Notes

Today I’d like to invite you to discuss something more important than patterns, strategies, and profit sheets. I want to show you how one little thing can have the ultimate impact on your day trading career. In fact, it will determine if you’re going to make it as a day trader at all.

I’m talking about believing in yourself.

Over the past couple of years, I’ve been grazing the psychological aspect of trading on my podcast show B The Trader. I’ve mentioned countless times how important the discipline is, and how it’s imperative to follow your strategy once you’ve properly tested it. However, it will be very hard to do any of it if you don’t believe in yourself. It has to come first.

Hear me out. If I don’t believe in myself, then I don’t really have faith in my plan. And if I don’t have faith in my plan, I won’t stick to it. My decisions will become flawed since they are no longer based on logic and rationality. I will start ignoring my own rules, and my actions will often be motivated by emotion, not reason.

Normally, you base your trading process on the assumption that you know what you’re doing. You lean on your plan, but what happens when you stop seeing your plan as reliable? What can you accomplish when you don’t trust your own judgment?

Almost a year ago, I hit a rough patch of my day trading journey. For a moment, it got tough to focus on the process. There was a lot going in my life at the time. On top of it, I was looking for a new day job to provide a stable income that would allow me to do day trading part-time. Even though that was the best decision I could make for my family at the time, I had to admit that it was making me feel insecure. In short, I wasn’t convinced anymore that I could make it as a day trader.

To be honest, I’m not exactly sure how I got to that point. When I started day trading over three years ago, I was full of enthusiasm and excitement. I had a realistic view of the process; I didn’t expect to figure out the market overnight. Well, maybe, a tiny part of me was hoping for an instant breakthrough, but I knew that becoming a consistently profitable day trader would take time, hard work, and patience. After all, I’ve already had a successful career under my belt. By then, I was looking forward to a new challenge.

During the next two years later, I gained a good knowledge of the market and a few solid strategies that worked well for me. I’ve increased my position to 2000 shares from the original hundred. However, my initial excitement about day trading wore off quite a bit. My profit chart was slowly approaching the lower side of the resistance and support area for a while. I had some negative days, but most of my trades worked out fine. I wasn’t gaining much, but I wasn’t losing that much either. Overall, I’ve been doing alright. But for some reason, every red day was hitting me like a truck. Every lost trade, no matter how large or small, eroded my confidence and self-belief.

Soon, I couldn’t stick to my rules, and I kept on pulling out of trades before hitting my risk or reward levels. Sometimes that meant incurring a small loss, sometimes – making a smaller gain than I could have. At first, it didn’t seem like a huge deal. After all, I was also experimenting with new setups and patterns, trying to find the new things I could trade. However, my practice runs and half-measures on proven setups inevitably messed up my 1:3 risk-reward strategy. My inconsistency started costing me money. And as the overall picture was looking grimmer by day, I wasn’t sure of anything anymore.

Even my friends started pointing out that I lacked self-confidence. The problem was, I wasn’t sure how to work on it. When you say that you need to believe in yourself, it implies action: to believe, to have a belief. But how do I actually do it?

And just to clarify, it’s never “just one thing”. There’s never a silver bullet that will fix all your problems at once; it’s always more complicated than that. But in my case, the thing that helped me the most was focusing on the process of day trading rather than the result.

Before, whenever I was scared of losing money, I lost money. It was like a self-fulfilling prophecy that haunted me time after time. At some point, I had to record myself committing to staying in the trade in order to create a sense of accountability and actually follow through on what I had said. You can watch me do that in the video below.

I was sick of my brain playing tricks on me. I didn’t want to switch my plan for no reason anymore. One of the most painful realizations was that most setups I traded were unfolding exactly the way I expected them to, but I just didn’t let them play out. Now, I committed to letting them play out until they would hit my risk or reward. I got into this trade for a reason, and I should trust my plan.

But even back then, I knew very well that the numbers didn’t lie. I understood that a 50-60% win rate strategy would be profitable as long as I was true to the 1:3 risk-reward ratio. My plan was fine; it was only my lack of belief in myself that was holding me back.

First, I had to stop thinking of myself using the words fail and failure. I didn’t fail when I first started trading, I was going through a learning curve. Neither did I fail when I opted to look for a day job. Instead, I chose to lift off the moneymaking pressure off my passion project. Day trading was the goal; monetary gain was a pleasant side effect.

People don’t start learning how to paint in order to hang a new painting on the wall. If an art piece is all you’re after, there are faster ways to obtain it. However, if your intention is to draw for the sake of the process, you’ll end up with a nice collection of paintings sooner or later.

So I had to find a few workarounds, but I didn’t give up on my dreams. Yes, I had to admit that I wasn’t one of those guys that managed to succeed right away. But we all have a different journey anyway, so why would I compare myself to anyone else?

We’re all terrified of failing. But the truth is that it’s much scarier to throw your hands in the air, label yourself good-for-nothing, and give up trying to succeed at the things you love. It takes much more character and courage to keep going, accept the possibility of making mistakes, and keep on learning as you’re walking the walk.

Almost a year after I’ve recorded the video above, I feel incredibly proud of myself for being so open and honest about how it felt back then. I couldn’t be a trader who only posts profit charts and boasts about the biggest wins. In my opinion, this is a very skewed view of day trading. These bits of information depict only a tiny fraction of what it’s like to be a trader. Instead, I believe that we should show the full picture. Just like with everything, there are highs and lows. And if you’re not prepared, the lows can kick you to the ground.

The way I see it, this is a far more honest way to show beginner traders what they’re getting themselves into. It’s also a great reminder for the seasoned traders that shit happens. Success is not linear; mistakes happen along the way. You could be the smartest, most capable person in the world and still feel like it’s not enough some days. This is only a dark phase, and it will pass.

It’s OK to doubt yourself and your abilities as long as you’re willing to keep on putting one foot in front of the other. Fall in love with the process of trading, and try to change the way you think about it. When you stop chasing a quick buck, you’ll have a much better experience.

And of course, believe in yourself! Acknowledge your every improvement. You don’t need to have a green day to feel like you’ve learned something. As long as you’re doing better than yesterday, you have a reason to be proud of yourself.

And of course, have a support group. Find or build a community of people that will help you recover from a bad day. Thanks to my podcast show, I had a chance to talk to many experienced, consistently profitable traders. Not a single one of them had a 100% smooth path. Everyone had epic losses (they make the best stories!), and everyone had moments when giving up seemed so close. Yet, they’re still here, so am I, and so are you.

If you like my message, please stick around for more! I regularly publish new educational videos about day trading, trade recaps, info product reviews, as well as interviews with the best day traders out there.

And if you have any words of encouragement for struggling day traders out there, please comment below! Let’s hope that it will make someone’s day a bit better
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Every day provides valuable lessons if you’re willing to learn. For example, one can view the breakeven days as wasted time because no opportunities have been harnessed, and no new goals have been reached. But since I do day trading for the love of the process and not just for the instant gratification of the monetary gain, let me share the lessons I learned one day almost a year ago.

That day I traded MYOV stock. I held it overnight, and I was comfortable holding it pre-market because the setup looked great. The resistance area was shown as $13.13. But as the market opened, the resistance area moved to $12.40.

I was determined to follow my trading strategy and stay until my risk got hit. However, I went around that plan by adjusting my risk too soon.

MYOV opened at $12.40 and soon tanked to $11.60. Since I got in at $12.45, that would’ve been a great time to cover. Unfortunately, I was too busy multitasking, and I missed it.

Surely, it was an upsetting experience, and it did affect the way I felt about the trade. On the one hand, I wanted to wait because I was sure that MYOV could flush even further than $11.60. On the other hand, I was feeling a bit on edge due to the previously missed opportunity. At that point, I was afraid to lose this trade altogether and end up with another red day.

Meanwhile, MYOV was moving back up to the pre-market level. When it reached $12.40, my stop was hit, and I incurred a small loss.

After it happened, MYOV moved up a couple more cents, got rejected at a level just below $12.50, and bounced back down into an $11-something area.
MYOV trade of November 22, 2019 by Alex Bustos of B The Trader
MYOV trade: learning the lesson about setting risk around key levels

This is why I’d like to talk to you about the key levels. As you can see, I was right about the general direction of MYOV price. However, my mistake was setting the risk too low.

When it comes to big price stocks (or any stocks that are over $1), key levels start playing a role in how these stocks get traded. Round numbers ending in .50 or .00 act as magnets for prices, and they tend to gravitate towards those levels. The price often spikes up to hit round numbers only to move away from them in the next moment.

In this particular case, the stock almost hit $12.50 and tanked back down into $11s. But since it hit my stop on the way up, and I lost 5 cents a share instead of covering my position with a solid gain.

I got out with a relatively small loss, but it gave me something to think about. The first lesson I took out of that trade was that if the risk is too close to a round number, I should round it up. That’s true for key levels and any even numbers in general (i.e., $6.30 as opposed to $6.27).

Another lesson was that I should commit to my strategy with all seriousness. The only reason why I adjusted my risk was that I missed the first opportunity to cover. I was scared to lose money now that I haven’t made any. Yes, the resistance level has changed as well, but it didn’t shake up my belief in the MYOV trade as much as the missed opportunity did.

So here is the paradox of day trading: I lose money whenever I focus too much on not losing money.

A negative trade at the beginning of the day can make you question yourself even more. Nevertheless, I ended that day with a small gain. Thanks to my experience and discipline, I managed to pull myself together and finished the day on a better note. The best part, I didn’t revenge trade, and I didn’t let myself feel defeated. Instead, I went on with the other stocks that I’ve been monitoring, and I turned my day around very quickly.

I traded an EYEG stock that resulted in a small win. It wasn’t my prime setup, but I’ve been experimenting with it for a while. Because I was still testing it, I took a very small position. Despite that, the gain from it covered the MYOV trade loss and then some.

And again, this is where I gained an appreciation for day trading as a process. Figuring out how things work, understanding the psychology behind day trading is truly amazing.

EYEG is a microfloat (i view any float that’s smaller than 3mil as a small float), and they tend to squeeze. The best way to trade them is to think about the supply and demand part of it. Basically, you have to consider where all the short sellers will get squeezed and where the long sellers will chase.
EYEG trade of November 22, 2019 by Alex Bustos of B The Trader
EYEG trade: a win with a small position

It went from $8.80 down to $8 really quickly, and then back up to $9.50. At the time, the top was $9.40. So you’d think that EYEG would skyrocket because it’s already rotated its float three or four times, so it was going to squeeze shorts, which it had already started doing. That would have been the time for traders who go long to jump in and break the high of the day. And when it happens, you have a catalyst to launch the stock to a new level.

But instead, EYEG stopped out, bounced to $9.47, and failed. This was the moment when everyone started to get worried. At that point, I was just looking for a clear sign, and I got it. It happened on a bounce when it created a lower high at $8.50. 10 minutes later, it went down to $6.60. I covered at $7.50, making a quick 90-cent per-share gain.

At the end of the day, it’s great to know that I’m improving. All day traders have red and neutral days, but the biggest challenge is to find something to take away from it and something to look forward to.

For me, these small green days simply mean that I’m doing better than I did before. I managed to overcome my fear of losing after making a mistake. I didn’t make rushed and emotional decisions, and I went into the EYEG trade with a clear head.

Thanks to yesterday’s mistakes, I keep on getting better as a day trader. And because of the lessons I’ve learned today, my tomorrow will be even more exciting. Isn’t that a great way to look at things?

To sum up the lessons of the day, let me repeat this:

Don’t adjust your risk too quickly. Believe in yourself and your strategy.
Round up your risk when it’s close to the key level or a round number.
Look out for the opportunities where a predictable sequence of events should unfold, yet nothing happens. Look for a huge support area; sometimes, it breaks with no follow-up, and the price just sits and recovers quite quickly. These are the signs that other sellers may get worried. This is a great moment for you to come in and go long.
No matter if it’s green, red, or breakeven, every day provides new opportunities for growth and learning. Day trading is about continuous improvement. Rapid growth happens, but most people advance 1% at a time. As long as you do it consistently, you will do great.
When you go after what you want to do, things start happening. Persistence is the key, and so is knowing your true goal.

In your experience as a day trader, have you had a memorable day that taught you valuable lessons? Do share it in the comments, I’d love to hear from you!