As usual, Handle is right onâ¦but I would stress the #1 reason for the majority losing in ANY time frame: cant throw away the loser quick enough-unable to admit your wrong on a consistent basis as it does a number on your ego. Way too much emphasis on signals-following a plan-money managementâ¦even backtesting is a waste of time if you cant control your losers and the emotions that go with it. I consider myself a beginner ( 3 years) but have won all 3 years- but not nearly enough to make a living but improving every year-as I believe this a long term venture and donât EXPECT to make a living until year 5-so u better love it!! Iâm sorry that I cant tell u exactly âhowâ cause there is a lot of feel to what I do BUT there are many things I have in common with Handle-his thinking-the many ties-and a defined entry pattern that I like best ( there are many to fit ones personal/emotional style and u must find that out for yourself) + a set of strong trade management rules once your in -especially on the downside ⦠which is all u need to win. Then write me in 2 years to see what happened I hope this helps the first 2 posterâsâ¦
It is curious, but in itself logical, that failure speaks louder at ET than success because it is most or many who are making no progress or insufficient progress. So the issue is not really daytrading at all. It is whether the savvy, patience and dedication are sufficiently there in an individual for that individual to master the puzzle of the markets. Daytrading offers you the most points. The daily gyrations (eg CL), open to close, are the swings up and down which follow each other sequentially. Now add together the maximum points from each swing and it gives you the maximum points that market offered you for that day. Add together the maximum points a market offers you for every weekday of the week and you are talking a very big pile of points each week. The frustration for the learner is not being able to start taking some of those points on a daily net gain basis. You have to devise or adopt a reliable methodology for taking points from the sequential swings of the days trading session. (For example use minimum 35 points to distinguish and measure each swing in CL.) Trading itself requires a combination of decisiveness and patience utilising a focussed familiarity with the metrics of the market you are trading. This requires not only a suitable trading mentality but also all the preparation and study that goes beforehand. Finally daytrading does offer the opportunity to make yourself rich. The highest success in most forms of activity goes to the few not the many; that is the only proviso.
Here we go again! It looks like I have generated some interest in the methods I use, so I will begin giving some specific info on the things I have learned over the years. Before we go any further, let me repeat what I said previously. Learn math. It is the LANGUAGE of investing, and without it you are crippled. Learn to calculate in your head, with a reasonable amount of accuracy. If you trade like I do, you will very often not have time to pick up a calculator and key in numbers. Practice. Learn to handle Excel well. I don't mean all of the esoteric stuff, but I use the usual simple calcs, powers and roots, and some charting. For testing your ideas, you will need to process LARGE, LARGE amounts of data. Don't invest in SQUAT unless you are certain the odds are on YOUR SIDE. You will only know this if you have PROVEN you theses by submitting them to rigorous testing. If you don't test, you are flying blind. and run about a 50/50 chance of losing. As part of your brushup in math, take a hard look at SIMPLE PROBABILITY and MATHEMATICAL EXPECTATION. Every good horse player knows this stuff, and you must as well. ---------- I got some emails that I should answer, so here goes. rtiger29 -- re: Measurement of success As I said bedore, I don't use dollars gained as a measure. It's fun, but not really productive. Here is the formula I use: (SellPrice/(BuyPrice + BuyCommission + SellCommission)^(1/NbrDays) This is the way Excel wants to see it entered. If you are using another language, you may have to modify. Now, what does this give us? Note that the commissions are added to the per share cost at the beginning. That way, the output represents PURE PROFIT. Here, we are dividing the SellPrice by the total costs to get the ratio. But remember, we need to include TIME as a factor. Years ago I arbitrarily set a goal of 2% for each trade per day. I knew it wasn't a realistic target, its far too high. But, it's something to strive for. When we compound that, using 250 market days in a year, we get 1.02^250 (we divided 2% by 100 giving .02, added 1, and raised to the 250th power) The result is 141.268. What that means is that if I had bet $1 and won 1.02 times that much, then bet $1.02, etc, etc, until I had done it 250 times successfully, I would have $141.268. As you can see, this is wildly optimistic. However, it is ONLY a target. Actually my current rate is a little under 1.01 for the last 20 trades. It keeps me happy for now. So, to include TIME as a factor in the formula above, we take a ROOT, that is 1/NbrDays, where NbrDays is the number of days you held the position. This appears in the eq as ^(1/NbrDays). ---------- tyrant -- re: 70% Wins In most of the books I have read about trading, a 70% win rate is considered good. Actually there are TWO FACTORS involved, the WIN RATE and the GAIN RATIO. Example: I bet $1. I have a 20% chance of winning. But historically I know that my average gain ratio is 10 to 1, i.e. win $10 for every $1 I bet. Look at the numbers: I have a 1 in 5 chance of winning 10 times what I bet. Good bet. What I am saying is that you must consider BOTH of these factors in order to bet logically. If you only win 50% ot the time, then you must seek out positions where you are assured of making at least $2 for each $1 you bet. Anything above that will be profit in the long run. Now, obviously, searching for opportunities like that might be fruitless. So, you must concentrate on three things: (1) Raise your WIN RATE. (2) Raise your GAIN RATIO. (3) Improve your skills at searching for information which benefits your investment program. Example: I spent hours today looking for info on "Rare Earth" opportunities. Now, I know that Molycorp (MCP) is in the process of reactivating mining interests in lower Calif. Why would I waste time on Sunday doing crazy stuff like that? Because I know that that mining area was closed down some time ago, and the US substantially withdrew from the global market because of environmental concerns. I also know that China has rich deposits of rare earth minerals, and they appear to be on a global commodity binge. So, I will watch MCP from time to time, for any sign that an opportunity is there. You make your luck. ---------- dwpeters: -- re: Swing Trading Take one of your longer trades, and convert it into a compounded rate per day as I have done above. Lets say you bought at $10 (ignore comms) and sold 25 days later for $12.50. When you enter that data into the eq, you get a daily compounded rate of 1.009 approx. That is roughly my average right now, but it takes me FAR LESS TIME to accomplish the same end. This means that I have funds free, not tied up, that I can use for other opportunities. If you look at the math, you are ALWAYS better off to trade SHORT TERM than long term. Try out some calcs. So Long for now, guys. Good Luck!
Gotta disagree with you. The WIN RATE is one of the factors used in calculating the MATHEMATICAL EXPECTATION of bets. The use of reliable long term data in making these calulations is vital to long term success.
The last comment should have been addressed to Clubber Lang, but I messed up. Haven't been on this board for long.
the business model for wall street is that of similiar to horse track and lotteries. the mutual fund/hedge fund model is that of a ponzi scheme the model of the ETF is legalized skimming by the ETF operators. it's one big scam,,if you are crook,theif, no morals you belong in wall street. tonnes of money to steal legallly and legalized gambling where the house doesn't pay taxes on profits. it's smart money(HFT) taking money from dumb money(pension funds and retail traders) it's just one big f#cking scam. a very profitable scam. the winners take money from the losers. somebody is paying for the free lunch. either the fed etc or somebody there is no free money in wall street...the money or profits in wall street is tainted with blood on it. or dirty money. stolen money. lieing, cheating is the norm. and expected. honor is an unkown concept. it's a dog eat dog world. demons killing demons in wall street .theif stealing from other theives. everybody is a crook in wall street. get out of this hell hole when you still can.
Thank you crater, That was very enjoyable. I appreciate your math comments as I took far too many wasteful college classes. I never thought I would be studying bone head math and statistics on my own time but I sure do now. I had not considered the info you provided in that particular manner and I thank you for the education. I now have it set up in my Excel trading sheets. It appears though that your copy and paste didnât come out right and the last paren after SellCommission fell off. (SellPrice/(BuyPrice + BuyCommission + SellCommission))^(1/NbrDays)
hi, yes, i think its a far more difficult game than longer-timeframe trading game, but its possible to achieve consistent profitability, just that it requires higher degree of understanding in psychology/market price reading skill/emotion handling skill. its like a higher level of poker game. i trade TF for about an hour a day from 930am-1030am edt. no indicator, no robot, no auto/semi-auto systems, just price alone. am not profitable everyday, am not sure if some1 can do it, but i know i cant & i wont be able to, so i just focus on playing the game & play only my best hands & forget bout all other things.
---------- Robert Y: Thanks for the catch! Good One! With two right parens before the "^" is the proper code. Thanks again.
OUT OF BED, GUYS! ON YOUR FEET! TIME TO START TRADING! Throughout the entire world, events have been occurring since you turned off your computer last night. Maybe some yahoo was shot in South Africa, the miners in Indonesia are succumbing en masse to a viral infection, the leaders in Germany have announced that they will no longer support Greece, -- whatever. Now, I'm making this stuff up, of course, but THESE ARE TYPICAL OF THE THINGS THAT WILL CONTROL THE COURSE OF YOUR TRADING FOR THE REST OF THE DAY! Want success as a trader? Get off your ass. Get up early and start making preparations for the coming day. I have already updated my spreadsheets from last Friday's close of business, I have surveyed the general precious metals, checked the current price of silver, and looked at the course of the European markets. When you are seriously trading stocks, folks, you are NOT playing children's games. A single stupid blunder can cost you thousands of dollars. MOVE!