Redman you raised good points. In 1997-99 I sat next to a guy in Atlanta flipping $2 stocks making 1/8, then 1/16. At that time there were no ECN rebates and he was prob paying 1.5 cents/ During the 1/8's if he makes min tick move he makes $95 on a 1000 lot, when 1/16 he made $47.5. Now, if he scalps the min ticks and assuming hemakes both side of rebate , at .0025per sh his net pnl is $9.Obviously he can hold out for more than 1 penny albeit at a little bit more risk. Maybe the trick is to find stocks that moves a tad more than LU in order to get that 2-4 penny profit. Flipping these stocks for 2-4 cents is what you mean by high vol scalping correct?
Another reason I like position trading is that it gives you quite a bit of time to analyze each potential trade or existing trade, for stops or additional positions. Much slower pace, I have always found, lends itself well to better decision making.
The relation between the trading time frame (some call it fractal) and the price swing (that determines the profit potential) is not linear. I mean if you reduce your trading time frame by a factor of 4, the price swing might go down by only a factor of 2. This suggests that the smaller the time frame you trade, the higher the winning potential. On the other hand, the smaller the price swings the more significant the slippage and commissions, which favors the longer time frame trading. For different trading vehicles the sweet point is different. I.e. options have higher slippage than stocks, so you get hit hard if you try to daytrade them. When comparing time frames, another factor to consider is that in the intraday ones the market internals are predominant, while the dailies and above are affected more by the market external factors. If you're a trend trader you have to choose a trading vehicle and a time frame that trends better, so you may not be able to successfully trade indices in longer time frames. If you're a fader you have to trade a less trending vehicle.
Agree. However, I am not so quick to discount daytrading. In fact, daytrading offers much more opportunities compared to position trading. Two important considerations must be overcome in daytrading - discipline and commissions/slippage. Position traders have to weather through possibly long periods of drawdown, and this to me, is one of its very few disadvantages. It might also seem that there are more profitable position traders than daytraders in the long run..but, one must always remember that, daytrading is fast-forwarding the process. Position traders might have to wait 10 years to find that their systems ultimately fail..whereas daytraders take much shorter time to find out.
Says here at http://www.trader-soft.com/option-trading/option-glossary/p.html that position trading is: "An investing strategy in which open positions are held for an extended period of time. Usually six months to a year or more. " if this is the case, where do you draw the line between trading and investing?, and also, how do you make a living at this if you hold positions for that long?..6 months to a year is a long time for your landlord to wait for his rent...if you know what i'm saying. How long does it take a position trader to realize that he/she was lost and to sell at a loss of 1.00 per share...1.75...2.00 a share?... - nate
The big money is in the big swing. It's so much easier to "predict" price direction when considering a longer term chart (1-2 years). On short term stocks are easier manipulated in long term only general conditions count which cannot be manipulated. The shorter the timeframe the harder it is to predict movement. No one knows what stocks will do tomorrow or next week. Of course this does not mean I accept long periods of prices going down. In this cases I am stopped out and look for other opportunities. Focussing on the longer term also allows for better and more objective buying and selling decisions which I always take when markets are closed. Besides this I spend only about one hour a day analyzing my portfolio and the general markets. In daytrading you have to consider all these hours that you spend. I have the impression many people daytrade because they like the excitement. Position trading is more relaxed and sometimes boring but I trade for the money, not for the excitement. However, I like daytraders because they provide liquidity allowing me to buy or sell stocks whenever I want. Also I like to watch the markets during the day. Just to learn. regards, Ivo
"The big money was not in the individual fluctuations but in the main movementsâthat is, not in reading the tape but in sizing up the entire market and its trend." Reminiscences of a Stock Operator
Another reason that I like position trading is the strength of technicals. There is no question that technicals are stronger on daily and weekly chart than they are on intraday charts. I believe that this is due to the fact that the closing price of a bar actually means something on a daily or weekly chart whereas intraday it may or may not.
What do you mean by stronger technicals? Can you give an example of them being stronger on daily and weekly charts?
The frequency of a bullish divergence or bearish divergence being right is much higher on the longer charts, and of course points to bigger sustained moves. Other technicals are stronger as well , like RSI moving up from the OS line--it's more often right on the larger charts and the moves are better sustained. My belief is that the daily bars and the weekly bars are more powerful because I believe that a lot of the professional position traders do their trading end of day not on the open. The amateurs in large part trade opens and during the day making those closing prices on intraday bars much much weaker.