Day trading is like a fascinating game that rolls chess, poker, and gaming into an exciting package, adds the adrenaline rush of a roller coaster, and flavors it with a few dashes of lemon and a pinch of salt.
Trading is a great struggle between illusion and reality, and in many ways, a cruel maze of tricks within tricks. However, if you are one of those who can create a plan, follow a strategy with strong discipline, handle your gambling demons, and accept trading as a profession, you can possibly make it... after 3-5 years of hard study.
Trading attracts people who love challenges. However, only a lucky few can stand out of the crowd and make a fortune out of thin air. These people need to have a vast amount of experience, know how to keep their cool in the face of natural greed/fear impulses, and be savvy about the psychology of the masses. They need to gather some initial trading capital, but also have some money in reserve for critical situations and slump periods, because these are statistically proven to happen to all traders - it is just a matter of time and cardinality of trades.
Knowing when not to trade, when to take a break and step back is a critical part of risk management. Most of all, you need a working trading system that suits your needs and trading style.
If you have all of these, the last piece of the puzzle is to embrace the following tenets:
- “The goal of a good trader is not to make money; the goal is to trade well.”
- “Making money is more important than proving to yourself you were right.”
- “Your effectiveness in trading is proportionate to the hard effort you put into trading.”
- “The greatest lesson in making money is the experience gained from losing money.”
- “Try to enter as close as possible to the point where you were wrong. Never fight or question the price action.”
- “If you have a will to win, you will win.
This article is split into two sections. The first part is a window to the life and mind of a master trader with more than 15 years of experience in both crypto-related and regular stock markets. This is the part of the knowledge sharing.
The second part introduces you to basic trading products such as spot, swap, or margin.
Part 1: What the life of a day trader is like: an interview with a successful cryptocurrency trader, who wishes to remain anonymous.
Thank you so much for accepting my invitation for an interview. To kick this off, tell us something about yourself and what led you to trading crypto and the stock markets?
I actually didn't get straight into trading at first. I was participating in classical hardware and cloud mining for cryptocurrencies, and then doing some minor investments, which led me into stock market trading. After that, back in 2016, I learned about crypto trading, and I can say it was a blessing, since I could use existing methods used in the stock market that worked pretty effectively in crypto, too.
How did your journey start?
My first experiences with trading were unusual. I made quite a bit of profit during several week-long periods without any knowledge but inevitably broke the streak then and suffered brutal losses. Many people quit after losses, but in your trading failures, you can gain plenty of experience to become a success. That's why it is important to journal your losses and find what connects them, fix the issue, and move forward.
Many people have a great start when they start trading, but they get drunk on early success and crushed a few months later. How were your first trading months?
I agree some people do get drunk on trading in crypto because it is such a speculative market, but in the stock market, it's a lot tougher.
How many years do you think it could take for somebody to become a successful trader?
It depends on the person and their lifestyle. The traits you grew up with can naturally make you a successful trader. So I don't think it's measurable in time, and it's really about who you are that determines how quickly you can adapt to the market.
Consider thinking about one's lifestyle habits overall and make game-changing life adjustments such as tuning sleeping habits and adding regular workouts. Sometimes, it is not about trading only but more about building a better life.
What was your breaking point from an average trader to a successful trader who can do whatever he wants?
Discipline was the only thing I needed to learn. As soon as I realized the importance of discipline and persistence, I started to grow and become what I am today as a trader and as a human being.
That and a lot of backtesting. I recommend this to all who are at their trading beginning to add a daily 30 minutes backtesting timeslot to their daily schedule if they really want to improve and boost their confidence when entering trade setups in real-time.
What are the key aspects one needs to embrace to become a decent trader?
Tough question, but again it can be summed up as discipline, patience, and persistence. Many people fail a couple of times and fall for what's called “revenge trading”, which means irrational trading after you lose, hoping you get lucky and win back the losses quickly. But as you can guess, they will only go further down the spiral most of the time.
It is also critical to absorb a lot of knowledge that will help you to create your own opinion. When you start to listen to your inner voice while following the plan, you are on a good path. Only following others simply gets you nowhere in the long run.
Then, hide your Profit and Loss (PNL) indicator. (PNL is the difference between profit and loss in trading.) Don't observe the money you may be gaining or losing; trade the setup, not the PNL.
What are the most frequent trading demons that could possess a trader and cause account bankruptcy?
FOMO (fear of missing out), greed, and not following your backtested trading plan. But if I were more specific, it would go like this:
- Exited too soon
- Exited too late
- Entered too soon
- Entered too late
- Taking too much risk
- Didn't take a planned trade because of self-doubt
To fight these demons and get rid of them for good, avoid these pitfalls and give yourself a point for each successful and flawlessly executed trade. You are cured when you have five positive points at each of these. However, If you collect ten bad points for a single item mentioned below and you cannot stop, you are probably doomed to be a non-trader.
(Screenshot from 2011 - explaining the Demon Finder principles)
Feel free to make a copy of the above-mentioned GoogleDoc and use it.
Feel free to make a copy of the above-mentioned GoogleDoc and use it.
What about the path to becoming a trader? What milestone do we need to pass first before entering the Valhalla of trading?
Always try to protect your capital. Trading is one of those professions where you need to have both skills and capital. Without money there is no trading. Also, you need some money to back yourself up.
At least a month of paper trading to start. Then, develop 2-3 strategies and backtest them hard on at least 100 samples. Then start with 1% of your capital per trade. You can move this up to 3% per trade but only if your hit rate is about 60%. When you hit a sequence of 4 losses in a row and you feel that you are completly out of the zone, decerease the trading size from 1% to 0.5% until you will get like 2-3 winners that will get you back to the game mode.
At least a month of paper trading to start. Then, develop 2-3 strategies and backtest them hard on at least 100 samples. Then start with 1% of your capital per trade. You can move this up to 3% per trade but only if your hit rate is about 60%. When you hit a sequence of 4 losses in a row and you feel that you are completly out of the zone, decerease the trading size from 1% to 0.5% until you will get like 2-3 winners that will get you back to the game mode.
Of course, there are traders that have 85-90% hit rate. These guys trade big numbers and the only thing they need other than meeting trade conditions is to have enough liquidity. Trades like this usually have from 0.8 to 1.3 R (Risk/Reward Ratio) while not using much leverage.
Personally, I found that around 2.5R is my mostly reached target.
What method do you use for trading?
I use many things now since I like the effect of pulling a lot of Aces from up my sleeve. I'm always trying to add essential books to my library and use something new here and there.
Currently, I trade crypto using Elliott Wave (EW), Price Action (Pat) combined with some basic Candlestick knowledge, and some Moving Average (MA) strategies. But one needs to understand the smart money concepts to create a successful trading method. Some great sources are free to watch on YouTube, such as:
Currently, I trade crypto using Elliott Wave (EW), Price Action (Pat) combined with some basic Candlestick knowledge, and some Moving Average (MA) strategies. But one needs to understand the smart money concepts to create a successful trading method. Some great sources are free to watch on YouTube, such as:
In the stock market, it's a bit harder, so I use Volume Price Analysis (VPA), EW, Candlesticks, trendlines, and some chart patterns even though some of them are getting obsolete. It is also good to have a basic overview of the news that moves the market. However, I am not a “news” trader.
The capability of reading the market bias is more important than the strategy used, though. Markets tend to seek liquidity that lies in zones of inefficiency. Markets return to these zones to balance themselves. Try to use monthly, weekly, and daily charts to spot those inefficiencies, such as fair value gaps (FVG), equal highs or lows, and other liquidity stores, such as liquidity pockets that form around multiple touched trendlines. When you mark these zones, try to imagine a path the market needs to accomplish to reach these areas before it changes direction or continues further after a pullback.
What is your top advice for somebody who wants to be a great trader one day?
Do it for yourself, not for the money.
Really, the best thing about trading is it can teach you a lot about the values of life that will guide you to a better lifestyle. A better lifestyle then morphs you into a better version of yourself, and as the better version of yourself, you can make the people around you happier.
Personally, I get a lot of these values from a fellow named Jim Rohn, who left his teachings for the world to learn from. He was an avid businessman and motivational speaker who amassed a vast fortune from nothing.
Then also, don't try to make each day a trading day. Sometimes you can observe the market and not make a single trade since the stars don't align in your favor. Never trade when you don't have an edge.
Trading is like poker with one critical difference. In a game of poker, you need to play each hand with cards you got. In trading, you can wait for the proper hand and then trade it perfectly. If you have a will to win, of course.
What was your greatest win and your most "redonkulous" fail in trading?
Well, my greatest win would have to be everything compounded that I've acquired over time, but the most in one single trade, if I can remember, is 2500% on a leveraged BTC position.
I've lost it all before, so nothing can be more of a failure than that. But I believe that failures will give you the experience to succeed.
Do you have any more secrets for being a good trader and long-term success?
There aren't any secrets. All the information is out there, and most of it is free… However, you need to be passionate about what you do no matter what it is.
If you don't like what you're doing, you're not going to be successful in it. That's what I believe, but I do have a passion for the art of trading. And yes, I do like the money that comes with it, but I love the ability to predict. It might seem cheesy, but it's like being a wizard and seeing into the future a little bit. Sure, sometimes I'm wrong, but those times I'm right are just great.
Then, of course, learn to anticipate, not participate. Stop chasing pumps or the moves that are already on the go - good traders don't trade because something is moving. Your time to enter this was 5 minutes ago. You can jump into a trade for a quick grab and go, but if you stay in it, you are just sacrificing your capital for somebody else's success. Do the opposite. Start laughing at the chart and be glad that it is going so well without you. Then, prepare to trade the retest, since almost every good entry is retested at some point.
Then, you have to learn to have patience with great trades, but also imperial impatience with trades that don't look good or that are eating through your stop-loss (SL) zone. Observe, adapt, execute within a few seconds. It's all about doing non-stop quick adjustments as the situation develops.
And lastly, be aware that as a retail trader, you are easy prey for Market Makers (MM), when trading on emotions. To be successful in the market, learn to move with MM, resist their calls to sell, when all they are doing is selling a ticket to “destination fucked” for as many traders as possible before they do the counter move. Defeat the market by defeating your emotions and your urge to trade first. Then, be patient and execute as your backtested setup showed you.
That's right. I agree. As an intelligent trader with experience under your belt, you agree that no guru is going to make you rich in the long run, is that right?
Exactly. You need to love what you do and be ok with doing it on your own. Only then can you do it for endless hours and still feel full of life and motivation.
Tell us about your average trading day.
Well, it's just like any other person's day except for the fact that I don't drive to work. I walk across the hall to my office. I wake up at 5 in the morning, take a shower and get to the charts, watch pre-market for stocks, and check my overnight holds for crypto.
Then, I do a few hours of trading, and sometimes I don't trade if the opportunity isn't there. I'm only really working for 1–2 hours, and I usually just read until something pops up. Some days I don't even bother checking and go out for the day. I like to keep my life balanced between work and play.
What are the most inspiring books you have read? Trading or otherwise!
Lots of reading and knowledge from people who have been successful in the field. As a kid, I read The Richest Man in Babylon by George Samuel Clason, and this was my gateway to more comprehensive books like Trading in the Zone by Mark Douglas.
For self-improvement, I really enjoyed Master Your Hidden Self by Serge Kahili King and The Truth by Neil Straus.
If you could time travel and give advice to yourself before you started trading, what would it be?
Don't wish for things but make sure you are doing the maximum to make it happen. And of course, enjoy what you do. If you don't enjoy what you do, it will be hard to get through the part in which you are not profitable, and you will mostly give up.
And maybe also that the pain is temporary, while the pride is forever.
Well said.
The end of the knowledge-gathering section.
The next part will introduce you to the world of Bitcoin DeFi trading products that could be considered as an alternative to other DeFi platforms such as Uniswap (Ethereum-based) or Centralized exchanges (which mostly require KYC and deposition of your assets to their control).
- Decentralized finance (DeFi) is an emerging financial technology based on secure distributed ledgers similar to those used by cryptocurrencies. The system removes the control banks and institutions have on money, financial products, and financial services.
- Decentralized finance uses the blockchain technology that cryptocurrencies use. A blockchain is a distributed and secured database or ledger. Applications called dApps are used to handle transactions and run the blockchain.
Part 2: Find the proper trading playground
So, did you enjoy the interview? Are you motivated to go explore, learn and participate in this high-risk/reward environment now? If the answer is yes, then I say good! The following will introduce you to other trading prerequisites and to common trading products.
While studying, reading, observing, or doing courses is a vital part of learning, the most crucial part of the learning path of becoming a day trader is getting down in the figurative trenches, and trading—making decisions in real-time, writing notes, and analyzing your trades.
To start your trading journey, use a browser-based technical analysis (TA) tool, such as TradingView, for paper trading or just as your "trading sandbox" for all your charting observations, and journal entries.
Then, you will need a trading platform with an easy-to-use interface. Start by experimenting with small amounts of real assets. This is the best way to start, as you will experience what it’s like to trade with "real money," even if just a few dollars are on the table.
A brief introduction to the world of cryptocurrency trading products
1) Swapping or Spot buying is where you buy an asset you believe in or have researched, with the plan of selling the asset for a profit in the future.
2) Margin trades allow you to Long and Short, which means you don't buy the asset per se, but put up collateral to take a position on market direction. You make money by forecasting the market's future price. Using leverage (1x-5x) can enhance your profit if you have a technical analysis or fundamental edge.
NOTE: Very often, you do buy the underlying asset using margin trading. If you use bitcoin as collateral and buy bitcoin on margin, you hold that bitcoin that you purchased. But when bitcoin’s price rises in the future, it is highly likely you will have to sell it to pay back the loan (that you leveraged) but still hold onto the bitcoin 'profit'. It depends if you are trading derivatives or not.
3) Lastly, Perpetual Futures
A perpetual futures contract—or perpetual swap—is somewhat similar to an ordinary futures contract in that it allows traders to speculate on the future price movements of cryptocurrencies. The core difference is that perpetual swaps do not have expiration dates. Traditional futures have expiration dates, which forces the price to track the spot price due to arbitrage between the contract and spot price, with the settlement date in view.
You can take on the risks and rewards of the spot price movement without actually buying or selling the asset. You cover the risk by supplying margin assets that cover any losses you experience if the price moves against your position.
Outro
Good luck on your trading journey!
Remember:
-> Stay patient.
Learn from your mistakes. Journal your trades and mostly your aftermath-like observations! If you have a will to win and keep improving, you are on the pathway to success! Don't get discouraged in the first 2-3 years of learning and trading since most traders made it into positive months after five years of active trading. So, don't think about you as a trade you will be in next year, but think about yourself as a trader who needs to be here five years from now, working hard to improve and adapt
-> Stay patient.
Learn from your mistakes. Journal your trades and mostly your aftermath-like observations! If you have a will to win and keep improving, you are on the pathway to success! Don't get discouraged in the first 2-3 years of learning and trading since most traders made it into positive months after five years of active trading. So, don't think about you as a trade you will be in next year, but think about yourself as a trader who needs to be here five years from now, working hard to improve and adapt
-> Also, don't be afraid to ask for help. Find a trading community, be proactive, work hard and talk about your journey with others. If you simply don't know where to start, I can give you two tips:
1) Free discord community of Mindo
2) Monthly subscription-based (150 USD) trading group called Chroma with many live streams you can watch, many chat possibilities to ask and grow, and a lot of materials delivered by skillful traders you can use to your advantage. However, the best thing is their kind and friendly attitude. Optionally, signup to the Whop platform, from the space of which you can join Chroma using the following link and get a 5 USD bonus.
2) Monthly subscription-based (150 USD) trading group called Chroma with many live streams you can watch, many chat possibilities to ask and grow, and a lot of materials delivered by skillful traders you can use to your advantage. However, the best thing is their kind and friendly attitude. Optionally, signup to the Whop platform, from the space of which you can join Chroma using the following link and get a 5 USD bonus.
-> Be rigid in your rules but flexible with your expectations.
-> And lastly, if your trading portfolio is below 1000 USD, invest in yourself and your future success first. Buy a book, watch a course, practice what you have learned, and journal what you found out.
Don't trade to make money; learn first how to survive, protect your capital, and trade well overall. - Mickey Maler
See you in the trenches!