Day trading is definitely more profitable and safer than Swing / Position trading

[victor123]

Hi,

I think Day trading is definitely more profitable than Swing / Position trading provided the following are true.

(1) The trader is equally adept in Day / Swing / Position trading.
(2) The same level of risk is taken.
(3) While day-trading the trader does not overtrade.
(4) The trader only takes high probablity and low risk trades with a high winning ratio and average profit to loss ratio. This calls for patience and generates less trades.
(5) Average trade profit is high (i.e. slippage does'nt eat most of the profits).
(6) Funds 50k - 1 million

The reason why I think Day trading is better than Swing / Postion trading in the above circumstances are as follows.

(1) You avoid risk of overnight exposure.
(2) Can take advantage of leverage.
(3) Compond profits more quickly
(4) Overall exposure is much less reducing risk to your account.

Do you agree or disagree ?

 

[Mathemagician]

I disagree. Each has its place and purpose in a well-constructed portfolio.

jj

 

[Trader333]

4) The trader only takes high probablity and low risk trades with a high winning ratio and average profit to loss ratio. This calls for patience and generates less trades.

How do you determine this ?

I also disagree because one of the key things you cannot do day-trading is position compounding and this is where massive money is made by professionals. Also if you factor in volatility and position size accordingly to that the risk evens out for both in my view.


Paul

 

[fifty2aces]

Assuming you have a daytrading system with the same risk/reward ratio and winrate as your swingtrading system, the daytrading one will be more profitable, as you will get more opportunities to trade. I wouldn't say the daytrading is "safer", as the drawdowns should be similar in magnitude, and overnight moves can go in your favour as easily as they can go against you.

The reason daytrading systems may not be as profitable is the higher number of commissions paid - if you only have a narrow edge, this will significantly impact your profitability. Also, daytrading systems are less scalable - eventually you may be looking to take positions which are "too large" for the market, meaning you'll get slippage, which will mean lower profits.

Obviously there's psycological issues as well- people are more likely to overtrade if they are trading intraday, and having less time to make decisions is more likely to result in irrational actions.

 

[tune]

one of the key things you cannot do day-trading is position compounding and this is where massive money is made by professionals.

Would it be fair to say that pyramiding your profit into a succesful trending trade would achieve something similar if day trading?

 

[Trader333]

Would it be fair to say that pyramiding your profit into a succesful trending trade would achieve something similar if day trading?

Unlikely in my view as trends during the day rarely last long enough to do this.


Paul

 

[gamma]

I believe one has to quantify to get some perpective.
In day trading it is possible to get 30/50 points quite regularily but it would be very difficult to compound this as in a day trading system you effectively are trading in a mini trend and at times against the major trend.

 

[new_trader]

Hi,

I think Day trading is definitely more profitable than Swing / Position trading provided the following are true.

(1) The trader is equally adept in Day / Swing / Position trading.
(2) The same level of risk is taken.
(3) While day-trading the trader does not overtrade.
(4) The trader only takes high probablity and low risk trades with a high winning ratio and average profit to loss ratio. This calls for patience and generates less trades.
(5) Average trade profit is high (i.e. slippage does'nt eat most of the profits).
(6) Funds 50k - 1 million

The reason why I think Day trading is better than Swing / Postion trading in the above circumstances are as follows.

(1) You avoid risk of overnight exposure.
(2) Can take advantage of leverage.
(3) Compond profits more quickly
(4) Overall exposure is much less reducing risk to your account.

Do you agree or disagree ?

DISAGREE!

(1) You avoid risk of overnight exposure.

Makes no/little difference if there is a STOP in place. Day trader exits their position and a swing trader puts in a protective stop.

(2) Can take advantage of leverage.

What difference does it make what type of trader you are? I can keep an ES position open until expiry as long as I maintain my margin or I can exit within seconds.

(3) Compond profits more quickly

This makes absolutely no sense.

(4) Overall exposure is much less reducing risk to your account.

Explain how you arrive at this conclusion.

 

[darktone]

Hi,

I think Day trading is definitely more profitable than Swing / Position trading provided the following are true.

(1) The trader is equally adept in Day / Swing / Position trading.
(2) The same level of risk is taken.
(3) While day-trading the trader does not overtrade.
(4) The trader only takes high probablity and low risk trades with a high winning ratio and average profit to loss ratio. This calls for patience and generates less trades.
(5) Average trade profit is high (i.e. slippage does'nt eat most of the profits).
(6) Funds 50k - 1 million

The reason why I think Day trading is better than Swing / Postion trading in the above circumstances are as follows.

(1) You avoid risk of overnight exposure.
(2) Can take advantage of leverage.
(3) Compond profits more quickly
(4) Overall exposure is much less reducing risk to your account.

Do you agree or disagree ?

i disagree with the above.
Howbout a position view executed with a 'daytrading' entry? Let alone all the other reasons not to daytrade such as having a life!

 

[Lightning McQueen]

I would tend to agree that day trading, not scalping but as you say a small number of trades per day of lets say two or three, feels safer than placing a trade lasting several days.

Whether it is more profitable is open to debate, day trading in theory should be able to extend the points available per day compared to swinging over several days but the swing trader cleans up if the instrument gaps significantly each day.

 

[victor123]

How do you determine this ?

I also disagree because one of the key things you cannot do day-trading is position compounding and this is where massive money is made by professionals. Also if you factor in volatility and position size accordingly to that the risk evens out for both in my view.


Paul

Perhaps I should have been more specifc. I am looking at a strategy which makes 30 -40 points average profit, sometimes a lot more. Average loss 5 points. Wins 70% of the times (should get better). Trades in the first 2 hours after pits open. If you are only watching one market you may get a one or two trades a week. So need to watch a few markets if you want to get a trade every day. The strategy is very selective as you can see. Although it opens and closes positions within a day, it won't require you to trade all day.

You can not practically do position compounding. But you can gradually increase the size of your bets on a daily basis (assuming most days are profitable).

I have done some basic mathes. The amount of profit it can generate over a year after slippage if I gradually increase my bet size seems to far exceed any swing trading strategy.

The best part is ...

(1) I am not trading all day.
(2) Overnight exposure is avoided.

IMO, the overnight exposure is a very important thing. Why ? If something drastic happens during the market hours you can get yourself out quickly even though with a big slippage. The slippage would be very high overnight as the volumes are too thin.

Also, what happens if something happens on the weekend when the markets are closed ? Or may be on a day when just US markets are closed ? We simply have no control on how much gap the Futures market would open with.

Generally speaking Day-trading is considered more risky because of factors like overtrading, low average trade profit (slippage takes it all) etc. But if done conservatively / selectively it can be far more profitable and safer than other styles of trading.

Let me have your views.

 

[victor123]

DISAGREE!

(3) Compond profits more quickly

This makes absolutely no sense.

(4) Overall exposure is much less reducing risk to your account.

Explain how you arrive at this conclusion.

What I meant by point (3) was that you can use the profits earned in one day to increase the size of your bets in the next day. This is because you are opening and closing postions on a daily basis. A Swing trader can do this less often. Generally speaking if you are using Speadbetting or buying / selling stocks you can do this more easily. While trading futures, I would normally increase the number of contracts when my account jumps by a certain value (which would be atleast the additional margin required to trade an extra contract).

Point (4) is derived from the general fact that a person holding a postion for 30 minutes is exposed to lesser risk than a person holding a position for 3 days. I don't know how it's derived in mathematics. As a layman...chances of something drastic and unfavourable happening is less in smaller time-window.

 

[Rhody Trader]

Point (4) is derived from the general fact that a person holding a postion for 30 minutes is exposed to lesser risk than a person holding a position for 3 days. I don't know how it's derived in mathematics. As a layman...chances of something drastic and unfavourable happening is less in smaller time-window.

While it might be true that smaller price movements occur during shorter timeframes, that doesn't necessarily equate to less risk. Position risk is largely determined by position size.

 

[fiftyfifty]

IMO, the overnight exposure is a very important thing. Why ? If something drastic happens during the market hours you can get yourself out quickly even though with a big slippage. The slippage would be very high overnight as the volumes are too thin.

Also, what happens if something happens on the weekend when the markets are closed ? Or may be on a day when just US markets are closed ? We simply have no control on how much gap the Futures market would open with.

Also, if you aren't going to hold overnight positions then your clearer should allow you to hold less margin for your position size allowing further leverage.

 

[FXSCALPER2]

Of course day trading is more profitable if you know what you are doing. It is too obvious. If I position trade and you day trade and we have 50% hit rate and 2:1 r:r ratio, for example, what makes a difference between our outcomes is how often we get to apply your edge, everything else being the same.

 

[darktone]

Of course day trading is more profitable if you know what you are doing. It is too obvious. If I position trade and you day trade and we have 50% hit rate and 2:1 r:r ratio, for example, what makes a difference between our outcomes is how often we get to apply your edge, everything else being the same.

I dunno bout that! If you aim at tight entries rr is slightly better than 2/1! coupled with far less screen time. Id rather take my chances swinging!

 

[fibonelli]

In one of his recent daily videos, John F Carter says the day trades pay the bills and the swing/position trades build the capital.

 

[dbphoenix]

In one of his recent daily videos, John F Carter says the day trades pay the bills and the swing/position trades build the capital.

I never have understood the either/or attitude that so many people seem to have . . .

 

[fifty2aces]

I never have understood the either/or attitude that so many people seem to have . . .

Indeed, it seems that the only thing most traders can agree on is that their method is best, an everyone else is doing it wrong.

 

[darktone]

I never have understood the either/or attitude that so many people seem to have . . .

Different caps! Different people! What is there not to understand?