timsk said:
Hi Split,
I may be labouring under a misapprehension about potential returns and their correlation to the time frame traded. Perhaps you or other subscribers can provide some insight and clarity. 😀
My impression is - and my feeling is that this is a view held by many members - is that the shorter the timeframe, the larger the potential returns. Conversely, the longer the timeframe, the poorer the returns. Damian makes the point that day traders might expect better returns than swing or position traders because they tend to put in many more screen hours. In other words, the potential return is commensurate with the time and effort put in. Many people would add that day trading carries more risk than swing or position trading, although this is both a separate topic and a contentious one.
Attached is a monthly chart of the FTSE 250 index from 2000 - 2006. At a glance, it is easy to see that returns in excess of 20% P/A are attainable from 2003 - 2006. However, someone who swing or position trades and manages similar returns in the first half from 2000 - 2003 will, arguably, be doing very well indeed. I'd be interested to hear how those of you who trade longer time frames faired in these first three years.
Looking at the chart, one can see why day traders might do better than than those trading longer term time frames. Day trading is dependant upon a degree of volatility rather than a strong and enduring trend. As we all know, trends are fickle things: there's no knowing how long they will last and deciding when they start and finish is a subject of endless debate. All of which must amuse the day trader, whose only real concern is finding a highly liquid market with enough volatility to trade his or her strategies. In fact, day trading is a doddle by comparison, isn't it? 😉
Happy New Year one and all!
Tim.
On answering Anley's post I was referring to his 25% expectation for trading. I expect far more than that, or I would not do it. The work is too much, especially at my time of life! Even so I made about 35% this year, which is no great shakes, I know, and a lot will laugh at the figure,
As far as buying and holding is concerned, you'll find my present ones on another thread. Ones I had during 2003 and sold in summer of this year, when I needed the cash for other purposes, have been LOOK, CNE, MTI, ASK Central (which was taken over and produced good profits in just a few months). I tend to, and still do, go for the cheaper priced stocks but I splashed out and bought BDEV, which gave me a great profit, just when I needed the cash most-
Now I'm building a portfolio, again, with less money and with two I did not sell, HYD, SUY and a spec penny one, GLD. This Christmas I bought RAB.
You are asking for results during a very good period for the markets. They are results that I, personally, do not think I would have been capable of by trading and they may not be repeatable in the future. I am, simply, incapable of committing the time and capital necessary to trading and I know that I would have been too nervous to stay in a trade for very long and would not have made the money I made with the portfolio, probably losing a lot of it. The most, (and very rare for me) that I have been in is nine days.
Now, why is it that (they say) 90% of traders fail? I think that it is too frequent trading. Probably, shorting stocks that are, fundamentally, good growth stocks. Things that a buy and hold man does not do. I watch the chart when I buy but I've done the figures first, and nosed around for opinions on other boards. That is what gives me confidence and peace of mind with my holdings.
The old adage again. Horses for courses! All the Best to All of Us for 2007
Split