Focusing On Fundamentals And The Psychological Nature Of Day Trading

Trading Blog


November 27, 2020

We’ve recently talked about developing and tracking a trading strategy. In this blog post, I’d like to expand that topic by introducing someone else’s perspective and experience. As I mentioned many times before, there’s no right or wrong way to develop a trading plan. You could even try to copy and paste someone else’s strategy hoping for an off-chance of it fitting your personality and your trading style. In fact, that’s how most beginner traders start their journey; they emulate their mentors and gurus. And while it works for some people, most find real success when they develop their own trading strategy. That’s when many traders turn back to basics and start relearning the fundamentals.

Aly Angel is a day trader who relies heavily on research. She’s all spreadsheets, statistics, and calendars. The best part is, it works for her like a charm.

Aly is a long buyer, and she often trades the trends. Occasionally, it means the opposite of following the crowd. For example, last year, the reverse split cycle pattern has gained popularity, but many people got it wrong. Knowing the trend in more detail and understanding how it actually worked instead of following someone else’s oversimplified explanation, she and her team managed to trade against the many people who followed the trend blindly.

In the video below, she goes into detail about tracking her strategies and developing new ones. If you’re into doing research to improve your trading, you’ll enjoy this interview a lot!

Interview with Aly Angel about day trading fundamentals and trading psychology

Aly also uses her degree in psychology to trade better. She knows that we’re all human, and we all make mistakes. We all have our past traumas and triggers that determine the way we make decisions and go about our trades. 

It’s interesting to see how many people dismiss the psychological aspects of day trading while also following motivational speakers who encourage their followers to try things outside of their comfort zone. You can use motivational quotes and lion-based social media images to prove your point, or you could share a personal story that will resonate with thousands of other people. 

This is why I think that it’s so important to hear about the personal insecurities and struggles of consistently profitable traders. On one hand, it’s cool to build up this guru persona to rely on. Calling yourself an expert helps since confidence attracts people. That’s especially true if you’re planning to sell products and services such as DVD guides and mentorships. On the other hand, sometimes there’s a risk of creating this infallible person, a branded image of someone who knows all the answers and can predict every market move. In the short-term, it may help you sell more stuff, but that’s just not how humans really are. Besides, you can never be 100% sure when it comes to an ever-changing stock market. 

Aly Angel is very open about her anxiety and fears, past and present. When she started, she was trading with only $1500. As her account grew, she hesitated to increase her position due to the fear of losing. And this is something that so many traders can relate to.

However, everyone understands that you’re leaving a lot of money on the table if you’re trading with only a few shares. The bigger your size is, the more your total gain is. And of course, your risk also grows, and that’s what’s holding back so many people out there who are just petrified of scaling their day trading accounts.

This is not the kind of problem that you need to “just get over.” There are deep psychological triggers at play, as well as limiting beliefs and mentality shortcomings. Discipline and trusting the process may help, but many people still need to go deeper to understand why they are their own biggest enemy.

People sabotage themselves for many reasons. For some, it could be separation anxiety, the fear of loss, the feeling of not being worthy of success, or a lack of abundance mindset. All these things contribute to how traders make their decisions. 

That’s why sheer willpower will only get you this far. You can’t become consistently disciplined until you work through your psychological issues. You need to understand what pulls and pushes you, and how you can overcome or compensate it.

In Aly’s case, she struggled to increase her size past 500 shares for a year and a half. And even when she was already profitable and relatively successful, she still couldn’t bear the thought of losing over $100 at once. 

It took a lot of psychological work to unpack that baggage. But again, that’s why people have teams, masterminds, mentors, and friends, who help them reach a new level by outgrowing their circumstances.

And don’t discount the trial and error method. Trying something new and seeing how you react is a great tool to change your habits and shift your mindset. In one of my past interviews with Jack Kellogg, he mentioned that he had gotten over the fear of loss by losing really big once. The worst has already happened. Now, what’s the damage? Have you survived? Do you think you can get over it? If the answer is yes, congratulations! You’ve just expanded your horizons and reached a new level. You might have approached the new milestone through a negative experience, but you can’t have big wins without big losses.

And if you’re not quite there yet to try and fail without beating yourself up over it, try paper trading. This is a fantastic tool for those who want to practice new setups and test things out without the pressure of losing their account.

In fact, it’s not just for beginner traders. Aly is into paper trading a lot too. She still uses it for research or when she’s curious about a ticker but doesn’t have enough time or attention span to commit to a trade fully. There’s a stigma amongst the experienced traders about how people behave when trading paper account instead of risking real money. But to her, this is first and foremost a testing tool, so it serves the purpose.

Aly has a lot of takes on things that are a bit different. I love it when traders share their opinions about the process; it’s so much fun to see day trading through someone else’s eyes. For example, it was great to hear an alternative viewpoint about the PDT rule. To me, having a limited amount of trades per week means higher standards of entry and better discipline. It’s annoying, but it could be the necessary evil for someone who’s just starting out and wants to trade everything out of curiosity. To her, it’s discouraging. She also views PDT as a reason why so many day traders tend to develop bad habits, i.e., not cutting their losses fast enough in the hope of a rebound. If you only have three trades a week, you don’t want to lose them. You can’t afford to waste a trade on getting in and out fast, which is a very common thing to do once you realize that you’re wrong. This way, traders lose way more than they could’ve if they accepted the loss and moved on right away. The discipline part and higher standards may work for a trader who already knows what they’re doing, but it’s terrible for a total beginner who wants to test things and try out something new.

Do you have any hot takes on day trading? Please share in the comments! And if you like the interview above, please like and subscribe on Youtube or on your favorite podcast platform!


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