How I Became a Profitable Trader
Summary
TLDRIn 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
📊 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.
🧠 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.
Mindmap
Keywords
💡Position Sizing
💡Break Even
💡Discipline
💡Momentum
💡Stop Loss
💡Micro Contracts
💡Leveraging
💡Pain and Discomfort
💡Best Loser Wins
💡Emotional Trading
💡Adapting to Market Conditions
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
oh
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