11 Principles To Profitable Trading
Your ‘Step By Step’ Trading Psychology
Guide
By: Jdun Trades
Mastering our trading psychology is one of the most important
aspects of becoming and staying a successful trader yet remains at
the top of the list of things many traders struggle most with. Like
many of you, I used to struggle heavily with my trading psychology. I
would commonly trade on tilt, revenge trade, break my rules, the list
goes on: you name it, I did it. I have been a student of this game
called trading for 7 going on 8 years now. I have been profitable for
around 4-5 of those years, making over 2 million dollars with proof. I
started my journey with just $5,000. I have always tried to be very
transparent on social media between doing live logins, showing YTD
P/L (something almost none of the industry does), and constantly
preaching that trading is VERY hard and requires a ton of hard work
to succeed at. You truly have to want it more than you want to
breathe. All this to say, I took everything that I have learned over the
past 8 years of my journey, feedback from 1.2 Million + organic
followers across social media, 60,000+ students inside Team Bull
Trading, and 1,000’s of others who I have helped to turn their
trading around to trade with confidence and put together this one of
a kind trading psychology handbook. I want to address all the
problems that we have as traders and not only how I have fixed
them, but how I’ve helped others do the exact same. These are all
the lessons you will need in good times and bad. I hope this helps
and furthers you in your trading journey. That person in the mirror is
the one who is going to elevate you to the next level. You can do it.
Team Bull Strong.
Chapter 1: Confidence
The building block to profitable trading is confidence. Confidence in
ourselves. Confidence in our system. Confidence every time we click
that buy button. The problem with most traders is they look at
confidence from the wrong lenses. There is an age-old phrase in
trading that goes something like this “trading is 90% psychology
and 10% technicals” I could not disagree more. “Great Trading
psychology cannot be built on terrible technicals” is a phrase I often
tell my students. You cannot build confidence in your trading
without a sound system and complete understanding of the
technical analysis you are trading on.
An example I often use is David Goggins, known for authoring
his book “Can’t hurt me” and being one of the most disciplined /
mentally strong people on earth. If you put him in front of a
computer screen to trade, he is not going to be confident in his
ability to trade and make money in the stock market (unless David is
secretly a trader, in which, I retract my above statement) but you get
the point. No matter how mentally tough, disciplined, strong you
are, the formula to build confidence in yourself as a trader comes
through education, screen time, and consistent work on your craft.
Robert Green, Author of famous book ‘Power’ stated the famous
phrase it takes 10,000 hours to master anything. Let’s put this into
a trading perspective. 250 trading days / year x 2 hours per day.
You are looking at 20 years to get your hours in. We do not have that
long, my friend. Time is all we have, and we need to execute NOW.
This is why I stress to that you NEED a few hours of screen time
minimum a day, spending a few hours reading / on education on the
weekend, journaling every day, ANYTHING you can do to get your
hours in and increase your experience time every day. This is how
you get better without even seeing it. It is like going to the gym every
day. You will not see the results tomorrow, but you are getting better
every single day. You must remember that on this trading journey.
The ‘Aha’ Moment is also something I want to touch on when it
comes to confidence building. Many traders are looking for their
‘aha’ moment where everything clicks and trading becomes easy. I
have good news and bad news. The bad news is that moment is not
coming, trading will always be hard to some degree. The GOOD
news is that while an ‘easy switch’ doesn’t click on in your brain,
trading profitably will slowly get easier to execute. You will feel
calmer in your entries, exits, and managing your trades. You will see
the market more clearly and have an exact understanding of where
your edge is and how you are going to make your money. That’s the
‘aha’ moment you need to be looking for. A consistent flow of
confidence, calm, and executing without panic.
Chapter 2: Becoming disciplined & what it takes
One of the most frequent questions I get is “Jdun, how do I become
a disciplined trader, I keep breaking my rules” and it receives a
similar response every single time.
You CANNOT be a disciplined trader and an undisciplined
person. How you do one thing is how you do everything. This directly
applies to trading. If you cheat on your spouse, on your workouts, on
your diet, on your promises to yourself, you are going to cheat on
your trading plan. I mean think about it, what is separating you from
breaking the rules in your everyday life and when you are in the
middle of a trade with real money at risk. Nothing. This is why it is
critical to change the whole structure of the discipline in your daily
life and how YOU operate as a person. You have the ability to
change. You have the ability to give 100% to everything you do and
do it well. You must make the choice and use your daily trading as
motivation to become better in every aspect of your life. I went
through this exact process before. I know some of you have seen my
before and after pictures, but for those who have not, here they are.
It’s embarrassing, yet inspiring at the same time (haha). On a
serious note, it resembles all the changes in daily habits I put myself
through and what was taking place in my mind. This directly applied
to my trading as well. The person on the left was unprofitable,
undisciplined, unmotivated, unjust about everything else positive.
The person on the right developed into a multi-millionaire trader,
business owner, health enthusiast, and family man. I do not say that
to brag or boast, but to put in perspective what is possible when you
go all in and set your mind to it. Mindset is everything.
Chapter 3: Trading with less than $5,000: Building a
small account
This is where it all started for me years ago. I was just a young kid
with $5,000 and a dream to make it big with trading. Years later, we
did make it big, but it was not without some major set backs and
lessons I wish I had known prior. I am going to lay them all out here.
Trading with a small account is tough, do not let anyone tell
you differently. While it is very possible to hit big and turn a little
into a lot, this is not the mindset I want you having. Small account
trading should be used to build your skills, find your system, and
learn to manage risk with less at stake. If you cannot manage
$5,000, I promise you cannot manage $50,000. This is a common
misconception traders have, more money does not make you a
better trader, but learning how to trade with less will certainly make
you a better trader when you have earned the right to trade with
$50,000.
Here is my formula to building a small account / trading with
less than $5,000:
20% of capital MAX used for any trade: $5,000 x .20 = $800 / trade
2-5% max account RISK / trade: $5,000 account x $800 used x 30%
stop loss = $250 MAX risk / trade (You can certainly use less too)
Start with 1 contract & EARN YOUR SIZE up. Reevaluate every
month
Stick to a basket of stocks: SPY, QQQ, AAPL, AMD, AMZN are a few
good ones to start
Use this time to build discipline & trust in your system: The goal with
a small account is not to make a bunch of money, but build a skill
set and system that will later. That is the key my friends
Ditch the daily goal: Daily goals are HORRIBLE for traders
trying to grow a small account, or any traders at all. They offer no
real benefit. Think about it, a daily goal sets an imaginary number
that you must hit to feel content with your trading day. This puts the
full focus on the money, exactly what we DON’T want to do as
traders. It makes us pull out of winners early in order to secure a
‘daily goal.’ It makes us over trade and force trades in order to
secure a ‘daily goal’ (typically resulting in losses). It makes us trade
to hit a number vs trading for principal and system which is what will
make us profitable in the long term. Ditch the daily goal and shift
your goals to process and principal based goals. Long term moneybased goals are fine, but not daily. Long term vision.
Chapter 4: Bouncing back after a huge loss
This one is tough. Losses hurt, but bigger than expected losses can
be agonizing. We have all been there or will be there at some point
in our trading career. I certainly have many times, and I have
learned valuable (and painful) lessons each time.
You need to first remember you are not alone. Losses are a
part of this game and are often not talked about. You and I are going
to lose trades and a lot of them. Our job is to be the BEST loser. The
best loser wins this game. The pain of a big loss hurts, but there is
beauty in this. You need to use this as a pivot point. Screenshot the
loss, write it down, acknowledge and accept it. Use the loss / losses
as fuel. The only way we move past this is acceptance and
accountability.
I have found some of my biggest successes come after my
largest drawdown. While the loss may still hurt, you are not knocked
out. I like to compare some of my bigger losses and drawdowns to
Buster Douglas and Mike Tyson. Buster Douglas got knocked down
/ out by Mike Tyson and not only got back up but ended up beating
Tyson in the fight. His ‘why’ was what propelled him forward. His
mom died days before the fight and there was going to be nothing
standing in his way of winning that fight. You need to have the same
attitude towards your trading. Make a plan, fight back through
education and screen time, and do not give up. Do not come back
and make the same mistakes, but do not you dare even think about
giving up. BUSTER DOUGLAS FOUGHT BACK! So will you.
Chapter 5: The importance of having a system
A trader without a system is like an NFL Quarterback without a
playbook. It does not work and if it does, it does not last for long. A
trading system is a set of rules and guidelines that dictate when we
take trades, how much size we use, and everything in between. We
do not think, we react. As a beginner or intermediate trader, it is
critical to develop a system and go through the trial-and-error
process: It will save you tons of time and money in the future.
My trading system is purely based on price action. I read
candlesticks on smaller time frames, find levels on the hourly and
daily charts, and read volume. That is it. I keep my trading and
strategy remarkably simple because that is where my edge is and
where I have found success. My system tells me when to enter and
keeps the guess work out. Far too many traders go into each day
guessing when and where to enter their trades, resulting in losses. If
you would like to know more about my system, I have a ton of free
education on YouTube (@jduntrades) and Instagram (@jduntrades)
where I am live every morning at 8:30am ET with a free trading
watchlist, game plan, and more. I try to keep it as simple as
possible because that is what works for me and has helped 1,000’s
of my students simplify their trading too.
KISS is a phrase I think about often: Keep It Simple Stupid
Trading does not have to be complex. Some of the best and
smartest traders I have had the pleasure of talking to and learning
from all keep their strategies very simple. The key to success is
building a system, following it, building confidence in it, and
executing it. That is the team bull way.
Chapter 6: Executing like a pro:
Our job as traders is to execute and execute well. If you want to
execute like a pro, you need to start thinking like one. There are
several key elements to executing like a pro:
Element 1: Sniper mentality: Our job as traders is to act like a
sniper not a machine gunner. We want to be precise about where we
land our shots. We have one bullet in the chamber, and we do not
want to waste it on a bad shot. Quality over quantity is extremely
important in the process of becoming and staying a profitable trader
Element 2: Be the house: Who makes more, the casino or the
player? The casino. This is because they have an edge and execute
it every hand. They go into each game knowing they have an edge
and an advantage over time. Think of yourself playing blackjack: if
you knew which hand you would have every time, you would only
place your money on high hands like 18,19,20,21. You would not
double down on a 14. You need to think of your trading the same
way. We only put risk on the table when we can see the set up in
front of us and know that we have an edge. No advantage, no trade.
Element 3: Basketball style: Every basketball team goes into
the game with a playbook. Man to man, zone, box and 1, whatever
the defense throws there is a play to combat it and score. The same
thing goes with trading, whatever the market throws at us we must
be able to adapt and react. The best traders in the world who
consistently make money all go in with a plan to deal with whatever
the market throws at them. Think of your trading like an NBA team
heading into the finals. A lot is on the line. That is your daily mindset
going into the trading day. We improve every day and focus on it.
The one critical element of executing like a pro is knowing
exactly what to expect. They do not ‘think’ about what they are
doing, they do not ‘debate’ on what the next move is, they execute.
Kobe Bryant executed. Lebron James executes. Elon Musk
executes. The list goes on. As a trader overthinking your edge /
execution will only lead to missed trades, bad management, and
losing money. The key to executing like a pro is building repetition
day after day in your trading and becoming confident every time you
click that buy button.
CHAPTER 7: When you want to give up
I remember more times than I can count wanting to quit trading.
Thinking to myself ‘maybe I am not cut out for this,’ ‘I think I need to
find something else to try,’ ‘I hate this, I am done.’ The list went on
of things I would tell myself after a difficult day, week, month in the
market. The reality is that trading can bring some very dark days our
way. It challenges us mentally, emotionally, and financially. Now,
there is a good part and a bad part to these challenges trading
brings our way.
The bad news: It is going to be hard. You have felt it. You are
feeling it. Your back is against the wall. You went through, are going
through, or are going to go through a tough road to get to that point
of consistently making money.
The good news: You can. You will. All the hardships, losses,
frustrations you experienced mold you into exactly who you need to
be. I remember telling myself every single day ‘There is NO PLAN
B’, ‘I want this more than I want to breathe’, ‘I HAVE to become a
profitable trader no matter what.’ I did not give myself a choice to
find success and I did not care about a timeline. That is the attitude
it is going to take to win, and it is going to change your life forever. It
is similar to fitness where you show up every day for a while and see
no results, but if you hit it long enough, you become unrecognizable
in every way. The changes and growth you are going to see mentally
from committing to your trading success and going to spread to
every area of your life. This process is not just about becoming a
disciplined trader, but a disciplined and successful person. This
was the mindset that always got me through the ‘I want to quit’
times. It is NOT an option. Stay strong.
CHAPTER 8: When you feel like revenge trading
Revenge trading is one of the most common reasons traders lose
money and blow their accounts. It is the act of losing a trade and
continuing to trade based on revenge and a need to make the
money back that they lost. I have been there, I get it. The urge to
make lost money back is strong, especially as a beginner trader, and
what I am about to explain to you will shift your mindset on this
forever.
Your relationship with losses needs to change, and it needs to
change today. You need to embrace losing, learn to love it. The
reason you are revenge trading is because you cannot stand the
thought of losing money, losing in life, being a loser. You are
correlating your long-term success as a trader to the result of 1,2,3
trades. You are taking your losses personally and trying to prove to
yourself that you aren’t how that last trade just turned out. When
you hate losing and refuse to accept it as part of the process, this
happens over and over again. Now, real change comes in when you
embrace losing.
When you learn to love losing, everything changes. Trading
losses can no longer negatively affect your ego, discipline, or
anything else we need to keep in line to make money. We learn from
our losses. We become the best loser. We tell ourselves after losses
‘
This is normal’, ‘This is part of the process,’ ‘I may have lost
this trade, but I am a great trader and will continue to learn and be
great’. It is critical to our long-term success in this game to
embrace losing, accept it as part of the process, and learn from
every loss. This is not a teeter totter, a loss does not need a win
immediately to balance it out. Take time after every loss / losing
streak to regroup and come back collected. Being mentally in the
game and able to regroup will result in the bigger wins long term
needed to offset the losses that will happen.
CHAPTER 9: When you feel tilt creeping up
Similar to revenge trading, tilt is an account killer. Tilt is what
happens when you lose a trade, get angry, lose control, and begin
making irrational decisions. It almost feels like you are no longer in
control of your trading, as if you are in the passenger seat with no
access to the steering wheel. Tilt is what causes traders to continue
averaging down, not follow a stop loss, and take trades that they
would typically not take. Sounds familiar, right? Lucky for you, it
does not have to stay this way.
The first step to overcoming tilt is recognizing when it is
creeping up. When I first started trading, I would have a ‘mental
check in’ every 15 minutes of the trading day. I would take note of
how my patience, impulsivity, focus, frustration, and so on was
doing. It was critical for me to keep my emotions and current state
in check to avoid slipping into tilt. Like revenge trading, it is
important to accept losing as part of the process and to respect your
risk. It typically takes many trades to build up an account, and all
that can be wiped away with one bad tilt trade.
Tilt also derives from not having a system or not being
confident in the system that you are trading. If you do not have strict
parameters to your trading and how you execute / manage your
trades, it is going to be much easier to slip into tilt and make
emotional adjustments when things start to go wrong. You can fix
much of tilt by committing to a plan before you take the trade.
Identify your entry, exit, trims, and plan the trade before actually
executing. I typically see tilt play out in beginner-intermediate
traders that enter traders strictly to make money, with no plan in
sight. This cannot be you if you want to stay in this game. It is
important to acknowledge that and stay on top of it every single day.
Often, we are our own worst enemy when it comes to mistakes like
this, and it is extremely avoidable.
Acknowledge, accept, and avoid letting it be a part of your
future. You have the ability to make that choice and take that
action. Let this be a reminder that you are in control of your trading.
You can do it.
CHAPTER 10: Recognizing your A, B, & C game
One of the first questions I ask my students when I am getting to
know them is what is their A, B, and C game. I typically receive a
confused response shortly after. Similar to athletes, musicians, and
CEOs of the largest companies of the world, we all have things we
are good at, and that we need to improve on. Knowing these and
how to plan them to keep moving forward is critical to our long-term
success as traders. Let us dive in.
Mapping out our A, B, and C game refers to the process of
identifying what we are great at, decent at, and for lack of better
words, suck at. It is acknowledging and becoming aware of the
things we do well and the things that we do not. The only way to
move forward as traders is to have a deep understanding of what is
holding us back, and where our strengths are.
A game: Our A game refers to the things we are best at. If you
are good at identifying entries and exits, finding the bottoms with
minimal draw down and catching tops before the reversal comes,
you would put that in your A game. But in the process of that, you
don’t hold for the whole move, you typically sell early and do not
follow your plan, we put that in the B game.
B game: Our B game is something we do okay at, it is not killing
us, but if we could improve it to A, it would make us a lot more
money. Upgrading your B game attributes to A game over time is
going to make a massive difference in your trading. From our
example above, you identify the set up’s great but do not hold for
the bigger move. We know that about ourselves now so we can work
on it. Imagine your trading if you held for that extra 20,30,40%
profit. This would be life changing for you and your trading. We
know that we have work to do, and because we are aware of it, we
can work on it. Now, let us say in the mix of all this, you are great at
identifying entries, you need work on holding them, but you find
yourself forcing trades on the side and becoming extremely
impatient waitin for your set ups. That is where C game comes in.
C game: This is what ultimately keeps traders unprofitable. You
can have the best A game and B game; yet, even with one horrible
trait in our C game, we cannot keep money. It is tough to look at
your C game because it forces you to acknowledge problems within
yourself. The magic happens when we do this, when we accept our
faults and that we suck at something or multiple things, and we
make a plan to make it better. When we identify what is holding us
back and commit to finding a way to make it better, pushing it into
our B game category, positive change starts to take place in our
trading accounts and our daily habits.
Having a clear understanding of your A, B, and C game is
extremely important to building a solid trading system and
becoming the profitable trader you are committed to being. I
recommend getting a fresh notebook, and reevaluating every single
day what your strengths and weaknesses are, as some things come
up day to day that you may not think of right away. Make a plan and
commit to change. You can do this.
CHAPTER 11: When you are on a losing streak
I have been on some brutal losing streaks in my 7 going on 8 years
of trading in the stock market. I have tried every trick in the book to
break them, to boost my confidence / ego, and to snap it cold
turkey. In the next few paragraphs, I am going to teach you the only
strategy I have found to consistently work for my students and I, and
how you can implement it too.
The first step of snapping a losing streak is to size down
massively. You are losing, things are not working out, the first step is
to minimize the damage taking place. If you are trading 100
contracts, you are back to 20. If you are trading 20 contracts, you
are back to 5. If you are trading 5 contracts, you are back to 1. You
get the point. You need to significantly reduce your position size to
limit the amount of losses you are taking in thisdownturnn. A phrase
that I live by trading daily is ‘live to trade another day.’ If you can
survive the downside, the upside will come. Not only will reducing
size limit the amount of risk on the table, but it will help with your
psychology as well.
The second step is taking control of your psychology. Now,
reducing position size significantly will help a lot with psychology
right away. Many times, in a losing streak, we are focused more on
the money and how much we are losing / how much we must make
back. By reducing the amount of money we are using per trade, we
will naturally think less about it; Therefore, helping our trading
psychology. It is imperative to recognize and be aware of what's
happening and affirm yourself losing periods are completely normal
in this game. It is how we react to these periods that defines our
future.
The third step of this process is journaling. You need to be
journaling and taking accountability now more than ever. If you
cannot pinpoint where things are going wrong, it is going to be
nearly impossible to fix. Take 15-20 minutes per day and dive into
each trade you took. Examine the time frames you looked at, your
emotions during the trade, what was the entry trigger for your buy
signal. Look at every little detail of the trades you are taking to find
similarities between them. If you can identify where things
continually go wrong, it is going to put you in a much better position
to snap the losing streak and get back to winning.
When it is all said and done, our job as traders is to become the
best loser possible. Embrace the struggle that comes with the
learning curve. Accept that in order to build trading psychology, you
must have a solid system to build on. I hope this guide has put you
one step closer to your goals and gives you something to come back
to / lean on in challenging times. You can do it. “If others can, so can
I.” No plan B. Be sure to join me every morning M-F at 8:30am ET
on my Instagram live (@jduntrades) for my daily walk through, watch
list, and to get ready for the trading day. Consistency is the key to
success. God bless.