Livermore quote: âAfter spending many years in Wall Street and after making and losing millions of dollars I want to tell you this: It never was my thinking that made the big money for me. It always was my sitting.â
Sadly, the American public has been sold a bill of goods by the financial establsihment. Eg. you have to be in it for the long haul. Shorting has infinite loss. You can't time the markets. If you miss the best 5 days per year you won't achieve long term statistical gains.,, ad nauseum. Maybe most can't time the markets (lack trading skills, have a full time day job, etc.) but it doesn't take a rocket scientist to recognize losses and go to cash. Sadly, a large percentage of the population has had their 401K and other retirement plans decimated and are now facing postponing many things in life, including retirement. And an awful lot have been pushed over the edge and will never see the American dream. All it took to avoid this was to step out of the way. Cash is king when the sh&t hits the fan.
I assume you're writing this after you called for a major selloff or crash last week and the market absolutely ripped against you... so now you're a daytrader, and a great one at that.
1) To clarify: I am not afraid of gaps. I embrace gaps for trading the opening. Day-trading is my chosen method of trading for the time-being. 2) Excuse me? What does it mean by "intraday gap"? Is there such a thing? You have to explain this one to me.
The 2 simple mentalities you cited are not entirely true. #1) "Irrational" fear. I don't know why you said they are irrational. You are probably saying "fearing death from a plane crash" is irrational, "fearing your house be burnt down by fire" is irrational. They are not irrational. The probability of such occurrences is low. But they are not irrational. What's wrong with people choosing to travel on the road instead of flying? What's wrong with people buying house insurance or choose not to live inside a forrest. It is a choice. It is a way of risk management. Day traders have made a choice: they don't want to accept a gapping risk. If you had held even just 1000 shares of RIMM Thursday night short, you would have waken up with a loss of $15000 on your swing trade. What's so irrational about it? #2) "Fast money". You made it sound like day traders are all greedy bastards who want to make a quick buck. How about seeing it as a way of getting a higher probability of winning and minimizing risks? Have you seen the markets having a "fire and ice" behavior from one day to the next - a big rally followed by a sell-off? In trading, that's "3 steps forward and 2 steps back". In day trading, we want to trade when we feel that the odds are more in our favor, long or short. For me, it's much easier to predict a stock's likely run for the next hour than the next 3 days to 2 weeks. There is no doubt that swing trading can make good money. But so can day trading or buy-and-hold. They are just all different approaches.
I have a simple mentality. You can call me a simpleton if you wish. My fears are NOT irrational. My fears are based on the egocentric fools that populate our one party political system which is disguised as two parties albeit of incompetent and corrupt morons. With these boys and girls in charge, it is hope not fear which would seem to be the irrational emotion. In case you have not noticed they change their minds and they change the rules a lot. I managed to be out of the market when these clowns suspended the shorting of financial institutions or any other stock that claimed to be a financial, as I remember the list grew over time. This is not so much a free market anymore as it is political game show where Barry has taken Monty Hall's place, and one never knows what is behind door number one or any other door, but there always seem to losers with a winner or two. I do not consider my self a day trader any more, I am a drive-by trader who simply gets and takes whatever money the market will allow me to get my hands on, before some stupid ass politician sneezes and moves the market a couple hundred points against me.
Bringing up the example of RIMM to try to discredit positional trading is weak. Here is why. No (good) student of technical analysis would short a stock that already made a GAP and did not show a sign of weakness (the first gap would not be interpreted as a gap of exhaustion) So if someone shorted a stock like RIMM and got burned so be it. People don't like flying and like driving because they perceive themselves in control (even though chance of dying in a car crash is far higher). YOU HAVE NO MORE CONTROL INTRADAY THAN OVERNIGHT, ANY PERCEIVED "CONTROL" IS AN ILLUSION I said many times, intraday you are the mercy of large institutional traders who decided to throw a block of shares by looking at 6 months charts. This is not a far fetched. I see intraday charts all the time and some of the patterns I see intraday are the ones I would NEVER see on a 6months chart. The most worthless chart is the 1 minute chart.