Why do we do this?

[FetteredChinos]

I'm getting more and more inclined to think that day-trading/short term trading only really benefits 1 set of people, and that is the brokers, and their partners in crime, the spreadbet companies, unless you are one of the elite being consistenly profitable intraday. (anyone care to step forward???)

a large chunk of my intermediate term profits (when they occur once in a blue moon) goes to funding their extravagant lifestyle.

so this morning, instead of knuckling down to work like a good pair of trousers, i had a look at some monthly ( ) data.

the idea was simply to follow the intermediate-to-long term trend on a monthly basis with both a stop and a target level.

here is something i have been tinkering with on the SP500. (data from yahoo, so a bit unreliable, but it gives the right ideas).


basically, compare the current months close with the close X months ago (7-15) work pretty well.

trade in the direction of this difference (ie if we have been on a bull run, assume it will continue, at least for the current month).

have a stop-loss, and a take-profit order , both set up at 1.5 x average recent range.

frankly, this has returned approximately 1,800 big SP points since the mid 90s. (18,000 tradeable points)

about 150 a month since volatility picked up in 1995-ish, with a max drawdown in the region of 1500 points, which for a long term strat is pretty tidy.


even deducting the cost of carry (which in the states is less than in the UK) it seems to snaffle the big moves, without being annoyed by noise.

since the TP and SL orders increase profitability, Stopping and reversing at these levels will increase profitability further.


it does beg the question, why trade in the very short term, with all the stress it entails?i appreciate it can be hugely more profitable, and i know the ovenight risk is eliminated, but these things even out over time.



FC

 

[rossored]

I actually don't find daytrading stressful at all (but then I do trade in v.small size atm). Infuriating at times, but not stressful.

However, the thought of holding positions overnight / long term does stress me out.

So thats my perspective right now.

Anyone else?

 

[trendie]

FC,

I would disagree regarding intra-day not being profitable. ( I speak from hope, rather than experience ).
But there is the, again, the psychology of it all.

Ending the day with a result, brings a sense of immediacy of feedback.
( imagine trading weeklys, and being in profit for 5 days, only to close at b/e or a small loss in last 2 days !! )

Also, smaller time-frames, and smaller stop-losses result in a sense of achievement.
Long-term, obviously, the bigger chunks are better.
Speaking personally, I need a sense of "bagged" profits, or definite losses, rather than a vague, "well my trade is profitable, but it might still go against me" type situation.

Anyway, there is nothing to stop traders using multiple strategies.

Your post reminds me of the book, "Where are all the customers yachts".

 

[Racer]

it does beg the question, why trade in the very short term, with all the stress it entails?i appreciate it can be hugely more profitable, and i know the ovenight risk is eliminated, but these things even out over time.

I much prefer longer term swing trading, I will do day trading if I see the chance.
As long as I have shorts and longs I can sleep quite well holding overnight positions. It is only when I am completely short or long that I worry!

 

[jmreeve]

I think the bulk of profitable short term traders are trading strategies that provide liquidity to the market and have the bid-ask spread as an edge.

The problem with this style of trading is it is not that scalable.

Long term trading can provide far bigger £ returns but with smaller percentage terms.
If you want to make a lot of money trading long term stragies then design a really good trading program,
set up a hedge fund and get rich from the 20% management incentive.

 

[dbphoenix]

Why choose? My longer-term positions were taken two years ago, but I daytrade the NQ. It's not necessary to be all of one focus.

 

[Roberto]

I'm getting more and more inclined to think that day-trading/short term trading only really benefits 1 set of people, and that is the brokers, and their partners in crime, the spreadbet companies, unless you are one of the elite being consistenly profitable intraday. (anyone care to step forward???)

There are many here making a living that way, FC, (or at least, there were until fairly recently: I think there've been a lot of disappearances of late), but few will come forward because nobody's in a hurry to volunteer for ridicule and insults from the loud-mouthed, opinionated and ill-informed folk who can't bear to admit the possibility that all their prejudices might turn out to be mistaken. I'm afraid that's just how it is here at the moment, and I'm by NO means the only one who thinks so.

 

[JTrader]

rossored -
I actually don't find daytrading stressful at all (but then I do trade in v.small size atm). Infuriating at times, but not stressful.

However, the thought of holding positions overnight / long term does stress me out.

So thats my perspective right now.

Anyone else?

Hi rossored

I agree - that I find holding overnight positions is considerably more stressful than daytrading - as the potential gaps in price and the losses that follow are much bigger - and i have less control of my positions if holding overnight. However, I do find daytrading relatively stressful.

Cheers

jtrader.

 

[FetteredChinos]

There are many here making a living that way, FC, (or at least, there were until fairly recently: I think there've been a lot of disappearances of late), but few will come forward because nobody's in a hurry to volunteer for ridicule and insults from the loud-mouthed, opinionated and ill-informed folk who can't bear to admit the possibility that all their prejudices might turn out to be mistaken. I'm afraid that's just how it is here at the moment, and I'm by NO means the only one who thinks so.

Eh up Bobby,

im not doubting that for one moment at all, i was just making a point regarding my own situation.

i dont think i have what it takes to trade intraday profitably a reliable amount of time (2 good weeks, 1 bad). and when i look at the overall picture, the results are fairly similar to my background methods that are a comparative stroll in the park.

so i ask myself "why put myself through the mill for minimal extra return" ?

incidentally, something based on the method i attached in the very 1st post seems to work pretty well on weekly data on the SP500, so with scalability the net return is a lot greater, but that is by the by.

just calling a pitchfork a pitchfork.

FC

 

[TWI]

Day trading, I have no doubt at all , provides the best returns for account equity. I exist on day trading returns and if I have an overnight position it is because I have failed to exit on the close at a scratch. I run longer term systems on index/fx and commodities but the returns here are small change compared to the scalping.
jmr is spot on with what he is saying the professional day traders are really liquidity providers and the bid/ask is our edge. I do not know how long this will continue as it has tightened up a lot over the past two years. I think the paper players (IB's and HF's) have realised they can save a lot in good execution so there is far less cream to go around far more locals. I have had to change the way I trade completely over this period of time and now employ automation to execute on certain legs which was not possible before but for me now becomes an essential element, you really cannot afford to miss a tick these days.
Ulltimately the exchange and the clearer are the winners, I know of very few day traders who make more than they pay in costs. It is a hard game when you see how much you pay each month to exchanges who generally treat you with disdain when you phone up with a problem.
Also have to agree with jmr on another point, the richest "traders" I know are the ones running hedge funds that take their 1.5-3% management fee every year and 20% profit share..Just calculate that on 1bln+ under management. This is true success in the marketplace.

 

[dbphoenix]

nobody's in a hurry to volunteer for ridicule and insults from the loud-mouthed, opinionated and ill-informed folk who can't bear to admit the possibility that all their prejudices might turn out to be mistaken..

Indeed . . .

 

[TWI]

dont think i have what it takes to trade intraday profitably a reliable amount of time (2 good weeks, 1 bad). and when i look at the overall picture, the results are fairly similar to my background methods that are a comparative stroll in the park

It is not that you do not have what it takes, it is just that you have not discovered the methodology. You are up against a lot of competition and unless you have the tools and spot on execution I think you have had it. I spend £1700 per month for my setup, I would not spend that if I thought I could get away with paying less.

 

[a320]

I agree with rosso... Plus last week on the ES we had 106 points of intraday tradeable ranges compared with just 13 points from Monday to Fridays close.

You only need to capture a quarter of the intraday ranges & you've effectively doubled the weekly range..

CJ

 

[ddunne82]

my 2 cents

I gotta throw in my 2 cents here - i think mixing it up between intraday and swing is IMHO the way forward. Looking at it from a purely logical point of view, unless you have another source of income, it must be incredibly hard to start of as a trader swing trading because your capital is tied up for relatively long periods of time.

Personally, i trade a few MT systems on the indexs and FX and play the squeeze daily on the eminis. This gives me a steady-ish income from the eminis and then i use the swing systems as my yearly/semi bonus. i have found this works as you dont spend you time staring at the screen with your swings gonig mad at the intra-day swings. Keeping an eye on it every day, update the records, file the paperwork and hopefully hgave a nice bonus come march.

But circumstances dictate how you can trade - i am single, no dependants, get wasted at the weekends and can live comfortably this way. Maybe my ideas will change when i get stuck on a chain and ball!!!

 

[dbphoenix]

Personally, i trade a few MT systems on the indexs and FX and play the squeeze daily on the eminis. This gives me a steady-ish income from the eminis and then i use the swing systems as my yearly/semi bonus. i have found this works as you dont spend you time staring at the screen with your swings gonig mad at the intra-day swings. Keeping an eye on it every day, update the records, file the paperwork and hopefully hgave a nice bonus come march.

There's also the issue of pyramiding, which I find far easier to do trading longer-term. With the indexes, for example, there were many ops during the first leg to add to the position. Ignoring this aspect gives a false impression of the profit discrepancies between daytrading and swing trading.

 

[Salty Gibbon]

Intra-day trading is not so very difficult.

Personally I have found the route to success through focussing on my own behaviour and modifying it ( considerably at times ) to bring it into line with what is required for success at intra-day trading.

Strict self discipline is the key but this is not always easy to achieve.

I believe that mastery of oneself can be rather more difficult than mastery of the markets.

 

[FetteredChinos]

badoing - £45 on the office sweepstake on the Cheltenham Gold Cup.

nice start to the weekend..

 

[mofo]

gotta go with a320 on this one. 4 paper trades on RIMM this pm ( i know, i know, not real trading, pyschological issues etc, but couldn't guarantee requisite screen time today for real trading, so just honing the old technique). 5 trades, one loss, $1.6K up before commissions. Check it out, just retracing a bit after a good climb today. Position trading much harder on the old pyscho issues IMHO

 

[mofo]

and up she goes again

 

[Salty Gibbon]

Try trading RIMM for real Mofo.

Different story.