Just who is right?

[itdontgo]

Lots of people imply there are only about 10% of traders making any profits at all, albeit the lucky few making substantial profits. On sites like these, however, where you would expect to find a different take, many people imply they are successful day traders. The first ever book I read on Stocks (Dr John White - Investing in stocks and shares) described 'day traders' as desperate Dan types who are nothing but deuded gamblers.

I suspect that some people will react most outraged to this description of their profession which would in some respect make me feel its pains them to be reminded of this. The implication being that they are gamblers.

When I used to run an IT business the overheads meant we needed to run at a margin of at least 40% to cover costs. Obviously shares are cheaper to trade but there would surely need to be a large swing to overcome the spread, CGT, commision and loses. Do people really acheive this over the course of a day?

 

[tightstops]

i think gambling is a pretty fair description of daytrading but this doesnt mean the skilled cant find situations where they have a better than 50/50 chance of doubling there money on a paticular trade, making trades like this shouldnt be considered desperate since its pretty much exactly the same as buying and then selling in 2 months time - a trade was opened then closed and profit or loss followed. ive heard people say its not proper trading, i think theres a stronger argument the other way, in any case i dont think the fact thats it may not be "proper trading" should be a reason to avoid it. ive never understood the diference between risking 20 pips to make 40 and risking 200 to make 400 except youll probably have to wait a couple of weeks for the later instead of a couple of hours. the same money will be won or lost. ive a feeling the people who dislike it so much have tried it and struggled to compete or prefer not to spend so much time in front of the computer and have managed to find quite acceptable ways to make money which are a little less intensive. daytrading is a bit more stressfull tho at the end of day might be flat whereas longterm holders might go to bed thinking about their position more. obviously less time to make decisions intraday so for those who like to take their time its not ideal. for people begining to trade i think daily and weekly charts are probably best but since what happens on these time frames is very similar to what happens on intraday charts being rushed seems to be the only disadvantage. i cant speak for shares but the overheads on the most liquid currencie pairs or dow jones futures or ftse futures are a bout 1 pip so not much to worry about there

 

[Splitlink]

i think gambling is a pretty fair description of daytrading but this doesnt mean the skilled cant find situations where they have a better than 50/50 chance of doubling there money on a paticular trade, making trades like this shouldnt be considered desperate since its pretty much exactly the same as buying and then selling in 2 months time - a trade was opened then closed and profit or loss followed. ive heard people say its not proper trading, i think theres a stronger argument the other way, in any case i dont think the fact thats it may not be "proper trading" should be a reason to avoid it. ive never understood the diference between risking 20 pips to make 40 and risking 200 to make 400 except youll probably have to wait a couple of weeks for the later instead of a couple of hours. the same money will be won or lost. ive a feeling the people who dislike it so much have tried it and struggled to compete or prefer not to spend so much time in front of the computer and have managed to find quite acceptable ways to make money which are a little less intensive. daytrading is a bit more stressfull tho at the end of day might be flat whereas longterm holders might go to bed thinking about their position more. obviously less time to make decisions intraday so for those who like to take their time its not ideal. for people begining to trade i think daily and weekly charts are probably best but since what happens on these time frames is very similar to what happens on intraday charts being rushed seems to be the only disadvantage. i cant speak for shares but the overheads on the most liquid currencie pairs or dow jones futures or ftse futures are a bout 1 pip so not much to worry about there

What decision making is not a gamble? Isn't holding a share overnight, in the hope that it gaps in your favour, instead of against you, a bigger gamble?

Opening any kind of business entails much finger crossing, in my view. Even marrying the right person or buying a good house in a flood plain or earthquake zone. It's life and day trading should not entail losing your shirt. Most experienced day traders exit losing trades very quickly.

Split

 

[TheBramble]

I suspect that some people will react most outraged to this description of their profession which would in some respect make me feel its pains them to be reminded of this. The implication being that they are gamblers.

I doubt many would be at all bothered by anyone else's definition or description of their activities. If they are, they're in the wrong game.

It's been debated before, but when you get down to it - all that process is concerned with is semantics and subjective opinion – which is perfect for bulletin boards, but the real world issue is whether trading is making you money. If it is, who cares what it’s called?

When I used to run an IT business the overheads meant we needed to run at a margin of at least 40% to cover costs. Obviously shares are cheaper to trade but there would surely need to be a large swing to overcome the spread, CGT, commision and loses. Do people really acheive this over the course of a day?

As a prior business owner you’ll be well aware of the many additional hassles involved in just breaking even, the external factors over which you have little to no control and the frustrations of failing to consider the impacts of every single thing you really should have considered. Trading is a doddle in comparison.

You mention needing large swings. Why? Maybe on a longer term basis you’d be looking for larger (relative) swings, but how many trades do you need at even just $0.35 (my minimum target) profit a day to make it worthwhile?

And don’t forget CGT (UK) is payable only on profits, not turnover.

Spreads (Bid/Offer) are not an issue if you’re working the right stocks and at the right time (of the market, the cycle, the day etc.). If spreads are a major consideration, you’re in the wrong stocks, time of day, phase of the cycle etc.

Loses are a business expense and with the correct Risk and Money Management represent a far more knowable and controllable factor in your overall profitability than would have been the case in your previous business situation.

So to answer your question “Who is Right?” - you don’t really care if it’s 10% or 5% or 1% that make money at trading unless you particularly want to (endlessly, and it will be…) debate the issue. A better use of time and curiosity in my view would be to start asking questions that get you onto whatever that minority percentage might be.

 

[_coda]

Thanks for the heads up.

A better use of time and curiosity in my view would be to start asking questions that get you onto whatever that minority percentage might be.

I've been curious about what the various success/failure ratios quoted are based on, and how they were measured.

Do they include the one-time dabblers as well as the serious? Do they cover only day traders or the whole spectrum?

Answers I'd still love to have, but a side issue to the real business.

 

[new_trader]

Not much difference

On sites like these, however, where you would expect to find a different take, many people imply they are successful day traders.

EXACTLY!

IMO: Day trading is like a speeded up version of investing. You make & lose money much faster and that is about the only difference.

 

[Splitlink]

I doubt many would be at all bothered by anyone else's definition or description of their activities. If they are, they're in the wrong game.

It's been debated before, but when you get down to it - all that process is concerned with is semantics and subjective opinion – which is perfect for bulletin boards, but the real world issue is whether trading is making you money. If it is, who cares what it’s called?


So to answer your question “Who is Right?” - you don’t really care if it’s 10% or 5% or 1% that make money at trading unless you particularly want to (endlessly, and it will be…) debate the issue. A better use of time and curiosity in my view would be to start asking questions that get you onto whatever that minority percentage might be.

Precisely. Who cares what others think? They must have a reason of their own to insinuate that it's not as good as what they do.

Split

 

[Trader333]

Do people really acheive this over the course of a day?

Yes they do and there are several on this site. The best example (in my view) is to look at many of the trade execution posts given by Grey1. He literally makes thousands of dollars almost every day and posts his trades on here for all to see.


Paul