Now when I say all daytraders, I'm talking about independent discretionary daytraders. I'm not talking about HFs running algo bots and doing market making, arbitrage, etc. The reasons why I feel a daytrader is ultimately doomed for failure: 1 Limiting profits. The very nature of daytrading means that you are cutting your profit potential short by not holding for more than a day or a few hours. There are are moves that go on for days, weeks, and months with only the slightest pullbacks. These are the moves that make your year. 2 Daytrading is a very addicting and can become compulsive. The more frequently you trade the more addicted you become to the action. Also the more frequently you trade the more compulsive your actions become. 3 Irrational fear of holding overnight. Many daytraders think that daytrading is actually less risky than holding overnights because they think they have too much "headline" or "overnight" risk even when they have a position that is deep ITM. 4 Daytraders often use excess leverage. Futures and options offer so much leverage that an intraday move can blow u out. 5 Daytraders don't often diversify. Its really hard to intraday trade a portfolio, so most guys just concentrate positions in one or two instruments. 6 Great profit potential also means greater loss potential. Sure you can make 2x the daily range daytrading but more often you can lose 2x the daily range. 7 Daytrading is ultimately a non scalable skill. I admit I'm flat YTD and thus in a long slump. I had three 25k losses in the past three months. But my average for the past 240 sessions is still 600/day. I want to finally give up daytrading and start swing trading but don't want to give up my "bread and butter". And I feel i can't grow my account swing trading as fast as I can daytrading. Has anyone successfully made the transition? Is swing trading better? I'm just tired of trading intraday noise.
Those who can trade will make money. Those who can't wont. Saying day trading leads to failure is nonsense
Expertise in trading intraday noise is not a scalable skill. If I had not bothered with daytrading and focused on swing trading the past 4 years maybe I'd be ready to manage OPM by now.
That's your problem. Taking massive losses, but not having massive winners. Keep the losses small, and you will find your 600/day becomes 2000/day.
So basically you believe all day traders are compulsive gamblers, use way to much leverage and use the wrong strategies. These are the things you have to lose to be successful. It's called learning discipline.
Exactly if not for those three massive losses, I'd be up 75k for the year. But the fact this that such huge losses are Unavoidable. I can trade using very little leverage and trade the trend and make money 30 days in a row but then one day I come in fade a trend, average down, and its game over (25k loss). No matter what people say, discipline is a myth - its nearly impossible to maintain when compulsively trading intraday noise moves. If your swing trade a portfolio of 20 positions then even if one position goes to zero, that still isn't enough to do too much damage.
With your mindset, you would probably average down into your swing trading positions too and blow out in a week.
Discipline is the biggest myth in trading. Even if its attainable, its useless without a real edge. Discipline is like self actualization or enlightenment - the pinnacle of human achievement but total impossible to achieve, it is a myth. Just look at Buffet, Icahn, T Boone, Kirk Krikorian - these guys are all blowing up in the twilight of their life after decades of "discipline".
Like I said, if you have 20 different not too correlated positions and one goes to zero that only a 5% hit. My plans for swing trading is to "scalp" but on a much longer timeframe and across many different positions so that I'm not impatiently trading noise.
If you're fading a trend and doing it with significant money - enough to take a 25k loss - use options. That's what they're there for. You lose a little for the insurance, but gain a lot in loss mitigation. If you structure it right, you could even wind up making money on a mistake. If what you're trading doesn't have options, trade something else. Do NOT fade a trend with a lot of money without insuring that bet. Stop losses can also work, but the problem with them is that they are too severe in limiting your upside potential, and not flexible enough to give you an actual gain if you make a really big mistake. Some of my best days have come from my stupidest mistakes, simply because the options that I used to insure my position saved my scrawny butt.