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

[teezeike]

Fine post, Teddy.

I'd like a little feedback on some challenges and questions I have regarding day-trading.

1) PRESET TARGET: If I was seting a predetermined profit target on the trade, for example, 5%. I could reasonably achieve that on most trades. However, I'd have one trade that would be turning negative, I'd need intra-day support or resistance to hold to stay in. If there was no hold, the trade would become quite negative, with possibly a loss of 15% or 20%. That, in effect, wipes out three to five days of trading profits.

1. You must always use stop loss whenever you enter any position. Depending on your risk value.
2. Whenever you are comfortably green..shift your stop loss to lock-in. Say you are at 5% profit...you need to lock in at 0 or more %.
3. Intra Day support /Resistance do not work alone. You must have your entry and exit strategies.
4. Those traders that thrive are those that minimise their losses...any time.

2) LETTING IT RUN: A preset target, ensured small incremental wins, but was fragile with regard to overall P/L. Letting a trade run, although, had inherent risks. I'd seen many a nice gain evaporate like dew in a desert within seconds. If I had capped and closed, I'd have a profit. However, some days, I'd let the trade run, and pile up a huge profit.

1. Count small losses and have a big win is ageless in trading. But then you must always protect some profit while letting your profit run! Your exit strategy must inform you to stop the party.

3) INSTRUMENT: I was trading a highly volatile instrument, options on the $RUT. Slippage was rough. I'm considering trading other instruments, like the SPY or QQQQ, which have very small spreads.

1. Volatility is very GOOD to a day trader. Without that...no money will be made. $RUT is quite ok as well as $SPX...QQQQ.
2. What is important is to detemine your entry, exit and risk management.

In US markets, I've heard some day-traders say they prefer to trade the stock, less slippage, as opposed to the option, where you can spend a lot of the day just making up the spread.
1. Option is highly geared and is the den of succesful traders. You know your maximum isk from day 1. You must assign your option asap less time decay.


Questions to the successful day-traders:

1) Are you working with preset gain targets, even if the chart may allow for more of a run?

a. Depends on your strategy.

2) Are you letting trades run with the chart?
a. As in (1)
3) How critical are the instruments you trade? Can an accomplished day-trader trade most anything or are there certain specific instruments that allow you to find an edge?

a. Any instrument that is liquid is good...and volatile is the best.

4) Are you day-trading indexes, as opposed to stocks?

a. Indexes is really better in technical trading. Stock is better in fundamentals. Most liquid Stocks also follow indexes

Dont be.

 

[nine]

Fine post, Teddy.
Questions to the successful day-traders:

1) Are you working with preset gain targets, even if the chart may allow for more of a run?
2) Are you letting trades run with the chart?
3) How critical are the instruments you trade? Can an accomplished day-trader trade most anything or are there certain specific instruments that allow you to find an edge?
4) Are you day-trading indexes, as opposed to stocks?

This is just what I do and reflects my trading strategy and preferences for cash flow. There are lots of ways to skin a rat.

1. Yes, absolutely. My targets give a greater than 66% win rate for my selected entry patterns.
2. No.
3. Some are better than others: trendiness, liquidity, etc vary but the basic principles can be applied to many things.
4. Index futures although I would add currencies if I wasn't trading the asian session (weakest time for currency trendiness).

If you can find a pattern where targets will give you twice the amount risked with a 2/3rd win rate then even allowing for commission and slippage its just a question of how frequently your pattern occurs each day.

 

[RogerTheTrader]

Dont be.

Quick with the reply... and thanks.

I'm following most of what you're saying, and I totally agree, volatility is really a necessity of day-trading. No sense putting up a stake and then watching it go nowhere.

The $RUT, though, I found to be very dicey to day-trade. Lots of wild fluctuations on the BID/ASK. Normally, the spread is around .30 to .40. I'd monitor Implied Volatility and the price action. A news event would drive the ASK price, but barely move the BID. Saps are diving in on the news and the spread would be 2.00. Fifteen minutes later, the ASK would normalize and if you had jumped on the news, you'd be upside down quite quickly.

I'd been in trades where it was going my way, but then I'd see a sudden drop in implied volatility and 70% of my gain could be gone in a second, before the price moved on the chart. The best gains came from breaks in support or resistance, and breaks in secondary support or resistance.

However, I'd seen days where the fluctuations were so wild, I was glad I wasn't in a trade.

Now, I'm using debit spreads and wide credit spreads, playing ranges, rather than the movement and I've stayed solvent, profitable and peaceful.

That is why I asked about the instrument. I'm going to look more into the SPY and/or another stock index with high liquidity and very tight spreads.

$RUT is tricky, also, due to the lack of any volume.

Now that I have a large group of spreads building profits through time decay and they take little maintenance, I'm looking at finding a "Go To" instrument to day-trade when time allows.

 

[RogerTheTrader]

This is just what I do and reflects my trading strategy and preferences for cash flow. There are lots of ways to skin a rat.

1. Yes, absolutely. My targets give a greater than 66% win rate for my selected entry patterns.
2. No.
3. Some are better than others: trendiness, liquidity, etc vary but the basic principles can be applied to many things.
4. Index futures although I would add currencies if I wasn't trading the asian session (weakest time for currency trendiness).

If you can find a pattern where targets will give you twice the amount risked with a 2/3rd win rate then even allowing for commission and slippage its just a question of how frequently your pattern occurs each day.

Thanks for the input, nine...

Just what I was looking for. Especially the answers to #1 and #2.

I'll find the instrument, looking for high liquidity and tight spreads. I haven't traded currencies and/or futures. I'll stick with options and stocks for the moment.

That's a challenge in this game. You can be hopping all over the place and never master one. When I get bored with profits from my current strategies, I'll dip my toe elsewhere.

Thanks again.

 

[fcmisc]

Correct.

Information(historical,current,future) moves the market in this order.

1. Historical...What was the outcome when it happened..before...9/11, Recession, Big discovery..(time tested)
2. Current..What just happened or happening..( Right Downs..., Rate Cut, Capital Infusion,...Bankruptcy)
3. What might happen...Rumours..."Buy the Rumour Sell the Fact"..Bear Stern to be bought by Chinese Bank...Warren Buffet to invest in Whatever...

It would take a great skill set and solid plan to navigate these short term than mid-long term. Long term news should be stale...short term very HOT. Its accurate interpretation is the SKILL that gives first strike advantage.

I'm afraid I have to disagree again. As an example, before the 7/7 attacks on London, smoke was pouring out of the tube stations way before the markets reacted. The police were all saying it was an electrical fault. But that obviously wasn't true. All you had to do was make sure you were switched on, and buy a few hundred bunds.

Do you have any examples of clear cut mid term trade signals? I'd be interested to learn more about this area as allI know about is short term trading.

 

[victor123]

I can't quite get this

Many people say that you can not or should not put a huge amout of money in day-trading as this itself could cause slippage or result you not getting decent fills. So, large funds look for longer term trades. But traders in many of the biggest institutions regularly day-trade with very large sums of money. Do they not get affected by the issue of scalability in day-trading ?

 

[fcmisc]

Many people say that you can not or should not put a huge amout of money in day-trading as this itself could cause slippage or result you not getting decent fills. So, large funds look for longer term trades. But traders in many of the biggest institutions regularly day-trade with very large sums of money. Do they not get affected by the issue of scalability in day-trading ?

It depends on what you mean by "size".

If you're an individual, then making a grand or two a day can provide an excellent living. But if you're a fund, then a grand or two is barely going to cover IT costs.

If you can find a few strategies that aren't scalable individually, that doesn't mean that the total income from the portfolio won't buy you a nice car, house, high class escorts etc...

A lot of what institutional traders is about market making and hedging positions. They aren't speculating on direction, but providing a service to the end user.

 

[RogerTheTrader]

Many people say that you can not or should not put a huge amout of money in day-trading as this itself could cause slippage or result you not getting decent fills. So, large funds look for longer term trades. But traders in many of the biggest institutions regularly day-trade with very large sums of money. Do they not get affected by the issue of scalability in day-trading ?

I'm not sure what the answer is to your question. But I would suggest using the same capital per trade.

One danger of day-trading is losing on one trade and increasing stake on the next. You can blow a crater in your account quicker than you can say, BLIMEY!

Having daily targets and loss limits will keep you in the game.

 

[darktone]

Many people say that you can not or should not put a huge amout of money in day-trading as this itself could cause slippage or result you not getting decent fills. So, large funds look for longer term trades. But traders in many of the biggest institutions regularly day-trade with very large sums of money. Do they not get affected by the issue of scalability in day-trading ?

Depends what your trading and what you mean by 'size'. Whatever it is make sure its liquid! Size depends mostly on entry style and risk tolerance.

 

[moneymachine]

day trading

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 am a former "local" of NYMEX and I can tell you that I am absolutley convinced that long term trading is more profitable and less stressful than day trading I went the Traders Expo here in New York last week and hear Bo Yader speak to this issue. He said in the long run long term trading is much better than day trading. So my opinion is yes day trading is fun but if you start to focus on the objective of making money start attuning yourself to the long term trades.

 

[theroguetrader]

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 ?

1) If you TRADE WITH THE TREND - and have the stop in the " CORRECT PLACE " - you wont need to worry whats going on with the rest of the financial world... !!

2) dont follow number 1 - the " leverage " will finish you off anyway ........ !!

3) compound LOSSES MORE QUICKLY....... !!

4) You have MORE exposure on a day trade than a long term one ...!!

The ONLY reason you think a day trade is more profitable is because of F E A R .... !!


The markets are, have ALWAYS been and ALWAYS will be about upside potential V downside risk - !!

or what we humans would call GREED - V - FEAR......... !!


stay in for longer trades (especially when starting off) - its a LOT less stressful, and once you learn the rules, then you can start to slack off a bit .... !!

 

[de123]

come to page 7, will read evrything, its an interesting tread...i have to say,...

Position trading, was good to me at stocks, and few in forex, never had done when overleveraged if traded oil etc...but then again, u might become 2 confident and put a lot in one thing, which might go the other way (at scalping u go out imediatly, no problem) but if the market is not 24/5, u might be screwed, so i dont trade anything that isnt 24/5,...and some rules when trending, only add to wining postions must be inplace,...it can be also devastating if u dont,...so basicly,...

when trending/swinging
positive
1. coumpounding profits
2. no overtrading
3. locking profits
4. low leverage

negative
1. Gaps if not 24/5
2. adding to a loosing position
3. low ratio of wining trades

daytrading
positive
1. high ratio of wining trades
2. fast money
3. no gaps

negative
1. overtrading
2. spread, slipage
3. overleveraged

One more thing,...when trending, if the first sl hit, and then reenter and if the second hit, then scalp to bring back some money and then look for another setup to reenter...the hardest thing if market goes your way is locking profits
and being patient and adding to a wining postion, after retesting some previous R or S....ow whatever suits for u....

But if u are doing stocks, or futures or anything that isnt 24/5 (i aint), then have in mind,...that ususaly Gaps will hapen if there was a change in forex,..ofocourse u will then try to hedge it with forex, and if u ****en ur self, and dont hold it, then u might do some crazy stuff, which if u didnt market will reward u...it happen to me twice actually....Nevertheless i am still Alive and still am asking my self which aproach should be the best,...FOR ME.

 

[mp6140]

Mp -- Personally, I Like The Italian Combo !

DAY TRADING --- less drawdowns, faster accumulation of equity, reduced overall risk,

SWING TRADING ---- larger pip accumulation, LARGE drawdowns which reduce amount of margin one can use and therefore reduce amount of lots used in trade, longer waiting time to hit "tp" and increased stress on reverses.

to be honest, I use both !

i like to set a tp point a week or so in the future, more as a game I play with than for any reason (those who know me are aware that I hit a tp point within one pip of its reversal point consistently) and while this is happening, I then am free to play any or all timeframes as a daytrader, cause i enjoy not being overly bored.

OR -- one can choose ANY variation wished for ---- set a trade with the trend, take profit at the normal intraday reversal periods and reverse your trade, take profit on that reversal and now play the next reversal. Thats one way, or you could simply HOLD your initial position, open new trades to play the reversals, or play the reversals on EACH usable timeframe.

I believe one can make more equity faster by daytrading (as you eliminate the times when your money is in a negative situation) but daytrading is for the more experienced trader, which leaves playing the higher timeframes (and 30 min is not bad for the newer trader) the only game he/she should be trading in.

my opinion of course, but I have been doing it since Caeser was a pup, so have seen a few things.

enjoy and trade well

mp

 

[teezeike]

DAY TRADING --- less drawdowns, faster accumulation of equity, reduced overall risk,

SWING TRADING ---- larger pip accumulation, LARGE drawdowns which reduce amount of margin one can use and therefore reduce amount of lots used in trade, longer waiting time to hit "tp" and increased stress on reverses.

to be honest, I use both !

i like to set a tp point a week or so in the future, more as a game I play with than for any reason (those who know me are aware that I hit a tp point within one pip of its reversal point consistently) and while this is happening, I then am free to play any or all timeframes as a daytrader, cause i enjoy not being overly bored.

OR -- one can choose ANY variation wished for ---- set a trade with the trend, take profit at the normal intraday reversal periods and reverse your trade, take profit on that reversal and now play the next reversal. Thats one way, or you could simply HOLD your initial position, open new trades to play the reversals, or play the reversals on EACH usable timeframe.

I believe one can make more equity faster by daytrading (as you eliminate the times when your money is in a negative situation) but daytrading is for the more experienced trader, which leaves playing the higher timeframes (and 30 min is not bad for the newer trader) the only game he/she should be trading in.

my opinion of course, but I have been doing it since Caeser was a pup, so have seen a few things.

enjoy and trade well

mp

Hi Mp,

You are right.

I wonder how someone can setup a long term uni-directional trade. Market keeps changing everyday...even with big picture in view.

The problem with the BIG picture is that you see only the forest...Not the trees. It is a good vision but unclear. Money game must be played with clear mind and vision.

I do 2 types of trade:

1. Daytrading employing market structures, logic and timing. Never Scalping.

2. Long term trading employing carry trade. A market neautral specification. In same sector, I buy strenght and sell weakness. Same amount. If the market goes down...the weak will go down faster than the strong If the market goes up... the stong should be up faster than the weak. This way I trade the big picture and don not care how the market goes. Over time you will see that the relative performance gap is always in your favour.

Rgds

 

[mp6140]

Hi Mp,

You are right.
I wonder how someone can setup a long term uni-directional trade. Market keeps changing everyday...even with big picture in view.

The problem with the BIG picture is that you see only the forest...Not the trees. It is a good vision but unclear. Money game must be played with clear mind and vision.
Rgds

=======================================================
Im not gonna quote how YOU trade because its how YOU trade and while Im sure its a good method, its not germain to the threads original question, BUT - - - - - using some very available chart overlays (the SHI channels and support and resistance) you can pretty much hit your tp points, or at least exit and wait to see if the currency decides to breakout or bounce down from the top channel point ---- see the attached jpeg for some idea of what Im talking about.

armed with that, one can set up a fairly clear longer term hold, based on the fact that the currency BOUNCES off the top and bottom of the channel, UNLESS something rather drastic moves it.

the problem, as can be seen, is that during that grand move up or down, the currency likes to visit a number of houses of ill repute, and depending on its ego driven needs, may give the impression of "random" movement, when in fact we know its simply following its libido and its address book, from one house to another, but will end up at home sooner or later !

its the way forex works, always works and should continue to work, cause thats the mechanics of it !

the wonder of forex is it exhibits the behavior of the best "channeling" stocks, because thats precisely how it moves through the forest, kinda ignoring the trees in the long term !

enjoy and trade well

mp

 

[shanghaikahn]

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 ?

Dead on