Beginner’s Guide to Day Trading Success: A Step-by-Step Plan

Posted in: Trading Article, Trading Tutorials

DOWNLOAD THIS POST AS A PDF - CLICK HERE -

I want to make public the methods we teach for traders to find day trading success, swing trading success, or a positive outcome with any style of trading.

This guide assumes that you already have your trade platform and that you have funded your trade account with our minimum recommendation of $5,000.

By following the easy steps below, you will accomplish a mastery of the three main areas necessary to succeed in trading: methodology, risk management and trade psychology.

Stage 1: Create Your Foundation

  1. Establish your reason for trading.  Hopefully you will have edited your reason down to three simple words.  “TO MAKE MONEY!”
  1. Understand that in order to achieve your reason for trading (to make money), you must accept the fact that you have to first learn how to ‘not lose money.’  How do we do that?  By not losing ‘the forest amongst the trees.’
  1. Strive to accept the fact that we make money from the ‘edge’ that our trade system, our ‘methodology,’ gives us over time.  Not from any individual trade or small series of trades.  Notice I said ‘strive.’  I did not straight out say ‘accept.’  You are NOT ready to accept this fact but you ARE ready to strive to accept it.  There is a big difference.  In order to actually accept this critical fact, you must first learn to take internal ownership of the methodology.  By skipping this important necessity, you will merely take a leap of faith — thinking that the method will work but not actually believing it will work.  Once you are in a trade, your inner self will fight against you.  This will lead to your undoing and can only be prevented by Stage 2.
  1. Keep it simple:  Use the Power of Quitting (POQ).  (If you don’t know what that is, please have a look at this video tutorial).  Combine POQ with a strict time limit each day.  I recommend trading from the open of the US Session and quitting with POQ or, at 11:00 am CST, whichever comes first.  If you are trading other markets or in other time zones, use the same concept and have a time-based circuit breaker combined with your POQ rules.  Commit to this and you will dramatically reduce the risk of failing.

Stage 2: Striving to Accept the Way to Make Money as a Trader

  1. Seek a beginner’s market where you can risk 2% or less per trade with a $5,000 account.  I suggest the NASDAQ eMini 144 tick chart.  Why?  Because you can trade 1 contract and your average risk per trade will be less than 2% per a $5000 account.  Also, it trades great with NetPicks trading systems.  Don’t take my word for it though lest you run the risk of that fatal leap of faith.  Prove it to yourself so you can finally believe in it and accept the edge that it will give you, internally.  How?
  1. Manually back test!  Make sure you back test correctly.  Briefly, you want to post at least 100 trades in your spreadsheet (though 200 is even better).  Make sure you use a solid tracker like the Ultimate Trade Analyzer Lite spreadsheet (which we give away FREE) so your statistics will be accurately tracked. This is critical.  If you do not know the correct way to back test, shoot us an email and ask us as it is beyond the scope of this brief guide.
  1. Witness the results of your back test.  Note the losses as they relate to the winners.  Notice key stats and results like the most consecutive losses and largest draw down period.  I refer to this as the ‘one step back’ mode.  Notice also, the ‘two steps forward’ mode that always follows.  Take note of how your internal self reacted to uncomfortable set-ups.  Then notice the net profits that occurred through your 100+ trades, despite your discomfort and the losses that happened throughout.  Wow!  “It really does work,” you’re thinking to yourself.  You are beginning to accept.  You are beginning to believe.  You are beginning to take internal ownership of the system that will be your main tool for achieving your reason for trading.  What was that again?  To make money. Don’t ever forget.
  1. Be business-like!  Don’t think you can build Rome in a day.  Don’t think you can take internal ownership by short-cutting this step-by-step guide.  There are only short cuts to busting out your account… not to growing it.  Realize that successful trading is NOT some place you magically arrive at one day.  It is a day-to-day, trade after trade business-like journey.

Stage 3:  Practice Makes Perfect

  1. Forward test.  Now you are ready to simulation trade this market.  Sim trading is NOT the same as real trading, nor do we expect it to be.  But it does serve a valuable purpose.  You can now work at perfecting your craft by learning how to execute your trades in real time, while still adding trades to your spreadsheet, building your data set even beyond your back test.  Also, you are reinforcing and perfecting your knowledge of your system in real-time action.
  1. Do this for a few weeks to a month.  Once you feel you have a firm understanding of how your system works, you can recognize all the trade set-ups, and you can execute them, you are now ready for the final step before actually going live.
  1. Commit to taking 25 consecutive mistake-free trades, live, in your sim account.  A mistake can be anything including:  execution errors, second guessing, moving your stops and targets outside of your plan, missing an entry, not adjusting around a key level, etc.  If you make a mistake on the 24th trade, for example, you must start over at 1 again.  Consider this your ‘dress rehearsal.’
  1. Make sure you are practicing for real – Power of Quitting combined with your time-based circuit breaker.  It may seem like you will benefit more by just continuing to trade throughout the session, getting more and more practice trades under your belt.  This is not true!  The understated and often forgotten ingredient to your long term trading success is discipline.  By practicing how you will ultimately trade for real, you will be strengthening this critical aspect to trading.  Don’t short cut this process.

Stage 4:  The Curtain Opens… It’s Showtime!!

  1. It is time to begin trading.  Once you have achieved your 25 consecutive mistake-free trades, and have meticulously tracked each and every one of them with your ever-growing spreadsheet, you will now have seen that this system works, over and over again.  You will have lived through the ever-repeating ‘two steps forward, one step backward’ routine enough times to adequately allow your inner self to claim that profound and deep internal ownership of your trade plan.  You are now ‘ready to succeed’ and you will!  You have learned that we make money based on the edge of our system.  You have learned how to NOT lose money because you now know that it is the ‘edge’ of our system that ultimately achieves our reason for trading, not any given trade or trades.  What was that reason again?  Repeat it every day!  Lean on the system and take your trades, because that IS the only way to continually make money trading.
  1. Allow yourself to trade one contract only, until you can take 25 mistake-free trades, consecutively, live with real money.  You know the drill.  Start back at 1 again if you make a mistake.  Remember, this is real money now.  Real live trading.
  1. Develop your trade plan beyond.  What comes next?  Here are some ideas:
    • Earn the right of passage.  At this point you can begin trading with a standard 2% risk per trade.  Establish your prior day’s ending balance and use that to determine what a 2% risk would be, and how many contracts you can take per the average trade risk of your chosen market and timeframe.  If you took my advice, and stuck with the NQ 144, then a $5,000 account would allow you to trade two contracts on any trade risking 10 ticks (2.5 points) or less.  Do the math!
    • As your account grows, so does the number of contracts you can trade.  Again, keep it to the 2% risk per yesterday’s ending account balance.  2% risk, combined with the winning edge of your system, POQ and your time-based circuit breaker will keep you on the winning track and you will have arrived as a solid member of the 10% club of ongoing winning traders! (Which is a whole lot better than being a member of the other 90% club.  Trust me!)
    • Back test other markets and time frames. Maybe even use other trading systems.  Go through the exact process you did for the NQ 144.  Examine Stage 1, then proceed to Stage 2, and work your way down the list with the same disciplined, meticulous business-like approach, duplicating the process again.
    • Remember that our trades are just trees in our forest.  We don’t want to get lost amongst the trees.  We need to elevate high enough above, so that we can keep an eye on our entire forest.  With the two steps forward, one step back dynamic you will see your equity curves growing in a stair-step manner, at a 45-degree angling upward and to the right. Sure, we will see a lot of our trees fall.  That’s okay.  That’s how we keep our forest healthy.  We have accepted our way of making money and we have learned that we MUST sacrifice a third of the trees in our forest so that we can grow our forest two thirds larger.  By trying to prevent the falling trees, we will wind up underneath them, buried and busted.  Stay above the fray and let the process happen.
    • If you do wind up losing your way, stop what you’re doing.  Take a step back. Re-evaluate.  Go back to Stage 1 and start over again.  The guide worked.  It will work again.

Additional Advice

  1. Educate Yourself – There are excellent education options available to you, including right here at NetPicks where each and every one of us is dedicated to the success of our members.
  1. Surround Yourself with Other Successful Traders – This is pretty obvious but trading can be a lonely business and requires great levels of discipline and concentration.  The market could care less about the passing of time but as humans we feel it, as the minutes pass by, day after day, trade after trade.  It helps to be surrounded with other traders in a trade room or forum where each supports the other and the passing of time each session is much easier to endure.
  1. Find Yourself a Good Mentor – For the same reasons as number 1 and 2.  Also, a Mentor will hold you accountable and often times that is the ONE thing missing to push a trader from just ‘getting by’ to becoming truly successful.

Good luck.  Have fun.  Enjoy the journey.

The following two tabs change content below.

4 Responses to “Beginner’s Guide to Day Trading Success: A Step-by-Step Plan”

  1. rufus

    coach tj should write more articles. his writing style is very nice. i could see why he have a successful trade room.

    Reply
  2. rufus

    although on the 2nd thought, this article just about sums up everything that is trading so there’s not much more to say! thanks coach TJ for the wonderful article and time spent writing it i know it took a long time. but it can help me.

    Reply
  3. Bheki

    Kindly email me your guide growth spreadsheet

    Reply

Leave a Reply

Your email address will not be published. Required fields are marked *

* :

* :

* :

:

This site uses Akismet to reduce spam. Learn how your comment data is processed.