Day traders ONLY - a continuing study

[coyotte]

As I stated prior -- I must trade differently to others.
I just go for small bites of the cherry -- but on a consistent basis.

With stocks like LHG and OXR there is more often than not a greater than .05cent move on a intraday, 2day and Fri/Mon basis.

At around the $3.00 level you only need 2000 shares @ $6000 to make a .05c move to come out with a $100 profit less (with IGmarkets) $6+$6 Brokerage.

The KEY is imo to keep STOPS tight and do not hesitate to act.
The moment price moves against U jump ship -- even if in profit -- take the smaller profit and wait for another entry --- I give both the above shares a .02cent leeway -- both the above shares can be traded long/short which is what U need.

So my bottom line is--- stick to a handful of stocks in the $1.00 to $4.00 range with reasonable daily volatility and ample volume --- but get to know them! -- follow them on 15min charts over a month or so and you start to get the FEEL of them.

Keep my trading targets at a realistic level relative to the "s/t trading bank" and be satisfied with nibbles rather than a feast.

I still maintain Position Trades (BHP AMP WOW etc) Medium Term 10/30 days Target Trades (ILU) -- Day Trading is just another part of the group.

The RMD trade was closed on Tues @ breakeven less brokerage -- I rarely trade this stock as it lacks daily volatility -- but thought the probability for a small down move was high (I was Short).

Love this bit from Mark Douglas (page 35) -- could start a thread on this:

The first trader uses a simple, possibly even mediocre trading technique, but posses a mind-set that is not susceptible to subconsciously distorting market information, hesitating, rationalizing, hoping, or jumping the gun.
The second trader is a phenomenal analyst, but still operating out of the typical fears that make him susceptible to all of the psychological maladies that the other trader is free of.

----- CHOOSE --- and WHY ?


cheers

and a Very Merry Christmas to one and all.

 

[coyotte]

Actually whilst not exectly "day trading" but a maybe a point to start from is the IC forum Weekly Comp.

These Guys/Gals (around 20) select a stock for a week -- Open Monday to Close Friday -- they are required to provide a chart with reasons why the selection was chosen -- just ordinary people -- ordinary charts and selection methods -- without the luxury of being able to board and jump ship when they want to.

They can manage to make profits of over 10% in a week, often in a day.
There would be around five who consistanly manage a 3% to 5% profit week after week --- all low tech stuff -- no over analysis -- just everyday short term traders -- If they can manage that with the restrictions invoked then in my books these are you're fair dinkum traders --- no pie in the sky stuff here.

But I just find it strange that the Gurus on this site maintain that on avg the best you can expect is a 50/50 strike rate (in that case just throw a dart) whilst a few of the competitors in this comp just go on week in, week out picking winning stocks --- they probably haven't run into the Gurus to realize that they should not be doing that, poor inocent buggers.


Note : although I had closed the position on Tues (carrying a large SHORT over nights can be unhealthy) RMD did carry on to hit and even exceed the stated target on Thurs and Friday --- so really no high tech, over analysis need be involved.


Cheers

 

[ducati916]

coyotte

These Guys/Gals (around 20) select a stock for a week

There would be around five who consistanly manage a 3% to 5% profit week after week

Immediately we can see that only 25% manage a consistent return out of the 20 "super traders". How many are these 20 expressed as a % of IC as a whole?

This is in a consistent Bull market of 4yrs duration now.

But I just find it strange that the Gurus on this site maintain that on avg the best you can expect is a 50/50 strike rate (in that case just throw a dart) whilst a few of the competitors in this comp just go on week in, week out picking winning stocks

Because simply that is what the numbers return.
However, if in this TINY sample, there is a significant deviation, then post the link to the results, and let me have a nosy about. I would be quite interested to see their results at/towards the end of May this year, as one example.

jog on
d998
http://ducati998.wordpress.com/

 

[constable]

As I stated prior -- I must trade differently to others.
I just go for small bites of the cherry -- but on a consistent basis.

With stocks like LHG and OXR there is more often than not a greater than .05cent move on a intraday, 2day and Fri/Mon basis.

At around the $3.00 level you only need 2000 shares @ $6000 to make a .05c move to come out with a $100 profit less (with IGmarkets) $6+$6 Brokerage.

The KEY is imo to keep STOPS tight and do not hesitate to act.
The moment price moves against U jump ship -- even if in profit -- take the smaller profit and wait for another entry --- I give both the above shares a .02cent leeway -- both the above shares can be traded long/short which is what U need.

So my bottom line is--- stick to a handful of stocks in the $1.00 to $4.00 range with reasonable daily volatility and ample volume --- but get to know them! -- follow them on 15min charts over a month or so and you start to get the FEEL of them.

Keep my trading targets at a realistic level relative to the "s/t trading bank" and be satisfied with nibbles rather than a feast.

I still maintain Position Trades (BHP AMP WOW etc) Medium Term 10/30 days Target Trades (ILU) -- Day Trading is just another part of the group.

The RMD trade was closed on Tues @ breakeven less brokerage -- I rarely trade this stock as it lacks daily volatility -- but thought the probability for a small down move was high (I was Short).

Love this bit from Mark Douglas (page 35) -- could start a thread on this:



----- CHOOSE --- and WHY ?


cheers

and a Very Merry Christmas to one and all.

Similar to my own style in relation to small bites of the cherry and tight stop losses.
Last week i placed 14 trades 6 wins avg $525 and 8 losses avg $242.68
expectancy 2.16
$1036 taxable for the week
Last 8 weeks avg $1265 per week exp 1.55
Nothing spectacular but rarely used any funds to purchase as most positions were daily.
low light bottom drawed inl holdining 80000 avg .296
tas 200000 avg .206
not particulary concerned with either of these stocks as both are fundamentally sound imo worth holding long term.
Generally pretty quick to sack a stock but as the above two examples reveal I still fool myself sometimes! Not sure having the luxury of funds to hold is a good thing sometimes but fundamentals have to be fairly upbeat b4 i take the stock on board.

 

[Kauri]

Why?

This is a more accurate interpretation of the 95% lose statistic. You may place 100's perhap's 1000's of paper trades and win a high % and think, hell son, I'm in the 5%.................not until you can overcome the relentless grind of daytrading. Nothing worse than being asked everyday by the Missus, how much money did you make today, when you've just been mauled by some Futures contract.


jog on
d998

I have always wondered about this 95% lose-5% win statistic that is so often quoted. Is it founded in fact, is there a study anywhere that backs this up or is it something that has been repeated so often that it has become fact? Just curious..

 

[It's Snake Pliskin]

I have always wondered about this 95% lose-5% win statistic that is so often quoted. Is it founded in fact, is there a study anywhere that backs this up or is it something that has been repeated so often that it has become fact? Just curious..

Kauri,

Good question. I think the reality is nobody would know. It would be impossible to measure. Unless brokers have stats on the issue - maybe.

 

[Bobby]

Bobby

There is no one answer that will appease everyone. Speaking for myself, the day-to-day pressure of needing to maintain an emotional equilibrium necessary to exercise impartial discipline, with sums of money that were significant to myself............were exhausting.

At times it was impossible. I had a series [live] of six or seven quite major losses, and my confidence was at a very low ebb. I did manage to come good, but, it took a lot to keep placing trades.

The temptation is to cut back on size.
On the face of it sensible, and recommended by many authors.This to my mind is a MISTAKE.

Why?

Simply because, you start a pattern of losing with size, and winning small. It's simply another variation of ignoring [or poor discipline] on stops. There are other variations on the same theme, but in essence, as previously stated, the psychological grinding will wear down 95% of daytraders.

This is a more accurate interpretation of the 95% lose statistic. You may place 100's perhap's 1000's of paper trades and win a high % and think, hell son, I'm in the 5%.................not until you can overcome the relentless grind of daytrading. Nothing worse than being asked everyday by the Missus, how much money did you make today, when you've just been mauled by some Futures contract.

Why don't boxers, or contact fight sports fight full contact everyday?
Same reason traders shouldn't trade everyday.
Do yourself a favour, and let the mind heal itself between trades.

jog on
d998

Hello Duc,

Thanks for being so candid, I do endorse your reasoning on not cutting back trade size.
Yep the burden of trading each day would encumber most, maybe a touch of megalomania could be the key ? :

Just on stops ~ did you place them in the market or use your mental dexterity.

Being questioned by a spouse everyday on how did you go $Dear$ would generate enough stress to cloud each new trade, Uck !

Appreciate your input.
Bob.

 

[ducati916]

et al

In regards to stops, definitely mental. The reason being that the MM in the US do run stops, and you can very often see them do it watching LevelII screens it is that blatant.

Therefore, if I believed the move was real, and not just a gunning, I would exit.............of course, sometimes gunning can become real.

In regards to the 95% stat. there was a large study done in the US utilising Schwab, or someone, that pretty much confirmed the stat.

There was also this study;
http://faculty.haas.berkeley.edu/odean/papers/Taiwan Performance/Who Gains from Trade 040407.pdf

Daytrading is hard graft baby!

jog on
d998

 

[It's Snake Pliskin]

Being questioned by a spouse everyday on how did you go $Dear$ would generate enough stress to cloud each new trade, Uck !

Bob,
This is an important aspect which is more than annoying. It is psychological destructive pollution. It would lead to divorce based on my character.

 

[barney]

Bob,
This is an important aspect which is more than annoying. It is psychological destructive pollution. It would lead to divorce based on my character.

Howdy Snake, and merry Xmas to you ................. I've gotta give my wife a wrap based on your comment ........... As you know I've made a couple of monumental stuff ups in the last few months, but at no time did my wife give me a hard time, or put pressure on me to stop trading ............ I am one of the lucky ones ............ All the best to all for the festive season (Remember .... one glass of water for every three beers ............. thats gona be a lot of water I'm gona have to drink (JK, but it is a good time of year)

 

[Bobby]

Bob,
This is an important aspect which is more than annoying. It is psychological destructive pollution. It would lead to divorce based on my character.

Snake I fully agree with you on this, I've tried marriage ~ ( great for some ) but not for me.
Its all those little things that used to bug me no end, like at my own BBQ being told this *You're not having another can are you Bob?* Gee's now I'll have as many as I like!

Bottoms Up Bob.

 

[It's Snake Pliskin]

Snake I fully agree with you on this, I've tried marriage ~ ( great for some ) but not for me.
Its all those little things that used to bug me no end, like at my own BBQ being told this *You're not having another can are you Bob?* Gee's now I'll have as many as I like!

Bottoms Up Bob.

Bob and Barney,

I have a nice little Jap wife who is very supportive and not selfish.

Barney you sound as if your wife is a gem

 

[happytrader]

I have always wondered about this 95% lose-5% win statistic that is so often quoted. Is it founded in fact, is there a study anywhere that backs this up or is it something that has been repeated so often that it has become fact? Just curious..

Hi Kauri

From the traders I know that have come and gone I would definitely say its true. Also we had a poster here named Rex who had worked for Etrade pretty much testify to the drop out rate.

The most significant quality that I have identified with successful traders is an indomitable spirit or inner mastery. No all day screen watching or negotiating with stop losses and entries because that would amount to being dominated by the market or some inner thought. Traders also benefit from not getting too comfortable. Most noteable is the absence of projecting blame, shame and making rude noises to all and sundry when things don't go as expected or no one agrees.



Cheers
Happytrader

 

[barney]

Bob and Barney,

I have a nice little Jap wife who is very supportive and not selfish.

Barney you sound as if your wife is a gem

Absolutely Snake ............ Supportive, unselfish, giving, caring, compassionate, long suffering .............. seriously I would run out of space if I had to write all the words I could think of (she occassionally gives me a bit of stick when I need it, but boy she puts up with a lot b4 it gets to that stage) .............. I have met a few japanese ladies, and they mostly seem to have great humility, which I reckon is one of the greatest attributes a person can have ................

Hi Bob, being out of a relationship is the best way to be, if the relationship was not mutually rewarding ............ (enjoy those extra few beers)

I know I've gotten off topic here, but what the heck ...Its christmas!!!!

PS Merry Xmas Coyotte .............. I like the way you approach trading ... I've learned some good stuff from your "concepts" (I have my copy of "Adaptive Analysis" now, so the xmas break wont be wasted!!!)

 

[qaz]

But I just find it strange that the Gurus on this site maintain that on avg the best you can expect is a 50/50 strike rate (in that case just throw a dart) whilst a few of the competitors in this comp just go on week in, week out picking winning stocks --- they probably haven't run into the Gurus to realize that they should not be doing that, poor inocent buggers.

I think they're basically trying to say that psychology and money management is much more important than your entry rate and that you can make fantastic returns with a completely random entry system if your psychology and money management is spot on.

 

[soultrader]

I am strictly an intraday trader and never hold any positions overnight. I also trade mainly the first 60 minutes only which allows me to stay away from the screens.

This might be slightly off topic but I wanted to hear you guys opinion. It seems like more and more day traders are automating their trading. Some go far as to say automation is the only way to make money day trading. As a pure discretionary trader I find myself a rare breed.

However, I believe there is an edge with both discretionary and automated trading. Discretionary allows better intraday entries if one is a good tape reader. This means you will be taking minimal heat... in the long run you end up saving a ton of points. On the other hand, automated trading helps one take emotions out of trading. (not entirely but more than discretionary)

What are your thoughts on automated vs discretionary? What type of trader are you and which do you prefer? Thanks.

 

[ducati916]

Discretionary allows better intraday entries if one is a good tape reader.

Which assumes that you can identify the correct trend direction in short timeframes. The Law of large numbers dictates 50/50. However, there will always be the odd outlier [person] that can overcome this statistic. If you are such a person, then daytrading will be profitable.

Of far more interest though is assuming you are only a 50/50 trader, can you still be profitable?

The answer is yes. But it has nothing to do with trading prowess, more, psychological indomitability. This is where daytraders fail. The mental stamina required will burn out 95%......the 5% psychological monsters will do well.

Also if 9/10 trades are winning trades, then a discretionary methodology will work just fine assuming that you are not tick scalping.

If you are tick scalping, you need zero brokerage to overcome the losses when they occur [and possibly a 7/10 success rate]

The Prop. Shops tend to automate with 100's to 1000's of envelope [bracket] trades [as an example of automated] and this pretty much results in being net profitable. However you have, low brokerage, and robust platforms capable of firing off hundreds of trades more or less instantly. The average retail trader will not have these two advantages.

jog on
d998

 

[soultrader]

Theres a great article by Brett Steenbarger where he talks about trading psychology. (Located here) He mentions how trading is more than just mastering your own psychological weakness. Most traders fail because of the lack of market understanding and knowledge.

I agree with this comment. I think alot of traders never fully understand the market or markets they are trading. In order to be successful in intraday trading, one must be an expert in the underlying financial instrument he is trading. This means knowing exactly where key S&R levels are, understanding the characteristic of the contract/stock, etc...

I trade the YM dow minis exclusively. I have learned to specialize in it which has helped me tremendously. I understand the personality of the traders behind it, average volume, price acceptance vs price rejection, certain psych levels it likes to respect, the flow of the tape, pivot points it respects, etc... All of these information has helped me identify which trading strategies I need to apply successfully everyday. By looking at the flow of the tape and volume within the first 5-10 minutes I am able to identify a trend vs rangebound day. I am not a scalper... my trading style is more of a one shot one kill type.

Therefore, a trader can be psychologically strong. But without the proper education and training, he is doomed to fail. Of course there are other important factors such as money management, discipline, etc...

I think scalping is a technique best left for floor traders. I know of traders who consider themsevles a scalper by trading 3-4 times and taking 1 point of the S&P. However, i believe a more appropiate phrase should be a trader taking profits too soon. Scalper for me refers to a trader making over 30-50 trades a day on high volume taking a few ticks here and there. Although we can obtain pit noise live and direct, floor traders still have an advantage on us: the visual. They are able to spot the top teners (top ten big floor traders) step in and out before us.

A friend of mine told me when I was 20.... "To make real money, be an expert in something." In trading, I believe one needs to be an expert in the market he trades and an expert in his own trading metholodogy.

Good luck

 

[ducati916]

soultrader

Well unfortunately I do not rate Brett Steenbarger at all.

I agree with this comment. I think alot of traders never fully understand the market or markets they are trading. In order to be successful in intraday trading, one must be an expert in the underlying financial instrument he is trading. This means knowing exactly where key S&R levels are, understanding the characteristic of the contract/stock, etc...

What moves a futures contract [or a stock]

*sentiment
*price psychology
*news
*arbitrage
*hedging
*cash market
*interest rates
*inflation
*etc

These are by definition future events, and unknowable. Thus, Brett is waffling total nonsense.

I trade the YM dow minis exclusively. I have learned to specialize in it which has helped me tremendously. I understand the personality of the traders behind it, average volume, price acceptance vs price rejection, certain psych levels it likes to respect, the flow of the tape, pivot points it respects, etc... All of these information has helped me identify which trading strategies I need to apply successfully everyday. By looking at the flow of the tape and volume within the first 5-10 minutes I am able to identify a trend vs rangebound day. I am not a scalper... my trading style is more of a one shot one kill type.

See above.

Daytrading is really about assuming risk..........and managing that risk in a compressed timeframe. That's it. All you need know is;

*I will assume risk on my entry signal
*I will close the trade at my stop
*I will exit on my exit signal

That's it. Nothing else required. You need know or understand absolutely nothing further than this. If you can do this all day long, with large amounts of money, in a calm manner, you'll do very well.

jog on
d998

 

[nizar]

A friend of mine told me when I was 20.... "To make real money, be an expert in something." In trading, I believe one needs to be an expert in the market he trades and an expert in his own trading metholodogy.

Too true