Do you have to day trade to trade full time?

[prawn_86]

Firstly let me say you are on the right track by thinking about and trialling different options. I have been doing this for 3 yrs and only now feel i am starting to get my head around it. By no means are any of my answers definitive or even close to it.

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.

Answering the bit in bold: It is based on the market assumptions of what other people in the market think will happen. Nothing happens in secrecy, there are leaks etc, so market participants will have an idea of what is going on. EG any actual changes in law etc will be debated for a long time, not just changed instantly.

The problem with taking an ultra long term view based solely on news is that there are so many other variables effecting stocks. SUre one peice of news may have a long term positive effect, but in the short term stocks can go bust for other reasons. Look up the term 'survivorship bias'. In the end every company goes broke or gets taken over/sold off.

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.

Scalpers make money based on probabilites and patterns, more so than caring what the stock is. Its all about following somewhat predicatble 'herd' behaviour, and cutting their losses short when the odds go against them.

To subscribe to threads, up the top of each page click the 'thread tools' button then 'subscribe to thread'. This will then keep track of it it in your UserCP.

 

[shortlist]

Firstly let me say you are on the right track by thinking about and trialling different options. I have been doing this for 3 yrs and only now feel i am starting to get my head around it. By no means are any of my answers definitive or even close to it.



Answering the bit in bold: It is based on the market assumptions of what other people in the market think will happen. Nothing happens in secrecy, there are leaks etc, so market participants will have an idea of what is going on. EG any actual changes in law etc will be debated for a long time, not just changed instantly.

The problem with taking an ultra long term view based solely on news is that there are so many other variables effecting stocks. SUre one peice of news may have a long term positive effect, but in the short term stocks can go bust for other reasons. Look up the term 'survivorship bias'. In the end every company goes broke or gets taken over/sold off.



Scalpers make money based on probabilites and patterns, more so than caring what the stock is. Its all about following somewhat predicatble 'herd' behaviour, and cutting their losses short when the odds go against them.

To subscribe to threads, up the top of each page click the 'thread tools' button then 'subscribe to thread'. This will then keep track of it it in your UserCP.

Many thanks to tech/a and prawn_86 for all your help. Taking seconds to fill an order make sense now (thinking about scalping) as does the fact scalpers are simply looking for patterns and not caring about the stock. I did some scalping on a demo and it worked out reasonably well - only I presumed in reality it would take much longer to buy and sell so it's reassuring this is not the case and orders usually get filled quite quickly.

I found scalping fun, but I can see how it kind of precludes the implementation of lengthy studies of companies, etc. My plan is to start what I guess is the usual way - relatively stable blue chip equities, low risk, low profit, bought with my own money through a big online trader like Westpac. If things go well, I learn how the process works and my research/analysis pays off, I would "upgrade" to more sophisticated trades/investments over time.

Thanks again! + added this thread to subscriptions now.

I'll just add (in edit) to bring this thread back on subject, I can see the attraction of day trading, which if I am right is generally considered to be slightly longer-term than scalping. I think what intimidates newbies like me is keeping the shares overnight. This is the appeal of buying and selling before cocoa time.

 

[Out Too Soon]

I can't day trade as I have a slow satellite connection (backwards bloody country Oz) but I still hope to make a living eventually.
I have stuck on the border of my screen a goal "goal = $100 day avg ie ~$3100/mth"
At the moment I need more capital but I am half way there this month trading between 3 days & 12 wks. this is the first good mth in many many mths tho
4 yrs of on & off practice, eventually I will get there. You want to know my secret? I have set my goal & stuck it on the edge of my screen where I see it all the time

 

[Mr J]

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

In his "Nothing to Something" thread, he averaged a trade every 30 seconds. Quite amazing, considering the spread.

as does the fact scalpers are simply looking for patterns and not caring about the stock

Traders as a whole don't care about the stock. They're in it for the movement.

I found scalping fun, but I can see how it kind of precludes the implementation of lengthy studies of companies, etc. My plan is to start what I guess is the usual way - relatively stable blue chip equities, low risk, low profit, bought with my own money through a big online trader like Westpac. If things go well, I learn how the process works and my research/analysis pays off, I would "upgrade" to more sophisticated trades/investments over time.

Perhaps you shouldn't be looking to do things the usual way? You're also talking like an investor, not a trader, and you're not going to make a living (or even just a nice supplementary income) investing unless you have a serious amount of capital. I consider longterm investing to be a loser's game anyway, once inflation and variance is considered.

I can see the attraction of day trading, which if I am right is generally considered to be slightly longer-term than scalping.

Scalping is day-trading, just one the fast end of the scale. Day-trading contains a large variety of methods and timescales.

I think what intimidates newbies like me is keeping the shares overnight.

I used to think this was unnecessary exposure, but we gain a lot by letting our money work for us while we're asleep, out etc.

I can't day trade as I have a slow satellite connection (backwards bloody country Oz)

The regional areas are backwards, the cities are adequate. Slow by Euro-US standards, but our population density is just a touch lower, so it's to be expected.

 

[shortlist]

I can't day trade as I have a slow satellite connection (backwards bloody country Oz) but I still hope to make a living eventually.
I have stuck on the border of my screen a goal "goal = $100 day avg ie ~$3100/mth"
At the moment I need more capital but I am half way there this month trading between 3 days & 12 wks. this is the first good mth in many many mths tho
4 yrs of on & off practice, eventually I will get there. You want to know my secret? I have set my goal & stuck it on the edge of my screen where I see it all the time

Your system of $100 a day and sticking to goals sounds like a good idea to me. Presumable this is after tax and brokerage fees? I read somewhere on here that Trembling Hand (I think, apologies if wrong TH) said he didn't like to go below 1% loss per day, as he didn't want to have to catch up mopre than this on the following day - I think this is a smart rule to incorporate into your system as well.

As an aside, what capital are you requiring to return $100 a day? You can tell me to get lost if this is personal no worries at all.

 

[shortlist]

In his "Nothing to Something" thread, he averaged a trade every 30 seconds. Quite amazing, considering the spread.



Traders as a whole don't care about the stock. They're in it for the movement.



Perhaps you shouldn't be looking to do things the usual way? You're also talking like an investor, not a trader, and you're not going to make a living (or even just a nice supplementary income) investing unless you have a serious amount of capital. I consider longterm investing to be a loser's game anyway, once inflation and variance is considered.



Scalping is day-trading, just one the fast end of the scale. Day-trading contains a large variety of methods and timescales.



I used to think this was unnecessary exposure, but we gain a lot by letting our money work for us while we're asleep, out etc.



The regional areas are backwards, the cities are adequate. Slow by Euro-US standards, but our population density is just a touch lower, so it's to be expected.

You might be right about why go the "usual way" and I think it's just newbie nerves right now - tread carefully for a while and see how the feel of the process works out. The fluidity of the buying and selling, what's left after fees and taxes, etc. Like I said, my long-term goal would be to be more adventurous. Baby steps for now....

I also happen to agree with you about the trader/investor talk. I understand the distinction and I am aiming more to the trader side of things - short-term processes within a day perhaps. It's all new to me, but the demos I have run have all been mostly buying and selling without keeping overnight. I kept some spot gold on a longer-term basis and did well, but most equities were in and out and happy to take small profits/losses, which I think is the definition of a day trader??? THanks for your advice.......!

 

[tech/a]

(1) You need to complete your degree in trading. This will be self taught in the most part--yes you can engage tutors which will accelerate the process. To have a degree will take the mandatory 10000 hrs or 3 or so years. Part time even longer.
(2) To have honors you'll need a further 5000 or so hrs.
(3) Doctorate another 3 yrs or so.

At doctorate you'll be proficient and understand WHAT YOU NEED TO KNOW to be profitable--and you will be consistently profitable.
More importantly you'll know WHAT YOU DONT NEED TO KNOW.

Thats what takes the time and costs a squillion.

This is how simple it is but wont mean much without at least a degree.

Profit comes from one of 3.

(1) You trade more winners than losers.IE 70% win rate Winners and losers same value
OR
(2) Your accumulated winners far exceed the loss of your accumulated Losers. IE 35% winners but winners 5x the size of your losers.
OR
(3) A combination of 1&2

 

[shortlist]

(1) You need to complete your degree in trading. This will be self taught in the most part--yes you can engage tutors which will accelerate the process. To have a degree will take the mandatory 10000 hrs or 3 or so years. Part time even longer.
(2) To have honors you'll need a further 5000 or so hrs.
(3) Doctorate another 3 yrs or so.

At doctorate you'll be proficient and understand WHAT YOU NEED TO KNOW to be profitable--and you will be consistently profitable.
More importantly you'll know WHAT YOU DONT NEED TO KNOW.

Thats what takes the time and costs a squillion.

This is how simple it is but wont mean much without at least a degree.

Profit comes from one of 3.

(1) You trade more winners than losers.IE 70% win rate Winners and losers same value
OR
(2) Your accumulated winners far exceed the loss of your accumulated Losers. IE 35% winners but winners 5x the size of your losers.
OR
(3) A combination of 1&2

Thanks tech/a - and nice analogy with the degree structure (I've already got one doctorate so now I'm working towards another it seems....!) Do you believe in focusing on one specific sector or are you more of an "opportunist" when it comes to short-term trading?

I'm following the ASF September Stock Tipping Competition with some interest. I notice a little over 50% of tips made as of August 28 have made profit this month so far, with a few that are unchanged and some of course that have lost (if I recall about 30% of tips have lost value so far). I mention this because I note that many of the winners (just over half if memory serves) are in roughyl one area, in this case metals/mining.

I guess what I'm asking is: in your opinion is the protracted and deep study of a specific sector more worthwhile than simply picking up on whatever is doing well at whatever moment you're buying?

Thanks once again

 

[Frank D]

I guess what I'm asking is: in your opinion is the protracted and deep study of a specific sector more worthwhile than simply picking up on whatever is doing well at whatever moment you're buying?

In my opinion you need to diversify sectors and pick a number of stocks
in each.

But it’s not only about the stocks you choose, you should track the
indexes that make up those stocks.

The overall index of each sector will often provide ideal set-ups and
better timing strategies. It makes it much easier than tracking each
and every stock on a daily, weekly or monthly basis.

If the Index is setting up patterns I just simply move into those stocks,
not the other way around.

I track a number of markets, forex, and commodities, and for me it’s just
to difficult to track stocks individually.

The index will let you know when and where to trade.

Perfect examples were Financials from July, and currently oil
stocks (hopefully)

 

[shortlist]

In my opinion you need to diversify sectors and pick a number of stocks
in each.

But it’s not only about the stocks you choose, you should track the
indexes that make up those stocks.

The overall index of each sector will often provide ideal set-ups and
better timing strategies. It makes it much easier than tracking each
and every stock on a daily, weekly or monthly basis.

If the Index is setting up patterns I just simply move into those stocks,
not the other way around.

I track a number of markets, forex, and commodities, and for me it’s just
to difficult to track stocks individually.

The index will let you know when and where to trade.

Perfect examples were Financials from July, and currently oil
stocks (hopefully)

Thanks Frank. It sounds like you're at a much more sophisticated level of trading than I am thinking about! My basic plan as a total beginner is continue to run demos until more comfortable, then buy shares in X once I am confident an uptrend is en route, and then sell them shortly afterwards to see if I can make a small profit. Tracking multiple indices and stocks is way over my head right now. If it helps illustrate my level of inexperience, I did not even know a specific sector like metals/mining had its own index - you're saying the ASX has its own mining index?

As for profit, I don't want anyone to think I am being unrealistic here. I have read some newbies who write about how they intend to make 20% + and higher figures. My own basic research shows me 0.5% -2% is a bloody good result and I will be happy with that, frankly. In your opinion should I be able to make 0.5% - 2% on shares if I do my research and buy at the right time? Would the (relatively) consistent return of 0.5% profit on each trade be a realistic goal? I also would expect to lose a similar percentage of course, but less often, laws of entropy, etc. notwithstanding!)

 

[Mr J]

and then sell them shortly afterwards to see if I can make a small profit.

You may also consider holding on to them (or at least some of them) for a large profit .

 

[shortlist]

You may also consider holding on to them (or at least some of them) for a large profit .

I think the sell as soon as any profit is realised is another sign of newbie nerves, and the courage to hold for longer periods will hopefully develop as time goes on. I am not averse to holding longer - years even, but to start with I think it's going to be shorter bursts. How long have you been trading/investing?

 

[skyQuake]

Let your winners run or brokerage will eat you alive, esp for a retail trader trying to take 0.5~2%
Heck for the small caps, thats probably how much the spread is.

 

[shortlist]

Let your winners run or brokerage will eat you alive, esp for a retail trader trying to take 0.5~2%

If brokerage is often a set fee, would that not depend on the quantity of shares bought?

 

[Frank D]

. My own basic research shows me 0.5% -2% is a bloody good result and I will be happy with that, frankly. In your opinion should I be able to make 0.5% - 2% on shares if I do my research and buy at the right time? Would the (relatively) consistent return of 0.5% profit on each trade be a realistic goal? I also would expect to lose a similar percentage of course, but less often, laws of entropy, etc. notwithstanding!)

My own research is you can make 10-20% per Quarter, even more on rare occassions depending on the cycles in the market.

However, for you to achieve that you need to be buying the 'dips' and
exitting the peaks, the greater the dip the greater the peak.

That basically translates to trading 1 or 2 twice per quarter and Holding.

If the market doesn't dip then you need to wait, but that's why trading different sectors help, as
one sector is trending another sector is consolidating over a number of months providing a set-up
in the future.

The premise is you break up Quarterly timeframes like you break up daily timeframes and treat
each Quarterly timeframe as an individual time piece, and optimise the Quarter with lesser
timeframe set-ups.

Start from the top and then work your way down into entry set-ups using lesser timeframes:- Monthly, Weekly and Daily.

I just think it's too hard to be 'day trading' stocks and trying to take small profits, especially
when you are just starting out.

Enjoy the Journey.

 

[shortlist]

My own research is you can make 10-20% per Quarter, even more on rare occassions depending on the cycles in the market.

However, for you to achieve that you need to be buying the 'dips' and
exitting the peaks, the greater the dip the greater the peak.

That basically translates to trading 1 or 2 twice per quarter and Holding.

If the market doesn't dip then you need to wait, but that's why trading different sectors help, as
one sector is trending another sector is consolidating over a number of months providing a set-up
in the future.

The premise is you break up Quarterly timeframes like you break up daily timeframes and treat
each Quarterly timeframe as an individual time piece, and optimise the Quarter with lesser
timeframe set-ups.

Start from the top and then work your way down into entry set-ups using lesser timeframes:- Monthly, Weekly and Daily.

I just think it's too hard to be 'day trading' stocks and trying to take small profits, especially
when you are just starting out.

Enjoy the Journey.

Thanks Frank. I'm going to sit down with a beer tonight and think about your quarterly system. Off the top of my head, if you were making 15% per trade, and doing two trades per qtr you wouldn't need that large a capital base before you built up quite a profit over a few years - providing you reinvested all gains. Am I right?

I reiterate in edit that I won't be expecting returns like this for a long time. I'm just Mr 2% for now, and I think if I aim there I might just pull it off.

 

[tech/a]

My own research is you can make 10-20% per Quarter, even more on rare occassions depending on the cycles in the market

Frank
Of what?
A capital base of $100K then should do or do you mean something different?

More to talk of but a bit pressed for time.
Later.

 

[AlterEgo]

As for profit, I don't want anyone to think I am being unrealistic here. I have read some newbies who write about how they intend to make 20% + and higher figures. My own basic research shows me 0.5% -2% is a bloody good result and I will be happy with that, frankly. In your opinion should I be able to make 0.5% - 2% on shares if I do my research and buy at the right time? Would the (relatively) consistent return of 0.5% profit on each trade be a realistic goal? I also would expect to lose a similar percentage of course, but less often, laws of entropy, etc. notwithstanding!)

If you're only aiming to make 0.5% profit per trade, you're wasting your time and money IMO. You'll never make an overall profit with your profits that small. You should be aiming for at least 10% profits IMO (preferably much higher).

Just look what your brokerage fees, and the spread costs you for that small gain:
For $10,000 trade, with brokerage of $15 each way, means brokerage alone costs you 0.3%. Then add the spead of say 0.5% ($1 share with 0.5c spread) means that share has to move 0.8% just for you to break even. So risking all that (plus the distance your stop-loss is away from your entry) just for a possible gain of 0.5% is only going to result in failure. You'd be better off swing trading over several days or weeks for the bigger gains IMO.

 

[Mr J]

I think the sell as soon as any profit is realised is another sign of newbie nerves, and the courage to hold for longer periods will hopefully develop as time goes on. I am not averse to holding longer - years even, but to start with I think it's going to be shorter bursts. How long have you been trading/investing?

Remeber you don't need to close or hold onto the entire position. Partial sells at good profit while letting some ride might be a good way to become comfortable. I haven't been doing this much longer than you.

If you're only aiming to make 0.5% profit per trade

Given the timeframe he's talkinga about, he may be talking about 0.5% of total capital.

 

[shortlist]

If you're only aiming to make 0.5% profit per trade, you're wasting your time and money IMO. You'll never make an overall profit with your profits that small. You should be aiming for at least 10% profits IMO (preferably much higher).

Just look what your brokerage fees, and the spread costs you for that small gain:
For $10,000 trade, with brokerage of $15 each way, means brokerage alone costs you 0.3%. Then add the spead of say 0.5% ($1 share with 0.5c spread) means that share has to move 0.8% just for you to break even. So risking all that (plus the distance your stop-loss is away from your entry) just for a possible gain of 0.5% is only going to result in failure. You'd be better off swing trading over several days or weeks for the bigger gains IMO.

Thanks for this AE. I'm here to learn after all and there really is a lot of great advice andknowledge on this forum. I appreciate your example of the 0.5% being too small to aim at. I think my logic was if I bought enough shares then 0.5% profit would be large enough to accommodate brokerage fees, by I'm only beginning to understand stuff like "spread" and wouldn't mind more clarification if you have the time.