Many beginner traders have gurus and mentors that they look up to. People buy DVDs, participate in challenges and programs. However, there’s another effective way to get a second opinion on your day trading strategies and habits. It’s less costly, and it sure will change the way you trade. I’m talking about trading accountability buddies (TAB). 

Carl Fred and I have been accountability buddies for a while. The best thing is that we get to discuss our trades in a constructive manner. There’s no competition or bragging as there is on Twitter. Instead, we exchange ideas, strategies, and stories of success and failures freely.

 From August to December 2019, Carl had a steady climb in his PnL chart. His win rate was over 70%, and he was doing great overall. However, it doesn’t go like that forever. We all make mistakes, and we all sometimes experience a lapse in bad habits. Check out the video below to learn what challenges we experience this January.

No matter how good of a day trader you may be, there’s always a trade that goes south. And instead of cutting the loss and letting it go, sometimes a trader tries to fix it by reentering and changing the average price or by trying to wait it out. Either way, most often, traders end up losing more than they would have if they exited before attempting to fix things.

And if a trader does win a trade like that, it creates a false sense of being right. Moreover, it can create a really bad habit if a trader does it time after time. Building a habit out of it is the real danger of trade hacking.

Thinking that you can make any trade profitable is wrong. It’s impossible since most of the successful strategies hover at a 60%-70% success rate. That means that you’re bound to lose roughly 1/3 of the time. It’s a given, and resisting that can be very costly since an overextended trade like that can blow up your account.

Moreover, you’re going to have to control the trade manually since having a hard stop can get in the way of fixing it. But having a hard stop is like having an autopilot ready to cover you in case something goes wrong; it’s your fail-safe. Without it, you are in charge of everything that’s happening, but you are also extremely susceptible to risk. That’s how you end up in a situation where a single trade can eat up a month’s worth of earnings or even blow up your whole account altogether.

Having a hard stop doesn’t save you from occasional slippage that loses you extra 10-20 cents a share. But it saves you from a $0.50-$1/share loss if the trade really gets out of hand. As someone who’s experienced both, I’d rather take the slippage.

And it’s one thing to hear this advice from your mentor, and it’s entirely another thing to live through it and experience it yourself. Occasionally, we get lucky to learn from someone else’s experience, although most people are stubborn enough to make their own mistakes. Unfortunately, we humans don’t always follow the rules.

And ingrained habits like that are the most difficult to break. It’s like saying “Just don’t do that”; it’s always easier said than done. Bringing this problem to a mentor can be great if there are some underlying patterns or psychological reasons that you don’t realize yet. But if it’s simply a discipline issue, there’s nothing that your mentor can do for you. You’re the only one who can eliminate it.

However, someone who’s still on your level can help you in a different way. You can talk it over, exchange experiences, and get to a better place together. Chances are, they are going through the same learning curve as you are, and they know exactly what it feels like. Their experience is as relevant as it gets. And now that you know that you’re not alone, things feel different.

Pros and Cons

It’s one thing to know that nobody’s perfect, and it’s entirely different to see someone else who’s candid about their everyday mistakes. Most gurus are open about their biggest losses or dramatic fails because they always make great stories, yet very few people will be willing to talk about their daily struggles and small challenges that they deal with every single day. The mentor or guru label implies a certain level of expertise which doesn’t allow people to share their authentic experience and be entirely honest about what they’re going through. However, a trading accountability buddy doesn’t have a reputation to worry about, and they can discuss their process and results in a much more straightforward fashion. That’s the biggest advantage of having a TAB.

And of course, there are some downsides too. If you’re like me, it may be easy for you to get swayed by other people’s experiences. I’ve said many times that every day trader needs to find their own trading style and niche. However, when I see that someone is doing very well, I get tempted to try out their strategy just in case it works for me too. It’s not a bad start if that process is accompanied by diligent research and tested through paper trading. But if you’re doing things live, and you keep on taking losses, this is a no-go. If you’re easily influenced by someone else’s success, it’s important to recognize it early on and take measures. Again, there’s nothing wrong with wanting to try out new things. However, it should be done in a better, more structured way.

And of course, this influence is not limited to your trading accountability buddy only. You could be affected by the trades you see on Twitter, in chat rooms, or in your mentor’s recaps. It happens, you just need to be aware of it and not let it get too far.

And of course, I’m not saying that you don’t need mentors if you have a trading accountability buddy. Ideally, you should have both. It’s also great to be a part of a day trading community where you can share your experience, wins, and losses. This process may not be as intimate and open as with the accountability buddy, but it’s still beneficial. Again, the point is to realize that we’re all work in progress and to take off the excessive pressure that we put on ourselves by thinking that we’re the only ones dealing with day trading challenges.

So if you’ve never had a TAB, I strongly recommend you find one. And if you do, I’d love to hear about your experience! Make sure to share it in the comments to the Youtube video!