Coaching group I am a part of got a homework assignment. We are two give an advice to a hypothetical new trader regarding two of the most likely problems they will encounter. It’s intended to benefit the person dispensing the advice, not the other way around. #1 Inability to accept/take initial loss. Loosing in a trade seems so final and irreversible. You start extrapolating … if I loose X every trade, I will be down Y by the end of the month and out of money by the end of the year. Also, due to mean reverting nature of the markets, loosing trades always seem to come back and even turn into would be gains! Advice: Taking losses is part of the job description for a pro trader! Losses are an integral part of trading, they must not be avoided! They must be accepted to be considered a professional trader. Inability to take a pre-determined loss, will lead to taking much bigger loss eventually or sitting in a draw-down watching opportunities pass by. But the biggest issue is - you will never be able to size up because you can’t trust yourself to take that initial loss! Condition yourself to accept the pre-determined loss prior to taking the trade. If you have the edge, losses are just expenses of doing business. If you don’t have the edge, losses are your insurance premiums for surviving long enough to gain the edge. #2 FOMO As a new trader, it’s difficult to understand context in which you are trading. Some days require to be more aggressive, some more patient, some to be inactive. Because day traders have limited window of opportunity - usually around the open - you will often experience urgency to take a trade because, if you miss this one, you may be sitting on your hands all day or try to force trades. Related to this is taking entries pre-maturely. It’s difficult to see your would be trade work without you. Advice: Condition yourself to seek perfection with your signals. Expect the stock to do exactly what you expect it to do. If it doesn’t, let it go! This was not your money to take. If you take the perfect signal which does not work out (because it’s still a game of probabilities, not certainties), you can accept it. But if you take a sub-par signal and it results in a loss (see#1 above), you will fill like an idiot. Have a maximum number of signals to take per your trading window. This number must be small enough to make you very selective and patient. Accept the fact that you may not trade at all that day. Let go of “missed” opportunities.
D1 trading at the retail level with no experience is a death sentence regardless of the teacher. Sim is pointless. Micro futures, no stocks. The only people that make it are those that generate edge internally.
#1 Not having a plan. Preferably written down. The plan should answer the question "What do I do now?" #2 Not having the discipline to follow your plan.
I’d say chill out. What matters isn’t the next trade but the next 1000’s ones. Focus on improving your system and execution. It’s kind of an art. A performance. Visualize what the perfect trade would look like and what it’s implying for you as a trader. Certain thoughts are destroying yourself. You end up ruining your performance. I’ve seen guys recommending a video by a super star surfer. Big wave surfing. Laird Hamilton i believe. Stop thinking about money and start thinking about what would the best trade look like. Maybe he can’t make decisions under pressure and needs to widen his timeframe in order to take cold blooded decisions. Maybe he has no plan to refer to and needs to solve every little tick. Maybe he hasn’t enough experience and needs more practice to master the plan. Not sure which video they’re referring to Maybe this one … IDK The best advice for new trader is deliberate practice. Anyway … Practice, make mistake, improve.
Exits are not monolithic. Using a "predetermined loss" is an example. Monastic, overly simplified. Depending upon the entry* there are usually signs it is not going to work out as the trade continues. Most setups are not enter and forget, some might be, but most are not. Wishful and/or lazy thinking. Consider a more robust exit strategy 1) Max Loss, 2) a BE signal with a Cancel BE signal exit extra condition 3) a "stall" signal again with a CANCEL. All are precisely defined. All have trigger(s), cancels and then "next backstop" well defined. The above is overly simplified but you get the point. One cannot cook a great meal with a spoon and a hotplate. There is a minimum set of tools that is needed. IMO, this is why most people fail. They don't have the minimum set, are not proficient using them, and go on tilt when things go wrong. Furthermore, they don't even know it. For FOMO, again most people have very simple setups. They are static snapshots. Consider the fact there are literally 1000's of possible setups every few bars. There is nothing wrong with a multistage conditional setup, with aborts along each stage. The problem a lot of people have with their setup, is that there are simply too many conditions, happening too quickly to manage trade after trade. Also, there is a difference between a setup and an entry. If that is not clear, think about it. There are not many good strategies that have the setup and the entry always being the same. Not managing them separately is a missed opportunity. Again wishful-lazy thinking. It is not 1975. So, I would say, your answers are wrong by oversimplification and incompleteness. Best of luck * How effective the exit tactics are is a criterion for the setup and entry, BTW. PS: if your answer get you a passing grade, then I would run not walk aways from that group. Those answer would only string you along in sub optimal trading, indefinitely. There will be no traction, only a lot of ups and downs. PPS: I agree with Hilmy. If that is the advice you are getting as a new trader, don't start.
Dont' bother starting. You have better chance for profit beggin money in streets long term than daytrading lol But seriously, get a real job and stick to it. Trade on the side.