daytraders feed on long term traders

Discussion in 'Trading' started by silk, Feb 2, 2003.

  1. silk

    silk

    I beilieve that the best opportunity for daytrading (not scalping) a stock is when long term holders of the stock are taking action. I am speaking of the day trader who is trying to catch a move (40 cents+). I believe that the lion share of trading in most stocks on most days are just day traders and index arbers. Money flow at the end of the day is basically a wash. When this is the case it is very hard for the day trader of stocks to make money. You are basically trading futures via a stock. There is still good money to be made here, but the risk/reward isn't as favorable and success depends more on chance.

    The good opportunity is when long term holders of a stock are making decisions. For instance, a fund decides to sell their 400k share stake in a stock after an earnings announcement. Long term holders do not care about the daytraders time frame. They will sell the stock aggressively all day not worrying about each nickel and dime, because they know they have a few hundred k to sell the following day as well. These are the type of sellers that a daytrader can profit from. A good example of this was AHC last week.

    When there is real selling and buying going on in an issue, it is pretty easy to identify on ones screen. The stock will not care what futures are doing and will be in its own world. The trick is to identify that this is the case early on and jump in, go with the flow. When there is real buying or selling, the stock/sector tends to want to finish at the high or low of the day.

    Unfortunately, I have seen very little "real" buying and selling going on so far this year. Futures have been very volatile and stocks have been somewhat volatile, but true strength and weakness among individual stocks and sectors has occured this year. If you are on the wrong side of futures, you are generally hurt badly so far this year.

    Many times last year i could be on the wrong side of futures, but still make out well because i was in a strong or weak sector/stock. This has not been the case this year for me, and i've had a bad January becomes I got myself on the wrong side of futures all month.
     
    redbaron1981 likes this.
  2. jem

    jem

    Silk good analysis. Now my question is what caused you to be on the wrong side of the futures. Is it a market structure change? or just a bad month.
     
  3. nkhoi

    nkhoi Moderator

    by right side of future you mean future daily was up but you were short. If so since you don't know ahead whether the day will be up or down you won't know if you are on the right side until eod. Thus there is no right /wrong side it only appear that way looking back.
     
  4. nitro

    nitro

    YUM! And they sure do taste good!

    crunch crunch.

    nitro
     
  5. nkhoi

    nkhoi Moderator

  6. a piggy back ride :)

    Natalie
     
  7. This is basically the entire crux of my trading strategy. The direction of the markets has absolutely no influence on my trading decisions. Sure, some days a strong market may help/hurt my positions and vice versa, but over time I have found it evens out.