GruntnoWay
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sunday times says daytrading is dead. Anyone agree? I don't.
Is Day Trading DEAD?
- Thread starter GruntnoWay
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Depends on what is being traded. Day trading fx is not dead, it has what is required, volatility. Day trading FTSE stocks for example is dead for me. I now hold at least intraday and switched to mainly fx trading back in March. Indices can also still be traded on a daily basis. I would assume they refer to what is probably the commonest type of day trading for most people coming in to this business, i.e. FTSE 100stocks?
TraderPattern
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I am pasting the story here, since Times Online stories only stay live for a few weeks before the link goes dead.
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TraderPattern
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The Sunday Times - Business
August 08, 2004
Special Report: Stagnant stock markets kill off the day traders
Flat share prices are making it hard for small professional investors to earn a living. Report by Angus McCrone
FOR Shane Archer, one of Britain’s full-time share traders, working life is getting lonelier. “There used to be four or five other traders I would swap e-mails with every week, but now there is only one,” he said.
The markets of 2004 have not been kind to day traders and other speculators who try to make profits by going long or short on a share or other financial instrument.
“I’m finding it very, very hard,” said Archer. “I’m scratching a living, nothing more.”
It is a far cry from the late 1990s when day trading and short-term investing became hotly fashionable in Britain, spurred on by the availability of internet trading platforms. Even during the bear market of 2000-3 many people carried on making profits because they were able to go short on tumbling stocks.
The problem this year has been that shares, and stock- market indexes such as the FTSE 100 and the Dow Jones industrial average, have spent most of their time “vibrating” in small ranges. There have been no established firm trends for people to jump on.
One sign of this came on Tuesday, July 13, when the Dow traded in a range of 26.5 points, its tightest range in percentage terms in one day since 1983.
“It really has been horrible,” said Zak Mir, a short-term trader and technical analyst. “The problem is that people have not been getting the 10% to 20% swings in share prices to outweigh the times when their stop-loss orders are hit and they lose 3%-5%.”
Today’s difficulties come after six or seven years in which short-term trading mushroomed from an activity mainly for professionals such as the former “locals” of the Liffe floor in the City. It is now a mass-market phenomenon with a kaleidoscope of competing products and providers.
Clem Chambers, chief executive of ADVFN, the data and bulletin-board provider, estimates that there are almost 5,000 “hyperactive” traders in Britain these days and 20,000 to 30,000 once-a-week traders.
David Linton, chief executive of Updata, a software firm that sells charting packages to investors, is more cautious. He said: “There are now about 1,000 people who are constantly active in the markets, down quite a lot from the peak. Then there are probably 10,000 individuals who may trade several times a month, but probably not every month. Finally, there are the ‘spring-cleaners’ who dust off their portfolios every now and then and decide to start trading again. I would put this category at more than 100,000.”
An ever-growing list of firms offers market-making services to speculative investors and many of them — including IG Index, CMC/deal4free, Man Group and Cantor Index — have been among the financial sector’s most prolific advertisers in the past four years.
The main trading instruments are financial spread betting, which enables private investors to go long or short on the basis of an initial margin payment of 10% or less; futures and options, which enable more experienced investors to do the same; and low-commission internet-based share dealing.
Many private investors get drawn into short-term trading by the glamour and excitement, highlighted in films such as the 1987 Oliver Stone film Wall Street and books such as the 1923 classic Reminiscences of a Stock Operator by Edwin Lefèvre.
Among many would-be traders, however, there is an astonishing naivety, an expectation that it is easy to make profits with little more than the aid of a few stock-market charts.
Adrian Patten, a former City foreign-exchange dealer who now trades full-time on his own account, said: “For most amateurs, it’s an easy way to lose money. The more they trade, the more the odds are against them because they keep paying the market bid-offer spread each time. Many of them also make the classic mistake of not cutting loss-making positions.”
Financial-spread bookmakers are coy about the proportion of their clients that make profits over the medium term, but Patten reckons that at least 80% lose money and only 5% are consistent profit-makers.
The successful proportion may be higher among traders of contracts for difference (CFDs), futures and options because a high level of experience is required before somebody can open an account to trade in these products.
In general, day traders and short-term investors tend to do best when the markets are “trending” — when prices move in one direction for a sustained period.
The technology bubble of late 1999 and early 2000 was a purple patch for speculators for that reason. Some people made hundreds of thousands of pounds just hanging on to little-understood technology stocks. The lucky ones sold out before the bubble burst.
The long stock-market retreat from 2000 to March 2003 also provided plenty of scope for trend-followers, as did the sharp recovery after the start of the Iraq war last year.
David Buik at Cantor Index, a leading provider of spread betting and CFDs, said traders are being discouraged by very low volatility. The VIX index, calculated by the Chicago Board Options Exchange as a way of measuring market volatility, fell from 31.5% in March 2003 to a low of 13.8% in mid-July.
Angus Campbell, head of marketing at the spread-betting firm Finspreads, said: “We think this is a temporary phenomenon. The moment that volatility returns to equities, stock indexes or currencies, people will come back in to trade.”
Britain’s more durable speculators are sticking to what they do best and waiting for the markets to start behaving in a more congenial manner.
Simon Cawkwell, Britain’s best-known bearish trader, lost £2.5m last year when he was caught short on shares in Regus, the office-space provider.
However, Cawkwell has bounced back, making £150,000 with bets on Euro 2004 and horse racing. He then successfully went short on shares when the FTSE 100 index hit 4,500 in June.
“I thought the market was overblown. I went £5m short of shares, and have now vacuumed up some profits,” he said. He is now either short, or contemplating going short, on several more shares including Regus again (as it raises cash in a rights issue), RAB Capital and Colt Telecom.
“John”, an investor in north London, is also sticking to his style, which is a combination of quick-fire trading on options on the FTSE 100 index and the German Dax, and longer-term investing in small stocks.
“I have already traded four options this morning and I’m looking to do another one,” he said a few days ago. “I tend to do a combination of buying and selling put and call options, based on maths I do in my head.
“Usually I trade options that are at least six months from their expiry date. I may go up to £300 to £500 per point, but my normal size is smaller.” A £300-a-point position could involve an exposure of £50,000 or more.
“John” said he sometimes loses £15,000 to £20,000 and his gains tend to be smaller but more
frequent. “I did not retire from my previous job until I had £1m to my name. That amount gives you plenty of cushion to take a hit,” he said.
Every short-term trader approaches his task slightly differently, but the professional ones put in long hours and research their subject voraciously.
Archer said: “My week begins on Sunday. I spend an hour to 90 minutes going through the calendar for the next two weeks, including scheduled dividend payments, company results and option expiries.
“I then generally go through share-price graphs and news for the FTSE 100 companies and select 30 of those to focus on that week.
“On Monday, between 7.30am and 9am, I’m looking at trading volumes in these stocks. I don’t generally start a new trade until after 9.30am. Before the American figures come out at 1.30pm I will take a decision on whether to stay in my morning trade or not. At 3.30pm to 4pm I will decide whether to stay in it overnight.”
Archer said he had been thinking of going long on WPP, the communications group. “If I bought at 505p, I would have my stop-loss at 500p and a short-term target at 525p. If the stock closed tonight at 515p I would raise my stop to 510p, and if it was particularly strong and got to 525p I would close half the trade.”
Patten’s schedule reflects his preference for trading exchange rates and stock indexes such as the S&P 500. “I spend the morning catching up on the news from Asia and America and looking at charts. I do a lot of reading — technology reviews and international publications.
I look closely at the American market between 2.30pm and 3.30pm our time and again between 6.45pm and 7.30pm.”
Patten’s time horizon is longer than Archer’s. When we spoke, he was short on the S&P 500 index from 1118.3 and had been for more than a fortnight.
His trigger for this was noticing that the American semiconductor index had broken down through some important chart levels. He expected the wider market to follow.
Coincidentally, Archer was also picking up negative signals — in his case from the imminent appearance of a “death cross” on the FTSE 100 index and the Dow Jones. A death cross is where a chart shows an index breaking down through its 50-day and 200-day moving averages.
A certain humility is a key ingredient for success. Patten said: “Reminiscences of a Stock Operator is the
best book about the markets, but people forget that Jesse Livermore (the notorious Wall Street speculator who is its subject) ended up losing in the 1930s all the money he had made in the 1920s, and shooting himself.”
INDIVIDUALISTIC AND ANTI-ESTABLISHMENT: PROFILE OF A TYPICAL DAY TRADER
IF THE IMAGE of the City of London is conformist, Britain’s short-term traders are highly individualistic and some of them are positively anti-establishment.
The most regimented among them, such as the hundreds of ‘liquidity providers’ who sit in trading arcades in the City and make dozens of short-term futures trades every day, tend to be intense, anonymously dressed young men in their twenties and thirties.
Among the traders who work from home or small offices there are both retired investors who have graduated to speculation and young bucks who hope to get rich quickly. Most of them are aged between 35 and 50, and male.
David Buik of Cantor Index said: ‘The ratio of men to women is 25 to one. However, we have six very successful lady traders among our clients. They tend to be more cautious.’
Another intriguing aspect is the high Asian representation. It is estimated that 20% of spread-betting and CFD traders are Asians. Part of the reason may be an ingrained interest in specu- lation in Indian and Chinese culture.
Zak Mir, a short-term trader and technical analyst, says: ‘The Asian community tends to be entrepreneurial, partly because of the difficulties Asians can face in getting a job.’
August 08, 2004
Special Report: Stagnant stock markets kill off the day traders
Flat share prices are making it hard for small professional investors to earn a living. Report by Angus McCrone
FOR Shane Archer, one of Britain’s full-time share traders, working life is getting lonelier. “There used to be four or five other traders I would swap e-mails with every week, but now there is only one,” he said.
The markets of 2004 have not been kind to day traders and other speculators who try to make profits by going long or short on a share or other financial instrument.
“I’m finding it very, very hard,” said Archer. “I’m scratching a living, nothing more.”
It is a far cry from the late 1990s when day trading and short-term investing became hotly fashionable in Britain, spurred on by the availability of internet trading platforms. Even during the bear market of 2000-3 many people carried on making profits because they were able to go short on tumbling stocks.
The problem this year has been that shares, and stock- market indexes such as the FTSE 100 and the Dow Jones industrial average, have spent most of their time “vibrating” in small ranges. There have been no established firm trends for people to jump on.
One sign of this came on Tuesday, July 13, when the Dow traded in a range of 26.5 points, its tightest range in percentage terms in one day since 1983.
“It really has been horrible,” said Zak Mir, a short-term trader and technical analyst. “The problem is that people have not been getting the 10% to 20% swings in share prices to outweigh the times when their stop-loss orders are hit and they lose 3%-5%.”
Today’s difficulties come after six or seven years in which short-term trading mushroomed from an activity mainly for professionals such as the former “locals” of the Liffe floor in the City. It is now a mass-market phenomenon with a kaleidoscope of competing products and providers.
Clem Chambers, chief executive of ADVFN, the data and bulletin-board provider, estimates that there are almost 5,000 “hyperactive” traders in Britain these days and 20,000 to 30,000 once-a-week traders.
David Linton, chief executive of Updata, a software firm that sells charting packages to investors, is more cautious. He said: “There are now about 1,000 people who are constantly active in the markets, down quite a lot from the peak. Then there are probably 10,000 individuals who may trade several times a month, but probably not every month. Finally, there are the ‘spring-cleaners’ who dust off their portfolios every now and then and decide to start trading again. I would put this category at more than 100,000.”
An ever-growing list of firms offers market-making services to speculative investors and many of them — including IG Index, CMC/deal4free, Man Group and Cantor Index — have been among the financial sector’s most prolific advertisers in the past four years.
The main trading instruments are financial spread betting, which enables private investors to go long or short on the basis of an initial margin payment of 10% or less; futures and options, which enable more experienced investors to do the same; and low-commission internet-based share dealing.
Many private investors get drawn into short-term trading by the glamour and excitement, highlighted in films such as the 1987 Oliver Stone film Wall Street and books such as the 1923 classic Reminiscences of a Stock Operator by Edwin Lefèvre.
Among many would-be traders, however, there is an astonishing naivety, an expectation that it is easy to make profits with little more than the aid of a few stock-market charts.
Adrian Patten, a former City foreign-exchange dealer who now trades full-time on his own account, said: “For most amateurs, it’s an easy way to lose money. The more they trade, the more the odds are against them because they keep paying the market bid-offer spread each time. Many of them also make the classic mistake of not cutting loss-making positions.”
Financial-spread bookmakers are coy about the proportion of their clients that make profits over the medium term, but Patten reckons that at least 80% lose money and only 5% are consistent profit-makers.
The successful proportion may be higher among traders of contracts for difference (CFDs), futures and options because a high level of experience is required before somebody can open an account to trade in these products.
In general, day traders and short-term investors tend to do best when the markets are “trending” — when prices move in one direction for a sustained period.
The technology bubble of late 1999 and early 2000 was a purple patch for speculators for that reason. Some people made hundreds of thousands of pounds just hanging on to little-understood technology stocks. The lucky ones sold out before the bubble burst.
The long stock-market retreat from 2000 to March 2003 also provided plenty of scope for trend-followers, as did the sharp recovery after the start of the Iraq war last year.
David Buik at Cantor Index, a leading provider of spread betting and CFDs, said traders are being discouraged by very low volatility. The VIX index, calculated by the Chicago Board Options Exchange as a way of measuring market volatility, fell from 31.5% in March 2003 to a low of 13.8% in mid-July.
Angus Campbell, head of marketing at the spread-betting firm Finspreads, said: “We think this is a temporary phenomenon. The moment that volatility returns to equities, stock indexes or currencies, people will come back in to trade.”
Britain’s more durable speculators are sticking to what they do best and waiting for the markets to start behaving in a more congenial manner.
Simon Cawkwell, Britain’s best-known bearish trader, lost £2.5m last year when he was caught short on shares in Regus, the office-space provider.
However, Cawkwell has bounced back, making £150,000 with bets on Euro 2004 and horse racing. He then successfully went short on shares when the FTSE 100 index hit 4,500 in June.
“I thought the market was overblown. I went £5m short of shares, and have now vacuumed up some profits,” he said. He is now either short, or contemplating going short, on several more shares including Regus again (as it raises cash in a rights issue), RAB Capital and Colt Telecom.
“John”, an investor in north London, is also sticking to his style, which is a combination of quick-fire trading on options on the FTSE 100 index and the German Dax, and longer-term investing in small stocks.
“I have already traded four options this morning and I’m looking to do another one,” he said a few days ago. “I tend to do a combination of buying and selling put and call options, based on maths I do in my head.
“Usually I trade options that are at least six months from their expiry date. I may go up to £300 to £500 per point, but my normal size is smaller.” A £300-a-point position could involve an exposure of £50,000 or more.
“John” said he sometimes loses £15,000 to £20,000 and his gains tend to be smaller but more
frequent. “I did not retire from my previous job until I had £1m to my name. That amount gives you plenty of cushion to take a hit,” he said.
Every short-term trader approaches his task slightly differently, but the professional ones put in long hours and research their subject voraciously.
Archer said: “My week begins on Sunday. I spend an hour to 90 minutes going through the calendar for the next two weeks, including scheduled dividend payments, company results and option expiries.
“I then generally go through share-price graphs and news for the FTSE 100 companies and select 30 of those to focus on that week.
“On Monday, between 7.30am and 9am, I’m looking at trading volumes in these stocks. I don’t generally start a new trade until after 9.30am. Before the American figures come out at 1.30pm I will take a decision on whether to stay in my morning trade or not. At 3.30pm to 4pm I will decide whether to stay in it overnight.”
Archer said he had been thinking of going long on WPP, the communications group. “If I bought at 505p, I would have my stop-loss at 500p and a short-term target at 525p. If the stock closed tonight at 515p I would raise my stop to 510p, and if it was particularly strong and got to 525p I would close half the trade.”
Patten’s schedule reflects his preference for trading exchange rates and stock indexes such as the S&P 500. “I spend the morning catching up on the news from Asia and America and looking at charts. I do a lot of reading — technology reviews and international publications.
I look closely at the American market between 2.30pm and 3.30pm our time and again between 6.45pm and 7.30pm.”
Patten’s time horizon is longer than Archer’s. When we spoke, he was short on the S&P 500 index from 1118.3 and had been for more than a fortnight.
His trigger for this was noticing that the American semiconductor index had broken down through some important chart levels. He expected the wider market to follow.
Coincidentally, Archer was also picking up negative signals — in his case from the imminent appearance of a “death cross” on the FTSE 100 index and the Dow Jones. A death cross is where a chart shows an index breaking down through its 50-day and 200-day moving averages.
A certain humility is a key ingredient for success. Patten said: “Reminiscences of a Stock Operator is the
best book about the markets, but people forget that Jesse Livermore (the notorious Wall Street speculator who is its subject) ended up losing in the 1930s all the money he had made in the 1920s, and shooting himself.”
INDIVIDUALISTIC AND ANTI-ESTABLISHMENT: PROFILE OF A TYPICAL DAY TRADER
IF THE IMAGE of the City of London is conformist, Britain’s short-term traders are highly individualistic and some of them are positively anti-establishment.
The most regimented among them, such as the hundreds of ‘liquidity providers’ who sit in trading arcades in the City and make dozens of short-term futures trades every day, tend to be intense, anonymously dressed young men in their twenties and thirties.
Among the traders who work from home or small offices there are both retired investors who have graduated to speculation and young bucks who hope to get rich quickly. Most of them are aged between 35 and 50, and male.
David Buik of Cantor Index said: ‘The ratio of men to women is 25 to one. However, we have six very successful lady traders among our clients. They tend to be more cautious.’
Another intriguing aspect is the high Asian representation. It is estimated that 20% of spread-betting and CFD traders are Asians. Part of the reason may be an ingrained interest in specu- lation in Indian and Chinese culture.
Zak Mir, a short-term trader and technical analyst, says: ‘The Asian community tends to be entrepreneurial, partly because of the difficulties Asians can face in getting a job.’
TraderPattern
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I would like to make a few comments about the above story from the Sunday Times:
1) the story doesn't stress that we have just been through a very profitable trending phase on the daily bars. Trend oriented swingtraders and position traders worth their salt would have cleaned up nicely (some would have made a killing) over the last few months
2) the story tends to lump daytrading (intraday trading) together with swing trading and position trading. Even in periods when daily bars are not trending, intraday bars could have some very profitable microtrends
3) the story implies that low volatility and ranges imply the death of daytrading. While it may indeed be a valid cause for concern re: swingtrading/position trading, we go back to definitional deficiencies on the part of the author. Intraday, there is usually some kind of short lived trend somewhere. Even if this trend occurs in the context of reduced daily volatility, the astute trader would increase his position size, in order to simply maintain (and not increase) his monetary risk per trade.
4) I would sincerely hope that the spread betters referred to in the story are not intraday traders. If they are, I am not surprised they are failing at intraday trading. Spread betting intraday trading is not viable, since the spread is always too large (unless you manage to time countertrend entries to perfection, in which case the spread will be reasonable, since the price riggers -- spread betting firms -- narrow their spreads at potential turning points). Spread betting is a useful tax efficient vehicle in my view, but only for swingtrading and position trading. Intraday, you need direct electronic access to the exchanges via a broker; you will get killed if you spread bet intraday.
My contention is simple: daytrading is not dead for the consistent minority.
1) the story doesn't stress that we have just been through a very profitable trending phase on the daily bars. Trend oriented swingtraders and position traders worth their salt would have cleaned up nicely (some would have made a killing) over the last few months
2) the story tends to lump daytrading (intraday trading) together with swing trading and position trading. Even in periods when daily bars are not trending, intraday bars could have some very profitable microtrends
3) the story implies that low volatility and ranges imply the death of daytrading. While it may indeed be a valid cause for concern re: swingtrading/position trading, we go back to definitional deficiencies on the part of the author. Intraday, there is usually some kind of short lived trend somewhere. Even if this trend occurs in the context of reduced daily volatility, the astute trader would increase his position size, in order to simply maintain (and not increase) his monetary risk per trade.
4) I would sincerely hope that the spread betters referred to in the story are not intraday traders. If they are, I am not surprised they are failing at intraday trading. Spread betting intraday trading is not viable, since the spread is always too large (unless you manage to time countertrend entries to perfection, in which case the spread will be reasonable, since the price riggers -- spread betting firms -- narrow their spreads at potential turning points). Spread betting is a useful tax efficient vehicle in my view, but only for swingtrading and position trading. Intraday, you need direct electronic access to the exchanges via a broker; you will get killed if you spread bet intraday.
My contention is simple: daytrading is not dead for the consistent minority.
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TraderPattern
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To put it bluntly, daytrading is like any business. The majority who try it will fail. That does not, in and of itself, imply that daytrading is dead.
There will always be a minority of consistent winners. The idea is to endure your learning curve in order to take your shot at becoming part of this minority.
There will always be a minority of consistent winners. The idea is to endure your learning curve in order to take your shot at becoming part of this minority.
Faris
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i guess it all depends on what your trading.
I can imagine day trading UK stocks would be a nightmare so would agree with kevin on that one.
I first started trading Forex and im sure will be trading it for a while to come.
Forget trading stocks or index futures FOREX p!sses on them all!
Faris
I can imagine day trading UK stocks would be a nightmare so would agree with kevin on that one.
I first started trading Forex and im sure will be trading it for a while to come.
Forget trading stocks or index futures FOREX p!sses on them all!
Faris
If I trade on FTSE stocks I rarely make it a day trade. If I'm in profit by the end of the day its because of other factors, not because I predict that a stock will rise 2/3 pts before the close. I am planning ahead 3/5 days, sometimes weeks as happened on LLOY recently. So for me some sectors of day trading are dead for now, like FTSE 100, though if you have enough time and energy to screen stare then then biggies are still possible to trade, RBS being one I do follow. A few from 100 is not good though. Chart it, plan it and set a profit then walk for a few days. I am well up this year and its down to FX trading not what I used to stick with, which was almost always FTSE100 and SP500.
oNLY THE us INDEX FUTURES HAVE EVER BEEN DAY EATABLE THE DOTCOM BUBBLE WAS STUPIDY AND STOCK AND fx DAYtdaing is lose lose no matter what skill you haveGruntnoWay said:
the mini index futures are wonderful for daytrading but folks will try and put long term technical claptrap on them and of course they lose..
my group(invited only) never ever lose on any one day and our simple visual signal and vast knowledge of the oNLY market we look at ensure that and can do so for any trader who will dump everything for 1 month look at one market against time of day and price..
wanna hear me prove it each day..invited only..
Airthrey Capital
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Gully said:
Quite frankly, you can keep your invitation.
P.S...Why don't you go to night school and learn how to spell correctly, construct a sentence, use grammar and syntax properly.
Your sales pitch would, at least, sound more credible then.
TraderPattern
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Very well put, jimbo. Gully is most certainly linguistically-challenged.
