day trade 2 swing trade?

[spookygr]

Ok, right. I am not a day trader but am considering stepping into this hobby/profession.

I have a question that i am sure, well, everybody here will be able to answer.

Now, i am constantly reading about all these day traders bought stocks at a time they thought was good but turned out not to be and the price fell and they lost money. Ok well what is to stop them from not selling it and holding onto to it for a day or two or three etc, untill the price rises to either less of a loss or even a profit again. Basically whats stopping someone from making what started out to be a day trade into a swing trade, so as to lose less or make money.


I am sure there are plenty reasons, but as a person who knows very little on the subject, i am racking my brain trying to think of one.

thanks

 

[FetteredChinos]

someone famous (cant remember who) said a swing trade was a day-trade gone wrong...

to paraphrase, plagiarise and pillory..


spooky. what happens, say if you bough RBOS shares for example. and the price plummeted 50%, and then fell a bit more, then a bit more? it can happen, and does frequently. your capital is tied up in this one trade, solely from being unable to take a loss, when it could/would have been better employed elsewhere..

learn to love taking losses.. they happen quite a lot...

took me a while, but im getting there....

 

[spookygr]

Thanks fett,

I understand that the money may well be better employed somewhere else, but assuming that you had the capital to continue trading whilst still holding that losing stock then, in theory you would never make a loss, well unless you bought the stock at an unrepeatable market high.

What i mean is, with the prices of stocks fluctuating daily, odds are that at some point, your losing stock will return to a price which you could profit from. Assuming that you are a dedicated trader sitting infront of a computer, watching the market all day every day, you could just hold onto it until it reaches this point.

I know this just probably sounds silly, but like i said assuming someone had the capital.

 

[roguetrader]

Firstly, to trade anything, day, swing or short term investment you must have some sort of plan, since these are all different animals the trading plan will be different for each therefore you cannot just change your mind mid-way through the trade as you suggest. Swingtraders look to capture much bigger moves than daytraders do, and as such will commonly be using much smaller lot sizes. If you enter a daytrade, using daytrade risk assessment, and it goes against you, then you were wrong in your analysis of the stock. If you try to morph this into a swing trade you will now most likely have a lot size that skews your risk way out of whack.
Another big problem is that daytraders will not necessarily be trading with the intermediate trend. I have often been short intraday, a stock that swingtraders are long. Why? Because I am playing a short-term correction in the longer term trend. Essentially I am trading in a different time frame. If this trade goes against me and I hold for swing I am now in the longer time frame but trading against the trend. You would not stay in business long following this theory.

 

[FetteredChinos]

for an example, may i refer you to the posts made by Swager over on tactical trader..

you would require an astronomical capital to do this successfully..

but in theory, yet it can be done..

 

[spookygr]

thanks guys, i think i am getting a little closer to understanding, however as a complete layman on the subject a little of what rogue said confused me. I understand that you would be trading against the trend, but this is still within the idea. Trends change daily (as far as i am aware). So surely it will turn in your favour eventually. I am sorry if i am becoming annoying, i'm not intending to, i just want to learn.

Also fett, where about on tt can i find Swagers posts

thanks

 

[roberk]

Thanks fett,



I know this just probably sounds silly, but like i said assuming someone had the capital.

Nick leeson worked on this theory. That is the bad news. The good news is that more often than not the price will come back to your original entry, sooner or later, so it can be a good tactic, if you choose the right instrument.

 

[roguetrader]

Ok here's something that I'm not proud of but may help. Quite a long time back, when I first started this game, had no clue what I was doing I bought a few tech stocks as swing trades at the time, granted but for the prupose of this it should illustrate a point It was just after the tech bubble burst, but at a time when tech stocks had fallen a long way and all the talking heads were pointing to how far they had fallen and what a bargain they were now. Anyways 2 stocks I took positions in were ARBA and BVSN ARBA was an $80 stock at the time it went against me and I decided to make it a short term investment. BVSN same thing, bought at around $45. If I was holding today some 3 yrs later ARBA is around $15 and BVSN is a $2 stock that has had at least on reverse split. Trust me don't do it, its costly

 

[spookygr]

thanks everyone,

Ok, lets say i am talking about trading only well known relatively stable stocks. Dell or Microsoft for example. i know that bad things happen, but these types of companies are fairly safe. I am not talking about a long term investment, i am saying just buying it and then holding it but still watching it as if it were a day trade. Selling when the opportunity arises.

 

[SvenFoster]

I think this comes under the same category as pyramiding down and letting your losses run. It has to be a bad idea.

Now letting a winning intraday trade turn into a swing trade I'd say is a different kettle all together as it may show a definite level of objectiveness in your trading lacking in mine as long as it is in your plan. if you made it up on the spot well... then not so good ,so I'd review it and modify your plan acordingly

just an option,
chers Sven

 

[spookygr]

Basically, i think, i am talking about using day trading techniques over whatever time period it takes, within reason. It is quite rare that you buy a stock at a price that it never reaches again.

 

[roguetrader]

thanks everyone,

Ok, lets say i am talking about trading only well known relatively stable stocks. Dell or Microsoft for example. i know that bad things happen, but these types of companies are fairly safe. I am not talking about a long term investment, i am saying just buying it and then holding it but still watching it as if it were a day trade. Selling when the opportunity arises.

I would start by pulling up some longterm charts of your "stable" stocks. Enron was stable, er until it wasn't. Kmart was stable until it wasn't. To make daytrade money out of very stable stocks like MSFT your likely talking about hitting it with a lot of volume. If it goes against you you are now in too big a position for swing. Alternatively choose a swing position size, then you are not going to make enough money, on the daytrade so you should have looked for a swing trade in the first place.
Let's say I am looking for a daytrade today, I am looking for a stock that is going to move in my favour in the next few minutes hours, my analysis is based on the price action today, right now, I don't care what it is going to do tomorrow or the day after or next week. So I don't know. Your theory would have a chance of working if you could predict market tops and bottoms, so you could buy near a major market bottom, and hold indefinitely. But that would mean waiting for what you believe to be the next market bottom. Buy now and you are assuming a huge amount of risk

 

[roguetrader]

Basically, i think, i am talking about using day trading techniques over whatever time period it takes, within reason. It is quite rare that you buy a stock at a price that it never reaches again.

Daytrading techniques work for daytrades, not for other time frames.

 

[spookygr]

Ok, like i said bad things happen, but 99% of the time disasters like enron and kmart are exceptions.
Why is a high volume swing a bad idea, surely its the same as a low volume one with more risk. But, if you agree with my previous comment that "it is very rare that you buy a stock at a price that it never reaches again" then surely the risk isn't as great. Now dont get me wrong i understand that there is of course a risk that any and every stock can crash.

Now assuming that you are watching this stocks actions as closely as f it were a day trade then you could catch it

 

[roguetrader]

Why is a high volume swing a bad idea, surely its the same as a low volume one with more risk.

That is an impossible question for me to answer to you. Because it relates to risk, and by your proposed style you do not acknowledge risk as you believe that barring 1% of disasters your stock will always come back for you. The lot size is used to calculate risk against your stop. Since you have no stop this is irrelevant to you.

 

[Roberto]

Sorry to be negative but I must join the chorus of nay-sayers here. At some point you'll have an accident and it will be a disastrous one. If you're planning to make a living from this, there's no point in adopting a policy of something that will be "safe" 99% of the time. The one thing you can be sure of that way is that at some point you'll go under. You can have a policy that's "profitable" for whatever proportion of the time you want, as long as you've got enough capital to realise and withdraw the profits regularly. But you can't run with a policy that's only "safe" 99% of the time. Your primary responsibility as a trader is to be able to continue trading, and you can do that only if your policy is "safe" 100% of the time, not 99% of the time. The above point about Nick Leeson is an excellent one: his policy (though you may not quite think of it this way) is _exactly_ what you're proposing.

 

[roguetrader]

I missed the Leeson post. but that Illustrates the point quite well. I'm sure Nick believed (hoped) the market could not fall much further.

 

[barjon]

Basically, i think, i am talking about using day trading techniques over whatever time period it takes, within reason. It is quite rare that you buy a stock at a price that it never reaches again.

spookygr

Maybe, but you're then trading "hope" rather than your analysis and you may grow old waiting for the breakeven return - assuming you've been able to stand the margin calls on the way. Course if you're actually going to buy the stocks, you'll likely finish up with a portfolio of stocks and no money to trade. The old daytrade, whoops make it a swing trade, whoops make it a position trade, whoops stick it in the long term portfolio syndrome.

You say the Enrons of this world are rare but popular daytrades like AZN are not. You might have been pleased to see AZN back in its trading range aug/sep and daytraded long at say 2600 - moves against you so you hold on then zippo 250 points down in 3 days, another 300 over the next few weeks and another 160 today. Currently struggling to make 1900, how long before it sees 2600 again?

good trading

jon

 

[spookygr]

Ok , well, i guess its back to the drawing board for me, I thought i might have been onto something there. Thanks for the input everyone. Its been helpfull, well humbling at least ; )

thnx again

 

[roguetrader]

I don't mean to humble you mate, believe me I still have lots to learn too, and am learning everyday. May I ask have you read any books on trading?