I started day trading in 2005. The following lessons got me to profitability and have allowed me to make a living off the markets since then. Some of these lessons were taught to me while I traded at a proprietary day trading firm for six years, and others I learned on my own through trial and error.

Hopefully, these day trading lessons help you on your path to profitability…or to stay profitable if you have already achieved some success.

Keys to Day Trading Sucess

Here are 12 lessons you can use to increase your chances of day trading success.

1. Control Daily Losses

No matter how good a strategy is, we can have impulsive days or days where our strategy doesn’t suit the price action. If I lose 3% of my account in a day, I’m done for the day. That’s equivalent to 3 losses risking 1% of my account per trade. Never lose more than 3% a day.

You could also pick a dollar amount you are comfortable with losing, and that is your daily loss limit (3% or less of the account). As a benchmark, your maximum daily loss should be roughly equivalent to your average winning day. This way, one average winning day erases a bad losing day. If you have very few profitable days…well, then your daily loss limit should be very small.

This means that over time, the better you perform, the greater the tolerance for daily risk you can have. If you averaged $500 on your winning days last month, and you averaged $600 winning days this month, the daily risk tolerance can go up to $600 from $500.

I call this a daily maximum loss. When starting out, don’t risk 1% per trade. Start out risking 0.1%, and have a 0.3% maximum loss for the day. Losses occur more often when you’re starting, so you don’t want your capital dropping too quickly. As you get profitable, then you can increase your position size, and along with it your maximum daily loss.

2. Trade based on conditions and who I am today

When I consider what conditions are present when I am about to take a trade, I don’t only consider market conditions, I also consider my mental state/conditions.

Some days I am more anxious, more aggressive, or more impatient than other days. I need to account for that. I may adjust targets to compensate, or use a trailing stop loss, or not trade in slightly tougher conditions (which I would trade in when I am feeling good because there is still some opportunity there).

Each day our “breaking points”—the point when we make a mistake—is a bit different. If we are self-ware enough to notice our emotions affecting us, then we can intervene and avoid hitting the breaking point.

This idea involves a couple of concepts. One is self-awareness being a trading superpower. We need to not only be in tune with the market, but with ourselves. Because if you aren’t, then all those internal things you are trying to fight and ignore will continue to sabotage your trading like they always have.

The next concept is to realize that trading needs to be adaptive. Market conditions change and mental conditions change. We can have different rules for different conditions, and should. Then we know what to do if market conditions change from a volatile range to a slow-moving uptrend, as well as what to do when we are feeling anxious or overconfident.

3. I use a stop loss on every trade

Before my trade, I set my stop loss and it goes out at the same time as my entry. ALWAYS.

If the stop loss is hit, look for the next trade.

The trade didn’t work. End of story.

Never let a loss be more than expected because the stop loss wasn’t placed. Big losses are account and soul crushers.

If your broker doesn’t allow you to place a stop loss at the same time you enter a trade, get a new broker.

Don’t want to place a stop loss to control your risk because you’re afraid of market manipulation? Well, you have already been manipulated: out of the best risk control measure you have available.

See the Stop Hunting section later in the article.

If you are interested in learning my stock day trading method, check out the Price Action Stock Day Trading Course.

4. Only take a trade with 1.5:1 reward:risk OR GREATER

Nearly all my day trades are between 1.5:1 and 3:1 reward:risk. If I can’t get that (discussed next), based on typical movement, I don’t trade. Currently, I am working on integrating even some bigger reward trades in certain conditions.

While I have a reward:risk planned out, the market doesn’t care. I may think I can reasonably make 1.5 to 1 on a trade, but the price may stall and signal me to exit earlier (based on my Exit Rules). So I may actually end up with a profit of 0.5R or -0.75R instead of 1.5R or -1R. Because I am allowed to exit early (I have multiple Exit Rules, as opposed to “Can only hit SL or Target to exit”), that means that over many trades some of my losses will be smaller and some of my wins will be smaller (or larger if using a bigger target than usual or trailing stop loss).

So what matters is that that ratio stays above 1.5 over multiple real trades. The reward/risk at the start of the trade is the plan. But as discussed above, conditions can change.

Choose how you wish to trade. You can have very few exit rules, or you could have multiple reasons for exiting. No matter which way we go, we want our wins bigger than our losses (planned and actual, on average). If you cut winners early, you better cut losses early as well, otherwise your actual reward:risk will be much lower than the planned R:R.

You already know where your stop loss is going if you follow the lessons above. The next part of this equation is the target.

5. Target must be within typical movement

Prices only move so much. My target must be within typical movement.

If the price moved $0.50 in one direction before a big pullback, my target must be less than $0.50…maybe $0.25 to $0.40…unless I’m willing to hold through a pullback.

Reward:risk means nothing if the target is unlikely to get hit. Take your stop loss size (difference between entry and SL) and multiply it by 2. That is how far the price must move to reach your target with a 2:1 reward:risk.

Look at recent price moves. Based on your entry, does the price move enough to reach that target EASILY?

Look at how long it took price to move that far in the past, and how price moved on the way to that target (choppy, quick, steady, grindy?). Are you willing to hold this trade that long, and through similar conditions? See the Price Action Day Trading Cheat Sheet for more on this topic.

6. I prefer small stop losses or over large

Most traders “give their trades room”. That’s often a mistake, because you sacrifice your reward:risk. If a stock only moves $0.50 in an hour (or whatever time frame), the bigger the SL, the less room left for profit.

If I use a $0.05 stop loss I may be able to get in and out multiple times, capturing $0.10 profits. Since I am risking 1% of my account, my account gains 2% on every profitable trade. I can often do this 1-4 times in an hour. Even if you only win 50% of your trades. Do the math to see how much a day trader can make.

If I “give it room” and use a $0.20 SL, the price has to move $0.40, almost its entire hourly movement, just to give me a single 2:1 trade. Worse yet, many trader’s SLs are so big the price has almost no chance of hitting their target for hours with a 2:1 or 3:1 reward:risk.

7. Wishful thinking kills you

Trade what’s happening now. If price is trending, don’t assume it’ll change until it shows evidence. If it’s choppy, don’t assume it’ll change until it does.

This goes back to the reward:risk discussion above. Your target must be within what the market is providing.

This requires seeing both the forest and the trees. A stock for example may be making big bursts followed by small choppy sideways periods. The sideways period is small and choppy, and yes we could potentially trade that, but the bigger picture says there is lots of movement to potentially take advantage of when and if the price breaks out again.

I factor in both scenarios. I don’t know how long the choppy period will last, but if there is a tendency for big movement to follow, I need to factor that in as well. I may trade the range, being quick to exit if it doesn’t run, but if it does run, ride it. Or I may wait for the breakout, see if the pullback holds outside the range, and then get in for a portion of the rally expected. We can’t ignore the big picture of the small picture in this case. Both are important.

I could explain this a different way. I have an internal view of what I want to happen. If the market aligns with what I want, great, I stay with it. If the market starts deviating from what I want, I get out.

Having a plan and boundaries for how we want a trade to progress is not wishful thinking. Wishful thinking is when the price is no longer adhering to our plan and is violating our boundaries but we stick with the trade anyway.

If you are interested in learning my EURUSD/forex day trading method, check out the EURUSD Day Trading Course.

8. What about stop hunting?

If I get stopped out, I lost. I look for the next opportunity.

If we have a favorable reward:risk, we still come out ahead even if we lose more than 50% of our trades. The strategy should already factor in losses. It is a non-issue, simply a cost of doing business.

If you’re losing all the time, you can’t blame stop hunters. It’s you and your strategy that needs work.

If your stop gets triggered and then the price goes in your direction, you’re in too early. Wait for the stop out move and then get in. To understand who prices move and how it can feel like you are already getting screwed, see Why Prices Move Like They Do (Psychology of Price Movement).

And you will still lose sometimes.

9. Commentate while you trade

We are highly distractable. To stay focused continually repeat what trade setup you’re waiting for and what price has to do to create that opportunity. If price isn’t forming your setup, tell yourself that and remind yourself to wait.

This may sound silly, talking to yourself, but if you don’t consciously focus on what you need to, your mind will find something else to think about. Impulses will take over, and you’ll be missing trades or taking random trades before you know it.

Commentating is one of the best ways I have found to eliminate impulsive trades, random trades, and missed trades.

10. A mentality of “only the best” is better than “I want to trade”

People who fail open their platform and want to be active. They WANT to trade. They don’t understand that the market provides our opportunities. They want to trade, so they take trades when conditions or trade setups aren’t good.

I sit down and tell myself (continually while trading) I won’t trade unless I see something great. If you sacrifice quality, there are infinite low-quality trades you could take. Most will lose. One quality trade a day is better than 5 low-quality ones.

One, or a few, quality trades per day assures profit over the course of the month….assuming a good reward:risk (discussed above) and even a 40% win rate.

Lots of low-quality trades result in the death of your account. The win rate, taking low-quality trades, will be too low.

This doesn’t mean you can’t be active. Just be active in a productive way. Trade a short time frame, trade more instruments. Both those things will potentially provide more opportunities. Find your personal sweet spot for action. But understand activity is an average. Some days there are almost no quality opportunities, while other days the market may provide more trades than we can take.

11. Review and mentally prep

Each week review your trades. Note common mistakes. Pick the most costly common mistake and brainstorm how to improve it. The quickest way to improve is by reducing mistakes. That’s money your strategy is giving you that you are throwing away.

Do this every week. It never ends. It is part of trading.

I also work on my mental game every week. I write down things I need to remember for next week. I write or think about what is helping or hurting my trading. I strategize what to do with that information.

Before trading, and during trading, have a routine for getting into a proper mind frame for trading (or getting back into it if distracted).

12. Enjoy the journey

I love my life as a trader. I have free time and money to do other things I enjoy.

But I also enjoy my time trading. Whether I win or lose a trade, or a day, I have feedback I can use to improve.

I view trading as a way to improve my mind. Making money is a by-product. I like the self-discovery aspect of trading. And I think this is a healthy mindset for trading. If you view trading as a journey of self-discovery, then you are not upset or sabotaging yourself every time there is a little hiccup. The life of a trader has many ups and downs. If you expect the hiccups, the ups and down, you are better able to adapt to them.

I encourage people, win or lose, to be grateful for the opportunity to trade. The opportunity to be able to sit at home and trade some money to make more money. Bloody amazing. Consider that every time you sit down to trade. A mind just grateful to there is a lot better than a mind crowded with doubts, fears, frustrations, desires, etc.

Final Word on Lessons for Day Trading Successfully

I hope you found some of this helpful.

A lot of these lessons are rather simple and can be implemented quickly. Others will take more time to integrate.

If you start integrating some of these lessons, your trading will likely improve. Dig deeper into the lessons you don’t understand. They are all important and worth putting time into.

My day trading strategies are covered, in-depth, in the following courses:

Price Action Stock Day Trading Course

EURUSD Day Trading Course

by Cory Mitchell, CMT

Disclaimer: Nothing in this article is personal investment advice, or advice to buy or sell anything. Trading is risky and can result in substantial losses, even more than deposited if using leverage.