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Every professional has good days and bad days. For traders, those bad days are called red days — as in, their account finished in the red. It’s a difficult, highly emotional experience to lose money on the market. Warrior Trading founder Ross Cameron says how you deal with those days has a significant impact on your success as a day trader.
He’s developed what he calls the “six rules of trader rehab.” He recently created a video for the Warrior Trading YouTube channel on this topic after experiencing two red days in a row. He offered a “process for recovering from this type of spiral.”
The video aligns with Cameron’s approach to teaching others. He’s made millions as a day trader. He famously took $583.15 and earned $10 million with it, trades that are documented on the Warrior Trading site. But, in contrast to many traders who are public figures, he doesn’t constantly tout his successes. In an effort to teach traders, he talks about dealing with losses. It’s also a topic covered in his bestselling book, How To Day Trade: The Plain Truth.
“The most important thing after you have a big loss — especially when it’s like two or three red days in a row — is you have to stop the bleeding. You cannot continue to have these big red days,” Cameron said in the video.
His personal record is six consecutive red days, which he called “brutal.” His goal is to keep people from experiencing that — and, of course, avoiding a repeat of that experience himself. Trader rehab is designed to help.
Warrior Trading Rules Help Traders Recover From Red Days
Ross Cameron said the first thing many people consider after suffering a red day is to walk away from trading. He noted that in some cases it might be a good idea to “take a day off or a week off” if it helps you come back “a little bit refreshed and in a calmer state of mind.”
However, when Cameron falls off the horse, he likes to get right back on. “If I don’t, I start psyching myself out, and it just becomes bigger and bigger of a problem,” he said. To help him get back on track, he devised the six rules of trader rehab.
It’s important to note his experience isn’t typical. Becoming an experienced trader takes hard work, dedication, and a significant amount of time. Your results may differ materially due to a number of factors. Available research data suggests that most day traders are not profitable.
Rule 1: Acknowledge You’re in a Heightened Emotional State
Traders create trading plans built on data, logic, and reason. But red days can unleash emotions as those plans go awry. In another video on the Warrior Trading YouTube channel, Cameron delves deeply into this issue. He said recognizing emotions have gotten the better of you and bringing them under control is part of having what he calls “a successful red day.”
If traders don’t acknowledge their emotions, they run the risk of becoming what Cameron calls “emotionally hijacked.” That refers to what can happen to traders after they suffer a significant loss and quickly swap calm and cool for angry and irrational. Acknowledging that you’re in a heightened emotional state and walking away is the better idea.
Rule 2: Apply Restrictions on Your Trading Account
Warrior Trading teaches those going through trader rehab to put restrictions on their account to save themselves from themselves. In Ross Cameron’s case, that meant capping the amount of shares he traded at 5,000. His standard limit is about 20,000.
With the smaller share size, Cameron said that a “loss would be more manageable and then, therefore, the emotions that come following that loss would be smaller and not as likely to trigger another lapse of judgment where I become emotionally hijacked.”
Rule 3: Practice Mindfulness and Mediation To Reconnect With Discipline
As part of his trader rehab, Ross Cameron stays mindful of how he’s trading at the moment. He focuses on thoughtful, cautious trading that slowly rebuilds his account. To help himself in this area, he did a 15-minute guided meditation the night before the trading day in front of a fire he was cooking maple syrup on outside his Massachusetts home. He also went over the root causes of the mistakes he made and reminded himself to be patient.
He admitted he can get a little superstitious. For example, his 3-year-old son recently opened an umbrella in the house. Cameron’s reaction? “I walked away,” he said, smiling. “I can’t be part of this bad luck.”
He added, “So, I get a little superstitious, as do a lot of people who have a career that depends on a combination of skill and a little bit of good luck.”
Rule 4: Use Small Trades To Build a Cushion of Cash
In the video, Ross Cameron offers a recap of the details of how he traded on his first day back after consecutive red days. He focused on waiting to see a good setup for trading, not jumping into anything too early. On his first trade, buying just 1,700 shares, he made $700. “Is it a home run? Is it a huge win? No, but green nonetheless, so I was happy with that,” he said.
Step 5: Rebuild Confidence With One Week of Stable Trading Results
The Warrior Trading founder pointed out that his green day could have been better if he had been trading more aggressively. However, he said people do well to remember the goal of trader rehab is to reduce risk and gain confidence — although even he isn’t immune to the siren song of unrestricted trading on a rehab day.
He said that since he did well, a voice inside told him to take the restrictions off, but he stayed disciplined. “I said, ‘No,’ because right now it’s so important that today is a green day,” he shared. “I need to be very cautious, very disciplined, and just continue to reduce [share] size as the day goes on, which I did. That’s what allowed me to continue to make a little bit more but without risking giving it all back. Today was important for self-confidence and just clearing the slate.”
Rule 6: Remove Restrictions After Making Back About Half of Loss
Ross Cameron stays with the plan and doesn’t remove his self-imposed restrictions from his account until he’s made back half of the loss he experienced on his red days. He said the time needed to do that can vary, but it typically takes about a week.
So, how did Ross Cameron do on his first day of trader rehab? After the initial trade making $700, his next trade took him up to $4,000 in profit. He then made a series of trades that each earned him about $1,000 each. He ended the day making just over $8,000.
“This ended up being a really solid recovery day, first day of trader rehab,” Ross Cameron said. “I’m grateful for that.”
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