r/RealDayTrading

Traders are never more hopeful than when they are losing, and never more fearful than when they are winning.

There are many different reasons why traders lose - most of which are outlined in the Wiki ( WIKI - Read It! ). For the moment though I want to concentrate on the most obvious - You lose more money than you make. It is so self-evidentiary that it is almost tautological.

Let's take a look at an example of this:

https://preview.redd.it/sgqh52w83vah1.png?width=860&format=png&auto=webp&s=5d5ae8172c859d1c9af37ede33e465757e855386

It is 6/15 and you see RDDT at $180 - it bounced off the SMA 50 the previous day and looks Relatively Strong to the market. A decent long. Sure, the SMA 200 above but that could give you a good spot to evaluate the trade if it hits.

The next day though it drops. But you hold - perhaps you have some ITM Calls that are dated 2-3 weeks out and SPY is down for the day anyway. The next day it drops again but now you are close enough to the SMA 50 that you figure you might as well hold the position to see if support will stick. All of this makes sense. Of course one can argue that closing the long on 6/16 was the better play but most traders won't do this - call it Mistake #1. Finally the position breaks the SMA 50 and you close it for a big loss. At this point, patience has worn thin and you don't even consider waiting to see if it will hold the SMA 100. Plus - the market is looking weak and being long no longer feels like the right thing to do - Mistake #2.

So to recap: You went long - let's say an ITM Calls worth $8 - and lost roughly $7 per contract.

Like most traders you keep the stock you just had a big loss with on your radar and two days after you closed the position you see RDDT bounce back above the SMA 50. Call it revenge trading or just taking advantage of a good technical set-up (likely both) but you go long again. This time it works and you take profits especially since you have a bit of PTSD on the stock - Mistake #3. If you once again used deep-ITM Calls the pop from $169 to $175 probably gave you around $5 profit per contract.

Overall net loss on RDDT is $2 per contract. And this is best case scenario.

So what happens and what exactly are the mistakes?

Mistake #1 is entirely one of mindset - Traders do not like taking losses. Sounds obvious, right? I mean, nobody likes taking a loss. However, consider this analogy with Poker: You call a bet of $20, someone after you raises it up to $40, it comes back to you and you fold. This is common. The player here has no problem "losing" the $20 they bet as they have calculated they are already "beat". Traders/trading is different - we hate taking a loss, even if it is the exact right play. We always think things will turn around and get better. Our selective memory of all the times we closed a "loser" only to watch it reverse sticks in our mind as a constant cautionary tale. Ironically, traders are never more optimistic than when they are being shown evidence that their trade is not working. Should have this trader closed RDDT when half the green candle on the daily chart was erased? Of course. Do they? Most don't.

Which brings us to Mistake #2 - closing the trade after it has already lost 90% of its value (if you are using Options) just as major support is coming up. In this case, yes RDDT breaks the SMA 50, but the stronger support of the SMA 100 is right below that and is much more likely to hold. If you have shares you should absolutely not close this trade until that SMA breaks and is confirmed - but if you have Calls that have lost 90% of their value at that point it is just moronic to close it. But still - mindset once again ruins the day. How? Call it the "I am sick of the fucking trade" mindset. You now regret not closing it the second day, and you held it as it dropped again thinking the SMA 50 would finally kick in, but nope, that is broken as well. Finally you are fed up with the entire thing and want out - so you "rage close" the Calls for $1 or $2.

Naturally when you see RDDT bounce off the SMA 100 and then break above the SMA 50 again you are about ready to break some shit. Now you have two regrets on this damn stock but this time you are going to get even damnit! So you go long again - not a bad idea, I mean support held and you have your technical bounce. The next day you are in profit and you take it quickly. Herein lies Mistake #3 - remember when I said a trader is never more optimistic than when their trade isn't working? Well traders are never more pessimistic than when it is working. The moment you are in profit you start flashing back to the previous RDDT trade and how the stock personally injured you - and you are not going to let it hurt you again! Not you! So you take the profit - lest it reverse. I mean your thesis was correct, the chart is bullish - so why not completely doubt the entire thing?? That literally is where a trader should add to the position not close it. At the very least you should hold it until the SMA 200 is tested - but fear takes over and you take less profit than you lost previously.

We are never more hopeful than when we are losing and never more fearful than when we are winning - and that is why traders lose more than they win.

Best, H.S.

Hi all, I'm just getting into the knowing of day trading/trading in general, and I am currently in the first of the 10 steps (soaking up everything).

One concern I do have is around market hours. Due to my timezone, I'm only able to catch the AM session — roughly the first 1-2 hours after open. The PM session (midnight til 4AM here in Asia) is simply not accessible due to current life and work condition.

I'm wondering how much of a disadvantage this actually is. From what I've read so far, the AM session tends to have the highest volume and volatility, which sounds like it could be an advantage — but I'm also aware that the open can be the most chaotic time for newer traders, and that some of the cleaner setups tend to develop later in the day.

Any advice from the community would be appreciated. Still early in the journey and just trying to set realistic expectations before I get too deep in.

Hey everyone, looking for some solid recommendations on books or YouTube channels to learn technical analysis.
I’ve been long-term investing for about 6 years using fundamental analysis (with pretty good returns), but I'm looking to transition into trading. My immediate game plan is to build a paper trading bot and backtest existing strategies to get a feel for things and build up some confidence first.
Any advice on a roadmap or beginner-friendly resources would be awesome. Thanks!

I don't have time for a lengthy post, but I will try to do a video this morning. I only post here when it is important and if you follow me, you know my track record. The market has presented new information. Here are my pre-open market comments from the chat room this morning.

PRE-OPEN MARKET COMMENTS FRIDAY - The selling pressure in the US has been steady for the last two weeks. If buyers were excited we would not have tested the 50-day MA a second or third time and now the SPY has closed below it.

Yesterday the back drop was perfect for a short squeeze. The market had tested the 50-day MA a second time and the expectations for a negative reaction to MU earnings was priced in. The stock rallied to a new high and tech stocks bounced. In the last few months, that would have sparked buying. Support would have been confirmed and we would have seen a nice bounce. That's not what happened. The opening gap higher was smacked down like Chris Rock at the Oscars.

Overnight China was down 2% and the FXI made a new 52-week low yesterday. Japan was down 4% overnight. Korea had a 10% drop two days ago and it is down 5% overnight and poised to test that low. European markets were down 1% on average. This is a global market decline and it has spread to the US.

My market bias has shifted to neutral and it won't take much to shift me to bearish. We have a lower high double top. I expected a decent bid as we head into earnings season and that natural buying has not been enough to support the market.

Gold and and software stocks (10% of the S&P 500) have been very weak.

I am not entering any new bullish put spreads. I will manage what I have on. My bullish put spreads expire in three weeks or less and I won't hesitate to take gains if the market starts to drift lower today.

This is a critical juncture for the market. Be defensive. We have new information and we have to adjust to changing conditions. Until we have that information, we have to run with the information we have. We are data analysts.

If you have recently entered bullish put spreads, I would buy them back. The reward is now smaller than the risk. I am not in panic mode, I am just adjusting.

Software stocks have been great shorts.

Support is $722.60 and resistance is the 50-day MA.

Machine Vulturing

Machine play (vulturing) is the easiest way for many people to build and grow a bankroll. It is particularly well-suited for low and micro bankrolls because it offers a high edge with relatively low variance. As a result, it attracts massive competition.

The math guys identify the edges, determine the entry and exit points, and then others execute the plays to the letter. Vulturing rewards discipline and execution more than creativity or deep understanding.

 

Blackjack

Blackjack is a higher-skill game. While there are multiple ways to obtain an edge—counting, shuffle tracking, ace sequencing, hole carding, special promotions such as 2:1 blackjack or 2:1 suited blackjack, and in rare cases edge sorting—most people think of card counting when edge is mentioned.

There is a major jump in skill from machine vulturing. A player needs to understand how the game works and where the edge comes from. For example, the fact that if you bust, you have already lost even if the dealer subsequently busts contributes more than 6% to the house edge. Other player-favorable rules such as 3:2 blackjack payouts, doubling, splitting, surrender, and the ability to vary bets reduce that edge to approximately 0.5% in most standard 3:2 blackjack games.

The progression in blackjack is learning basic strategy, understanding why counting works, then learning to count and adjust for the running count and true count, varying betting and playing decisions based on the true count, and managing risk using a predetermined betting structure. One may also adjust sizing after significant drawdowns. For example, if you lose 10% of your bankroll, you might resize everything downward, especially if the bankroll is non-replenishable.

However, the reality of blackjack is that most players quickly hit realistic betting limits of 2×450 (betting two hands of $450 to keep bets under $500) or, in some cases, 2×800 (keeping bets under $1,000 and avoiding the psychological threshold that often triggers additional scrutiny). This means that a bankroll in the low six figures, say $250,000, can become quite comfortable for a player. Even a $50,000 bankroll may be sufficient to generate something in the region of $100/hour  with careful game selection.

The opponent, the dealer, plays by a fixed set of rules known beforehand. The rules may vary slightly—for example, whether the dealer hits soft 17 or stands on soft 17—but they are known in advance nevertheless.

The real challenge is getting money on the table and figuring out the best way to attack a game. Do you go for the throat and bet 2×1,500, or do you keep it at 2×400 and last longer?

The major attributes are:

1.   Tolerance

2.   Bet spread

3.   Game speed

4.   Deck penetration

5.   Rules

Tolerance and bet spread are related but not identical. A casino may be tolerant of a large lifetime win, but the floor may still be required to call surveillance if you bet more than $500 or if your session win exceeds $5,000. Another casino may tolerate any bet spread but focus heavily on session wins.A bet spread is just the ratio of your top bet to your bottom bet. If your max bet is 400 and min is 25, your spread is 1-16. Theoretically you would never play when the count is negative or even netural and only play when you have an edge so then you could have an infinite spread (difficult in practice to implement but one does need to take bathroom breaks or take phone calls that can be timed well) but there is a casino where you could (without any heat from the casino) avoid playing when the odds are not in your favor and play only when it is in your favor-ofcourse I am referring to the stock market and I digress here..sorry about that.

 

Game speed is controlled by the number of players, the dealer's dealing speed, and whether the casino uses hand shuffles or an ASM (Automatic Shuffling Machine). You almost never want to play a CSM (Continuous Shuffling Machine). Heads up (just you and the dealer) one could get 250 rounds an hour while a full tablewith side bets ,hand shuffle and a chatty dealer could give you 50 rounds/hr crushing your EV/hr.  But you might have to wake up at 4 am to get heads up play but nobody said this was easy either. (Graveyard shift 2-10 am or 4-noon is also low heat in many places as a side note).

 

Deck penetration refers to what percentage of a double-deck, four-deck, or six-deck shoe is dealt before the shuffle. A 50% double-deck game is barely playable, 60% is good, 75% is excellent, and 85% is mouth-watering. For six-deck games, 75% is playable, 83% is excellent, and 92% is mouth-watering.

Rules matter, but only to the extent that the house edge is controlled to a reasonable level, around 0.5% or so. The other factors often matter more. If a casino is relaxed despite having a 0.6% house edge because the game is H17, DOA, DAS, nRSA, and nLS (Hit Soft 17, Double on Any Two Cards, Double After Split, No Resplitting Aces, and No Late Surrender), I would gladly take it because tolerance matters more than minor rule differences.

 

Blackjack Versus Trading

This is all a long winded way of saying that blackjack is much easier to master than the dynamic elements of trading. In trading, you need to understand what kind of market you have had, what kind of market you have now, and understand price action deeply enough to gauge what may happen next and how you will react.

I have learned that understanding the environment is extremely crucial to survival. It determines how aggressive you can be on the spectrum of buying calls, buying call spreads, buying stock, selling puts, and selling put spreads. It also determines how much exposure you should have in different long strategies and how aggressive you can be in any individual stock.

This understanding has to be learned through experience. It requires being nimble enough to adjust and manage positions when things move in your favor or against you. It requires planning what you will do in either scenario and, at times, giving a trade less time or more time based on new information revealed through price action.

All of these concepts have parallels in blackjack, but on a much smaller scale. Mistakes in comportment, a lack of cover play, and playing like a robot will all ensure that you are asked to leave much sooner than a more creative player. However, the detrimental effects are far smaller.

The uncreative and non-nimble/stubborn blackjack player who cannot dynamically adjust, or who is unwilling to occasionally play a few negative-EV hands when a counter-catcher is sent to count him down, is unlikely to make seven figures. However, he can often make up for these shortcomings with hustle, a willingness to travel, cheap accommodations, and a determination to outwork everyone else.

A stubborn trader has no such luxury.

A trader who stubbornly holds onto his position and is unwilling to change his mind is quite often dead- not only in his portfolio, but also in his confidence. Eventually, he finds himself relegated to the bottom 90% of traders and dies a slow painful death.

 

So what attracts a blackjack player to trading?

Blackjack- A medium bar for success and a higher bar for greater success and a cap on it after that.

Trading- A much higher bar for success and a much much higher ceiling if you are that good.

Example- In blackjack, one could make $50/hr fairly easily in EV (as long as you could tolerate 20x your EV in fluctuation) while it is very hard to get above the $200-250/hr in EV while getting time in casinos. In fact I would say 1k a day is probably what very skilled pros make while handling expenses and car rentals and trying to keep them under 15-20%. Most pros once they have made about a million lifetime would be fairly well known and find it harder and harder to succeed.

 

The compounding effect isn’t that great in blackjack:

Common Progression in blackjack:

Skilled card counter low stakes(2*100 top bet) -> Skilled card counter (2*300 top bet)- > Skilled card counter high stakes player( 2*450 top bet)- > Skilled card counter very high stakes (2*800 top bet) -> Skilled card counter Nuclear high stakes (2*1500 top bet) . Quite often the pro will move down to 2*450 for the sake of longevity and grind it out in her later years. The accumulated knowledge, the expanding experience of playing over a decade and moving into multiple decades,  almost complete understanding of the cat and mouse game all of it would struggle to move the needly beyond a point.Why?

 In this, the player who is medium stakes or higher usually gets databased by casinos and this marks the first step in her getting lower hours based on name/face in the future. There after there is a race between the player getting more skilled in cover play, avoiding providing name, using disguises, friend’s players card etc…. versus casinos knowing more about her and either adding to the database or fliering her picture to the nearby casinos.

 

In trading, conditional on survival, everything compounds. Every mistake you conquer, every mindset you change positively compounds on top of each other so you become better everytime there is a shift. Everytime a concept that Pete(From OneOption) or Hariseldon (from Realdaytrading) or DaveWyse(from Rightlinetrading)  teaches that hits home, you become that bit better. The challenge is there is no paucity of things to overcome but the longer you somehow manage to somehow stay afloat, the higher the chances of one day getting past the bottom 90% and maybe even past the bottom 95%,96% and who knows maybe the bottom 99%.

Hope you enjoyed reading it as much as I enjoyed writing it. Will try to follow it up with another one if there is interest.