Why Patience and Perspective Are Every Trader’s Most Profitable Tools

If you’ve been following my articles, no doubt you’ve detected at least one theme — that day trading is less about the stock in question, and much more about what’s between your ears…and the ears of other traders.

I continue that theme today by looking at how your choice of time perspective can make a big difference in your mental game and, as a result, your longevity in this profession.

Related: Before You Start Day Trading, Know These Stages

When you’re just starting out

Let’s first look at people who want to get into day trading. It’s common for them to want to trade because they’ve been whipped into a lather by something they saw or heard on social media or elsewhere. That’s fine, but it’s the next step that often is the problem — how they decide to learn day trading.

I’m a huge believer in learning how to trade by doing so in a “SIM” or trading simulator. It allows you to see actual market movements going on right now and learn how to trade without risking your money. It’s not a perfect representation of the current market, but it’s close enough.

Here’s where time perspective first becomes an issue. It’s easy to think: Simulators are fake. I want to be a real trader, and that means using real money.

I’m here to tell you that losing real money does not make you a real trader — it simply hastens your demise. When you’re starting out, you don’t have much of a money cushion, and you have even less experience. It’s exactly the wrong time to risk the one thing that can wash you out of the business in a hurry — your precious funds.

It’s much better to make your first 500 mistakes where they don’t create deep, lasting scars. If you do this, you’ll be trading with real money soon enough. For now, just focus in the short term on learning the basics of how to read candlestick charts and technical indicators, and getting a feel for when the conditions are right to take a trade.

The next hurdle

I’ve been trading for a long time and have more than 25,000 trades under my belt. Even so, it’s confession time: I’m not immune to the emotions generated by hearing about someone else’s success this morning, while I’ve been studying my charts and have mostly been waiting for the right time to jump in. A few stocks may indeed move hundreds of percentage points up and down very quickly. That means we all regularly hear stories of someone making a dollar or sometimes even multiple dollars per share in a single day!

Congrats. Want to know the reality for a beginning trader? It’s this: You should be delighted if you can generate ten cents per share per day on a consistent basis. Delighted.

This is really hard for beginners to process. “But Ross,” they say: “My account is tiny! If I trade 500 shares today and pull out a dime per share, you’re saying I should be pumping the air over a lousy 50 bucks?”

That’s correct. In your rush to achieve the long-term goal of trading a large account, you’ll come to regret holding your positions in the hope that you’ll reach a dollar or more of profit. You’re much more likely to break even or worse. Ask me how I know. Play the short game, pull that regular dime out of the market, and soon enough you’ll be ready to adjust your sights higher.

Related: 5 Things You Need in Order to Be a Successful Day Trader

Intermediate angst

Let’s say you were smart and learned a lot in the SIM. Here’s a common progression:

• At first, you mostly lose money, though you might have some beginner’s luck.
• You have your first “green” day or two, when you made more than you lost.
• You still have plenty of red days, but begin to string together more green days.
• After what seems like forever, you’re at last able to have a green week, and then several green weeks in a row.
• After all this work, Congratulations! You’re officially at…breakeven!

That’s right: Considering all the red days and weeks you had in order to get to this point — if you played your cards right — you’re financially about even with where you started.

This situation can mess with your head, because your goal all along was to make money at day trading, and after months of hard effort, it can feel like that goal is far off. Take heart! It’s truly an accomplishment to be a break-even day trader. Your bank account might not show it, but you’re vastly richer in knowledge and skills, and primed to take things to the next level.

The expert’s challenge

You’ve put in the time and honed your day-trading skills. You might even have made day trading your full-time profession. I can’t say much about day trading with absolute certainty, but I’m certain about this: You WILL continue to have red days, and sometimes they’ll even string together into a full-blown slump. I’ve had them, and all the top traders I know have been there, too.

Once again, be careful about your perspective. It’s easy to think: Me? In a slump after all these years? After everything I know about trading? Could I be losing my mojo? Here’s a case where you need to shorten your perspective, put yourself into what I call “trader rehab,” and get back to basics. That means rebuilding your confidence by taking smaller trades and focusing on the fundamentals. You’ll be back in your right headspace before long.

Day trading is the great equalizer. Each day is a fresh opportunity to knock it out of the park, do OK, or get seriously beat up. The next time your trading emotions get stirred up, take a moment to orient yourself and make sure you have the right perspective. With the proper mental framework, you’re more likely to make the right next moves.

If you’ve been following my articles, no doubt you’ve detected at least one theme — that day trading is less about the stock in question, and much more about what’s between your ears…and the ears of other traders.

I continue that theme today by looking at how your choice of time perspective can make a big difference in your mental game and, as a result, your longevity in this profession.

Related: Before You Start Day Trading, Know These Stages