Why aren't there more long term investors?

[qwertyuiop1]

Why aren't there more long term traders/ investors?

Why aren't there more long term investors?

As far as i can gather from this site, most people aren't long term investors.

Suirely it's less demanding that day trading or holding a position just for a few days?

Weekly analysis would do the trick.

 

[Mathemagician]

An investor is generally considered to be a long-only buy and hold forever type. The issue that I think most have with "investing" is that it has drawdowns that can be enormous and very long compared to a more active approach, even though this is obviously not publicized well.

jj

 

[0007]

Why aren't there more long term investors?

As far as i can gather from this site, most people aren't long term investors.

Suirely it's less demanding that day trading or holding a position just for a few days?

Weekly analysis would do the trick.

Long term investment requires patience, sustained confidence and ability to look well over the horizon. Ok for Warren Buffet - but he's in a different class to me. As i've become more proficient my investment timescale has reduced. I find it easier to trade short term with my system and my returns come in quicker - suits me psychologically.

My records show that any trade kept longer than about 20 days doesn't make any extra money for me, and this period is gradually reducing which suggests my trading style is still evolving. This still allows plenty of freedom without the stress and concentration involved with day trading. Weekly analysis is too infrequent for me psychologically - though that's what i've done in the past quite successfully. EOD daily i find is just right.

I think "what is less demanding" is whatever works best for you and the only way to find out is by doing.

 

[qwertyuiop1]

An investor is generally considered to be a long-only buy and hold forever type. The issue that I think most have with "investing" is that it has drawdowns that can be enormous and very long compared to a more active approach, even though this is obviously not publicized well.

jj

I'm not sure I'd agree with that.

I'm referring to holding something for maybe a number of months - or maybe a year something.
And having entry/exit signals to ride that (hopefully) long term trend.

Drawowns can be limited as well.
E.g. Use a trailing stop-loss to identify a trends collapse.
Or - use discretionary judgement to identify the breakdown of a trend.
Ofr use whatever is desirable.

SUrely it is % drawdowns that are important - and not nominal.
I don't see why % drawdown would be increased just because we are dealing with a loinger time-frame.

Basically - long term trend-following/investing can be identical to shorter timeframe trend-following except it requires faer less attention.
MAybe n hour a week or something iof you were to do weekly analysis of charts to identify breakouts/breakdowns etc.

Principles of position sizing can also be adapted for longterm investing.

So that's the advantage of doinfg it longterm i.e. requires very little time.

So if i ask my question aniother way - what is the overriding advantage of swing/day trading above the approach I outlined above?
And think about it - even if you prove that returns aren't as good with long-term holding (which can be disputed) - given the extra hours involved in shorter trading, can it really be justified?

 

[Mathemagician]

I hold positions for longer than you describe and I'm most definitely a trader not an investor according to just about anyone's standards. Rather than getting caught up in the definitions, perhaps it's best if we just forget about what is/isn't investing and get to what you're really asking, which is "why aren't there many long-term traders here?"

I'd hazard a guess that many long-term traders don't spend all day in front of a computer and don't chase after some holy grail of an entry/exit indicator. Thus, no real point in hanging about.

jj

 

[qwertyuiop1]

I hold positions for longer than you describe and I'm most definitely a trader not an investor according to just about anyone's standards. Rather than getting caught up in the definitions, perhaps it's best if we just forget about what is/isn't investing and get to what you're really asking, which is "why aren't there many long-term traders here?"

I'd hazard a guess that many long-term traders don't spend all day in front of a computer and don't chase after some holy grail of an entry/exit indicator. Thus, no real point in hanging about.

jj

YEs - teh definitions of investor /long term trader is not important.
You're right in that I am asking why theer aren't more long term traders - particularly given it requires far less time.

I don't understand what you are tying to say thouigh when you say "Thus,no real point in hanging about"
DOes that mean you agree or disagree with me?

 

[mp6140]

YEs - teh definitions of investor /long term trader is not important.
You're right in that I am asking why theer aren't more long term traders - particularly given it requires far less time.
QUOTE]
============================================================

dad had shown me, starting back in the days of the "soes bandits" how computerized trading led to people trading shorter and shorter timeframes --- when computerized trading first was REALLY starting to move along, about 1995 - 1998, the overwhelming majority of people who invested in stocks, INVESTED in them, because it was expensive to buy and sell and even harder to do. Having said that, there WERE people who traded the shorter terms, but the difficulty in doing that, along with attendent costs, pretty much kept the situation "in house" with the larger institutions.

around 2000, the stock market realized that computers and "home traders" was something that WAS, and they werent gonna stop it (although they passed a lot of rules and regs to try !)

Only a few years ago, forex trading was essentially impossible for the "normal" retail trader, as there was no way to access the marketplace unless you had "scads" of money, became an "institution" yourself and traded that way (which is why dad is incorporated and runs a hedge fund and a few trusts !)

so this brings us to the present time -- aside from the drawdowns that were mentioned and very real, the mindset of those sitting in front of a computer is, for lack of a better concept, FAST -- and since the computer and its connecting data feeds are FAST, so is the mindset of most traders.

BUT NOT ALL --- many traders do "swings" which are longer term trades and the forex market lends itself ADMIRABLY to that type of action because currencies tend VERY STRONGLY to move in a channel, first moving down to the bottom of the channel and then making their way back to the top, where they "usually" bounce back down to the bottom and repeat the trip again, like a cog railway climbing a mountain, letting everyone off, and then making the trip back down ---- while the train is climbing up to the top, one goes LONG, and when the passengers leave and all the new passengers who want to go back down to town get in, we now SHORT !

its a fairly simple concept, with the only difficult part being knowing when the train is ACTUALLY at the station, and not just taking on water a few miles south of the peak !

at least thats how dad explained it, and hes fairly good at those things

mp

 

[MrGecko]

less demand for regular cash flows.

 

[Mathemagician]

YEs - teh definitions of investor /long term trader is not important.
You're right in that I am asking why theer aren't more long term traders - particularly given it requires far less time.

I don't understand what you are tying to say thouigh when you say "Thus,no real point in hanging about"
DOes that mean you agree or disagree with me?

You asked a question, and questions are not something that to my knowledge I am able to agree or disagree with. So, we're exploring the question you raised without prejudice as best we can.

jj

 

[nine]

The answer is two fold.

. longer term people probably don't spend long on the board.

. if you can overcome the issues you can make a lot more money shorter term (you can risk x% 6 times per day instead of 10 times per year).

 

[Splitlink]

Why aren't there more long term investors?

As far as i can gather from this site, most people aren't long term investors.

Suirely it's less demanding that day trading or holding a position just for a few days?

Weekly analysis would do the trick.

There are lots of long term investors, but this is a trading site and does not cater for them. It's a different ballgame. If you are interested, try The Motley Fool.

Split

 

[Splitlink]

The answer is two fold.

. longer term people probably don't spend long on the board.

. if you can overcome the issues you can make a lot more money shorter term (you can risk x% 6 times per day instead of 10 times per year).

Those who have large amounts of capital do not, always, feel comfortable risking it in the trading ring. There are far better risks to be had by holding shares. IMO, these are to be had in good growth shares. These are, usually, low cap and, therefore, low volume. Not suitable, in all cases for trading.

Did you know that Next PLC, was down to a few pence in the days when George Davis was there?. I didn't have the nerve to get them at that price, but I got them for under 180p. This was a company that had well over 100% growth over 5 years and MORE in cash than the company was valued for! How would you trade a company like that? Buy today and sell tomorrow? If you could get a decent spread, the market is too fickle from day to day for investors to stomach that.

There are going to be more of those around over the next few years. Everyone is going for the FT100 shares and the "elephants", as Jim Slater described them.

Split

 

[Jack o'Clubs]

There are lots of long term investors, but this is a trading site and does not cater for them. It's a different ballgame. If you are interested, try The Motley Fool.

Split

Quite right. My time scales have lengthened considerably, and my approach has become much more fundamental for various reasons (essentially those in your next post...). I'm more profitable, it' s less time intensive, and personally more satisfying when you hit a 'home run' after some decent fundamental analysis. Lots of opportunites in the current market conditions, as well. I've found less to be interested in on T2W as my arc has moved from 'trader' to 'investor'. Endless threads on scalping index futures are simply not interesting to me now, and I generally spend my forum time on Motley Fool. Maybe Sharky and the team should consider a new site to take on the Fool for those whose time horizons are longer than a few days...

 

[Splitlink]

Quite right. My time scales have lengthened considerably, and my approach has become much more fundamental for various reasons (essentially those in your next post...). I'm more profitable, it' s less time intensive, and personally more satisfying when you hit a 'home run' after some decent fundamental analysis. Lots of opportunites in the current market conditions, as well. I've found less to be interested in on T2W as my arc has moved from 'trader' to 'investor'. Endless threads on scalping index futures are simply not interesting to me now, and I generally spend my forum time on Motley Fool. Maybe Sharky and the team should consider a new site to take on the Fool for those whose time horizons are longer than a few days...

Hi Jack o'Clubs

I mentioned Next PLC and Jim Slater in the same post because I was reading his "The Zulu Principle". He cited Next as a bargain share and gave all the reasons for buying it. It was, then, a penny share because of some problems with George Davis, who left.

I looked at Next and it had gone up to somewhere between 150p and 200p, I forget the price, exactly, and it still looked great with lots of cash and no debt. That book cost me 19 quid! Jim Slater has been a hero to me, since!

Split

 

[Jack o'Clubs]

Hi Jack o'Clubs

I mentioned Next PLC and Jim Slater in the same post because I was reading his "The Zulu Principle". He cited Next as a bargain share and gave all the reasons for buying it. It was, then, a penny share because of some problems with George Davis, who left.

I looked at Next and it had gone up to somewhere between 150p and 200p, I forget the price, exactly, and it still looked great with lots of cash and no debt. That book cost me 19 quid! Jim Slater has been a hero to me, since!

Split

Agreed, his principles along with those of Martin Zweig have stood me in good stead! I subscribe to Company Refs in fact, which is not cheap (and to an extent could be in part replicated using 'free' screens elsewhere), but does help me pick out some cracking companies. I'm not sure I agree with his theory on stop losses (ie doesn't bother with them if he feels the fundamentals are in place) - because I think there is a place for marrying a combination of fundamentals - for shortlisting companies to invest in (or short) - and TA for timing. Works for me, anyhow.

 

[chump]

I'm an investor for wealth and a trader for wages and interest. Investor has nothing to do with buy and hold regardless of performance unless you want it to have.
Monthly and weekly charts are enough for investing and the rest is risk management.
The problem for many people is they really do not understand that the closer you look the less you see and they confuse activity with effective financial management as surely when you're doing 'something' it's got to be more productive than doing nothing . LOL

 

[qwertyuiop1]

There are lots of long term investors, but this is a trading site and does not cater for them. It's a different ballgame. If you are interested, try The Motley Fool.

Split

Ok - maybe I should not have used teh word 'investor'.

Lets replace it with long term trader.
i.e. Prepared to stay in a position for months as long as the trend stays with them as opposed to days.

THey still look at the same looking charts
i.e. If you were to take away the timeframe from a chart, a 5 minute chart would look the same shape with supposrt/resistance points just like a weekly chart or whatever would have.

For a long term trader, they will still have their steups,buy signal,exit signal.stop loss, position sizing etc.
Basically - they have everything a short term trader has with one big difference.
It takes a fractrion of teh time to do it
i.e. maybe an hour a week or less.

Someone mentioned that as a short term-trader they get to do far more trades
i.e. the implication being more trades = more money.
What that poster is forgetting is that due to closing out trades more quickly they minimise returns.

Ye s- a long term trader will have far less trades - but will also most likely have significantly higher returns oh each winning trade - hence not the need to trade more frequently.

SO - as far as I can see, long term trading uses all the techniques of short term trading without the need to put in anywhere near the same amount of time - and still generates equally good returns.

SO I am baffled as to why people do it over teh short term.

As i say - I'm not saying anyone is wrong or making a mistake to doing it over teh short term.
But I am curious as to what their reasons are for doing it short-term versus long term.

I still don't see the overriding advantage for short term versus long term given teh amount of hours required for long term trading if teh extra profits aren't there to compensate.

 

[chump]

One of the benefits of short term trading is you can make your running expenses from it and that leaves you able to get the full effect of investing which comes from not taking your money out too quickly and giving it the chance to run past every little twitch in the market...you can even be long and short the same instrument which afterall is only what the market often is across different timeframes...and of course the underlying concept also reflects what's happening to the market...that is large money buying a stock and periodically taking a protective option rather than sell it at every market twitch and other similar strategies.

 

[Jack o'Clubs]

Ok - maybe I should not have used teh word 'investor'.

Lets replace it with long term trader.
i.e. Prepared to stay in a position for months as long as the trend stays with them as opposed to days.

THey still look at the same looking charts
i.e. If you were to take away the timeframe from a chart, a 5 minute chart would look the same shape with supposrt/resistance points just like a weekly chart or whatever would have.

For a long term trader, they will still have their steups,buy signal,exit signal.stop loss, position sizing etc.
Basically - they have everything a short term trader has with one big difference.
It takes a fractrion of teh time to do it
i.e. maybe an hour a week or less.

Someone mentioned that as a short term-trader they get to do far more trades
i.e. the implication being more trades = more money.
What that poster is forgetting is that due to closing out trades more quickly they minimise returns.

Ye s- a long term trader will have far less trades - but will also most likely have significantly higher returns oh each winning trade - hence not the need to trade more frequently.

SO - as far as I can see, long term trading uses all the techniques of short term trading without the need to put in anywhere near the same amount of time - and still generates equally good returns.

SO I am baffled as to why people do it over teh short term.

As i say - I'm not saying anyone is wrong or making a mistake to doing it over teh short term.
But I am curious as to what their reasons are for doing it short-term versus long term.

I still don't see the overriding advantage for short term versus long term given teh amount of hours required for long term trading if teh extra profits aren't there to compensate.

It's about recycling capital quickly and effectively using leverage. Example: if you're a forex trader with £1000 to play with and 100x leverage, you can take some reasonable position sizes to generate a daily income (sure you can get wiped out quickly too, but just making the point and assuming competence...). More to the point, by closing out intra-day you bear none of the financing costs. For a long-term trader/investor then you bear the financing cost of gearing, and arguably you need more capital to get going - all of this has to be built into your return assumptions, as does the point about drawdowns. If you were taking a long-term view on EURUSD, for example, you'd need to be able to finance the moves against you which could be significant, and you certainly wouldn't be using maximum leverage. You then look at the average newbie poster to T2W who has a couple of grand to play with at best and you can see why making fractions of a percent trading forex intraday on a highly geared basis is more attractive than investing that money for a few months looking for a 10-20% return or similar. You do need some capital to invest effectively long-term, which is why its mostly the old farts on T2W (me, chump, Split!) who are doing it!

 

[chump]

It's about recycling capital quickly and effectively using leverage. Example: if you're a forex trader with £1000 to play with and 100x leverage, you can take some reasonable position sizes to generate a daily income (sure you can get wiped out quickly too, but just making the point and assuming competence...). More to the point, by closing out intra-day you bear none of the financing costs. For a long-term trader/investor then you bear the financing cost of gearing, and arguably you need more capital to get going - all of this has to be built into your return assumptions, as does the point about drawdowns. If you were taking a long-term view on EURUSD, for example, you'd need to be able to finance the moves against you which could be significant, and you certainly wouldn't be using maximum leverage. You then look at the average newbie poster to T2W who has a couple of grand to play with at best and you can see why making fractions of a percent trading forex intraday on a highly geared basis is more attractive than investing that money for a few months looking for a 10-20% return or similar. You do need some capital to invest effectively long-term, which is why its mostly the old farts on T2W (me, chump, Split!) who are doing it!

Cheeky. I'll have you know I'm just coming into my prime although I accept I'll have to peak one day