Do you have to day trade to trade full time?

Mr J · 9 September 2009

Trembling Hand said:
The reason is actually no different to why all others are also not profitable. Most people cannot trade. The problem with daytrading is that it just compresses their failure into a quicker time frame.

That is 300 trades in 2 months = blow up where a swing trader takes 1 year to do that. Same result though. :

Yes, the main factors is lacking skill, but day trading is tougher than swing trading. Faster decisions, less precision, higher fees, higher exposure of letting one trade affect others etc.

shortlist said:
Shame it didn't go into why day-trading was less profitable than longer trades.

Don't read too much into it, it's not much of a study as the samples are insignificant. There is some value in it though, such as showing how most do not use sensible management, and that chance was a larger factor (that a single trade could account for the majority of winnings).

Not so long ago I would have said that day trading is certainly more profitable than swing trader or longer, if skill is equal. This would be due to much higher volume with day trading. Something I overlooked is the power of having money in play when we wouldn't otherwise be trading. Having money in play 24 hours a day goes a long way towards making up for lesser volume. I wouldn't be surprised if good swing traders outperformed most day traders.

Or is it all just maths?

Everything is about maths.

nulla nulla said:
1. The "time involved" is the key to any degree of success. If you are not prepared to put the necessary time in, stick to your day job, otherwise you will lose;

The necessary time yes, but that varies greatly. Some trading methods are time-intensive, some are not. It doesn't necessarily take a lot of time to trade, and I also don't think it necessarily takes a lot of time to learn how to trade decently.

James Austin · 9 September 2009

Losing Accounts

Eleven (11) of the seventeen (17) day trading accounts lost money. More importantly, all 11 accounts were traded in a manner that realized a Risk of Ruin of 100%. That is, 65% of these accounts would almost certainly
lose any and all funds put at risk in them.

Winning Accounts

Only six (6) of the seventeen (17) day trading accounts made a profit. Four of these six accounts realized a significant risk of ruin. Clearly, accounts that have over a 25% chance of ruin are not successfully traded accounts.

Conclusions (Day Trading)

There was only one successful day trading account in the 17 accounts analyzed.

Fifteen of the 17 accounts analyzed had a significant risk (probability of ruin over 27.6%) of losing all funds. Eleven of these 17 accounts had a 100% chance of ruin. That is, 65% of these accounts would almost certainly lose any and all funds put at risk in them. Five of the six accounts, which realized net profits, were no more than marginally profitable and realized a large percentage of their profits from a single trade.

a peak performance activity is day trading

PS
perhaps the above, signed by any who opens a trading account, would act as a reminder, a caution, to any aspiring day-trader . . . . or would it!?

Edwood said:
this may well have been posted before on ASF, apologies if it has but this looked as good a place as any for it

http://www.nasaa.org/content/Files/Day_Trading_Analysis.pdf

James Austin · 9 September 2009

Mr J said:
Don't read too much into it, it's not much of a study as the samples are insignificant. There is some value in it though, such as showing how most do not use sensible management, and that chance was a larger factor (that a single trade could account for the majority of winnings).

true, but still representative no doubt

Mr J · 9 September 2009

Only because we know that's roughly what to expect .

shortlist said:
I have no problem with the term gambling, and have gambled in the past, but the difference with the stock market is that you have many more variables to guide you to an educated decision, so if you lose your money most often it's lack of research or unsuccessful interpretation of data. If you lose your money on a lottery or a card game this is because 1) the outcomes are harder to predict and/or 2) there are fewer or no tangible factors contributing to the end result in cards or lotteries, as opposed to following the foreign policy of a country and making a forex decision based on a government press release.

Shortlist, 'gambling' means to wager on an event with an uncertain outcome. This literally includes trading and any other sort of investment, and can also be interpreted to mean any action with reward and risk (i.e. everything we do).

If we lose a lottery or card game, it isn't because the outcomes are harder to predict, in fact it's far simplier. We lose because of shorterm variance or negative expectation. If intelligent traders/investors took the same approach to a card game, they would be profitable there as well.

shortlist · 9 September 2009

Mr J said:
Only because we know that's roughly what to expect .

Shortlist, 'gambling' means to wager on an event with an uncertain outcome. This literally includes trading and any other sort of investment, and can also be interpreted to mean any action with reward and risk (i.e. everything we do).

If we lose a lottery or card game, it isn't because the outcomes are harder to predict, in fact it's far simplier. We lose because of shorterm variance or negative expectation. If intelligent traders/investors took the same approach to a card game, they would be profitable there as well.

Sure, like I said I have no problem with the word gambling. I'm just trying to make a distinction between two different forms of gambling. If I hear a piece of news that I know will send the yen down agains the dollar, I can use that information to make a decision - a gamble perhaps. But I cannot think of an equivalent analogy in cards or lotteries other than for the croupier to tell me when the Ace is coming up.

Real1ty · 9 September 2009

shortlist said:
Sure, like I said I have no problem with the word gambling. I'm just trying to make a distinction between two different forms of gambling. If I hear a piece of news that I know will send the yen down agains the dollar, I can use that information to make a decision - a gamble perhaps. But I cannot think of an equivalent analogy in cards or lotteries other than for the croupier to tell me when the Ace is coming up.

But what you think will send the Yen down is not always what happens.

You are not taking into account, in this hypothetical example, what is already built into the price. Obviously there is always a number that will move the market if it is good or bad enough but how often do you see news releases for the price to jump up and down before finding a direction?

How often do you see good news sold off?

Plenty.....

Mr J · 9 September 2009

They are the same, as for each we weigh up the risk, reward, and probability of success (if we're to be informed bettors). Like I said, everything is about maths, and 'gambling' is no different. Probabilities can be expoited to give a bettor a mathematical edge in almost any form of 'gambling'.

Lottery - possibly if the jackpot is high enough.
Cards - placing people on hand ranges, reading betting patterns, knowledge of hand strength against ranges etc.
Roulette - physics.
Blackjack - exploiting the variable distribution of cards (more high cards left in deck is good for the player).
Sportsbetting - too easy. Lines vary like the prices in the financial markets.

Interestingly, your example of using news is actually the least informed unless you can assign some rough probabilities to the outcomes (i.e. the chance it moves the way you want).

tech/a · 9 September 2009

Arguementum infinitum.

I cant understand the constant pondering.
Of course you can trade for a living without day trading and you don't have to scalp and you don't have to trade fut's.

You just need to know how to trade profitably.
Who cares if its one trade or 50 trades that make the $$s
Below is trades I am currently holding the oldest is a week old.
If you cant exist off of this sort of $$s then drop the mansion and live in a tent like the rest of us!

No I don't trade full time and I don't wish to.
No its not using $500k.

shortlist · 9 September 2009

Real1ty said:
But what you think will send the Yen down is not always what happens.

You are not taking into account, in this hypothetical example, what is already built into the price. Obviously there is always a number that will move the market if it is good or bad enough but how often do you see news releases for the price to jump up and down before finding a direction?

How often do you see good news sold off?

Plenty.....

I'm not talking about just news though. I mean longer-term analysis of government policies on wide-ranging issues. There are certain theories that help us to understand the way governments wil or must act, if we assume they are rational actors (and we do assume that). We can use these theories to interpret the actions of a government and allow us to see what its next action will be. None of this gets in the news for weeks afterwards.

shortlist · 9 September 2009

tech/a said:
Arguementum infinitum.

I cant understand the constant pondering.
Of course you can trade for a living without day trading and you don't have to scalp and you don't have to trade fut's.

You just need to know how to trade profitably.
Who cares if its one trade or 50 trades that make the $$s
Below is trades I am currently holding the oldest is a week old.
If you cant exist off of this sort of $$s then drop the mansion and live in a tent like the rest of us!

No I don't trade full time and I don't wish to.
No its not using $500k.

It's reassuring to know you can trade for al iving without day or scalp trading. I don't want to do it for al iving because I want to talk to other human beings through my week! But you have made me more positive about it.

Excuse newbieness, but why do you say that "not it's not using $500k" - should I be able to infer that from the chart? What kind of figures are you talking about? What's the 200,000? Looks scarily large to me. This is like kindergarten for me....

prawn_86 · 9 September 2009

shortlist said:
I'm not talking about just news though. I mean longer-term analysis of government policies on wide-ranging issues. There are certain theories that help us to understand the way governments wil or must act, if we assume they are rational actors (and we do assume that). We can use these theories to interpret the actions of a government and allow us to see what its next action will be. None of this gets in the news for weeks afterwards.

Bad assumption to make.

It looks to me as though you are confusing economics with the stock market. The stock market really doesnt care what the actions of the gov will be, unless it is a major fundamental shift. Even then it generally prices those things in before it happens.

The market is a leading indicator and more based on a collective group of opinions of what will happen, rather than what actually does happen. Hence why stocks are never 'fair' value all the time.

shortlist · 9 September 2009

prawn_86 said:
Bad assumption to make.

It looks to me as though you are confusing economics with the stock market. The stock market really doesnt care what the actions of the gov will be, unless it is a major fundamental shift. Even then it generally prices those things in before it happens.

The market is a leading indicator and more based on a collective group of opinions of what will happen, rather than what actually does happen. Hence why stocks are never 'fair' value all the time.

The market can only be a leading indicator in things it knows about though. And while I agree that the stock market doesn't care about the government's actions, specific companies and other governments absolutely do care.

Real1ty · 9 September 2009

shortlist said:
I'm not talking about just news though. I mean longer-term analysis of government policies on wide-ranging issues. There are certain theories that help us to understand the way governments wil or must act, if we assume they are rational actors (and we do assume that). We can use these theories to interpret the actions of a government and allow us to see what its next action will be. None of this gets in the news for weeks afterwards.

You were talking about news when you said this which is what i replied to.

shortlist said:
Sure, like I said I have no problem with the word gambling. I'm just trying to make a distinction between two different forms of gambling. If I hear a piece of news that I know will send the yen down agains the dollar, I can use that information to make a decision - a gamble perhaps. But I cannot think of an equivalent analogy in cards or lotteries other than for the croupier to tell me when the Ace is coming up.

You were giving an example of why it isn't gambling and my reply to you was that it is to some extent as while you might think the news will send the Yen lower, in your example, you don't know how much of that news release was built into the price, hence the price may not perform how you expect it to.

Call it gambling, risk, what ever you want but markets don't always act like they are "supposed to", hence the "gamble"

Real1ty · 9 September 2009

shortlist said:
The market can only be a leading indicator in things it knows about though.

How could the market know what will happen in the future?

They are expectations and they are either met or not.

tech/a · 9 September 2009

Call it gambling, risk, what ever you want but markets don't always act like they are "supposed to", hence the "gamble"

Those that cant profit consistently from Trading call it "Gambling"
People think business is a gamble.
Those that run business's call it business.
If something doesn't act like its supposed to then get out of it.
If it does then stay in it.

If you think its a gamble then you shouldn't be trading (or attempting to).

The 200K is an 18K trade 200000@9.6c.
Not that scary.

shortlist · 10 September 2009

tech/a said:
Those that cant profit consistently from Trading call it "Gambling"
People think business is a gamble.
Those that run business's call it business.
If something doesn't act like its supposed to then get out of it.
If it does then stay in it.

If you think its a gamble then you shouldn't be trading (or attempting to).

The 200K is an 18K trade 200000@9.6c.
Not that scary.

Thanks tech/a. This is the point I was trying to make. I have no problem with the term gambling, but I was just trying to make the case that there is a difference between putting $500 on a deck of cards and studying a company or a government or a specific stock for months.

prawn_86 · 10 September 2009

shortlist said:
The market can only be a leading indicator in things it knows about though. And while I agree that the stock market doesn't care about the government's actions, specific companies and other governments absolutely do care.

Yeh i agree with Reality here. Unless you have specific inside information, which relates soley to one stock (which is illegal although it happens), then the market is going to have priced in its expectations. The saying "the market is always right" has come about for a reason, due to the fact that it is based on expectations being met or not, rather than news as such.

And even if you did have inside info about a gov decision it would have to be a huge change of law or something to specifically effect companies. Most co's have too much going on at the micro level to be worried about minor macro factors.

It appears you are going for the top down approach, but unless you are investing in entire sectors, you will still need to drill down into each individual company. Hence why i prefer the bottom up approach, find a company that is undervalued, then look at any macro factors that may effect it.

I guess what i am trying to say, is there is no possible way you can know a peice of news will effect the market, as some expectations of that news have already being priced in.

shortlist · 10 September 2009

prawn_86 said:
Yeh i agree with Reality here. Unless you have specific inside information, which relates soley to one stock (which is illegal although it happens), then the market is going to have priced in its expectations. The saying "the market is always right" has come about for a reason, due to the fact that it is based on expectations being met or not, rather than news as such.

And even if you did have inside info about a gov decision it would have to be a huge change of law or something to specifically effect companies. Most co's have too much going on at the micro level to be worried about minor macro factors.

It appears you are going for the top down approach, but unless you are investing in entire sectors, you will still need to drill down into each individual company. Hence why i prefer the bottom up approach, find a company that is undervalued, then look at any macro factors that may effect it.

I guess what i am trying to say, is there is no possible way you can know a peice of news will effect the market, as some expectations of that news have already being priced in.

I don't think we really disagree here. I think we seem to have gone down a different track from what I was saying initially. First, I'm not talking about specific information about one stock, which is not something you could base a successful trading portfolio on anyway, and yes it is illegal and so it should be as well. By the way I like your top down/bottom down explanation.

I am talking about inferring future events in a specific industry or exchange rate based on government actions that might not seem obvious to everyone at the time. You say the market prices events in - but based on what information? Where and when did that information come from? I suppose what I am talking about would only pay off over very, very long-term time frames though as government policies became obvious to the market.

But this is just an idea. I have also looked at scalping and swing trading but if I do this it would be in specific sectors I have studies for a long time, and I am not there yet by a long way. When I read some of the analysis on this site I realise I am just starting school so it's demo dollars for a long time!

shortlist · 10 September 2009

Talking of scalping and swing trading - again from a newbie perspective - I understand when you buy shares your share order has to be filled. OK, so how long does that take? If I buy $X shares at 11:30 and they happen to go nuts and rise by 0.5% by 11:43 (same time frame I used the other day....unimaginative, I know) and I hit sell - how long till they sell? How is scalping possible if it takes hours to fill a share order, or does it take seconds? I'm sure it always depends on market activity, but in anyone's experience here, what's a likely amount of time to wait for a share order to be filled? Is it dependent upon size of the order?

And with all these variables, how can a scalper possible run a consistent profit?

Thanks.........!

And to emphasise how new I am to all this, can anyone tell me how I can check if anyone has replied to my posts on the threads I write in? I'm doing it from memory at the moment.

tech/a · 10 September 2009

Seconds.
guys like T/H can run many trades in a minute.
Perhaps he will post a scatter diagram of a typical trading period.

Do you have to day trade to trade full time?

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