Don't Be fooled by Randomness Part2 - Day Trading Vs Swing Trading - Who Makes More?

[suby 10]

I recently just finshed the classic novel "reminances of a stock operator" and there was a quote in the book that really struck me.

 

"No man has any business being in the market all the time"

 

Immediatly I thought to myself, thats what DAYTRADERS do! For anyone who has read the book knows the story but for those who havn't I will shed some light.

 

Jesse Livermore began trading (day trading in bucket shops). He would trade according to his system, but his results were truly abysmal. Sure the man made money but the real money came when he started to swing trade. And by swing trade he developed an idea (hypothesis), waited for certain conditions to materalize, and then bet. Really that simple.

 

The reason why I am writing this is because I have recently revisted some threads on this forum (i.e. Don't be fooled by randomness) and it has become apparent to me that the majority of traders on this forum are day traders. I could be very wrong, so please correct me if I am.

 

In my short trading career thus far I can admitt that trading without a plan/hypothesis is gambling. Better yet its a waste of time. There is ZERO predictive power from the patterns of 1/5/15min bars (bullflag,S/R, etc). All of my success has come from swing trading.

 

I will stop my rambling at this point and open up the thread. Who day trades and who swing trades? Whats your personal preference? If you are a day trader, what do you do to make yourself a winner? If your a swing trader, how do you develop your hypothesis before entering into a trade

 

Disclaimer: I am not disregarding the valdity of technical analysis - This is a thread dedicated towards Noise/Randomness/DAYTrading Vs being able to quantify something/Swing Trade

 

Suby

[DbPhoenix 42]

 

Disclaimer: I am not disregarding the valdity of technical analysis - This is a thread dedicated towards Noise/Randomness/DAYTrading Vs being able to quantify something/Swing Trade

 

Suby

 

You're setting up a false dichotomy. There is no difference between day trading and swing trading except for the bar interval, if one is using bars. Remove the X and Y axes and you'd be hard-pressed to tell the difference. That you've been unsuccessful at daytrading may mean only that you've approached it in the wrong way.

[suby 10]

You're setting up a false dichotomy. There is no difference between day trading and swing trading except for the bar interval, if one is using bars. Remove the X and Y axes and you'd be hard-pressed to tell the difference. That you've been unsuccessful at daytrading may mean only that you've approached it in the wrong way.

 

DB,

 

How should one approach day trading?

[DbPhoenix 42]

DB,

 

How should one approach day trading?

 

The same way one should approach any sort of trading: Developing a Plan: The Trading Journal

[steve46 12]

This is good solid advice, that unfortunately few will follow, probably because of the effort that is required to take it all the way to its conclusion(s).

 

I offer similar advice but from a slightly different perspective....perhaps a summary of it will add value

 

If a person decides to try to learn this business there are basically two approaches. The first is to study independently using readily available resources on the Internet, from the exchanges and from third party providers of educational content related to trading as a business. Approaching it this way takes time, because you have to wade through content that is dated, filled with half truths, or in some instances completely fallacious...and of course the tendency is for provider to slant the content of educational materials in order to direct the reader to buy additional products or services...

 

The second is to find a skilled professional educator or trading professional willing to A) demonstrate proficiency and B) spend sufficient time with students to provide the basic background and guidance needed to trade profitably. For those who have been here a while, the pitfalls and obstacles are obvious....most of the self proclaimed providers are simply opportunistic folk, who are one step ahead of the student....unable to trade profitably themselves, they attempt to portray themselves as experts, and often the services they attempt to provide are overpriced and ineffective. The final "proof" of this is that when pressed to demonstrate their skills they resist, and finally withdraw to any arena where less knowledgeable customers exist....in other words they prey on the naïve, ignorant and struggling would-be traders.

 

As mentioned many times previously, part of the problem is that the struggling or new trader doesn't understand how to evaluate products and services. The simplest answer is

"start out reading and learning independently as much as possible, developing enough background, at minimum cost, so that you CAN intelligently evaluate vendors, AND rather than demand detailed record of profitable trading (which can easily be falsified) ask instead to observe a prospective vendor while they trade live. Record the sessions, independently and then evaluate both the result (did they make money), the risk, and the method (decision making)...ask yourself if what you see is a good fit, or if it is not, can you adjust yourself (within reason) to that type of approach....if the answer is yes, you MAY have found a good candidate (vendor) to teach you how to trade. If the answer is no, move on to the next candidate on your list...

 

Its hard work, but like most things in life, generally you receive based on the effort you put into it....

 

Best Regards

Steve

[BlueHorseshoe 10]

Remove the X and Y axes and you'd be hard-pressed to tell the difference.

 

Have a look at your commissions and spread (fixed, whether you're holding for a thousandth of a second or 3 years), and you'll be hard pressed not to

 

BlueHorseshoe

[DbPhoenix 42]

Have a look at your commissions and spread (fixed, whether you're holding for a thousandth of a second or 3 years), and you'll be hard pressed not to

 

BlueHorseshoe

 

None of that shows on a chart.

 

The point is that whether a daytrader or swing trader "makes more" has absolutely nothing to do with whether the trader is daytrading or swing trading but rather with the competence of the trader.

[suby 10]

None of that shows on a chart.

 

The point is that whether a daytrader or swing trader "makes more" has absolutely nothing to do with whether the trader is daytrading or swing trading but rather with the competence of the trader.

 

Actually has a lot to do with it Db. If your flying in and out of positions, commisions and slippage can easily eat someone up.

 

the purpose of this thread as mentioned is who is more profitable swing or day trader with the use of a hypothesis.

 

I understand that you are a daytrader Db and you are also fond of the NQ (also my contract of choice).

 

Can you give me an example of how you would enter into a trade? What criteria are you looking for? whats the avg duration of your trades? On avg how many points do you aim for on a day trade? most importantly out of 100 trades, how many of them are profitable?

[DbPhoenix 42]

Actually has a lot to do with it Db. If your flying in and out of positions, commisions and slippage can easily eat someone up.

 

Well, no, it doesn't. It depends more on the ratio of points to commissions, and there need be no slippage at all. Don't confuse trading intraday swings with scalping.

 

the purpose of this thread as mentioned is who is more profitable swing or day trader with the use of a hypothesis.

 

But the question is unanswerable unless you control a hell of a lot of variables. If you want an answer that means anything, then daytrade for a few weeks and swing trade for a few weeks and answer it for yourself. It's the only answer that will have any relevance to your situation.

 

I understand that you are a daytrader Db and you are also fond of the NQ (also my contract of choice).

 

I'm a daytrader and a swing trader and a position trader. It's all good.

 

Can you give me an example of how you would enter into a trade? What criteria are you looking for? whats the avg duration of your trades? On avg how many points do you aim for on a day trade? most importantly out of 100 trades, how many of them are profitable?

 

See the Wyckoff Forum. Loads of trades, loads of charts, loads of criteria. But none of it is going to do you much good unless and until you begin to develop a trading plan. Whatever somebody else does or doesn't do or says they do or whatever is irrelevant to you since nearly everybody lies.

 

This is your 35th thread. If your interest is primarily in chat, that's great. But you appear to be directionless. If that's the case, then asking people what their results are isn't going to put you on track and keep you there. At some point, you're going to have to sit down in front of your computer screen with a pad and pencil and work out something that is profitable for you. How do you enter a trade? What criteria do you look for? What's the average duration of your trades? How many points do you aim for? What's your win:loss ratio? If you can provide the answers to these questions, you might get a conversation going. Otherwise, it's just a tutorial, and given all the time you've been at this, you shouldn't need that any longer.

 

..........................

[steve46 12]

Every once in a while I read something that to me represents the bare bones truth of the matter. This is what I see in Db's post above.....

 

Clearly people have to struggle with their own demons, their own wish to be taken care of and their own limitations...and to me the exciting thing about living is that we all have the possibility of rising above our all too human limitations and choosing a different path....we can in effect create our own success IF WE CHOOSE TO......

 

this for me is the reason I continue to show up....it happened in my life and I try to provide that possibility for folks periodically...when on the few occasions I read something like this I feel hopeful that someone out there will decide to get up off their butt, and do something useful for themselves..

 

Best of luck folks

Edited April 6, 2013 by steve46

[Mysteron 10]

You're setting up a false dichotomy. There is no difference between day trading and swing trading except for the bar interval, if one is using bars. Remove the X and Y axes and you'd be hard-pressed to tell the difference. That you've been unsuccessful at daytrading may mean only that you've approached it in the wrong way.

 

You only have to look at a 5 min chart of a stock over a preiod of a few days and you'll see a clear difference between intraday price variation and price variation on daily charts.

 

The difference is obvious.

[DbPhoenix 42]

....................

[BlueHorseshoe 10]

None of that shows on a chart.

 

The point is that whether a daytrader or swing trader "makes more" has absolutely nothing to do with whether the trader is daytrading or swing trading but rather with the competence of the trader.

 

Successfully exploiting what is visually/graphically an identical price movement on a daily chart will result in a greater net gain than exploiting the same price movement on an intraday chart, but the fixed costs will remain the same for both.

 

Take the left hand chart you have posted above. Select an entry and exit point that would result in a profitable trade. If that chart were daily, you might have made 100 ticks per contract. If the chart were one minute, you might have made 2 ticks per contract. Both from what, graphically, is an identical price movement. If your fixed costs are 1 tick then you make 99 ticks in the first instance, and 1 in the second.

 

The question is, can you perform the second procedure 99 times for every one time you perform the first? Or, is your risk sufficiently limited in the second for you to perform it once with 99x the position size of the first? Or 10 times with 9.9x the position size of the first etc? If you can do this then your returns will probably be less volatile (great for money management, and perhaps the main benefit of successful daytrading), and your "edge" will have more opportunity to play itself out.

 

Expectancy x Opportunity is the key concept in understanding this.

 

I agree though - visually, I would doubt that anyone can consistently distinguish between a daily and an intraday chart and, unless we're talking about execution-specific strategies, that there would be any merit to trading the one differently from the other.

 

And of course, the more competent trader makes the most, as you say.

 

BlueHorseshoe

[Cory2679 11]

There is ZERO predictive power from the patterns of 1/5/15min bars (bullflag,S/R, etc).

 

Remove the X and Y axes and you'd be hard-pressed to tell the difference.

 

Have a look at your commissions and spread...

 

None of that shows on a chart.

 

Actually has a lot to do with it Db...

 

suby,

 

Commissions, spreads, and slippage have nothing to do with the predictive power of TA on smaller time-frames vs longer time-frames. Your original statement was not addressing lower profitablility on lower time-frames due to higher costs...you boldly stated that there is no predictive power on shorter time-frames.

[natureboy1618 10]

Re: being in the market all the time - that is actually not necessarily what day traders do.. The defining activity for day trading is entering and exiting within the same day; trading every day is not implicit. May want to look into why some days are more attractive to trade than others..

[suby 10]

Re: being in the market all the time - that is actually not necessarily what day traders do.. The defining activity for day trading is entering and exiting within the same day; trading every day is not implicit. May want to look into why some days are more attractive to trade than others..

 

I'm not naive and oblivious; however, many active traders (especially new ones) end up treating their trading like accounts like a slot machine at the casino.

[suby 10]

suby,

 

Commissions, spreads, and slippage have nothing to do with the predictive power of TA on smaller time-frames vs longer time-frames. Your original statement was not addressing lower profitablility on lower time-frames due to higher costs...you boldly stated that there is no predictive power on shorter time-frames.

 

Cory,

 

When i initially posted, I was somewhat ranting but let me clarify. Day trading/intraday trading is a shorter time frame than one who swing trades with EOD data. Many will argue with me that there is no differnce (all good). Intraday trading has way more noise than swing trading and I can back that up to anyone who wants to disagree with that statement. I posted this thread to generate discussion to those who have had success trading intraday (consistently).

 

The fact of the matter is day trading/intraday trading is a lot harder than swing trading in my opinion atleast and I'm curious to hear some of the methods that the community deploys to take advantage of these anomalies. Am I saying that market is random...? no. Due to the market structure (specifically in the equities space) theres a lot more noise in intraday trading as i;ve said a million times before. With that being said... Take a stock the Citibank ©. Take its OHLC prices for its previous days, and closely watch what happens when it hits these levels. You can thank me later for the free ATM

[suby 10]

Cory,

 

When i initially posted, I was somewhat ranting but let me clarify. Day trading/intraday trading is a shorter time frame than one who swing trades with EOD data. Many will argue with me that there is no differnce (all good). Intraday trading has way more noise than swing trading and I can back that up to anyone who wants to disagree with that statement. I posted this thread to generate discussion to those who have had success trading intraday (consistently).

 

The fact of the matter is day trading/intraday trading is a lot harder than swing trading in my opinion atleast and I'm curious to hear some of the methods that the community deploys to take advantage of these anomalies. Am I saying that market is random...? no. Due to the market structure (specifically in the equities space) theres a lot more noise in intraday trading as i;ve said a million times before. With that being said... Take a stock the Citibank ©. Take its OHLC prices for its previous days, and closely watch what happens when it hits these levels. You can thank me later for the free ATM

 

And one more thing, I boldly stand by what I said earlier that technical analysis has ZERO predictive power when one is applying it to a 1/5/10 min time frame. I stand by that

[suby 10]

..........................

 

Out of 100 trades Db,

 

whats your hit rate like?

[onesmith 10]

And one more thing, I boldly stand by what I said earlier that technical analysis has ZERO predictive power when one is applying it to a 1/5/10 min time frame. I stand by that

 

There is a lot of information in those time frames. It's going to be tough seeing it until you change that belief.

[steve46 12]

There is a lot of information in those time frames. It's going to be tough seeing it until you change that belief.

 

Absolutely agree with Onesmith. Couldn't have said it better than that.....

[doitrite 10]

Thanks to Steve as my experience shows. One must research (e.g. an offer) at least 3 levels deep to verify. Takes time but not as much as when I lose.

[BlueHorseshoe 10]

There is a lot of information in those time frames. It's going to be tough seeing it until you change that belief.

 

There's a lot of information about everything everywhere. The volume of information doesn't seem important to me - the information's utility is all that matters.

 

The information contained in any timeframe is only as valuable as its utility permits, and that depends on the strategy being deployed.

 

Information from one timeframe can, of course, have utility in other timeframes.

 

It is sensible to focus on the information that provides the greatest utility for the strategy in question, wherever that information comes from.

 

BlueHorseshoe

[onesmith 10]

It is sensible to focus on the information that provides the greatest utility for the strategy in question, wherever that information comes from.

 

I get that. ......pre-narrowing the search to a few near optimal time frames is beneficial. Some time frames nearly always have lots of noise and little if any signal. Logically it makes sense to toss out the time frames that are not likely to give signals.

 

....but if you only try things everyone tries you will never be pleasantly surprised because you never do anything different than anyone has already done. It can't work the way everyone thinks it should. We are not the only ones smart enough to be efficient, to follow the scientific method, to stick to what's sensible or whatever label you prefer for doing what everyone who is educated knows is the rational thing to do.

 

For the specific case ...which time frames should be excluded. The absence of any time frame is a mistake.

 

Counter intuitive for the win everytime. That timeframe that only gives one signal over some rediculous amount of time like an entire lifetime, is the signal that's strong enough to model strats (using the significantly small enough sample size of one.) that will work on every timeframe and every symbol.

 

var: sensible(efficient), inefficient(invertsensible);

[Manihi 10]

Out of 100 trades Db,

 

whats your hit rate like?

 

How about you tell us about your "swing trade" hit rate and win loss ratio.

 

I have a feeling you are grasping to find a comfort zone in your trading.

 

Trading the ES, I am currently running at a 20.17% win rate. That might make you feel a little queezy, but it is very profitable. If you study your price action and charts you might get a clue as to how I trade to achieve the result.

 

Sometimes you can label it a daytading system,like today ...thankyou market, other days it is one hell of a grind, but we achieve our goal (profitability) and await for the next opportunity..

 

I use an indicator,God forbid!! Predictability is not part of the equation...

 

On the other hand, I also trade a method that is totally random and the is a one day trade, win or loss and that is a lot higher win/loss ratio.