How to Day Trade for a Living: Tools, Tactics, Money Management, Discipline and Trading Psychology

This next piece of advice also came from an experienced trader in our community. When coupled with using consistent “R”, it provided the means to slow the bleeding of my account until I could develop a more consistent winning strategy. That experienced trader actually said he risked $10 per trade when he started, so that a very good 3R trade would yield only $30. In fact, he said that even on technically “green” days he might still only break-even or even lose money due to commissions. Nevertheless, he focused on being “green” according to R and then increased his risk amount slowly as he gained consistency. So, I applied nearly the same strategy and began risking $20 per trade for five months with a goal of achieving 20R per month. As shown in Figure 9.1 below, I lost money in the first two months but had achieved my 20R goal by the fourth month. The key takeaway is that my account was able to survive a combined -28R in those first two months. At a $20 risk per trade, I lost about $560. And in fact, due to an increase in consistency, I was able to increase my risk per trade to $40 in months six and seven.