Becoming a Successful Day Trader- Whiteboard Wednesday

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One of the biggest misconceptions about day trading is that you can load up a $500 trading account and start having success immediately. It doesn’t quite work like that. Yes, there are cases out there where someone takes $1,000 and turns it into a sizable account, but for the most part you will have to go through a process in order to become a successful day trader. We call this process The four stages of becoming a successful day trader.

It is a simple process but one you have to take note of. In a recent chat with a new member the other day I told him about this process. My exact words were ” You have to learn what NOT to do before your account starts heading in the right direction”. In order for you to thrive in this business you have to pay your dues through learning.Here are the 4 steps we cover in the video lesson.

Step 1 – Losing Phase

Yes, just about every successful day trader will start off losing. Meaning, you will blow up a couple of small accounts and push the limits of frustration. You will have big wins in the beginning but your lack of risk management will eventually cost you most of all your great wins. Trading at this point will feel like you just can’t get off the ground. We call this the discovery period. You read books, buy online courses, try different indicators, jump from one method to another, etc. Your essentially are looking for the holy grail of trading. You start to realize that trading is more than you expected and it is not going to be that easy.

Step 2 -Lose Less Phase

Armed with new knowledge, you re-load your blown up account and feel like you can finally start attacking the markets again. You have a pretty good idea of what kind of trader you want to be. You probably have a new scanning software, you know what you’re looking for and you have a nice feeling that you are finally going to master this game. But the market is not your enemy anymore. The enemy is you and your emotions. Plus, your lacking in minor details like executing your orders properly and taking your losses when you have to. You see, now you have some baggage from when you took some hits. The one thing you really have to worry about is letting that baggage “stick” for the long term and possibly prevent you to moving on to the next stage.

Step 3- Breakeven Phase

Now you have been trading for a while there are still some details you need to iron out. For example, you haven’t been though a bear market and so you might be getting frustrated with your long trades. This is when you start to feel like you are taking one step forward and one step back. You are also flirting with your ego. For example, you know you have to take a small loss but your ego and earlier baggage might be an obstacle keeping you from taking the biggest leap forward.

Step 4- Consistently Banking

Welcome to the holy land. You know your identity. You know your strategy. You know what you are looking for. You’ve also learned how to block out the noise. But as I mentioned earlier, you now no what not to do.