How to Get a Lifetime of Investing Experience in Only One Year Plus, how day traders can learn a lesson from pilots.

There's no denying that long-term, buy-and-hold investing can produce remarkable results. Berkshire Hathaway is the best example of that. I'm a day trader and find value in long-term investing. Because it's enough for me to focus just on day trading, I have an investment advisor who manages the long-term portion of my portfolio.

The contrast between what he does and what I do could hardly be greater: My average hold time for a stock is five minutes, and sometimes, I'll be in a stock for mere seconds. With those hold times, it doesn't take long to find out if my investment strategy was right, wrong or dead wrong.

It's not an exaggeration to say that day trading can be like compressing a lifetime of investing into a year. I've made over 20,000 trades so far and plan to keep trading for many more years.

Two common phases day traders go through

The first phase is beginner's luck. I actually think it's a thing with day trading, and I experienced it myself. In my first year of trading, I made about $30,000. Was I pumped! Yes, it was work, but it sure beat pumping gas, which I had done a few years back, or working for a bad-tempered boss, which I also knew about.

Over the years, I've heard enough similar stories from other traders to believe beginner's luck is quite common. However, a hard reality always waits in the wings for those happy beginners, and it even has a name: regression to the mean.

After my second year of trading, I gave back those early gains and was now at breakeven. But in my third year of studying and hard work at trading — I wish I could say I turned the corner, but I didn't. I lost a lot of money and was down to my last chance before having to get a "real" job.

Some people can look back at turning points and identify a mentor who said the right thing or a chance encounter that made a difference. In my case, keeping a journal of all my trades saved my day trading career. I recorded not only the trades but also my strategy at the moment I took the trades. In scouring that journal, I discerned a trading pattern that resulted in losing transactions and a different set of characteristics for my winning trades. With this knowledge, I turned my ship around.

This leads me to the second common phase, "investing friction." Sometimes, when day traders experience a hard loss, they fear taking more risks. They mentally box themselves in, and it becomes more difficult to regain their trading confidence. It can be the beginning of a downward spiral.

But here's the really interesting thing: The same phenomenon sometimes happens with wins. After an especially memorable win, traders will pull back and make progressively smaller trades.

Back to my trading journal: There are about 250 trading days in a year. I've found that my top 10 trading days usually account for over 20% of my entire year's profit. On those golden days, am I just throwing caution to the wind? No, and this is where the flying analogy comes in.

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Trusting your instruments

When you learn to fly, you only practice on days with good weather. You're operating under what's known as "Visual Flight Rules." But if you stick with it, you'll learn "Instrument Flight Rules." When you're cleared to fly with those rules, the good news is you can fly in all kinds of weather. The bad news is you must ignore your gut and learn to trust your instruments, or you'll go into the ground.

The same is true with day trading. Successful day traders are not gamblers or cowboys but more like experienced pilots. They do a profit-and-loss calculation before ever taking a trade. They will see a recognizable pattern in the behavior of the stock price, including other factors like trading volume, news about the company, and so on. If it adds up, they take the trade.

The next part is where successful traders earn money: They stick with the parameters they set up. That means if the stock goes up, they have a process for taking some profits off the table while letting the stock continue to rise. But if the stock begins to go down, they don't let it ride "a little longer," hoping it will turn around. Instead, they sell without hesitation and cap the loss.

Either way, they trusted their instruments and would live to trade another day.

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Don't get me wrong: Even after 20,000 trades, I can control my emotions and trade according to my instruments. It never gets "easy" because I can always follow my parameters. Sometimes, emotions will get the better of me, and I'll think: What just happened? Then, my journal review will reveal that on that day, my emotions got the best of me for that trade. It's then up to me to become more disciplined in the heat of the moment, so I apply what I learned from that last trade.

There's no way to turn day trading into a sure-fire system for profit-making. You can improve your chances of doing well in this most unforgiving of environments. You achieve that by doing three things:

1. Record what you were thinking at the time and how it worked out;
2. Analyze that transaction and how you might adjust your parameters in the future; and
3. Have the discipline to stick to those course corrections on the next day.

There is no guarantee of profits, but it's the only way I've found to stay in this profession for the long term.