How I Became a Profitable Trader

Summary

In this trading-focused video, the speaker shares three key strategies that helped them transition from break-even to profitability in trading. The first strategy is to adjust position size based on trade parameters to standardize risk. The second is to recognize and manage fear during trades, trusting analysis over emotions. Lastly, the speaker emphasizes the importance of not being married to a trading bias, but instead adapting to market signals. The video also showcases the speaker's live trading sessions and encourages viewers to watch for practical insights.

Takeaways

• 📊 Struggling to break even is a common challenge for traders, but focusing on specific strategies can help push towards profitability.
• 💡 Sizing down or adjusting position size based on trade parameters is crucial for standardized risk management and avoiding emotional trading decisions.
• 📈 Trading micro contracts can be a valuable learning tool despite higher commission costs, and can lead to significant profits when managed correctly.
• 🤔 The discomfort of trading can stem from our brain's natural aversion to pain and the fear of loss, which can cloud decision-making.
• 🚫 Avoid taking actions in trades based on discomfort or the desire to escape it, and instead focus on new market information.
• 💰 Holding onto trades even when they are uncomfortable can be beneficial, as the market may be confirming the original thesis and moving in the trader's favor.
• 📉 It's important to let profits run and not to cut trades early due to fear of unrealized profits disappearing, which can lead to missed opportunities.
• 🔍 Traders should strive to level out emotions during trades and trust their analysis, rather than reacting to positive or negative outcomes.
• 🔄 Being adaptable and not marrying to a bias is essential; traders must listen to the market and adjust their strategies accordingly.
• 📉 Overleveraging and taking oversized losses can lead to tilt and missed opportunities, so it's important to adapt to the market's direction.
• 📈 The importance of having a fluid approach to trading, being open to both long and short positions, and adapting to the market's signals for successful scalping.

Q & A

What were the three key strategies discussed in the video to improve trading results?

The three key strategies discussed were: 1) Adjusting position size to standardize risk across trades, 2) Recognizing fear and discomfort in trading and not letting it dictate actions, and 3) Not marrying to a bias and adapting to what the market is actually doing.

Why is it important to size down or adjust position size in trading according to the video?

Sizing down or adjusting position size is important to standardize risk across trades, prevent overleveraging, and avoid making emotional decisions based on profit and loss rather than the actual market conditions.

What is the concept of trading micro contracts as suggested by Dylan O'Neal?

Trading micro contracts is a strategy to reduce the risk per trade by dealing with smaller contract sizes, which helps in managing risk more effectively and learning the trading concepts without large financial exposure.

How does the speaker use the example of NASDAQ e-mini and Q contracts to illustrate sizing down?

The speaker uses the example to show that by switching to micro contracts, which are 1/10th the size of e-mini contracts, a trader can manage their risk more effectively. For instance, if a stop loss is set at 20 points away, entering with five micro NASDAQ contracts would mean each point movement is worth $2 instead of $20.

What is the book 'Best Loser Wins' by Tom Houlahan and how does it relate to the video?

The book 'Best Loser Wins' by Tom Houlahan discusses the psychology of trading and the importance of managing emotions. It is related to the video as the speaker mentions it while talking about recognizing fear and discomfort in trading and not letting these emotions dictate trading actions.

Why should traders avoid taking profits too early in a trade according to the video?

Taking profits too early can prevent traders from letting their profits run, which is crucial for making money in trading. The video emphasizes sticking out the discomfort and focusing on the chart rather than the profit and loss, trusting the analysis and trade plan.

What is the concept of 'marrying your bias' in trading and why should it be avoided?

Marrying your bias refers to sticking too rigidly to a particular market view or expectation, ignoring the actual market conditions. It should be avoided because it can lead to overleveraging, taking oversized losses, and missing out on market opportunities.

How does the speaker suggest managing emotions during a trade?

The speaker suggests leveling out emotions, whether positive or negative, by focusing on the chart and trusting the analysis. They also recommend hiding the profit and loss if it helps to avoid emotional decisions and to always be ready to adapt to the market's signals.

What is the importance of adapting to the market's signals as highlighted in the video?

Adapting to the market's signals is crucial because it allows traders to be flexible and responsive to changing market conditions. Ignoring these signals can lead to significant losses and missed opportunities.

Can you provide an example from the video where the speaker talks about adapting to the market?

The speaker provides an example from their live stream where they initially look for short trades, take a loss, and then adapt by flipping their bias to long when the market conditions change, successfully catching trades in both directions.

What does the speaker suggest as a daily approach to trading?

The speaker suggests not having a daily bias and being open to playing both sides of the market on any given day. They emphasize the importance of listening to what the market is telling you and adapting accordingly.

Outlines

00:00

📊 Trading Discipline and Position Sizing

The speaker discusses their journey in trading, emphasizing the importance of discipline and position sizing for profitability. They mention the influence of Dylan O'Neal, a disciplined prop trader, on their approach. The key advice is to size down or adjust position size based on the trade's parameters to standardize risk, avoid over-leveraging, and prevent emotional decisions. The speaker illustrates this with an example using NASDAQ micro contracts and explains how it can lead to stress-free trading. They also refute the misconception that micro contracts are not profitable, sharing their personal experience of making more money with micros than with e-mini contracts.

05:01

🧠 Overcoming Emotional Trading and Adapting to Market Signals

This paragraph focuses on the psychological aspects of trading, drawing from Tom Hoagard's book 'Best Loser Wins'. The speaker talks about the brain's tendency to avoid pain and discomfort, which can interfere with trading decisions. They advise traders to stay in trades even when they're uncomfortable, as long as the market confirms the original thesis. The speaker also warns against cutting profitable trades early due to fear of pullbacks and emphasizes the importance of letting profits run. They share personal experiences of losing money by ignoring market signals and the importance of adapting to the market's direction, rather than sticking to a preconceived bias. The speaker concludes with a live stream example, demonstrating how to flip bias and adapt to market conditions for successful trades.

Keywords

💡Position Sizing

Position sizing refers to the strategy of determining the number of shares or contracts to trade in order to manage risk effectively. In the video's theme, it is crucial for maintaining consistent risk across trades and avoiding overleveraging. The speaker illustrates this by suggesting traders adjust their position size based on the trade parameters, such as using micro contracts to standardize risk.

💡Break Even

Break even is a term used to describe a situation where a trader's profits and losses balance out, resulting in no net gain or loss. The video discusses the struggle of hovering around break even as a significant challenge for the speaker. It is a common hurdle for traders as it indicates a period of no progress or growth in trading performance.

💡Discipline

Discipline in trading means adhering to a set of rules or strategies consistently, especially in the face of temptation to deviate from them due to emotions like greed or fear. The video emphasizes the importance of maintaining discipline to avoid poor trading decisions that can disrupt momentum and lead to losses.

💡Momentum

Momentum, in the context of trading, refers to the ongoing trend or movement in the price of a security. The video mentions that losing discipline in a single trading session can 'wreck' one's momentum, implying that a series of successful trades can build a positive trend that can be undone by a single poorly executed trade.

💡Stop Loss

A stop loss is an order placed with a broker to sell a security when it reaches a certain price, helping a trader limit their loss on a trade. The video script discusses setting a stop loss as part of the position sizing strategy to ensure that risk is managed and that emotional decisions are not made based on profit and loss (P&L) but rather on the market conditions.

💡Micro Contracts

Micro contracts are a type of financial instrument that represents a smaller fraction of the full contract, allowing traders to manage smaller positions and risk. The speaker uses micro NASDAQ contracts as an example to explain how sizing down can help in managing risk and avoiding large commissions while still being able to make significant profits.

💡Leveraging

Leveraging in trading involves using borrowed money or margin to increase the potential return on an investment. The video warns against overleveraging, as it can lead to emotional decisions and large losses if the trade does not go as planned, emphasizing the need for a balanced approach to risk management.

💡Pain and Discomfort

Pain and discomfort in trading are psychological states that arise from the fear of losses or the discomfort of being in a drawdown. The video script discusses how traders' brains are overly concerned with avoiding these feelings, which can lead to poor decision-making, such as exiting trades too early to avoid further discomfort.

💡Best Loser Wins

The term 'Best Loser Wins' is derived from the book by Tom Houlihan and is mentioned in the video as a concept that emphasizes the importance of staying in trades even when they become uncomfortable. It suggests that traders should not make decisions based on the desire to remove discomfort but rather on new market information.

💡Emotional Trading

Emotional trading refers to making decisions based on feelings such as fear, greed, or frustration, rather than on a rational analysis of the market. The video script advises against letting emotions dictate trading actions, advocating for a more analytical and disciplined approach to avoid making poor decisions.

💡Adapting to Market Conditions

Adapting to market conditions means being flexible and responsive to the changing dynamics of the market, rather than sticking to a predetermined bias. The video emphasizes the importance of listening to what the market is indicating and being willing to change one's trading strategy accordingly to avoid losses and capitalize on opportunities.

Highlights

The speaker discusses overcoming the challenge of breaking even in trading by focusing on three key strategies.

Emphasizes the importance of sizing down or adjusting position size based on trade parameters to standardize risk.

Mentions Dylan O'Neal as a mentor and a disciplined trader from Wall Street.

Provides an example using NASDAQ e-mini and Q contracts to illustrate the concept of risk standardization.

Advises against overleveraging and making emotional decisions based on P&L rather than chart analysis.

Dispels the myth that micro contracts are not profitable and shares personal experience of success with them.

Suggests using micro contracts for stress-free trading and the ability to manage trades in the background.

Recommends the book 'Best Loser Wins' by Tom Hoard for understanding the psychology of trading.

Discusses the discomfort of trading and the need to stay in trades even when they turn around from a loss.

Advises against taking profits too early due to fear and emphasizes letting profits run.

Shares a personal anecdote about holding onto a trade despite discomfort leading to a profitable outcome.

Encourages traders to level out emotions and trust their analysis rather than reacting to P&L.

Advises against having a daily bias and the importance of being open to trading both market sides.

Warns about the dangers of ignoring market signals and the importance of adapting to market conditions.

Shares a live stream example of flipping bias and adapting to the market, turning a loss into a profit.

Provides a recap of the three key strategies for improving trading: adjusting position size, managing emotions, and not marrying to a bias.

Transcripts

I've made a lot of huge strides in my

trading over the last 4 years but the

time I spent hovering around Break Even

was a huge hump for me to get over so in

this video I want to cover three things

that helped push me into

[Music]

profitability before I start I need to

mention that I still struggle with a

couple of these at times one trading

session where I lose discipline get

greedy and trade poorly can really wreck

my momentum so I'm not claiming to be

perfect but I believe if you really work

on these three things you'll see a

massive Improvement in your trading as I

have with mine and if you want to watch

me trade on a regular basis I am live on

this channel Monday through Friday for

the first 2 hours or so of the market

open let's get into

it I'll start off with maybe the most

important piece of advice I can give you

and that is to size down or at least

adjust your position size based on the

parameters of your trade now I want to

mention this was drilled into my head by

someone I consider a mentor of mine

Dylan O'Neal he is a prop Trader on Wall

Street and is an incredibly disciplined

Trader but the idea is very simple first

make sure you know how much you want to

risk on your trade let's say you are

willing to risk $200 for trade okay now

before entering a trade identify where

you would need to place your stop loss

let's take NASDAQ features for example

one point on the e- mini and Q contract

is worth $20 let's size down by

switching to the micro contracts which

are 1/10th the size so now one point is

just $2 if our stoploss is 20 points

away we would want to enter the trade

with five micro NASDAQ contracts if our

stop loss is 14 points away we would

enter with seven micro NASDAQ contracts

if our stop loss is 10 points away we

would enter with 10 Micro NASDAQ

contracts or One e- Mini contract by

doing this you standardized your risk

across your trades this keeps your stop

loss from being too tight this keeps you

from overleveraging and making emotional

decisions based off of your p&l and not

on the chart in front of you you may be

thinking micros suck they cost too much

in commissions you can't make big money

with them well you're wrong commissions

do suck but I believe it's worth it to

get this concept down as far as making

money you can make great money with

micros a few months ago I was trading e-

mini on one account now I was trading

the micros on another account I made

$1,500 trading micros and I lost $500

trading minis if I'm confident in a

setup if I know I want to be positioned

short for instance but realize I maybe a

little early in the entry I can take the

trade with a few micros give the trade a

generous stop loss and Target the bottom

of a range and let the trade play out

stress free I can leave the trade

running in the background while I go

about my day and not feel the need to

constantly check it and micromanage it

pun intended so if you find that your

red days are equal to and sometimes

larger than your green Days please

consider sizing down to micros and

adjusting your position size based off

of where you should be stopping out of a

trade okay this next tip is definitely

straight out of the book best loser wins

by Tom hogard which you should

absolutely read if you haven't yet but

basically what I believe makes trading

so hard is because our brains are overly

concerned with protecting us from Pain

and discomfort and trading can be

uncomfortable when you're in draw down

in a trade close to getting stopped when

you do get stopped and the pain of a

loss is realized and when you're in

profit you're scared of pullbacks that

could easily erase that unreal realiz

profit all these cause discomfort but

have you ever been in a trade that

almost stopped you out where you spent

the entire trade and draw down only for

it to finally turn around and move back

towards your entry and closer to being

in the green and you thought if this

trade comes back to my entry I'll just

take this softare break even why would

you do that well obviously you've just

been sitting in this discomfort

desperate for it to go away regretting

getting in the trade but now the market

is likely confirming your original

thesis now moving in your direction so

why would you take the trade off the

only reason is to escape the discomfort

but your stop loss held and now things

look like they can go your way stay in

the trade unless of course the market

has provided you with more information

that negates your thesis and you do in

fact want to scratch the trade that's

fine but recognize when you're doing

something based off the desire to remove

discomfort as opposed to making a

decision based off of new information

now on the other side of the trade when

you're in profit not yet at your target

you may be getting nervous every time

the market has a normal pullback and you

see the potential Profit start to

evaporate you decideed to cut the trade

early green is green well let me read a

direct quote from best loser wins by Tom

hogard one of the popular cliches in the

trading world is that you can't go broke

taking a profit oh hell yes you can if

you unable to let your profits run you

will never make money trading the amount

of times I've gotten scared of my

unrealized profit disappearing cut the

trade early on a regular pullback only

for it to hit my target a few minutes

later is outrageous happens all the time

so I've been making a point to try and

stick out the discomfort focus on the

chart rather than my p&l and trust my

levels here's here's the trade I took

where I did just

[Music]

that low Trend jump out the downside is

greater than the upside you know let's

say it was the opposite let's say my

stop loss was here and my take profits

down here I would still hold this trade

probably you know until it hits my stop

so why would I not hold it until it hits

my take

profit Target acquired the best advice I

can give is to try and level out your

emotions in a trade whether positive or

negative if the trade works out fine if

the trade doesn't work out fine after

you exit it's back to the charts looking

for the next setup regardless of the

last trades outcome hide your p&l if

that will help trust your

[Music]

analysis I'm often asked in my live

stream if I have a daily bias I

generally don't there are scenarios that

I think are more likely to happen based

on current market conditions but since I

am just scalping I am usually open to

playing both sides of the market on any

given day the times I've lost the most

money are the times I've ignored what

the market was telling me and kept

trying to trade one side that just

wasn't working I would think well this

indicator is turning bearish price just

double topped we are due for a reversal

let me sell the highs by getting in

short we chop around at the highs get a

small movement down and I think I knew

it here it comes I'm going to add to

this position so I'll make a killing

when it proves me correct well would

don't you know it but price sweeps

higher stops me out for a loss double my

initial risk and now I'm pretty pissed

so I didn't wait for confirmation for

Price action to get short I was trying

to be an early seller I added to the

position with the smallest movement

lower out of greed there are times you

get rewarded for being overleveraged and

there are times you get whooped for

being overleveraged when you take a

beating that could easily send you into

tilt then maybe you try and short again

you were just early you were stop hunted

the move lower has to happen maybe you

even try shorting again with that double

size and Bam you were stopped at again

and watch as the market rips Higher by

marrying your bias you set yourself up

to be potentially overleveraged take

oversized losses go on tilt and miss the

real move the market is making you

cannot ignore what the market is telling

you it doesn't matter if you have an

oversold RSI with a Ballinger band

compression at the top of a kelter

Channel with a macd crossover if the

market is pushing price contrary to your

thesis you have to be willing to adapt

here's an example for my live stream I'm

looking for

shorts I'm going to try a

short took a stop out I take the loss I

was sized appropriately for the account

so not a big deal let's say the the down

move is over for now and Longs are the

play well if I want to flip my uh bias

and trade the other side then I would

want to see us come back probably to the

20s so after taking a losing trade to

the short side I planned what I want to

see in order to take the trade to the

upside I see what I want I take it

[Music]

and while I did exit a little early I'm

working on that I was able to enter long

again and catch another nice trade after

the move to the upside stalls out I then

get back in short writing the market

lower for a really nice

trade a lot more trades than I usually

take but I I think this price action

gave you trades in both directions so it

was fun um I think this was a really fun

session even though couple trades didn't

work that's how it is you know you're

going to take some HS but Shake It Off

like look for the next play and if your

if your bias is wrong flip you know I

flipped long and scal long again and

then I'm like all right maybe now let's

get the short side again so I was I was

playing you know both sides all day so

that trading day was a really good

example of having a fluid approach to

the scalping the markets and adapting to

what the market was saying to take the

session from a $260 red day into a $500

Green Day Market is ripping without me

right

now let's do a quick recap first adjust

your position size so that you have

standardized risk across each trade I

encourage you to trade micros if you are

a Futures Trader second recognize fear

when you are trading but don't let it

dictate your actions get comfortable

being uncomfortable and trust your

analysis third don't marry your bias

listen to what the market is telling you

and adapt I truly think if you combine

these three concepts with screen time in

front of the charts you will see huge

Improvement in your trading thanks so

much for watching see you in the next

one

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