Day Trading

[Kerim]

How do you respond when smart people that you like and respect say that one can make a living day trading, if only you learn enough and are disciplined enough with your "system"?

My position has always been that technical analysis has little to offer. (I'm NOT saying it is entirely meaningless; just that it really isn't actionable or predictive in the way that technicians hope.) And that if day trading successfully was within reach of mere mortals, that everyone would be doing it quietly. Instead these gurus seem to spend all of their time promoting their Dischord and YouTube channels and trying to get you to pay and subscribe to their stuff. If I could reliably make $500 or $1000 per day by just trading for a few hours, I'd never talk to anyone about stocks again.

And if it were possible and predictable in a way that a human could execute, algorithms would already have eaten that lunch.

Right?

[crimsonghost747]

Well, basically it is a fact that day trading is within reach of mere mortals and that you can indeed make a living doing it. This is proven simply by the fact that there are thousands, probably tens or hundreds of thousands, who do it. It cannot be done purely by using the same technical analysis formula over and over and over again, it takes more than that. Technical analysis can be a small part of it, it can be a large part of it. It is by no means the one and only thing that will make it work.

I think it's a lot like anything else that is kind of mixing practice, knowledge and just having the natural talent for it. Do not forget about that last part, it is crucial. Just like playing an instrument, or pretty much any sport ever created, some people are just better at it than others. To be good at, for example ice-hockey, requires a ton of practice & hard work for years and then when you move on from playing in the little league towards more advanced levels you also need a good level of understanding of different strategies, what works and what doesn't in a certain situation, how it all changes based on the current score etc.

And with all of that, even though all of that information is out there, only a small percentage of those who play ice-hockey actually manage to do it at a level which is significantly better than the average joe. Most people play for a while and then just quit, or move onto playing once in a while with friends for fun. The competition to be excellent is tough. It is no rocket science to figure out what is necessary for becoming good but still only a fraction of a percentage of those who play actually become extremely great at it, those are the guys you see playing in the NHL.

Now apply all of that to trading. It's the exact same thing. There is no "do this and you'll be great" handbook. The large majority will try and never become good, a small group of people will figure out a way to make it work for them, and then there is that tiny fraction of a percentage who actually are just super awesome at it and the results speak for themselves.

I guess to truly answer your question on how I would respond, it would be something like "yes it's possible but it's definitely not simple or easy. It takes a lot of time and effort and the competition is fierce, it really is not for everyone."

[fenders53]

The failure rate is well documented long before the days of Youtube gurus. Well above 90% lose their capital in under a year and many more don't survive over a few weeks or months. One of the problems is a system is going to lose effectiveness if you have a significant amount of traders using it on low liquidity stocks. I do wish I could get 100 people to pay me training fees and then follow me into trades so I can have some associates dump shares on them. (not really) Anyway I've never personally known anyone who can do it for an extended period of time, though various market cycles. So not impossible I guess, but the list is VERY short.

I've had decent success swing trading in years like this one. That's not the same as day trading. I am trading stocks I am generally OK with owning for years if that is how it turns out. And my "success" sometimes yields less than just holding the stock longer term anyway.

[cemanuel]

"How do you respond when smart people that you like and respect say that one can make a living day trading, if only you learn enough and are disciplined enough with your "system"?"

My basic response is, "I believe you. Best wishes if you do it."

I looked into it a little when I started out. Did not do it - or even spend much time looking into it - because from what I could see if you're going to, it needs to be your full time job - and people who have told me they day trade take it that way. They have set times where they trade, 10-hour stretches at a time. They have dozens of trades going on at once and they use AH trading extensively.

Not for me. I have never had enough interest to even ask someone how they go about it. Lots of ways to make money in the market and if you tell me this is your way I'll believe you.

[ken-do-nim]

I was starting to drift towards that at one point this year, and as forum members can attest, I was horrible It is also anathema to what I consider fun about a portfolio, which is stock collecting. What energizes me now is getting all my favorite stocks to 100 shares, then it will be 125, etc.

My friend Jeff in Connecticut day trades, but my understanding is that he had one lucrative period and has never matched that since.

[fenders53]

(12-21-2021, 05:07 PM)ken-do-nim Wrote: I was starting to drift towards that at one point this year, and as forum members can attest, I was horrible  It is also anathema to what I consider fun about a portfolio, which is stock collecting.  What energizes me now is getting all my favorite stocks to 100 shares, then it will be 125, etc.

My friend Jeff in Connecticut day trades, but my understanding is that he had one lucrative period and has never matched that since.

I saw a TikTok video from a kid about age 14 last week.  He said it is easy.  You just buy a stock that is going up and sell it when it stops going up.  Wish I had thought of that.  

I do have one trader guy I watch on Youtube for entertainment.  He mostly day trades but will follow them up or down with trailing stops depending on whether he is long or short of course.  He might buy the close on Friday unlike a "hair on fire" day trader. He is also trading indexes and ticker higher quality tickers like AMZN-TSLA-AAPL. He cuts his losses very quick when the trade goes against him.  Other than appropriate trade size that is pretty much rule number one.  Don't care who you are, eventually you have a few bad weeks where you don't it right much.  You'll take yourself out of the game quick if you are disciplined.  That part is just common sense.            

Personally I think swing trading is FAR easier.  Valuation is often involved to some degree then, and we can calculate it.  I have no idea whether a stock is going up or down in the next 15 minutes. Some of the high frequency guys aren't even trying to be in that long. I've seen them bet tens of thousands on a ticker and they don't know what the company even is. You better get out fast if that is your game.

[Kerim]

Yeah, I've always believed that a main advantage us solo investors have is the long time horizon, and you're just giving that away with day trading. Long time horizons and deferred gratification seem to be dying arts.

[cemanuel]

(12-21-2021, 10:15 PM)Kerim Wrote: Yeah, I've always believed that a main advantage us solo investors have is the long time horizon, and you're just giving that away with day trading. Long time horizons and deferred gratification seem to be dying arts.

I don't consider day trading investing. To me it's a form of self-employment to generate income/make a living. I'm far more familiar with commodity trading and large commercial ag operations that have staff doing that don't talk about it like they're investing but generating capital and cash flows.

[fenders53]

(12-21-2021, 10:15 PM)Kerim Wrote: Yeah, I've always believed that a main advantage us solo investors have is the long time horizon, and you're just giving that away with day trading. Long time horizons and deferred gratification seem to be dying arts.

This pretty much ends all bull markets.  I've always got a story....

When I built my house 20 years ago the old man that sold me the lot was the son of a local banker.  The man owned huge swathes of rural land back in the day.  He was a multi-millionaire in the 1920's.  His son told me they lost all their cash and some land during the 1929 crash.  I asked him how that could happen.  Leveraging oil stocks on 10-1 margin was the answer.  Oh wow, there was no need for that.  Just greed and a desire for instant gratification.