My Trading Journey
Hello fellow traders. My name is Dominic, though I go by the name MichaelGScott on profitly. I am 23 years old and from Michigan. I was asked to write a little post about who I am and my journey towards becoming a profitable trader. So here goes nothing.
After high school, I had no clue what I wanted to do with my life. All I knew is that I wanted to make good money and I wanted to enjoy doing it. I knew for a long time that a 9-5 job was never going to be for me, but didn’t have any concrete plan on how I was going to make money without getting one. So off to college I went to obtain a higher education and pass the time while I came up with a big idea on how I would become rich and get out of having to get a “normal” job. I chose to become an Actuarial Science major, as I was very good at math and it didn’t seem too terrible. That changed after I shadowed an actuary during my sophomore year and quickly decided it wasn’t for me. Fast forward to my senior year and I was now a Business Finance major with even less a clue of what I would be doing after school. I had not come up with a big idea of how I was going to be an entrepreneur and I was getting desperate. It was August of 2016 and I was getting less and less interested in going to class. I had missed the day when a guest speaker came in and had to watch the recording on youtube so I could write the paper on it. As I half-watched the presentation, I saw on the side list of recommended videos, an interview of Tim Sykes on the Steve Harvey Show about how this guy made millions trading pennystocks. I began poring through everything I could on Tim Sykes' youtube, trying to figure out if it was legit or just another get rich quick scam. I read his book, googled about other students, and begged my dad to let me try the challenge out. After about a month, my dad decided it was worth a try and offered to pay for the program (this won’t be the last time I borrow money from him). I’m not going to lie, I did not take this half as serious as I should have when I first started. I studied a little here and there, not quite understanding the level of dedication needed to even get any sort of momentum going in the stock market. My dad wanted his ROI and insisted I begin trading at the start of 2017. I knew I wasn’t even close to ready, but it was his money and he would get his way.
I started with a $2500 etrade account, which quickly became an untradable $500 account. I remember on multiple occasions doubling my positions on accident while trying to exit for a loss only to make the loss twice as bad, so yeah I was right when I said I wasn’t ready. In February of that year, I had some health issues that set me back quite a bit. I left college, finished from home, and vowed to use every minute of the day on learning this trading thing while I saw doctors and did tests. The normal job I was so afraid of was now not even a possibility due to my health. I was studying roughly 17 hours a day, watching the market, and digesting everything I could. I got $5000 from a relative to try again, this time with some more knowledge. This account slowly trended down as I was learning and keeping my losses small. As I was dealing with the struggles of PDT, I asked my dad for 10k so I could open 3 brokers and get myself some more day trades.
The problem with digesting so much information so quickly was that I was trying to do everything that I was seeing. I had no consistency, no bread and butter, and no identity. The one thing I don’t think traders take seriously from mentors is that you 100% need to find out who YOU are as a trader. We are all different types of people with different life experiences and we are going to be good and bad at different things, especially when it comes to the market. Your number one goal when setting out on your trading journey should be to find out who you are going to be in the market. I didn’t set out to do this and I paid the price. I went about 10 months of consistently losing money (total of -$6000) before I turned things around.
How I Turned it Around
The number one thing I did to change the course of which I was heading was to start looking inward. Instead of going out and trying to watch the same DVD again or find another youtube video on another different trading setup, I began to look at what I was doing in the market. I began to dissect my own trades, asking myself more difficult questions, and coming up with rules on how I wouldn’t just light my money on fire anymore. You want the best piece of advice that can make you money in the market? STOP DOING THINGS THAT CONSISTENTLY LOSE YOU MONEY. It doesn’t get easier than that, yet I was doing the same things over and over again and expecting different results. Insanity they call that right? I began tracking my trades and categorizing every trade by specific setup, time of day, otc or listed, pnl, r:r, percentage gain etc. My only goal was simple. To find out where I suck, and stop doing those things completely. I became disciplined in following my rules because I wanted to make this a career and not a regret I would have somewhere down the line. Through tracking, I not only found out where I was losing, but I found out there was actually some things I was doing really well and if I just cut out the bs trades, I would actually be profitable! It was a revelation let me tell you. I believe somewhere in most traders that are actually putting in the time and effort needed to succeed, lies profitability. They just probably won’t ever see it because they don’t know their numbers. It’s like trying to help a struggling business that doesn’t know any of its financial information. If you can’t identify the problem, how do you ever expect to find a solution?
I began trading only a few setups that I had found to work for me over time. I was trading mostly the pennystock framework on OTCs, as I had found myself to be muchhhh more profitable on OTCs vs listed. I was buying the breakouts, shorting the first red day (if I could get shares), buying the first green day, and rebuying the breakouts if they happened. This worked incredibly well when there was sector momentum. I became profitable in November 2017 and haven't had a red month (well I lost $102 in March this year so we’ll call it breakeven) since. There’s been ups and downs in my trading career, but I have been able to keep my profit chart trending up even through the down periods. This isn’t by accident (there’s plenty of times traders will question if they’re even good at this game or just had a hot run), it’s because I now know what I want to trade and have the patience to wait for those setups. I am not perfect. Really nowhere close. I screw up all the time. I buy illiquid garbage because it kinda sorta fits my pattern, I take on too much size because I get excited about the potential win, but I am self-aware enough to understand when I am going down a bad path and correct it as quickly as possible by going back to the basics. The steps that lead to my profitability. I have so much more to learn and still consider myself a newbie. I am consistently reaching out to different mentors to help me learn new things. I never want to get complacent. This game changes by the day and you need to be ready for anything. LX21 once said something along these lines, “if you do what the 90% of traders that lose money do, your chance of failure will be 100%, but if you do what the 10% are doing, your chance of success is 100%.” I always want to be striving to be doing what the 10% is doing.
Lessons and Tips
I was asked to provide some tips and lessons for upcoming traders, so here is what I came up with.
Know your numbers: To understand what you are doing well and what you are doing poorly, you need to have accurate data on each and every one of the trades you take. I would go through these numbers, at the very least, on a monthly basis and decipher what was working vs what lost you money. Learn to cut out completely what is consistently losing you money and set your focus on the setups that you are already profitable at. If you are not profitable at anything you are trading over a period of time, then you need to find new setups and strategies. Your numbers will tell you that. This will help you create your own rules for yourself. I am constantly updating my rules for what I am allowed to do and what I am forbidden to do. This will change depending on the market you are in and with what is working right now. Having the discipline to follow your own rules is paramount in becoming profitable and sustaining it. You are your own boss at this game and no one will stop you from making foolish decisions except yourself. If you can’t follow your own rules, you won’t last long.
Risk management: Whether you call it cutting losses quickly or cutting them intelligently, you need to be an expert at managing risk. Everyone has their own style when it comes to cutting losses. I learned very early on to fear the market. I have never, ever not cut a loss. Don’t let anyone ever tell you that “everyone does it” or “you’ll go through it at some point.” You are in control of whether or not you decide to cut a loss. A way to make this easier is to always be using the key levels as risk. If you are constantly choosing the right levels to play off of, then it should be very simple to cut a loss. The question I always ask myself when choosing risk is “at what point on the chart do I think the pattern is dead?” If I told myself that a stock would be dead under X price, why on earth would I want to be holding that anymore under that price?!
Adding to winners: The way to maximize profits using very minimal dollar risk is to be very strategic in how you manage a winning trade. Your goal as a trader is to maximize winners and to minimize losers so that in the long run you end up ahead. I have won on less than 50% of my trades over the course of my whole career, yet I am profitable. This means I have my risk/reward in an optimal zone. Over the course of 2018, I rarely have risked more than $200 on a trade. As I move risk up or down on a winning trade, I am always adding more size to get my avg as close to my risk as possible. This allows me to make much more on my winners, and my losers will all be $200 or less. This is something I struggled with for a long time as my winners and losers would all be the same amount and I would slowly lose money over time as my winning percentage got the best of me. Finding a strategy that allows one winner to overcome many losing trades is key to finding profitability.
Networking: Something I failed miserably at during my trading journey was communicating with other traders. When you begin learning how to trade, it is already incredibly lonely. You are trying to make it in a profession where less than 10% succeed, no one in your personal life even knows what it is, and you may even have a lot of negativity surrounding your dreams and goals as a trader. There’s nothing worse than being a consistently losing trader than being a consistently losing trader with no one to talk to about your struggles. There are a lot of people out there just like you, working their tail off to make it in this business. Reach out to them and learn from them. Or better yet, teach them some of what you know. You will begin to have more accountability for your trading when you are constantly discussing with other traders your ideas and having to explain why you are doing what you are doing on a daily basis. A year ago, I knew no traders personally, didn’t have any groups outside of major chatrooms, and rarely even reached out to the mentors I did have. Today, I am in 5-7 group chats with people I talk to on a regular basis, communicate with some of the best traders around, and even live with a trader I met thru the challenge! So if you’re new to trading, don’t try to go at it alone. It is already hard enough. Reach out to people and build relationships, you’ll never know what it could do for your mental state and your trading!
Learn from others’ mistakes: No matter what anyone tells you, you do NOT have to make every mistake in the book to learn the lessons from them. The horror stories I have heard from the likes of Grittani, Sykes, those on twitter, and even personal friends is PLENTY for me not to want to take a ginormous loss. If you understand why they had to endure those losses, you can quickly find ways to make sure that never happens to you. Most of the time, those losses come at times when people break rules. They lose discipline. And it’s usually very very good traders that make that mistake. Which is a great lesson right there. The market does not care who you are, how much money you’ve made, or how right you are about the company. It can and will do anything it wants. It is your job to keep yourself protected as much as you can. I’m not saying you won’t get stuck in a halt someday, lose more than you wanted due to slippage, or get caught in some surprise afterhours earnings (I was certainly surprised!) but you can always be looking for ways to stay safe out there. Learn from the pain others have had to suffer so you do not have to go through the same experiences.
Expect it to take time: The majority of people that find themselves in the 10% of traders making money didn’t get there overnight. The journey is long and very difficult. Don’t go into it expecting to be the next millionaire trader in a year. It isn’t realistic. The learning curve is steep and will take time to overcome. Everyone is different and will achieve different milestones at different times in their journey. Do not compare your journey to someone else’s. Do not compare your pnl to someone else’s. Everyone is at different stages in their journey and you need only worry about what you are doing. 95% of what will make you successful in this game will probably never get noticed. No one is checking in on you to make sure you got your studying in. No one will tell you to go over last months trades and analyze them. No one will be able to get you to walk away 30 mins into the trading session when you’ve broken every rule in the book and find yourself angry, confused, and down $1000. Do the little things right and have realistic expectations for yourself. If you do that, you’ll probably get where you’re going a lot quicker.
I just wanted to say it is an honor to be able to write this for whoever is reading. It feels like an eternity since I began my journey. There were a lot of days I didn’t quite know if I would ever make it. If this was all a waste of time and just not for me. I didn’t want to keep showing up on those weeks and months where every day was red. Resiliency is very important if you want to succeed at this game. If you’re struggling right now to gain profitability, I encourage you to keep pushing, keep working, and don’t give up.
Thank you Tim for everything.