Whenever someone asks me what I do for a living, and I say I daytrade stock index futures, their first response is always, "My God, isn't that incredibly dangerous?" And then they go on to tell me about how a friend of theirs lost a ton of money daytrading (I've heard amounts up to a million). But something puzzles me about all this. Various surveys show that between 80-95% of daytraders lose money ----- one study involving 68 traders found that every one of them lost, and 70% lost their entire trading capital. And these facts have been used to bolster the dubious rationale behind the new 25K rules on trading accounts. Yet assuming random long and short entries and random long and short exits, over time a trader's expectancy should approach 50-50, minus commissions and the spread (both pretty small these days). Given those odds, how can so many people lose so much money? The answer has to lie in money management ----- they cannot cut their losses properly and let their winners run sufficiently, and/or they trade far too big size for their account and skill level, so a bad run blows them out, and/or they make the terrible (nearly always) mistake of adding to losing positions. But are virtually everyone's money management skills really *that* wretched? Are most traders so overcome with hope and fear that they almost invariably make hideous mistakes handling their account? I have my own psychological trading issues to work through, but they certainly don't include any kamikaze-style actions. I find it a strange and amusing experience that most people look at me as if I'm crazy and then go on to smugly imply that total disaster is just about to strike, and it's a nothing short of a miracle that my head hasn't alreadsy been handed to me! Any thoughts on the subject?
i totally agree with you - i started day-trading in may this year (nasdaq stocks with IB) - i'm not yet profitable - but i learn a lot - and i cutted all my losses right from the start. it's a hard BUSINESS (and it IS nothing else than a business) - but those guys who just blow their whole account in the first few weeks or months i just can't understand. either they can afford to lose, or they consider it as a game - vegas would be better.
i'm engaged in trading stocks for more than 3 years now - tried many different styles and time frames. i realized for myself, that "classic" day-trading (exit flat every day) is just the best way for me to do this. i mean - everybody (of the so called "experts") keeps on talking about buy and hold and stuff like that. "stocks are best" - just have to hold them long enough. maybe that's true, if you hold 'em for 50 years or so. the dow jones for example made a zero performance from '68 to '82. pretty long time, hu?
but i'm a little off topic. what i wanted to say, is: i think, strictly cutting every loss is maybe the only "holy grail" - this alone won't make you rich - but it surely can protect you from getting blown, before you can really think about making money. the reason, why people talk that way you described about trading are: 1. they got no clue about all that and just adopted someone elses opinion. 2. they tried it - and lost. 3. thei're just envious. 4. ...??
so let's just ignore them - and do our business. i also plan to start trading the nq-mini - maybe it's dangerous - but discipline and cutting the losses will bring success to me.
by the way - please be generous with my "austrian" english ...