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The hardest part about day trading is the emotional battle, traders told BI about their professions.
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Those trying to turn a profit in markets said they often struggled with the toll of volatile trading days.
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They found measures such as seeing a psychologist and journaling to be helpful.
Day trading isn’t so much a science as it is an emotional test.
That’s the secret to day trading that outsiders don’t seem to understand, retail traders told me at a recent happy hour in New York’s Financial District.
That might come as a surprise to those who aren’t familiar with—no pun intended—the trade. Envision the day trader persona and what comes to mind for many people is probably a freewheeling, sports car-driving finance bro, but people trying to make their living in the markets frequently describe their work as a Sisphyean struggle, one that constantly tests a trader’s ability to deal with failure, conquer panic, and act “normal” in front of friends and family on big down days.
That distress is evident in the bird’s-eye data, which tells a story of how common failure is among day traders. One 2020 study found that nearly all traders who persisted for more than 300 days ended up losing money, after accounting for fees. Just 1% were able to clear the bar for making minimum wage.
Over 35% of traders said they believed their biggest challenge when trading was managing emotions or dealing with losses, according to a survey conducted by Quantified Strategies this year. (Dealing with losses was the top emotional challenge traders dealt with, according to a separate question in the survey.)
Another 2022 study found that around 23% of traders were found to have moderate, severe, or extremely severe stress levels.
Add to that a mortgage, bills to pay, and a family to support, and it isn’t hard to see why some traders feel seriously pressured on wild market days, according to Kevin Law, a 44-year-old trader.
Law, who mentors other traders with the platform BullMentor, says he doesn’t get too worked up on down days in the market, partly because he keeps the stakes low and reminds himself that he has a day job to fall back on. But traders he coaches sometimes inundate him with panicked texts asking what to do on volatile trading days, he said.
“It’s always emotions,” he said of the hardest part of being a trader.
Lin advises traders to develop a trading system with parameters and to stick to their trading strategies.
That can be easier said than done.
Ricardo Saldana, a 29-year-old trader, said his toughest emotional challenge was when he was trying to pass his first verification for a prop firm. He was so excited by the prospect of having access to fresh capital that he began to overtrade, a phenomenon where a trader places too many trades and frequently comes away with a loss.
“I was crushed. I felt like I choked away my opportunity,” he said, adding that he needed to take several months off the market afterward to simply recover.
On a separate occasion, he blew around $100,000 trading due to being distracted and trying to trade from the bathroom at work.
“Trading will teach you about yourself a lot, and you’ll see traits that you thought you never had,” he said of a trader’s response to failure.
Steven Lin, a 30-year-old trader, says it’s stressful to deal with market volatility all while balancing a day job and a personal life. He said he struggled with not bringing his bad trading days home, and believed bottling up emotions was a huge issue among traders.
“Because, on a bad market day, you’re going to be a little scrambled, and then you come home to your girlfriend or your family members, and they don’t know what you’ve experienced. So they’re going to act like everything’s normal, but then I have to take a deep breath, bring it all down,” he said, adding that he usually withheld his trading losses from his partner.
The loneliness associated with the profession is another issue that can make trading more emotionally challenging, the traders said.
Matt Brown, a 33-year-old trader, said he believed the most challenging part of his side-hustle was dealing with the ups and downs of trading while flying solo.
“It’s either: you lose all your money, or you try and stay alive long enough to learn something by yourself,” he said of the everyday stresses.
Saldana said he didn’t talk about his trading to anyone in his life. He aspires to trade full-time, but many of his friends and family don’t support that dream, he said.
He describes himself as a “lone wolf” and said attending the happy hour was his first attempt to find others like him.
The traders, many of whom had persisted in the market for years but still needed to support themselves with other jobs, said they had developed a few strategies for dealing with the market’s emotional tolls.
Brown said he tried to deal with bad market days by having a robust risk-management system, referring to guardrails like traders having a limited number of trades they can execute per day.
He also sees a psychologist to help him work through his emotional issues, which he thinks hold him back in trading.
“You might be afraid of your own success, or you might self-sabotage, or you lack discipline, or you lack patience,” he said, adding that he believed having enough discipline and patience were his biggest issues. “Trading is a lot like a mirror, at least for me.”
Saldana said he found it useful to journal alongside his trading — jotting notes like how he felt during a trade, why he thought a trade was valuable, and if there was anything he could have done better.
He also likes to regularly take breaks from the market, such as by setting hours when he’s not allowed to check his portfolio, or taking several months off from trading to avoid obsessing over losses.
“The great thing about day trading is there’s always tomorrow,” he said of stepping away from markets when there were losses. “Tomorrow, 9 a.m., the sun will come up.”
Read the original article on Business Insider
