Those who trade wish to make a lot of money. Traders are not trying to make $200 a day. They want to make much more. And often traders are ambitious. And they have rarely failed at anything they have done before. Perhaps they have been told their whole life that they were special. Most are the smartest person in most rooms. They are uninterested in being ordinary. And they aren’t. But all of this can be damaging.

So these special, ambitious people start to do some thinking. On a treacherous, rainy day like today in NYC they might let their minds wander. I am ready to start making some serious money they may think. I really need to lay into some stocks with more size certainly will be considered. I would look really cool in that new Benz on the back of the News today. I am better than that Red Dradle (trader who made 15k in a session and a half of trading, and my new nickname for one of our better new traders). I WANT TO BE THE MAN!

Just some advice. You shouldn’t try and make 5k a day by losing 5k. You shouldn’t do this after 10 years and you certainly shouldn’t do this when you start. Often new traders think their ability to lose a lot symbolizes their potential to make much more. No it doesn’t. You should never lose more than 1/2 of your median intraday gains. If you are making 1k a day, and a down day previously for you was -500, then now allowing yourself to lose -5k doesn’t mean you will now be able to make 5k. It means now you can lose 5k. And some new traders just don’t understand this.

If you want to make 5k a day you must first be able to make $500 consistently (downside of $250). Then you must show that you can make $750 consistently (downside $375). Then you must demonstrate that you can make $1k consistently (downside $500). Then $1500 (downside $750). Then $2000 (downside $1k). You get my point. But for some very strange reason traders think making that jump from 1k to 5k requires them to lose 5k in day. Again no it doesn’t.

You build from a base. You build from your profitable base. The way to make more is to make more while contemporaneously not exposing yourself to proportionally greater downside risk. And if you can’t make more than 2k in a day with a downside of $1k then stay at this level for awhile. There is nothing wrong with making that kind of money. Keep pushing yourself to get better. But do not force it.

One of the smartest traders on our desk has been making $600 a day the past few months. And I know he wants to make more. And one day he will. But he forced it this week. And he didn’t make more than $600. He took a huge rip. He took a rip that will set him back weeks.

I was talking with Steve about this the other day. And he got very animated. Steve is ultra calm so it is amusing to watch him get animated. But it usually means that he is about to make a very good point. And he did. Steve shared that traders who are making $600 a day can’t take these rips for another very important reason. Unlike Steve or myself they cannot make back $5k. They do not have the skills. If Steve rips up 5k he can make that back in less than an hour. But a new trader cannot. If you are making $600 a day it will take you weeks to make back a huge rip. And this game is about putting money in your pocket not throwing away a few weeks worth of gains.

So build from your positive base. Push yourself to get better. But do not force your progression. Losing more means you can lose more. It doesn’t mean you can make more.

Best of luck with your trading!