Home > Lessons from the trading floor > knowing what “should” happen next when day trading

knowing what “should” happen next when day trading

Do you want to earn a great living as a day trader? The only way to do that is to understand probabilities and take every trade based on what is probably going to happen, not what “is” going to happen. When managing money you must always look both ways before you place a trade. Most new traders who come to the business only look at a trade and see what they can make. They are only looking to one side of the street. There is an old saying that is right on the money, amatuers first consider profit potential, professionals consider risk first.

I have managed several day trading rooms and as a partner of one of the fastest growing proprietary trading firms in the country  I can tell you I have seen it all when it come to explanations for some trades! As a professional sitting at my screen day trading for a living I am constantly asking myself “what should happen next?” Most traders sit at their screen saying “what do I need or want to happen next!”

It might not seem like a difference but I can tell you that the perspective is huge! I am constantly assessing ALL probabilities and adjusting my share size and leverage as the market tells me what it wants to do. I never ask the market to do me a favor. I simply listen, struggling traders put on trades and tell the market to prove their brilliant analysis correct.

If the market makes a new high, I am saying to myself “if order flow is still good this stock should retest that high.” I place the trade and let the market unfold. There is never a thought of this must happen, if I do that I am only seeing what I want to happen, I am eliminating possibilities. I am predicting not trading.

The biggest losing trades I witness from experienced well capitalized traders is when they tell me “I didn’t see that coming.” Nobody is perfect. Trading is not a business of being perfect, but it is a business of minimizing mistakes.

In order to earn a consistent living as a day trader you must understand when to push your leverage. In order to  push your leverage you must have as many if/then scenarios as you can think of during the day and for each trade. When if/ then works out, you push your leverage, when your if/ then scenarios do not follow through you scale back and evaluate again.

This sounds simple and common sense but the difference between planning it out before the trade thinking about all the many possibilities during the tradde and actually doing it make the difference between getting paid for the month and telling all your friends that day trading “doesn’t work.”

Do not spend all day looking for entry signals as most unprofitable traders do. Spend all day building scenarios, when one has a high probability in your opinion, place the trade. The entry is not as significant as the sccenario. The scenario is what should happen next.


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