This Friday morning, I sat down at my computer to trade, as I do every weekday morning. It’s 5 days before Christmas, and the equities market volume has dried up. Investors are settling their positions, taking profits on their post-presidential election and Santa Claus-rally trades. With nothing worthwhile on my radar, I close out my trading platform and take a glance at my own trading metrics. That’s when I see it – my annual profit. If I stopped trading for the rest of the year, 2024 would be my first year of positive revenue.

Recognizing that reality has hit me profoundly. I’ve worked hard the last three years to learn how to trade equities. There’s so much that goes into becoming a successful trader. I underestimated the rigor of the market’s learning curve. Yet, now I’m here. Successfully trading my way to a viable business.

In past years, I’ve dreaded January 1 because it made real the previous year’s negative revenue. This holiday season, I’m excited for January 1. I feel confident in my ability to continue my positive trading. This makes me optimistic for 2025.

In reflecting on what made this year different from years prior, I’ve come up with a few key elements. Single pattern recognition and expertise was my first step toward clarity. Small share size execution helped me to recondition my brain to move past anxiety and build confidence. The final thing that helped me was to let go of perfection – perfect entries, perfect profits, and perfect PnL’s. Once I internalized that having the general timing correct is all that mattered, I stressed less about getting the “right price” on entries and exits.

Single Pattern Recognition & Expertise

In my second year of studying stocks (equities), I documented many recurring patterns I witnessed. Some happened at least a few times per month, some a few times per week, and still others a handful of times per quarter. I meticulously documented familiar price movements of each pattern with the intent to identify entry and exit signals for each.

You can guess the result: I felt like The Madhatter from Alice in Wonderland. My focus was never on one thing long enough to execute anything successfully. If I did manage to make a few trades, results were never consistent. I became more familiar with losing trades than with how a winning trade felt. If I did manage to make profit on a trade, my exhilaration was quickly followed with shadows of doubt about my own ability to repeat the success. As an aspiring trader at the time, this cycle of inconsistency made me feel insecure and hopeless.

After learning that successful traders only focus on their best setup, I turned my attention to my trading history to do just that. Initially, I focused my research on my biggest winning trades. While this was a good start, I struggled to isolate one specific pattern I could attribute to the success of those large wins. I lost count of how many times I went back to the drawing board – filtering and resampling from my Excel spreadsheet of tracked trades.

I began to develop the belief that I simply couldn’t trade. I was no good as a trader. Because believed I was no good, there was only one solution: I had to code a computer to trade these patterns for me. My own insecurity and fears were inhibiting my performance. Computers don’t feel those emotions, so problem solved, right? Just one thing – I didn’t know how to code.

So there I was, convinced I needed to code my observations into an automated strategy. Unfortunately, I was too poor to pay someone else to do it, and too uneducated to do it myself. Then I finally had an idea: what if I applied the theory of a computer’s ease of pattern recognition to my own brain? Meaning, what patterns was I naturally inclined or already “programmed” to recognize most easily? Like magic, the information I needed for success began to appear. It had been right in front of my eyes the entire time.

I narrowed my focus to the pattern that was easiest for me to recognize. I studied the elements of the market environment that coincided with price action from which I could profit on that one pattern. Though I built a log of paper trading success, I struggled to translate my newly discovered system into live trading. I had damaged myself in the years prior, having a large mental backlog of fear of loss. The extensive history of repeated loss was so strongly present in my memory, my body would physically respond to my trading anxiety: sweating, nausea, tachycardia. I would freeze up at my trading station and watch trades I knew would be winners unfold before my eyes. But I wasn’t in those trades because I had frozen up. My window of opportunity would pass, which would then trigger a cycle of bitter self-talk.

Really, a terribly vicious psychological cycle.

I knew I needed to regain my confidence to take trades. I decided that starting small was the only way, even though in my mind I really wanted to be making big money fast.

Small Share Size Execution

Initially, 100 shares sounded small enough. However, even that became gut-wrenching to trade. I needed to move past my hesitation, and recognized that I would have to recondition my brain. So, I traded with 1 share. It sounds ridiculous, but guess what – it worked!

I traded 1 share for each trade I took, noticing none of my trading anxiety was present when I did so. I was anxious to make my way back to 100 shares. So I jumped from 1 share to 50 shares per trade. After some time, I finally arrived back at 100 shares.

It seemed like becoming comfortable with 100 shares was the hardest part of this phase in the journey. Once I realized could do it with 100 shares, larger lot sizes became easy to adjust to over time. But the object of trading with just 1 share was to rewire my brain. I needed to see and experience success in trading without the presence of crippling anxiety. Repeating that experience helped me to break the cycle. It dampened the level of anxiety which allowed me to process the experience of trading with more clarity. With increased clarity, I was able to make better executions. With better executions and a higher number of winning trades than losing trades, I built more confidence.

Let Go of Perfection

As my confidence improved, my trading improved. I was inclined to take my performance improvement one step further. I had a thought that I should lean more on mathematics when it came to planning my trades. I wanted to adopt a system for entries and exits that helped me achieve a certain PnL per trade. In essence, I was still trying to “code” my trading system by attempting to trade it as a computer would.

While in theory this may have seemed like a good idea, in practice it was not. With strict entry prices, I missed out many trades. Remember the depiction I illustrated when I’d freeze up from anxiety? I’d watch successful trades play out in front of me, but without my participation. It would send me into a cycle of self-loathing for not executing on my hypothesis that the trade would be a winner.

Missing trades due to strict entry prices had the same effect. I would miss out on a trade because my price was a penny or so off, and the trade would leave without me. I’d watch my potential trade go on to be a success, but my PnL would remain unaffected because I was either too cheap or too greedy.

To avoid getting caught in the vicious psychological cycle again, I recognized action was needed. It was more important to be in the trade at the right time, rather than at the most precise price. First, I recoded the order type of all of my hot keys within my trading platform. Second, I kept all my same criteria for entry, but adopted a more discretionary or manual approach to execution.

What ultimately resulted was a thorough top-to-bottom trading system that I could execute. I knew a familiar setup that I could trade with comfortable size with timely executions. That’s all a retail trader really needs to satisfy to be successful.

As I close out 2024 as my first year of positive revenue, I’m both proud of and humbled by this milestone in my journey. Happy Holidays and Cheers!