The month of December 2019 was quite interesting. The month before that was rough, but it taught me a lot of lessons. The most important lesson, of course, was to start believing in myself.

The problem was, it was easier said than done. To focus on the process of day trading rather than the result, I decided not to upload any trades for the whole month. I also committed to not check my P&L chart at the end of the day or week.

At first, it seemed like a counter-intuitive thing to do. How are you supposed to know if you’re up or down? But because I measured (and still do) my gains and losses in R as opposed to the dollar value, I still had a pretty accurate idea of how I was doing. Of course, it was a bit harder to keep track of my balance in the long-term, but I still had a rough idea. Besides, my profit or loss wasn’t the point anymore.

The result of this experiment was quite liberating. First, it alleviated a lot of pressure. If you look at the day trading community, sometimes the way we share our results may come off a bit… braggy.

Don’t get me wrong; plenty of traders do a great job educating others and show the full picture, talking about the green and red days alike. However, the spirit of competition is always present. People love talking about their biggest gains and post their most successful trades. The darker side of it was that you could have a great trade yet feel disappointed because someone traded the same stock even better. And while I still loved to see a great P&L chart, I just didn’t want to be a part of the friendly competition anymore.

Back in November 2019, I decided not to compare myself to anyone else. By December, I was mentally ready to act on that promise.

Next, I got really serious about my 1:3 risk-reward strategy. Trust me, that was a challenge of its own. Unfortunately, two years of somewhat chaotic trading created some very questionable habits. For example, I was used to taking profits in the support area, averaging at roughly 1.8R. And if most of my profits were at the 1.8R level, and a few were at 3R, my average gain was still close to 2R. At the time, I was also experimenting with new patterns, so the percentage of my successful trades was on the lower side. And at some point, the math started working against me.

The reason why it’s vital to wait for the full 3R gain is that it covers for your statistically inevitable bad trades (typically, 1R each), as well as your mistakes ( such as the whopping 6R loss I’ve experienced earlier that year). And when both negative factors are on the rise, you end up barely breaking even, or worse, losing money.

One good trade is supposed to make up for three bad ones. That’s the strategy. If you don’t follow it, the whole system gets out of whack.

So I chose to take these rules seriously and follow my strategy despite bad habits. It was very hard at first. But thanks to my self-belief, it was possible.

Whenever I noticed the right setup where all my conditions were being met, I entered the trade and simply let it play out. I was also slowly learning to trust my intuition when it came to adding to my position. Additionally, I had to learn not to change my risk out of fear of loss and doubt. That was quite a journey. Of course, things didn’t change dramatically overnight. Nonetheless, they got way better.

I ended the month with my average gains being close to 2.5R. It still wasn’t perfect, but I was getting better.

The mindset shift about day trading triggered a very important change in me. You see, focusing on the process instead of the gains allows you to analyze your behavior instead of reacting to the binary nature of loss and gain. This way, it doesn’t matter if I lost or gained any money. The question is, did I trade well?

Am I happy with the way I entered the trade? Was it a setup that I was well versed in? Did I follow my day trading strategy? Now, these were the questions that really mattered.

Over these past few years, I’ve talked to many consistently profitable day traders. The funny thing is, they all agree that we make mistakes. No matter how experienced or successful you are, you will still have some bad days. We are human; mistakes are bound to happen. However, the main idea is to be disciplined enough not to let them spiral out of control. 

If one mistake wipes out three or four profits (9-12 R at a time), that could crush your spirit. However, if one mistake erases one profit (2-3 R), it’s not great, but it doesn’t feel like that huge of a deal. If you take your gains at 3R, your strategy will cover it.

So that month, I did a better job waiting to hit 2.8-3R. Additionally, I started dipping my toes into the big cap market. I had been practicing with some stocks in my paper account, and so far, I liked it. By December, I found some consistency, and I wanted to try them out in my real account, trading with a quarter of my position.

The best part about that transition was lower volatility. I was now trading stocks of real companies with well-known names – Disney, Tesla, Apple, Netflix, Boeing. Generally speaking, they tend to trade way nicer. Their stock prices wouldn’t plummet within seconds, at least in the pre-Covid times. And if I wanted to feel nostalgic and place trades in the small-cap land, it was only for my key strategy for shorting.

Additionally, I have been looking forward to the added challenge of managing my time. In my mind, that was going to help me with my discipline too. In December, I started a new job – or an old job – depending on how you look at it.

Getting my old job back allowed me to trade part-time while also making a living doing what I knew how to do very well. Thanks to the good track record and close relationships that I’ve built over the years, I managed to secure a comfortable schedule that allowed me to work and trade at the same time. Watch the video below to learn more about that!

To summarize, the month of December showed to me that mistakes could still happen, and that it was alright. Many day traders face the same exact challenges. However, self-belief, discipline, and a good strategy set them apart, make them successful, and keep them trading in the long-term.

Accepting the probability of mistakes means managing them and acting preemptively. During my interviews with some very successful traders, we’ve discussed some effective ways to manage the errors and limit their financial impact. But more on that later in the future blog posts 🙂

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