How do you learn about day trading?

[caleb2003]

akumaslair, I personally have found that short term trades have been more stressful than daytrading as the volatility has been so high, holding overnight is a complete lottery unless you're in it for the longer term (anyone who had shorted rio in the last few days would know this, i'm glad I didnt).

I think theres some excellent info here from the more experienced hands but big ones to avoid on the asx 200 are the opening half hour and the 30 minutes after close (if you use some bucketshop providers like IG) as these times can be truly erratic and blow away a days profit.

Trading on the Hang seng index has been great recently as the intraday trends have been excellent but holding overnight is extremely risky as it can gap over your stop by a long way.

My experience has been one of being ill disciplined initially and this cost me $$$$ and some great lessons but phsychology has played a major part in consistency.

I am not anywhere near as experienced as the others to have commented here but only other thing I'd say based on your quotes is that you stated that stocks excite you, I think that your emotions should be put to the side as trading will stress you too much when it goes against you.

Hope that helps

 

[wayneL]

A little passage from the Tao Te Ching:

He who understands much, says little
He who understands little, says much

At over 5000 posts, that perhaps means I'm the last person you should listen to, but be careful who you listen to.

But FWIW, from one of my posts on day trading from earlier this year.

An Interesting blog article from a bloke with a bit of credibility:

Ernie is a quantitative trader and consultant who helps his clients implement automated, statistical trading strategies. He can be reached through www.epchan.com. Ernie has worked as a quantitative researcher and trader in various investment banks (Morgan Stanley, Credit Suisse First Boston, Maple Securities) and hedge funds (Mapleridge Capital, Millennium Partners, MANE Fund Management) since 1996. He has a Ph.D. in physics from Cornell University.

http://epchan.blogspot.com/2007/02/in-praise-of-day-trading.html

In praise of day-trading

A recent article by Mark Hulbert in the NYTimes talked about the Value Line's rankings, and how this system is under-performing the market index in recent years. Mr. Hulbert asked Professor David Aronson of Baruch College whether this drop in performance means that the system has stopped working. Prof. Aronson says no: he believes that it takes 10 or more years [my emphasis] of under-performance of this strategy before one can say that it has stopped working! This statement, if taken out-of-context, is so manifestly untrue that it warrants some elaboration.

To evaluate whether a strategy has failed bears a lot of resemblance to evaluating whether a particular trade has failed. In my previous article on stop-loss, I outlined a method to determine how long it takes before we should exit a losing trade. This has to do with the historical average holding period of similar trades. This kind of thinking can also be applied to a strategy as a whole. If your strategy, like the Value Line system, holds a position for months or even years before replacing it with others, then yes, it may take many years to find out if the system has finally stopped working. On the other hand, if your system holds a position for just hours, or maybe just minutes, then no, it takes only a few months to find out! Why? Those who are well-versed in statistics know that the larger the sample size (in this case, the number of trades), the smaller the percent deviation from the mean return.

Which brings me to day-trading. In the popular press, day-trading has been given a bad-name. Everyone seems to think that those people who sit in sordid offices buying and selling stocks every minute and never holding over-night positions are no better than gamblers. And we all know how gamblers end up, right? Let me tell you a little secret: in my years working for hedge funds and prop-trading groups in investment banks, I have seen all kinds of trading strategies. In 100% of the cases, traders who have achieved spectacularly high Sharpe ratio (like 6 or higher), with minimal drawdown, are day-traders.

Notwithstanding, day trading is incredibly simple, it ain't rocket science, there are no "secrets", only techniques and basic maths. The hard part is the head game.

Sort the maths, manage the emotions, and success is likely. Few manage to do this however, which exposes the difficulty.

No charge.

Good luck

 

[tech/a]

Your inuendo is inflamatory.

Your ability as a moderator at best is poor---no inept.

Your contribution to this thread is 3rd grade, most 10 yr olds can cut and paste.

Time and effort spent assisting others DIRECTLY with their questions is looked upon as self serving.

A little passage from the Tao Te Ching:

He who understands much, says little
He who understands little, says much

At over 5000 posts, that perhaps means I'm the last person you should listen to, but be careful who you listen to.

No charge.

Un necessary and un warrented.
You abuse your position.

 

[nizar]

Notwithstanding, day trading is incredibly simple, it ain't rocket science, there are no "secrets", only techniques and basic maths. The hard part is the head game.

Sort the maths, manage the emotions, and success is likely. Few manage to do this however, which exposes the difficulty.

No charge.

Good luck

Hi Wayne,

I agree daytrading has the potential to be much more profitable than longer term trading.

A super smooth equity curve, a high level of opportunity/frequency, and decreased market exposure are wonderful characteristics that only high frequency trading can offer.

BUT i must disagee that it is, as you put it, incredibly simple.
To trade multiple times a day using a mechanical system is something that is rare.

And to trade intraday on a discretionary basis requires years of experience, wouldn't you agree.

 

[akumaslair]

thanks everyone...

I may have come across as saying that I though daytrading was the be all and end all..... i wouldn't mind day trading if the risks were lower then a short term trade, but I guess the risks would be similar if you had similar or sensible stop losses....

I guess this brings up another question, which I hope is not going too off topic.

I understand due diligence, which I use for other areas.... for the long term stocks, eg mining.... then I would say its quite obvious.. its just the when.....

however, how do you find out the performnace of a company in the short term...are we intending to trade based on no news and taking advantages of the small gaps that are created by low volumes... or are we intending to trade based on the expectations on some news, which I find to be a bit risky...

the reason I question the above is I see lots of experts, traders, long term traders, brokers and basically anyone who is or thinks they are good.... get it soooo wrong.... they can't even explain it themselves... I can name heaps of examples (not proclaiming to be an expert) eg SDL. I believe it was a recommended buy at about 60c by a few leading brokers.... it went up to 85c or similar, and now its back down to 50c........

what I am asking is, if even these guys who supposedly study these stocks full time can get it so disastrously wrong, how can we all have a chance.

I hope I am not blabbering on...

 

[sleepy]

"You must alter your thinking to Reward to Risk.
ONCE YOUR IN A TRADE
Thats what you trade---REWARD to RISK nothing more.
Once in a trade thats all you do.

Take care of R/R and you'll never worry about profit regardless of Capital you use."

Hi John,

Never a truer word spoken. In elite sport this is referred to:

'Process vs Outcome'
- If one totally concentrates on the PROCESS (e.g., watching the ball, executing the pass) then the OUTCOME (e.g., scoring a 100, winning) will take care of itself.

By the way ... How are you getting your R/R to appear on the chart? (i.e., what application are you using?)

sleepy

 

[wayneL]

Your inuendo is inflamatory.

Your ability as a moderator at best is poor---no inept.

Your contribution to this thread is 3rd grade, most 10 yr olds can cut and paste.

Time and effort spent assisting others DIRECTLY with their questions is looked upon as self serving.



Un necessary and un warrented.
You abuse your position.

So as a mod, I'm not entitled to participate in discussion and give an opinion?

Puleeeze!

My post has nothing whatever to do with my role as mod, so your focus on that is nothing short of tempestuous nonsense.

Name calling would be a 10 year old thing I would have thought.

Back to day trading eh?

 

[tech/a]

A little passage from the Tao Te Ching:

He who understands much, says little
He who understands little, says much

At over 5000 posts, that perhaps means I'm the last person you should listen to, but be careful who you listen to.

No charge

Participate all you like but refrain from the inflammatory rubbish like the above.
You breeze in then shift blame onto your victim--me in this case.

Had YOU stuck to the topic These posts would not be here!

An apology at anytime will be accepted.

Anytime you wish to demonstrate the simplicity in real time I'm sure we all will be intrigued.
Oh he's talking stock not options.
Look forward to some expert demonstration.
Oh and yes I'm happy to!

 

[IFocus]

I find share trading to be exciting, I enjoy the excitement

If you want excitement try sky diving, trading and excitement makes for a heady mix creating behaviors not very suitable for long term success.

Cost / liquidity / scale wise futures offer a better alternative for day trading. It can be done with stocks if you can find the volatility but a high degree of skill is required IMHO its simpler to trade the swings in a bull market and you are likely to make much larger profits.

Focus

 

[nizar]

Hi Wayne,

I agree daytrading has the potential to be much more profitable than longer term trading.

A super smooth equity curve, a high level of opportunity/frequency, and decreased market exposure are wonderful characteristics that only high frequency trading can offer.

BUT i must disagee that it is, as you put it, incredibly simple.
To trade multiple times a day using a mechanical system is something that is rare.

And to trade intraday on a discretionary basis requires years of experience, wouldn't you agree.

Wayne can you please respond to my post as to how daytrading is incredibly simple.

Thanks.

 

[sleepy]

Hi John,

Not sure if you missed my post ...
How are you getting your R/R to appear on the chart? (i.e., what application are you using?) ... or did you manually put those on?

sleepy

 

[wayneL]

Wayne can you please respond to my post as to how daytrading is incredibly simple.

Thanks.

Much is written by me and others on the topic. It's not hard. The psychology is the hard part.

Quite prepared to go into technique when I have some time, but bear in mind I might not necessarily know anything.

Caveat Emptor

 

[chops_a_must]

BUT i must disagee that it is, as you put it, incredibly simple.
To trade multiple times a day using a mechanical system is something that is rare.

And to trade intraday on a discretionary basis requires years of experience, wouldn't you agree.

I dunno. The highest probability trades appear to be very short term or intraday in nature.

TH, if time consumption is a factor, why not advise specialising in one sector/ instrument/ future etc.? Especially if the person only wants to make a handful of trades a week.

It sounds kind of similar to where I'm at. So my advice to someone at this point at the same time, who only wants to do a few trades, is to look at high probability set ups. Opens, closes, for starters perhaps.

 

[wayneL]

BUT i must disagee that it is, as you put it, incredibly simple.
To trade multiple times a day using a mechanical system is something that is rare.

And to trade intraday on a discretionary basis requires years of experience, wouldn't you agree.

A couple of points here:

* I never said anything about trading mechanically. I must agree that a "mechanical" system that works is rare. That said, Nick has one that works very well on indicies.

* A daytrading system need not trade "several" times a day. I don't. I'll take perhaps one trade on any particular chart... maximum two.

* If not mechanical, it need not be totally discretionary either. It can be rule based. An example of the is the "dummy a day" method as mentioned in various blogs. You can't get much simpler than that. eg http://maoxian.com/archive/category/trading-for-dummies/

"Simple" is in the context of some other ways people make a living. It is a bit more complicated than stuffing envelopes for a living, but compared to medicine or law, ludicrously simple.

 

[tech/a]

Akumasliar

You'll find there are many who
"Talk the talk"
Few "Walk the walk"

Sleepy I have PM'd you.

 

[akumaslair]

yep....I am not looking for something ridiculous like 20% per trade 3 times per day.... something realistic and consistent would be good, so I guess would 2%-3% per trade, say 2-3 times per week be a realistic expectation>?

 

[Trembling Hand]

yep....I am not looking for something ridiculous like 20% per trade 3 times per day.... something realistic and consistent would be good, so I guess would 2%-3% per trade, say 2-3 times per week be a realistic expectation>?

That’s just not relevant. What you have to concentrate on is this,

Expectancy = (Probability of Win * Average Win) - (Probability of Loss * Average Loss)

Your aim is to have this positive. Forget about looking at yesterday’s results and thinking there was a 2% move I could of got. You failure to even mention any losses just tells me that you need to do a couple of small trades to bring you in line with reality.

TH, if time consumption is a factor, why not advise specialising in one sector/ instrument/ future etc.? Especially if the person only wants to make a handful of trades a week.

It sounds kind of similar to where I'm at. So my advice to someone at this point at the same time, who only wants to do a few trades, is to look at high probability set ups. Opens, closes, for starters perhaps.

Yeah you are right. Concentrate on a couple of trades that you find or think you found that have a high prob. But that goes back to my point about time being better spent on your first biz.
A couple of trades a week is a hobby. Be careful when running a biz your hobby doesn’t steal time and money from what pays the bills.

 

[akumaslair]

ok.. fair enough...

where/how do I start....this is what I am a bit confused...

 

[Trembling Hand]

ok.. fair enough...

where/how do I start....this is what I am a bit confused...

Start doing.

Read stacks... trade a little....then read more...trade a little..the repeat again

 

[nizar]

ok.. fair enough...

where/how do I start....this is what I am a bit confused...

READ my initial post #8 in this thread.