Day trading for those too busy minding their own business

Picture this. You recently started leverage trading and you've already made between 20-60% profits trading Tesla derivatives on several occasions. In that euphoria, you started watching NVIDIA closely because it is NVIDIA, duhhh 🙄. And earlier that month (November 2024), you had a FaceTime call with your co-worker, who shared with you how he bought NVIDIA stocks 4 years ago, and he's currently +150%. Of course, you’re in two stock-related subreddits, and you’ve seen multiple screenshots of people making 100–1000% returns on their investments.

The stars aligned, NVIDIA dipped in 20 November, you bought leveraged derivatives with 5x leverage. It dipped again, following Martingale strategy, you snatch some more on discount. The dip continued, so you decided to go even bigger on a riskier 10x leverage. By 5 December, like a dream you're +135% up in your 10x leverage.

With the rate at which your 10x leverage position went from -30% to +135% in just 3 days, you hoped it'd hit +200% before day 5. “+200% isn’t 1000%, but it’s still a solid exit position”, you said to yourself. By day 4, you're at +145%, then suddenly, it dips to 130%. And your hard-earned gains begin to vanish into thin air, like smoke going to bed with the wind. Leaving you with a business class ticket to Regret-Ville. NVIDIA continued its relentless dip on day 5, now, you’re staring at -50% on your 5x leverage position and -20% on your 10x leverage position. You've just landed in Regret-Ville. The euphoria is 180 light-years away, and you could clearly hear the haunting whispers of “had I known” welcoming you.

Stop picturing. That was me.

Be aware of the impermanence of things

Before I started trading or investing in stocks, I did what I always do before committing to any investment—I invested in myself. I read, studied, and immersed myself in as much information as possible about what I was about to invest in. I read books like “A Random Walk Down Wall Street” by Burton G. Malkiel, Fooled by Randomness by Nassim Nicholas Taleb, The Psychology of Money by Morgan Housel, and Trading in the Zone by Mark Douglas. Of course, I sought advice from friends and colleagues who were already trading. Following that, I began trading.

First with €7 on a Tesla position with 10x leverage. Liquidated it within 2 weeks to focus on trading stocks to gradually get my bearings in this new environment with endless opportunities, swallowing €1 loss in the process, due to transaction fee. The principle was simple "buy low, sell high”. Since I was, and still am too busy minding my own business (in my case working a full-time job), I limited myself to few stocks, conducted both fundamental analyses and technical analyses of the companies I was interested. I bought CDPROJEKT, Footlocker, Peloton, Delivery Hero, Rivian, Tesla and others at different intervals. Fortunately, I took a sizable profit, ranging from 2% to 53%, within a year. My biggest wins came from Tesla and Peloton. I first bought Tesla stock at €169 in 2nd February 2024. I bought more when it fell to €156, and even more when it further dropped to €149. In October, I sold all my Peloton shares to realize a 50% profit. Sold that of Tesla in November to realize 53% profit. I started sipping that good good ol’ euphoria juice. "Just imagine this was 10x leverage?”. To equip myself with the right gear before scuba diving into leverage trading, I bombarded ChatGPT, ClaudeAI and PerplexityAI with a series of questions about leverage and knockout trading to understand the trade mechanics and inherent risks.

Tesla stocks became more volatile, breaking all time highs every other day. I exposed myself to more risk trading 10x leverage, making 20-60% profits within days, sometimes in minutes. I decided to focus on Tesla, after missing opportunities to realize my profit from my NVIDIA positions. Those profits I said earlier I took from my Tesla leverage positions were nothing but jab, jab, jab, no hooks. It was difficult to dodge Tesla's jabs and right hooks in the ring. Not to mention the knockouts I suffered. I mean knockoutS, with a big ol’ capital "S”. If you didn't get that metaphor, that's 100% loss of capital or premium, in several occasions. At some point taking between -50 to -70% loss became the norm, as it was better than -100%, mathematically, mentally and emotionally speaking.

I took a rather brief break from trading, and reread Trading in the Zone by Mark Douglas. Being a huge fan of psychological books, it’s obvious why this became my favourite book on trading. This trading psychology book focuses on developing the right mindset, discipline, and emotional control for successful trading. Here's a TL;DR, Mark emphasized, success comes from emotional discipline, probability-based thinking and risk management rather than just strategies.

Mathematically;

trading success = f(emotional discipline, probability-based thinking, risk management, trading strategies)

also

Consistency >> Profits

I took my L and made it elegant. From my experience and Mark's book, I enacted my trading rules. It is a lengthy read, so I will share a TL;DR version of it first, that Mark labelled “The 7 Principles of Consistency”.

The 7 Principles of Consistency

I objectively identify my edges.
I predefine the risk of every trade.
I completely accept the risk or I am willing to let go of the trade.
I act on my edges without reservation or hesitation.
I pay myself as the market makes money available to me.
I continually monitor my susceptibility for making errors.
I understand the absolute necessity of these principles of consistent success and, therefore, I never violate them.

It’s not what happens to you but how you react that matters

The Trading Rules

Be rigid in your rules and flexible in your expectations.
Anything can happen in the market.
Before going into any trade, predefine your risk, cut your losses, and systematically take your profits. Doing this you can eliminate most errors and help dealing with the first point.
Before going into any trade, predetermine your exit points to maintain discipline and avoid greed or fear-driven decisions.
Each trade or edge is unique. Even though at a given moment, the markets might look the same on charts or trend lines as it did at some previous moment, they’re different. The chart patterns might be similar but the underlying number of traders, their intentions and the watchers (traders waiting to enter or exit trade) & intentions are never the same. If what you predicted about the market was right once or multiple times, your brain will automatically start looking for those similar patterns. This is fools gold, the market is unique and you’ll eventually be wrong and take in hard losses.
Many traders aim for a risk-reward ratio of at least 2:1 or 3:1, meaning they target profits that are 2-3 times their potential loss. For example, if risking 5%, a profit of 10-15% is considered reasonable. Swing traders often aim for 15% or more per trade, while day traders may settle for smaller percentages due to frequent trades. Ultimately, consistent profitability and disciplined risk management are more important than hitting a specific profit percentage.
Never hold knockout trades more than a week.
If you’re very certain about a trade especially, knockouts, trade in both directions, putting half or quarter of investment in the opposite direction. Watch the market closely and be quick to cut your losses as soon as possible.
If you must hold knockouts longer, never forget point 3 and 8, additionally use stop loss.
Never buy Tesla stock, except for short term, both long and short.
An edge is the indication of higher probability of one thing happening over another. And there’s a random distribution of wins and losses for any given sets of variables that define an edge. Creating consistency requires you accept that trade isn’t about hoping or wondering or gathering evidence one way or another to determine if the next trade is going to work. The only evidence you need gather is whether the variables you used to define the edge are present at any given moment. When you use other information outside the parameters of your edge, you’re adding random variables to your trading regime. Adding these random variables makes it extremely difficult to determine what works and what doesn’t. Which might lead to decision paralysis, fear etc.
It doesn’t matter how much information you gather to support going in or out of a trade, because it only takes one trader somewhere in the world to negate that trade anyway. So bothering yourself gathering more information instead, rely on your trading regime and predefined risks.
Never hold a knockout trade into a US holiday.
Consciously choose consistency over every other reason or justification you have for trading.
The belief we operate out of will shape our mind and our experiences and will consequently reinforce what we already believe to be the truth. How truthful a belief is, relative to our environment is determined by how well it serves us: the degree to which it helps us satisfies our objectives. If you want to have consistent results then creating a belief “I am a consistent successful trader” will act as a primary source of positive energy to manage your perception, expectations, interpretation and actions in ways that satisfies the belief and consequently the objective. When it comes to personal transformation, the most important ingredients are your willingness to change, the clarity of your intent, and the strength of your desire.
Systematically take out your profit when the market makes it available for you. For every trade, you should predefine at what points you should sell portions of your position to realize some profits. If profit is 20% you sell say 1/3 or 1/4 of your total shares, then when it moves to up 50%, you sell another 1/3 or 1/4. This will build consistency. And also silences “had I known” voices & fear and minimize loss, because if the market moves opposite to your direction, you must've already secured some profit, and you can use that profit to buy more shares if you so wish.
Beware of stock value decays when trading stock derivatives. Stock derivatives like leverage, call options, etc., value decay overtime. Leveraged ETFs experience volatility decay or beta slippage due to daily rebalancing. Here’s how. Volatility Decay: In volatile, sideways markets, the resetting of leverage amplifies losses over time. Options undergo three main types of decay, Time Decay (Theta), Volatility Decay (Vega) and Gamma Decay (Gamma Scalping Costs).
Don’t hold ETF leverage trade more than 2 months. The value decay rapidly overtime. So when you get your profit 50% take it and dump the entire trade with time. Or invest more money (dollar cost average) when the decay wipe out percentage value of the investment, only if you’re sure it’ll go back up

This moment only exists now and won’t come again

This rule collectively is far from perfect and complete, hence, additional rules will be enacted as amendments to it. The beauty of it all, it has worked for some, it is currently working for me and will work for you.

Beauty of things that are flawed, imperfect, incomplete, impermanent and and.

When NVIDIA continued its relentless dip from 6 — 17 December 2024, I took on more risk by adding to my position with 10x leverage. And left my 5x leverage position untouched. By 3 January 2025, following my rules to the letter, when I was +51% on my 10x leverage position, I sold a portion of the shares to lock in some profits. Then sold another portion on another day when I was at +75%. For the 5x leverage position, I made my first sales at +7.72%, and another at +18.56%. After watching the market closely for a day or two, I sold all the remaining shares in both 5x and 10x leverage position at +21.95% and +133.1%, respectively.

Did I leave money on the line? Probably yes. I should've made…I did rule 16, I paid myself when the market made money available to me, periodtttt.

Have I lost 50-100% afterwards? Yes. Point 3 in both principles of consistency and the trading rules, I completely predefined and accepted the risks and the loss.

Since I am not an expert and the market is always unique, I can't guarantee that following these rules will make you profit, but it'll make you consistent.

⁠The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading.