Many novice traders are attracted to day trading because they perceive it as a fast-paced
environment that offers hundreds of opportunities throughout the day.
Or does it?
I’ve been a professional prop trader since 2013. I’ve also been an independent trader since 2007.
What is a prop trader? It means trading for a firm that provides capital for traders who can prove
they have a consistent edge over extended periods of time. Thereby offsetting any personal risk to a
third party.
Daytrading is like any other business. If you’re not entirely sure of your skills, trying out for a futures
firm has never been easier in the post-covid times. Most of them are fully remote.
But more on that in a minute.
Figure 1. 100th Trade of the day. So much work and no profits!!!
Back to the issue of hyperscalping.
There are millions of successful daytraders out there. But none of the legitimate ones who managed
to create wealth and abundance will ever tell you that daytrading is about kicking off 100 trades
every day. In fact, many of the best ones will only trade 1-2 trades per day.
Maybe up to about 3-4 trades if the first couple of trades reached a home run target.
But before you can get there, there are a number of skills to develop:
1.
2.
3.
4.
5.
6.
Understand and use the context of larger timeframes
Ability to see that context and pair it up with lower timeframe developments
Experience: to sift out intraday ’noise’ from genuine mispriced opportunities
A statistically viable risk model
An edge – aka the ability to ‘generate alpha’
To keep the edge for extended periods of time
If any of these skills is NOT in order, I guarantee you that it will be IMPOSSIBLE to make any
consistent income from daytrading.
Super and hyper-scalping doesn’t work because it usually relies on NEGATIVE risk/reward ratio.
What is that?
Risk/reward ratio is the amount you win vs the amount you risked.
So if you risked $100 and aimed to get $200 on top of your original risk, this means you have a 2:1
risk/reward ratio. Where you gain twice as much as you risked.
If your ‘system’ has a negative R:R ratio, where you risk $100 but only ever get $95, eventually this
will bleed your account.
Figure 2. Only when you get to 2:1 RR, you start making money, assuming the same accuracy percentage
There are many quasi-traders out there selling empty promises, focusing on results like houses,
Lambos and hot chicks, while teaching the mere basics of RSI, moving averages and nonsense like
‘trend is your friend’.
You also see a lot of ‘head and shoulders’ and ‘cup and handles’ type BS.
Let me tell you that in all 3 prop firms I worked at, if you even mentioned head and shoulders, you
would be the laughing stock of the entire trading floor.
Chart patterns of this kind are no different than ink stains in a psychiatrist office. Everyone will see
what they want to see.
Us humans are very good at imagining things.
Figure 3. Head & Shoulders? Or market giving me the middle finger!
But us as traders need to move away from retail trading mumbo-jumbo and step into the world of
real market mechanics to learn how to evaluate the market in a systematic way.
A way that will tell you when you right, but: WAY more importantly, a system that will tell you when
you’re clearly wrong.
The ONLY way that scalping for a few ticks works is if you own a MULTI-BILLION dollar hedge fund
and you’re using massive positions that have a tiny effect on the price itself. But these sorts of
systems cost about $100 million PER YEAR in maintenance costs with specialised servers and an
entire team of people who help to continually optimise the algorithms. It is NOT for small retail
traders. Even someone like me with a couple of million in trading capital is a SMALL FISH.
If you have less than a 6 figure account, then you’re pretty much a plankton. Attempting to scalp is
akin to letting yourself be eaten by the whales! So we need a different approach – usually in the
form of a robust risk model and a solid approach based on market mechanics: also known as ORDER
FLOW.
Figure 4. Don't be Whale Food!!!
The first step is to find excellent education. One that teaches step by step how to apply professional
orderflow techniques properly.
Second step is to open a DEMO account – yes, a DEMO – no real money!
And then to start practicing, running a journal and tracking your STATS.
In our Pro Dev Program we explain every single step of the way. Because we’ve all done it before
and we’re active, professional prop traders to this day.
But even with us by your side, you will STILL NEED TO DO LOTS OF PRACTICE.
Trading, music and sports are similar disciplines = all three require relentless self-discipline and
unusual emotional resilience. All three also require a methodical approach to skill development.
Just like in a video game, your ‘new character’ cannot go from zero to hero without some serious
practice and THE RIGHT STEPS put in place.
Whenever a musician has an issue with a particular musical piece, they don’t’ just mindlesly play the
same phrase over and over at the same tempo, hoping that they’ll magically wake up one day and be
able to play it flawlessly.
In daytrading this is akin to a trader constantly overtrading and not even realising they have a
problem, while repeating the same mistakes over and over, wondering when they’ll magically
become profitable.
CHANGE NOTHING – AND NOTHING CHANGES!
So some methodical thought needs to go into the practice.
The musician would go back to practicing a scale of the piece and then slow the phrase right down,
to identify which combination of notes is causing the problem.
The daytrader will need to quantify their largest mistakes – what is the one thing they keep doing
that is harming their performance the most?
Then you’ll need to set ONE task for yourself. Just ONE.
And then assign 6-8 weeks of practice before reviewing how you did with the task and whether you
stopped doing that one major mistake.
This step will be individual to every different trader.
One trader will have a problem with inconsistent position sizing - one time they risk 5%, another time
they risk 0.5%. Whether due to fear or lack of knowledge about tick value/stop loss sizes, that’s a
different issue yet again.
Another trader may have a fear-based behaviour. Where they’re not even sure about the setup
they’re taking, so even though it’s a perfectly valid setup, they were so traumatised by their previous
mistakes that they just cannot stay in a trade long enough to even give it a chance to move one way
or another.
Third trader could be addicted to pressing the buttons and keeps kicking off trades after loss after
loss after loss.
Fourth trader could be a complete opposite to the previous person: a super-risk averse individual
who cannot even bear to press the button. Even when the clear setup is staring them in the face. Byt
the time they get the courage to initiate a trade, it’s usually too late and they now have to use a stop
loss that is either bigger than average, or not at the right area (ie cutting through candle bodies –
never a good thing).
Step 1 is knowledge:
Learning a solid approach that relies on market mechanics, not on ink stains.
This will include understanding naked price action patterns and pairing them up with concepts from
market profile and supply/demand.
In our Market Stalkers Pro Dev Program you won’t have to hunt for these all over the net, battling
with books that assume you’re already an expert and wallpapering you with horridly complex
terminology.
Our Market Stalkers Method is rather unique approach. The first of its kind, we seamlessly use all
aspects of institutional order flow.
The program starts from the beginning, assuming you know nothing about supply/demand or
market profile. But the program also assumes you are not a complete novice. That you know what a
candlestick is, how to read the charts and that you know order types with their applications: limit
order, market order, stop loss, buy stop, sell stop. If you’re already equipped with that knowledge,
then you’re good to go.
Step 2 is experience and data gathering:
Whether you decide to sign up for one of our coaching bundles or not, this step will be harder or
easier. It is absolutely possible to gather necessary experience all by yourself, but bear in mind it will
take you much longer. If you start using a trader journal such as Edgewonk, it’s much easier to see
what needs work.
Undirected trial and error take a really long time to take you above
mediocrity.
Figure 5. Bumbling around without a coach
In daytrading, if you want a serious second or third income from it, you cannot be mediocre.
While my method offers a shortcut, building the experience to be a professional daytrading will NOT
happen overnight. So if you are going to come with me on this journey, be prepared to spend the
next 2-3 years honing your skills.
I took full 6 years to get good at daytrading from scartch all by myself. And I was already an excellent
swing trader. But daytrading.
Wow.
A different animal completely.
Once I admitted that I was a bit lost and that I had no idea what I was doing intraday, I signed up for
an apprenticeship and went to Chicago for a few months.
My performance started off quite lacklustre, but within 4 months under expert guidance, my coach
figured out which areas were my weak point. Once we eliminated those, I started making a killing,
month after month.
Step 3 - Practicing under pressure
Trading your own demo account that doesn’t have any consequences is one thing.
Practicing trading under pressure but still in a safe environment is another.
Using our partners challenges (aka trading combines) to hone your skills under pressure but without
risking your own $5-20k savings. First rule of business is: NEVER RISK ALL OF YOUR MONEY ON A
NEW VENTURE. Trading is no different.
If you are skilled enough, you can sign up for prop trading role ‘ tryouts’ for a small (but not
insignificant) monthly fee. Depending on the risk parameters you choose, the tryouts will cost you
anywhere from $125 - $375 per month.
There are rules to be followed.
You must stick to a daily loss limit. You cannot trade through certain releases. You must not go over
the maximum position size and your account cannot fall to a maximum drawdown.
If you break any of the rules, you have to reset the account which will cost you another $99 each
time you break a rule.
So you can be undisciplined, trade like a wildman, go nuts. But it will cost you.
Figure 6 We don't go to compete at the Olympics without lots of practice in a safe environment
However, the difference is that in real life these sorts of mistakes will cost you 1,000 – 10,000 a pop.
Whereas with practicing under pressure in a safe environment, you will only lose $99 each time you
break a rule.
Because you have a feel of skin in the game, this sort of practice is an amazing way to get you ready
for trading real money.
If you are already well capitalised and you have $75k-100k to plow into a trading account, TST
combines will serve you well.
But if you behave yourself in the combine, they WILL fund you with real money. I highly suggest that
anyone who wants to do this job seriously spends some time trading for a prop firm as an entry level
position. To learn the ropes and to develop a routine before trading your own cash.
One thing you’ll quickly learn if you’re just kicking off trade after trade after trade is that you’ll break
that daily loss limit super quick. And then you’ll realise that hyperscalping approach is just not the
way. The best traders I know only ever do 1 or 2 trades a day. They make their money and walk
away. We don’t sit there 12 hours a day looking for a million opportunities.
We trade to live. Not live to trade. In fact if you are sat there all day watching tick by tick, I guarantee
you that you won’t be consistently profitable. You will burnout quickly. It is not sustainable and it is
not realistic.
Also: more trades and more hours worked in daytrading does NOT equal more money. Quite the
opposite actually.
Anyways, once you’re through all of these learning hoops and trader rites of passage, it will be time
for:
Step 4 Creating another income
I know that many people have this idea how trading for a living is an amazing thing. But let me tell
you.
It’s not that amazing.
It’s bloody hard.
When you’re having a breakeven month and you’re not sure if you’ll have enough money to pay for
your mortgages and bills, this leads to horrible trading decisions and unnecessary pressure.
Whether you’re trading or working for a salary, you should NEVER have just one income stream.
NEVER.
So instead of flipping your boss off and doing a Jerry Maguire, think about this:
It’s much easier to become wealthy with multiple sources of income.
Figure 7. Multiple sources of income: key to a life with more freedom and resources
Prop trading is one of those jobs where they don’t care if you have another job or two on the side.
All they care about is that you do some trades to keep the funded account. When you’ll do them is
entirely up to you.
Now that you know what to expect, it’s time to start on that Step 1: learning how to properly use
orderflow.
Let me help you start the healing process from retail trading
traumas by teaching you the proper application of systematic order
flow strategies. Click below to start:
http://tiny.cc/start-healing