Daytrading vs position trading
- Thread starter Dispassionate
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Dispassionate said:
An economist may suggest that they would both end up with an equal risk v. reward profile given an equal time spent at the task. The economist may also suggest that if the market was very efficient and the efficiency was handed out evenly over all time periods they would both end up loosing their transaction costs, so the one who did the most trades would end up the worse off.
Stockjunkie
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Tuffty said:
Breaking even IS losing . What are you supposed to live on all this time you are breaking even ?
fresh air ?
Stockjunkie
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fxmarkets said:
You miss the very important factor that the PT has in his favour - huge overnight gains !
Stockjunkie
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No . Please see post # 17.
break " even " after all living costs are accounted for , is not really breaking even , as you have made something to live off.
Who gives a monkeys about BE ? who wants to BE after years of trading ?
break " even " after all living costs are accounted for , is not really breaking even , as you have made something to live off.
Who gives a monkeys about BE ? who wants to BE after years of trading ?
nine
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IMHO Daytrading should be more profitable.
I assume you are able to achieve low enough commissions and slippage to negate the "too much cost" argument. You should be able to do this with a liquid futures contract and a low cost broker like IB. I also assume that you are not so big that you can't use your strategy without moving the market and making it unprofitable (I wish 🙂)
In this case, assuming that for both swing/position and day trading you can find a method that achieves a profit factor (total profits/total losses) of say 2, then the question is how much of your equity can you risk and how often can you risk it.
Two examples of strategies with a pf of 2 would be a system that wins 3 x as much as it loses after costs and a win rate of 40%. Another would be a strategy that wins 1.2x as much as it loses after costs but has a win rate of 62%.
OK, given a PF of 2.0 after costs lets ignore optimal bets sizes etc (assume they are similar) and settle on a conservative option ... bet 1% of equity on each trade.
So how many times can you do that per week?
When I was position trading 10 different futures contracts I could get about 6 trades per contract per year or 60 total = 1.2 trades per week. So my profit is going to be 1.2*1%*average gain per trade each week.
With day trading 1 contract (I could probably manage 3 types if I was less lazy although my number of trades per contract would be lower) I get an average of 8 trades per day. So thats 40 trades per week. So my profit is going to be 40*1%*average gain per trade each week. Thats about 33 times more profit.
OK. I accept that I have ignored cumulative gains and made some easy assumptions. I have also ignored the greater difficulty in mastering oneself when trading on short timeframes (which are VERY real). But the reason one day trades is simple ---- for a given risk capital the potential profitability is MUCH higher.
The trade offs are "more work", "mastering oneself", and something else I will think of after I press "post quick reply."
I assume you are able to achieve low enough commissions and slippage to negate the "too much cost" argument. You should be able to do this with a liquid futures contract and a low cost broker like IB. I also assume that you are not so big that you can't use your strategy without moving the market and making it unprofitable (I wish 🙂)
In this case, assuming that for both swing/position and day trading you can find a method that achieves a profit factor (total profits/total losses) of say 2, then the question is how much of your equity can you risk and how often can you risk it.
Two examples of strategies with a pf of 2 would be a system that wins 3 x as much as it loses after costs and a win rate of 40%. Another would be a strategy that wins 1.2x as much as it loses after costs but has a win rate of 62%.
OK, given a PF of 2.0 after costs lets ignore optimal bets sizes etc (assume they are similar) and settle on a conservative option ... bet 1% of equity on each trade.
So how many times can you do that per week?
When I was position trading 10 different futures contracts I could get about 6 trades per contract per year or 60 total = 1.2 trades per week. So my profit is going to be 1.2*1%*average gain per trade each week.
With day trading 1 contract (I could probably manage 3 types if I was less lazy although my number of trades per contract would be lower) I get an average of 8 trades per day. So thats 40 trades per week. So my profit is going to be 40*1%*average gain per trade each week. Thats about 33 times more profit.
OK. I accept that I have ignored cumulative gains and made some easy assumptions. I have also ignored the greater difficulty in mastering oneself when trading on short timeframes (which are VERY real). But the reason one day trades is simple ---- for a given risk capital the potential profitability is MUCH higher.
The trade offs are "more work", "mastering oneself", and something else I will think of after I press "post quick reply."
Stockjunkie
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That is because YOUR kind of PT gives lousy returns , you have no idea how much profit REAL PT'ers get .
try 220 pts from top to toe .
2 pts per swing from a PT system ? are you kidding me ? that wouldn't be enough to even blink for me .
try 220 pts from top to toe .
2 pts per swing from a PT system ? are you kidding me ? that wouldn't be enough to even blink for me .
fxmarkets
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hmm figures points and numbers........ we are entering realm of mis matching concepts here.... simple way which strips all that out is to quote trade expectancy ratio... then its back to frequency of trading that ratio or expectancy.
have you got a ratio for a pt trader after say 200 trades to compare and frequency of flipping that ratio.
have you got a ratio for a pt trader after say 200 trades to compare and frequency of flipping that ratio.
nine
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Stockjunkie,
You seem to be trying to be offensive with your "shouting" YOUR at me after I put a rational argument up. I cant be bothered arguing on your terms.
If you want to be rational instead of just opiniated feel free to prove your point. Until then, the argument stands. Its not points, its expectancy, frequency, and the other elements of the risk reward equation.
Good luck in your development.
You seem to be trying to be offensive with your "shouting" YOUR at me after I put a rational argument up. I cant be bothered arguing on your terms.
If you want to be rational instead of just opiniated feel free to prove your point. Until then, the argument stands. Its not points, its expectancy, frequency, and the other elements of the risk reward equation.
Good luck in your development.
Stockjunkie
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it seems rationality is a subjective concept .
Who is " shouting " at you ?
Time to call this chat between you and I dead . Agree to disagree . Bye .
Who is " shouting " at you ?
Time to call this chat between you and I dead . Agree to disagree . Bye .
stockdaily
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I am a stock trader. My style of trading is position over daytrade.
