in front of the chart all day, being restricted in my when and where. Case closed.

I still wanted trade with my money for some above average returns, but on a small time budget. That story is detailed here^🇩🇪. As part of that I came across Best Loser Wins³. This quote caught my attention while reading:

Perhaps it is time to acknowledge trading for what it is? It is a great way to expose all your flaws. It is a great way to highlight your strengths. Through my trading and my research, I have uncovered weaknesses in my character.
For me, the side benefit of earning a living from trading the financial markets is the character traits it instils in me. I am more patient than ever. I am much more focused and disciplined than I was before. – Tom Hougaard³

Now it’s starting to sound interesting.

More about the mental game of trading

Success at trading is a mostly about mindset.

I always say that you could publish trading rules in the newspaper and no one would follow them. The key is consistency and discipline. [..] the confidence to stick to those rules even when things are going bad.⁴

The markets pose many challenges that need to be dealt with on a mental level:

Can you be calm and objective with a significant amount of money on the line?
Can you withstand the fear to get out and play it by the rules?
Do you have the patience to ride it out, to sight tight?

the ultimate test is the “belly test”. Can your belly handle the drawdowns? Are you willing to experience these feelings?

More clues #

At first I dismissed the idea. “I don’t want to be a day trader.” I said. But the idea kept coming back to me: “This vision of day trading has potential.”

I started to recognize aspects in trading I had already worked on:

“Don’t lie to yourself.” (Honesty⁵)
You need to listen to the market and view it objectively.
Failure is inevitable. It’s part of the process. It should be embraced.
Effectively changing my beliefs and subconscious reactions.
The importance of principles like “Ride winners, cut losers”, Always use stops, “Plan your trade, trade your plan”

These next two quotes strongly reminded me of The Power of Now:

In the past I was so preoccupied with what should happen. But to make money we must be focused on what is happening right here, right now.³

I think you are trading yesterday’s experience. You haven’t wiped the mind-slate clean. You are not present. You are focused on the past.³

Maybe trading, adapted to my style, would not be such a bad fit after all.

My decision #

I was hesitant to decide. Is this what I really want? Am I willing to put in the effort to make this work?

A decision carries with it the heavy responsibility to follow through. To not let up. To take the small steps that will get you there. To not be deterred by temporary setbacks.

I am very drawn to everything this project entails. In the end, the decision did not take long. My gut tells me that this is the way for me. I believe this is the best thing I can do for the world and other people.⁶

I know this is a though project. That it entails a ton of work. I’m all for it. Not because it is easy, but because it is hard.

Why specifically? #

“Just give me a concise list of reasons.”

In order of importance:

It provides me with a challenge that allows me to perpetually expand my comfort zone. (By continuously increasing the stakes to make it less comfortable for myself.)
There is much I can learn about myself in the markets, if I pay close attention.
Trading is fun.
Money also. Financial independence has always been one of the broader goal I’m working towards. I’d be nice if this gets me there or closer to it, but I’m not expecting anything.

How? #

I’m starting with Toms³ strategies and will slowly make them my own over time.

This is what I will do (ordered by the amount of time allotted):

Research and deliberate practice: get better with the strategies at a technical level
Trade: observe and review my strategies in action and the feelings they generate
Internal analysis: reflect and correct my behavioral responses
Produce output: share my research, learnings and progress
Distill and internalize trading principles
Improve my trading journal (it’s already pretty decent at this point)
Study price action
Consume relevant input (books, podcast, course)

This is an ongoing project and will be updated over time. More frequent updates can be found in the newsletter:

From a talk by Tom Hougaard (Author of Best Loser Wins³): The ideal trading mindset ↩︎
I realize this is a huge stake size and that I will have to build up a great level of confidence and capital to swing this big. I would rather aim way high and only get half-way there than setting a more realistic 10€. If you don’t comprehend why this is a large stake size: with a stop loss 20 points away, one has 1.000€ at risk. ↩︎
Best Loser Wins - Tom Hougaard: A book about the mental attitudes required to be a successful trader. It’s the best book on the stock market I’ve engaged with so far. The author is a real one. He knows what he’s talking about, is genuine and he lives what teaches. ↩︎ ↩︎ ↩︎ ↩︎ ↩︎ ↩︎
Richard Dennis in Market Wizards – Jack D Schwager. ↩︎
Another quote about honesty in trading I found insightful:
The fruits of your success will be in direct ratio to the honesty and sincerity of your own effort in keeping your own records, doing your own thinking, and reaching your own conclusions. – Jesse Livermore
↩︎
Eisel Mazard always urges listeners to go out and attempt to make the world a better place. I have looked for way that I can do that. Some way that is right for me.

The outcome of my why workshop⁷ was: “To improve myself, so that I can best support others.” By improving my personality through trading I will be able to do much more for other people and the world. Nowhere am I as driven, as in my self-development. Harnessing that drive for the betterment of all is how I can make the world a better place. ↩︎
See Find your Why – Simon Sinek ↩︎