On the seminar (or more precisely: “marketing seminar”), the guy who sell the program tell you and show you how easy it is to make money from the market from Day Trading. Although generally is quite true that everybody that can click a mouse could possibly make profit on this most volatile type of trading, at the end the key to success is not the “how” but the “why”… And below is some of them…

Three Possible Reasons Why Day Trading or E-minis Might NOT Be For You

What mention below are actually in general also valid to all kind of sharetrading/stocktrading on the market. But due to the nature of day trading (fast, real time, high leverage) all of the factors below become much more hurdle for this trading scheme.

1. If you a macho man or macho girl who never let anybody beat you – this is not for you.

Why did I do that, nooo...

What will you do if someone beat you and take the money from you ? The chance is you will re-consolidate, get another weapon or ammunition, and get even – this is exactly why day trading is not for you.

In a live and continuous environment, although receiving a valid and good buy signal, you can still be losing. And as you want to get even, you will just get back to the trade, ignoring your own system, as if the market is scare of you and willing to do whatever you say. If the result is still bad, you will have even triple motivation to get even. But if the result is now as you expect, then it become even very very dangerous situation as you think that you can beat the market when you want to.

The fact is, all the trade are basically random. Yes, with good system, in long term the number of losing trade will be outnumber by profitable trade  -or- your profitable trade give you much more profit percentage than losing percentage (e.g: every trade  has average profit of 20% but every loss only a mere 10% loss – then even it’s 50-50, you are still ahead)

So, if you really want to do successful Day Trading / E-minis / similar (actually share trading in general – but much-much worst in day trading), you need to be just cool even somebody take your money out right….

2. If You Cannot Lose Your Trading Account – this is not for you

Most of the trader probably will start maybe $5000 trading account. If this trading account is your mortgage for next month that you cannot lose it – then just forget it. When you start, whatever you deposit on the trading account, although you would prefer it, but you should be able to lose it all without a blink in your eyes.

"Why..why..me?"

Losing money should be a normal event. Yes, we don;t want it more than getting money, but losing money should not be a biggie for you when you want to do day trading. This is really different say if you invest in diversity portfolio and loss $20,000 due to market crash because of Global Financial Crisis, at least you can reason that everybody experience it and it’s not really your fault.

The feeling is quite different.  Losing $1000 in 10 minutes under your very eyes will give you some wondering: why did you take the trade? whether the system is good or not? (maybe you get ripped off), why you are so unlucky, why other people so lucky, etc, etc… This wild imagination will turn you into total failure in very short term if you cannot stand it – especially with the money that you cannot afford to lose.

If you are prepared to lose the whole trading account, having lost $1000, will just make you say to yourself “bad result, but don’t worry still got $4000 – tomorrow would be better” – at least on more positive spirit. And yes, if the trading system is really good on longer term, it will give distinctive result.

3. If you are not a discipline person or impatient – this is not for you

Day trading, even the time frame is  just a matters or minutes, need a lot of discipline and patience. Discipline to not or to take the trade according the trading plan and stick to it until the end. Patience to not just exit the profitable trade before hitting the profit target, or not exist a loss trade before hit stop loss target.

Some time you plan to target $200 profit, the trade has gone your way and now at $100 profit. Impatience people will just take $100 – you cannot get poor with any amount of profit they say. But remember the profit target is part of the system. For example the system is expected to have 4 x$200 profitable trade and 3 x $150 losing trade on average, giving you $350 profit in a day. But if your profit is only $100, $100,$100, $50, then the net result is minus $100 although you win more than lose.  If this happen, then you start have doubt on the system or your “luckyness” or something else where the real root cause is your lack of discipline and patience.

Well, that’s a start before you embrace your day trading career….

1. “I have to win this !”
2. “Give my money back!”

Regardless whether you are day traders, swing traders, Fibonacci traders, short term investor, long term investor, regardless of your trading system, once we have even one of those evil thoughts, we are guaranteed to revoke our success in the long run. Let’s see in a bit further why they are….

“I have to win this !”

Let say there was a bit of pressure on our side and we really need to win this particular trade that we want to enter. Any kind of pressure, for example: this is our last chunk of money in the account (if this one lost, that’s it, all gone) or we really need this trade profitable because otherwise you will miss the mortgage repayment – or even worse – that’s what left from what suppose to be my kids college fund. Or if you don’t win this trade, you cannot buy food for the rest of the week.

Then, still using our trading system you spot a trading opportunity. (It’s double the evil if because of the pressure, we simply ignore our trading system). “A, ha ! This is it.. I have to win this!” WIth this evil thought in your mind, let see what happened if we win and lose:

Yes, the market let us win

OK, of course we’re happy… but deep down in our mind we may make one or some of mental notes below:

• “See.., if I have enough reasons and confidence. I can do it”
  Then what happened if we stumble into the next pressure and that time we lost, we will blame the market, we blame the trading system, or we will blame something else because we already have the expectation to win. Then a step further, we will make tally that the market owe us one this time.
• “Yes, I conquer the market ! Easy !”
  We will develop ‘over-confidence’ which we assume that the market will give us whatever we want

No, you lost this trade.

Well, awful result.. But what is going on in our head is even uglier. We would start blaming the trading system (must be something wrong with it) or we would start blaming your luck (“That’s it I have no luck. I am cursed”) or even worse we would start destroying things around us to compensate our anger. We will also start to justified that the market owe us money. We may also feel that the market has betrayed us.

So, if you have this “I have to win this” evil thought, no matter you win or lose, you put a time bomb for your trading journey.

“Give my money back !”

After a few losses – especially losing streak – and suddenly we spot a good opportunity for trading based on our trading system. “OK. Give my money back!” Perhaps additionally you increase or double your position (from 1 contract to 2 contract, from 1000 shares to 2000 shares or from $2000 to $3000) with the intention ‘double or nothing’. We want to make up our loss. Again, wIth this evil thought in your mind, let see what happened if we win and lose:

Yes, the market let us win

You will feel that you just beat the market. Not only over confidence, we would also develop some false premise that the market has taken something from us then it’s about time to give it back to us. Unfortunately, it not always like that.

No, you lost this trade.

We would be angry and ruin the rest of the day, wouldn’t we ? We have just increased our lost. And that seeds on our deep mind to get revenge would start to grow now. “I’ll get you tomorrow, market !”

The disaster to come

Starting with these 2 little “innocent” thoughts, we can produce unlimited “disastrous” outcome.

When we got hurt, our subconscious will not just do nothing, it will activated our pain-avoiding mechanism. So the next time we try to do a trade again, we would be hesitated or making unnecessary mistake or become groggy or less confidence or miss a trade or  always blaming on something when something goes wrong. All of those will produce more bad result. At the end we will not be able to do anymore trade and fed up with everything. “That’s it! It’s not for me”.

When you got over confidence, you are bound to hurt yourself as well. It’s 100% guarantee that ‘the market’ will get you sometimes. And when that’s happened but you believe that’s not supposed to happened, you will get hurt even more.

The Solution

Mark Douglas in “Trading in the Zone” give the exact solution. The result of every single trade – yes every single one of them – is random. Any trading system or signal or methodology that we apply only increase the probability to a certain edge. Say from 50% win – 50% lost, to 70% win : 30% lost. That’s all.

So when we enter any single trade that we are about to enter. Do not expect anything. The result is random. We should never care the result of individual trading, we need to see in the long run.

What should we feel?

Let’s do simple exercise. Get a coin, a pen and a paper. Write number 1 to 500. Then flip the coin for 500 times and record the result. Go a head ,get one ! We know the probability is 50% head or 50% tail. Now, start flipping and do the tally on the paper.

Really do the flipping now! You will be able to feel what you should feel during trading. Just flipping, don’t try to guess any result.

Every single flip, you will know exactly the result: it’s head or otherwise a tail. Either one. Do another flip. Do not try to guess, just observe whether it’s head or a tail. Do another flip. Watch again (remember don’t try to guess). Do another one. Now try to observe your feeling between the flipping and seeing the result.

Did you feel excited? No.. it’s either head or tail nothing really special.

Did your heart beat faster? No… we know the result, either head or tail…

Were you sweating to see the result ? No… don’t be silly…

Well, that’s it… That’s exactly the feeling you need to experience during the trading. No need to expect anything because you know the result, it’s either win or lose. No need to be excited, no need to pump the blood more rapidly, no need to sweat.

Have not feel it yet ? Try another 50 times of flipping. Observe your feeling between the flipping and just before seeing the result.

On another note, take a look on the paper. After 500 flips, is it nearly 50% ? Yes it would. But look at your note.. Is there any 5 or more consecutive ‘head’s? Yes, it would. That’s your trading. You might get 5 or more consecutive win or loses, but at the end the probability is in your side. (Say 70% or more, otherwise your system got a flaw! In this case ‘back testing’ is the one you need to do)

Conclusion

If you have not read Marks’book and you are into share-related trading, go buy one. You will need it. Not just because it’s a good reading, but it provide practical solution of our problem. The problem is not in the trading system, it’s not on the signal, it’s not on the timing. Everything is on our mind.

If you have read the book. Read again! Not until you read it 5 times and implement it, only then you will see the improvement of your trading ! That’s a given promise !