without going into the tax treatment of such I am curious ... what percent of "real money" wins ( hopefully as opposed to losses and paper trades ) come from keeping your positions in a longer time frame perspective ( of course using different size positions and % of risk capital and stop loss risk management for those positions ) prob most people on ET are short term traders but even here , some of us must have a portion of P+L in overnights ? if so ... how do you manage the mental and risk management area here ?
My trading style is primarily a swing style which can sometimes turn into longer held positions as the trade moves in my favor. While I am a prop trader, I derive most of my income from overnight positions. The important thing is to develop a style that ur comfortable with. My style works as follows: i use different patterns and set-ups based on TA, and only take those with a reward:risk of at least 4:1. Therefore, i know where my entry is, where my stop is, where my target price is. The amount of shares i take varies for each position based on the amount of the loss. I'm usually fairly aggressive as my % of winners is around 65%, so I take the amount of shares that would limit my LOSS to roughly 5% of my balance. Now of course, things happen and sometimes u can't always get stopped out where you want (gap downs, slippage, etc.) but that's what works for me. I leave the 10% rule for the amateurs... Knowing where, when, and how i'm going to get out helps me sleep at night and takes the emotion out of it. Almost forgot, I tend to avoid stocks in the news (earnings, lawsuits, etc.) as that sometimes tends to mess with the technicals. hope that helps.
I am a long term position trader. Sometime I hold positions for years. I win about 40 % of the time and for awhile in 2001 I had 19 out of 20 losing trades or maybe 29 out of 30 losing trades. I stop my losses and keep positions small so my overall loss is only a few percent of equity. When the bull market comes I might make a lot of money, enough to pay for all my losses and save a nice profit besides.
if one is trading or holding longer term ... then I assume it is more important or just as important to have a vision of the forest instead of the trees ( i.e. weekly , monthly charts vs daily or 60 minute vs 5 minute )
While it is true that you need to look at different timeframes for holding positions, sometimes you get "lucky". For example, if I'm in a swing trade, and i see there is alot of strength pushing the stock to my target, i may only sell a portion of it at that target and use a trailing stop for the rest. I've been in trades where my expectation at initiation was for 1-2 weeks holding period and ended up holding for months. In that situation, i would usually hedge with options or put a stop just below some significant retracement level. Don't need a crystal ball for that type of trade, just good position management skills.
=================== Setharb; And as far as managing the mental,swing trade; like longs the market LUVs a long time & some I find facinating, short some the market hates, hates with a passion. Continual research can help plus i like to research; my best performing oil/gas sector stock favorite for years; underperformed late OCT, so rotated into something else,for a while anyway. Yes weekly, daily , forest more than trees[5 minutes =noise. avoid that time frame]; & like the pro forester says ''count EVERY tree'' also. IBD has helped, still does. And you look at so many monthly charts, yearly charts ; weekly time frame seems almost to small. And never have had underlying long/short go against me 25% one day suddenly; but alow for that like unlikely but actual one day in 1987.
Here is my trading mission for the day when the alarm goes off at 0600et. The pivot points etc are calculated from the close of the prior day. I check the Globex overnight to see if yesterdays HIGH and/or LOW was superseded. If so, i will cacalulate the pivot points. Throw in ACD, moving averages, flags, ranges, breakouts of many types, retests of breakouts, etc. ( i also have a self conceived entry do-dad i use, very related to the first hour breakout signals that everyone knows,). Throw in once the 0930et pit opening and i am "Good to Go".. I am not a jack of all trades, also not a master of one, BUT, i repeat, BUT i only daytrade one instrument, the ES, maybe some times also the ER2. But no more. Set up a 5 minute bar chart i do of the ES, also ES chart of the 15 minute for reference. The same charts also for the Dow and the ER2. I have up the NYSE volumn, advancers, decliners, the tiki, trin, and the 10 year bonds from the CBOT. From all of that i am looking for todays main swings, not range trading, not scalping, i want some of the meat of the runs. I want to be with the move, never fade it, i am not that sharp, if i switch sides it is because the mov avg's, pivot points ACD, etc says to do that. i have no opinions, NONE. A winning day for me is to catch a minimum of 4 handles, a decent day is 2 or more, a satisfying day is where i was losing but was able to get back to even. ETC, etc, but it is all fun, i do not carry overnights. I do not keep trying to find new signals etc, i just pay attention to what i know works. Approximately 240 trading days a year, (unless i take a vacation). Avg 100 days with small wins, 50 days small losses, 25 days breakeven including cost of tools and commissions, 25 days nice wins, 40 days sweet wins... PS, I have used ACD as it is called by mark fisher in his book, but i have always added a little to the pivot point breakout on strength or weakness as he uses in ACD. Larry Williams has always stated he likes to "ADD A LITTLE" on breakouts also. This stuff is old news, but it works if you use close but intelligent stops.
if so ... how do you manage the mental and risk management area here ? Mental is the real issue here for me. You must only trade the trade as intended. Day trade is only ever a day trade for me. The difference in my mental approach is dictated by whether i'm working for "them" ie- providing liquidity (day trading), or being one of "them" (longer term trading). I switch my mindset according to the style of trading i am participating in.
Mindset is about you, not them. Do not think in terms like "their" liquidity etc. Do not complicate the game by thinking of anything other than "YOUR" trade. They do not give a rats butt about you. Daytrading is nothing different from longer term position trading. It is simply a time compressed position trade that is exited at or before the end of day. When the time is compressed, it requires more decisions and nothing more. The signals etc are basically the same, rules ditto. ( My, thoughts are, make as few decisions, trades as possible, but do QUALITY decisions, less stressful.) Look at a 5 minute chart and a daily chart of the SP500, take away the time scale and what do you see? What i see is the same thing, same patterns, pivots, mov avg's, etc. You adjust the signals to the time frame and bingo. Risk management is adjusted accordingly, you take trades when the "ODDS" are in your favor, like playing poker relative to the cards drawn. The "ODDS" come from your past experience in the mkts and how you adjusted to previous mistakes etc. How you react to the head fakes of false breakouts etc, these parts are what you drill into your nogan as time goes on, they are in your makeup not in your setup. As you gain confidence and courage in your setups then the makeup of your mind will allow you to pull the trigger automatically. The mind games can not be taught from books, it all can be described in books but the images are only imprinted to the brain from real and actual grief and joy. Experience matters.
I've been profitably swing trading for 5 years. The key to management of your own emotions, and indeed your capital, is to (1) Have a successful system which has been back and forward tested and in which you have confidence, and (2) Holding diversified positions and never putting too much into one instrument. I've had countless days when an otherwise good stock has gapped down or dropped in bad news (justified or otherwise), but the loss has been offset by other positions. I would never, under any circumstances, take a large position in a single stock. Always, when possible, hold multiple positions, or if you have only one in play, size down and protect yourself. This is how you overcome the fear of holding longer term. Ultimately it is a game of statistics. You win more, or bigger, than you lose. And only time and experience can help you develop confidence to see that one position does not, or should not, impact you seriously. If you lose one stock and your feeling is "I'm crushed", then you have been overexposed. If you lose a stock and your feeling is "Win some, lose some, move on", then you're on the right track.