I learned a lot of lessons this last year.  I know I'm almost a full month into 2021, and so this seems a little late, but I've been thinking a lot about how far I've come with day trading in 2020.  Obviously, I've made some profits, but much more importantly, I've learned some major lessons.  Things like . . .

What does it mean to be red or green on the day

Since the first day I started watching the market, I wanted to test out new ideas.  It's taken a lot of hours in front of the market to get a handle on what factors are important, what are big indicators of weakness and strength, and what I should look for whether shorting or going long.  For a long time (I'm too embarrassed to say how long), I thought a stock was "red" on the day if the daily candle was red.  Once I realized that a stock was red or green on the day relative to yesterday's closing price, everything made so much more sense.  Those "first red day shorts" that traders were talking about finally made sense.  And not only that, but I began to get a much better feel for how yesterday's close played out as support or resistance for a stock.  This was the first big breakthrough I had.  I know, I should have already known this, but it made a huge difference for me in how I analyzed different plays.

I learned not to overfit my data

At least, I hope I've learned this lesson.  When I started coming up with my own plays, I had this notion that all I had to do was dial in the criteria to make it more profitable.  So plays that didn't seem to be holding their water just needed more and more and more parameters to make the data fit the way I wanted.  I ended up pursuing losing plays, adding a ridiculous amount of criteria, and never getting a great winning percentage.

I'm still making my own plays, and I'm still tweaking the type of criteria I use.  But every time I consider a new parameter, I make sure it logically makes sense, and I carefully consider whether I really need that new parameter added or not. 

For example, there's a short I've been playing and I noticed it had horrible success rates on both Wednesdays and Fridays.  The Friday part makes sense to me, but why would Wednesday be a problem?  I really don't know.  I had an idea that this was correlation rather than causation.  Later I noticed that most of those Wednesday plays also happened to have pretty large market caps, and now that I looked at it, higher market caps seemed to make the play less successful.  Maybe market cap size was a better parameter to consider rather than day of week?

Growing the Account and Risk Management

This is something I'm still working on.  I was growing my account consistently, adding in size and risk, but maybe a little too fast.  Then I hit a couple huge losses in September and it hit me  hard emotionally.  I took a loss that was bigger than any of the wins I'd ever made.  I went in with that risk in mind, but I didn't really think about the ramifications of how it would affect me if I  did hit that stop loss.  It didn't hurt me that much financially, but emotionally, it was hard to recover from. 

It made me realize a few things, like I needed a better risk to reward ratio.  Yes, it was nice that I had about a 70% winning rate, but I needed to do a lot better with my wins than my losses.  (More on that later)  This also made me question everything I was doing.  In fact, after September I did a total overhaul on my plays.  I went back through the entire year's watchlist and analyzed all the data points I could think of.  I came up with several more indicators, developed a few new plays, and tweaked the ones I already had on paper.  As a result, I know a lot more.  I have a much better handle on what I'm looking for and how to play my plays.  But I'm still recovering from those losses.  I feel a little bit like I'm starting over. 

I'm getting my mojo back, as I start to have consistency again, but I don't have the size that I had back in mid-2020.  I'm growing slowly, because I know that for myself, I'm going to be emotionally hit hard if I try to go for too much size all at once.  Slow and steady.

2021 Goal

I'm making goals for 2021 that I have control over.  I mean, obviously I'd like to make all the money in the world and be financially independent and live happily ever after, (and yes, I plan to do that too), but I can't make that as an actionable goal.  Instead, my #1 goal this year is to stick to my trading plan. 

One of my biggest failings is that I lose faith mid-way through.  I either take my profits too soon and don't wait for the stock to give me all it can give, or else I get scared out too soon and exit for a small loss (hoping to avoid a full loss), when I could have held for a profit.  Yeah, I've got lots of ideas about where I'd like to be financially by the end of 2021, but in order to get there, I recognize that I need a more concrete goal that I can hold myself accountable to.  So that's my goal.  Increase my confidence and stick to the plan.  It's what I believe will help me to improve my risk to reward ratio, and what will help me have the confidence to grow exponentially in size.

The 2020 market gave me so much to learn from.  I'm hopeful for the future and I'm excited for the rest of this year.  The more experience I have, the more I'm able to dial in where my personal faults lie and what I can do to be better.  How about you guys?  I am always curious to know what breakthroughs traders have had and how they overcome their faults.  How was 2020 for you?