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Day Trading Psychology – An Unspoken Rational Approach

If you put on a trade and your heart starts pounding, you are *not* ready to trade yet…Some people who aren’t ready to trade have other problems as well:

Pulling the trigger to get in

Staying with one trading strategy long enough to judge it

Letting good trades go bad

Day trading psychology plays a role in these issues, and books have been written to help traders deal with these problems, but most of them do not offer a practical solution.

In order to be successful at day trading support and resistance, you must have confidence in your trading strategy. Most traders with less than 2 or 3 years of experience, and for those who are just starting to learn day trading…well, they have nothing to be confident about. (But, there is a strategy that really helps inexperienced traders, so don’t be discouraged, we’ll talk about it in a minute.)

If your trading strategy isn’t making you money consistently, in “real time”, you can’t have confidence in it. But, how can you tell if your method is any good when you don’t yet have the nerve and discipline to trade it?

Day trading psychology involves building confidence, and consistent, profitable results will lead to confidence. Being a 27+ year veteran trader, my day trading advice for you would be to trade your strategy in simulation mode so that you can judge it rationally. The inexperienced trader (and even some traders with years of experience) has a difficult time thinking rationally when they are afraid of losing money, so take that fear out of the equation by utilizing simulation trading as a tool.

Some “professional” traders will tell you that simulation trading is useless or even, “the worst thing you can do.” But it depends on why and how you utilize simulated trading. If you choose a simulation strategy that has a defined number of setups, a fairly specific strategy for limiting losses, and you stick to that strategy like glue, never deviating from it – then simulated trading is a logical way of testing your method in real time and it will help you greatly.

Day trading psychology also involves self control. Cultivating good habits such as self control, and developing confidence while using a simulation method will help you when you’re ready to trade for profit.

Having confidence in a method you have traded in simulation mode is the most rational starting point for a new trader, or any struggling trader.

So begin the successful part of your trading career with a strategy that you personally have learned to trust through real-time trading (preferably simulated trading).

Not all trading strategies are alike when it comes to day trading psychology, and this is important to understand.

Any strategy that loses more than 60 % of the time (such as a trend-following system) will take enormous courage to trade, no matter what you do. These strategies demand a certain type of person (rich, with ice water in their veins).

Thousands of strategies force you to place a fixed stop and wait to see if it gets hit. These are difficult to trade with confidence – even IF you can find one that wins more than 65 – 70% of the time and makes money in the process. That’s a big IF. You can spend a career and thousands of dollars searching for success with this kind of strategy, most unfortunately end in failure.

My method for support and resistance trading is rarely talked about, but aside from making money for me on a consistent basis for more than 27 years, it just happens to have a rational approach to day trading psychology built in.

Here’s what I’m talking about…

The fear of trading is associated with the lack of control.

With most strategies you can control only a few aspects:

You can learn to control your entries through discipline and strict setups.

You can limit the size of each loss somewhat by using fixed hard stops.

You can control your overall chances of success by finding a strategy that works for you in simulated mode BEFORE you trade it with money.

You can control the days and times of day you trade.

You can control the number of contracts you trade, placing more money at risk on your highest-probability setups, and less on your lower-probability setups.


Most traders day trading futures don’t know how to control the overall size of their losses. Learning how to do this is the most rational way of dealing with fear, greed, and other problems of day trading psychology, and it’s the main key to my own success as a trader.

Remember this simple rule that will build your trading confidence like nothing else:

** Exit any trade that doesn’t go your way immediately. **

Forget about the commission, forget about how many hours you waited for the setup, forget everything except this rule. I know it’s radical, but just do it.

Then YOU will be in control of the one factor that most traders don’t believe can be controlled – the downside outcome of the current trade you’re in.

The first rule is used in combination with the second rule…

** Every trade starts out as a scalp until proven otherwise. **

This means that if you get 2 or 3 ticks gain and the market pauses and moves a tick in the wrong direction, you get out immediately with 1 or 2 ticks gain…. No questions asked.

This simple rule gives you control over your gain/loss ratio, another thing that most traders believe is beyond control.

I trade around support and resistance levels because they are built in to every liquid market. They arise primarily from the day trading psychology of people who are trapped in a bad trade and want to get out at break-even as soon as possible. This feeling does not change from year to year or from one generation to the next, so day trading support and resistance can never become a strategy of the past.

I write a daily market report where I give tomorrow’s support and resistance levels, including my own trading plan, as well is intraday updates. Experienced, professional traders have used my RBI Trader’s Updates since 1996 because I’m accurate and my trading plan works over the long haul.

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