Not every trade will be a winner. Nobody can win 100% of the time. A realistic win-rate is most likely between 50-60%, depending on your strategy. So therefore, I will expect to lose almost as many trades as I win.
2. I must accept that I will never be able to enter at the absolute lowest point, nor exit at the absolute highest point.
It is almost impossible to catch the “perfect” entry or exit. Just be happy with getting the profits that you had targetted (if you manage to get them).
3. I must accept that for almost every trade, there will be “red” moments (i.e. being in deficit) and there will be “green” moments (i.e. being in profit).
It is very rare to be able to jump into a trade where it just goes straight up all the way from start to end. There will almost always be agonizing moments where the trade just doesn’t go in your direction before hitting your desired profit target (if you manage to get there).
4. There will be periods of winning, and there will be periods of losing.
I must accept that wins may come in bunches, and losses may also come in bunches. Have to stay mentally strong when the bunches of losses come.
5. I must accept that I will inevitably always make mistakes.
No matter how many times I trade, I believe I will always still make mistakes and there will always be something new to learn every day.
I’m not sure if anyone reading this has ever watched this 1998 movie called “The Conman”, starring Andy Lau.
Andy Lau (known as “King” in the movie) plays an ex-convict who was once an expert gambler, and Nick Cheung (known as “Dragon”) is a wannabe gambler who wants to learn the tricks of the trade from King.
My favourite scene from the movie is timestamped above.
The horse race is about to begin, and Dragon thinks that his mentor King has all his bets ready and is about to call the betting house to place all his bets.
However, King actually calls a noodle restaurant instead to order food to be delivered to their apartment.
Dragon is perplexed and asks King: “We wasted so much time analyzing the bets. Why didn’t you even bet a penny?”
To which King replied: “I saw no safe bets. Why would I bet? The horse trainers only bet less than ten races a season. If you bet on every race, even Bill Gates will go broke.”
Dragon then said: “This is boring!”
To which King said: “Do you want to be a happy loser or a boring winner?”
I think this is a great lesson for day trading the stock market as well.
Good trades don’t come all that often.
You have to be very patient and not jump into bad trades.
Nobody said day trading isn’t boring. A large part of it involves waiting for the right trade to come.
Michael Phelps has one of the most beautiful butterfly techniques ever, which is a big reason why he was so good.
One thing you have to learn as a competitive swimmer is that technique is everything. Once you master the technique, the speed will come naturally.
The majority of your time and efforts should be on perfecting your stroke.
In the same way, I believe that for day trading, you have to focus on perfecting your execution and not so much on your P&L.
Obsess about adhering to every single step of your trading plan/strategy.
Obsess about risk management and minimising your losses.
Obsess about not jumping into a trade too early.
Obsess about keeping your emotions in check regardless of whether you win or lose.
Granted, your trading strategy should be a winning one (i.e. have an edge), and once you’ve found that – which I don’t believe is a difficult thing to do – it is then up to you to aim for perfect execution.
And once you master all that, I believe the profits should come naturally.
I’m definitely not there yet, but I’m working hard in the hope of getting there one day.