Day Trading

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docker

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I have noticed a lot of recent advertising regarding day trading, however I know very little about it. Are actual shares ever purchased through day trading accounts? Or is this simply a form of gambling ( betting higher or lower ) against the spread the trading provider is offering on that day?

If it is purely gambling surely on average there is not money to be made as like sport betting the bookie always wins unless you know alot more that the average investor / punter??
 
All share / currency / commodity or derivatives trading is gambling, the main difference with day trading is the shorter time-line of the gamble, i.e. in and out on the same day rather then awaiting developments over weeks, months or years.
 
docker said:
I have noticed a lot of recent advertising regarding day trading, however I know very little about it. Are actual shares ever purchased through day trading accounts? Or is this simply a form of gambling ( betting higher or lower ) against the spread the trading provider is offering on that day?

If it is purely gambling surely on average there is not money to be made as like sport betting the bookie always wins unless you know alot more that the average investor / punter??
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All trading is gambling as just mentioned, as the outcome is not known in advance.

The main difference with daytrading is that you are in complete control and can limit your loss on each trade to exactly what you set as your maximum amount (99.99% certainty as nothing can be 100% guaranteed, e.g. the market might dive and your stop will not be activated, if using a mechanical stop that is, as most daytraders use mental stops).

Once you can limit and control your losses; you can then put the odds in your favour providing you can learn the right tools to use. This is also another big difference compared to other forms of gambling, where the odds are always on the side of the one taking the bet on, such as the bookie or casino.

Daytradig allows you to shift sides, and instead of being the punter, you can become the bookie, or casino owner, but like them, you must play the odds also, and this is why most who try daytrading fail, as they don't know how to play the odds correctly - picking the right stock has absolutely nothing to do with it!
 
I was reading Richard Farleighs book today (the Australian guy who used to be on dragons den). He managed to amass a large amount of personal wealth in the past decade, mostly through managing hedge funds, speculating on currency movements and personal investments.

He is quite a clever chap, he got a first class honours in economics from his University, and used his intelligence and wit in the real world to make a lot of money. He is very considered in his opinions, his book is a nice read.

He makes the point in his book that day traders are just gamblers. He has never tried it because he is not a gambler. He reckons the only people who can successfully on a regular basis make money from day trading are people "at the coal face" i.e. traders who get a picture of orders in advance (which may signal an increase in demand and a share price rise over the course of a day etc).

The costs incurred in buying and selling shares (broker fees/taxes) is quite high, buying and selling shares for a profit within a day or week makes it very hard to make a profit obviously.

If Richard Farleigh doesn't do day tranding, then I for one wouldn't try it either.
 
Whiskey said:
I was reading Richard Farleighs book today (the Australian guy who used to be on dragons den). He managed to amass a large amount of personal wealth in the past decade, mostly through managing hedge funds, speculating on currency movements and personal investments.

He is quite a clever chap, he got a first class honours in economics from his University, and used his intelligence and wit in the real world to make a lot of money. He is very considered in his opinions, his book is a nice read.

He makes the point in his book that day traders are just gamblers. He has never tried it because he is not a gambler. He reckons the only people who can successfully on a regular basis make money from day trading are people "at the coal face" i.e. traders who get a picture of orders in advance (which may signal an increase in demand and a share price rise over the course of a day etc).

The costs incurred in buying and selling shares (broker fees/taxes) is quite high, buying and selling shares for a profit within a day or week makes it very hard to make a profit obviously.

If Richard Farleigh doesn't do day tranding, then I for one wouldn't try it either.
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If you were in need of a heart operation to save your life, who would you take advice from and which one would you prefer to carry out the operation on you.

a) A Brain surgeon

or

b) A Heart surgeon

Both would have studied medicine and became experts in their own field!

One mans' opinion is another mans' downfall
 
If one is to be "inspired" by others, then one should take it on themselves to read as much "facts" about the person as can be obtained.

http://www.moneyweek.com/file/16924/richard-farleigh-from-backward-child-to-top-investor.html

I have never heard of Richard Farleigh prior to his name being mentioned here, and already I have found that he lost 100 million when the tech bubble burst.

Many people have made millions thru many different endeavors, but what should matter most to the small time "investor"; is the preservation of capital.

If R.Farleigh said that he does not gamble, then in my eyes he is not as smart as he lets on to be, for when you invest your money, in anything where the outcome is not known in advance, or guaranteed, then you are taking a gamble - and no argument can change this fact of life.

I am sure that we have all heard the saying;

"Further away fields are always greener"

Oh, and I just noticed that he has sold some books, funny how these people who make so much money still have to sell books, why don't they just give the information away for free if the have so much money!

This has all the hallmarks of "the usual stuff", and will serve no purpose to anyone who is genuinely interested in learning how the real world of investing/daytrading/gambling really works - you can take your pick as they are all one and the same, and the sooner you accept this fact, and stop looking for inspiration from others, and look to yourself, as everyone has the ability within themselves to be as good as any other person on this planet; all one needs to do is start thinking differently and realize that most things are done for one thing and one thing only, and that is to get people to part with their money.

Keep your money and learn how to grow it yourself - you do not need the advice of others who charge you for same; but do listen to the advice of some who speak common sense and presents the facts in a logical framework of reality.

Sometimes we need to give ourselves a good "kick up the donkey" to wake up to what is really going on around us, and stop living in the dream world that has been created by those few who continually take all from those who don't have much!
 
I dont see how the average investor can make money, unless they trade a few times and get very lucky. I'm sure the providers on the service offers a spread with their margins in between...and that they manage that spread depending on which way their clients are betting...so therefore the real winners are the trader providers and maybe some very smart investors who are in a position to know whats going on in the market a long time before the average investor does.

With other forms of gambling, this also plays on humun nature where people think they are lucky or a better judge / investor than the average person. For example if you ask 1000 drivers to rate their driving skills out of 100...the average result will be much higher than 50...when it shound not be!

If I'm wrong and the average investor does make money...then who funds this money they make??? The providers?? It would apear to me that the average investor funds the money the providers and top investors make!

The talk of managing your losses isnt that simple, as you do still have losses...the point where you "cut your losses". Also you will have to pay charges, etc which mean a further loss. Doing this ever day would be very costly!
 
docker said:
I dont see how the average investor can make money, unless they trade a few times and get very lucky. I'm sure the providers on the service offers a spread with their margins in between...and that they manage that spread depending on which way their clients are betting...so therefore the real winners are the trader providers and maybe some very smart investors who are in a position to know whats going on in the market a long time before the average investor does.

With other forms of gambling, this also plays on humun nature where people think they are lucky or a better judge / investor than the average person. For example if you ask 1000 drivers to rate their driving skills out of 100...the average result will be much higher than 50...when it shound not be!

If I'm wrong and the average investor does make money...then who funds this money they make??? The providers?? It would apear to me that the average investor funds the money the providers and top investors make!

The talk of managing your losses isnt that simple, as you do still have losses...the point where you "cut your losses". Also you will have to pay charges, etc which mean a further loss. Doing this ever day would be very costly!
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Firstly, there is no such thing as "luck", and if someone enters the world of trading with this in their mind they are doomed to failure.

Every thing happens for a reason; the problem is that, it is very hard to logically work out the reason, prior to the event happening, in the majority of situations.

We can say, using math’s, that if an object is projected at a window, from a distance of 20M, and the object travels at a speed of 1 m/sec, then the window will be smashed in exactly 20 seconds from the time it is projected.

BUT - what about all of the variables that can happen!

What if we got a sudden wind gust blowing in the direction directly opposite the path of the projected object, we now might hit and break the glass in 19.99 seconds, so, whereas we thought we could tell the future with certainty, using our math equations, we now find that in order to do so we need to take some other unknown variables into account.

What if a tree fell in the path of the projected object and stopped it dead in its tracks - the window would never get broken!

What if, what if, what if?

The only thing that we can be certain of is that we are now in the present. The past is gone, so we can't experience that, and the future is not here yet, so that also can't be experienced.

A person can do whatever they so desire in the present moment, they have no control over what they will do in the future, no matter how hard they try to think otherwise, as it is just not possible.

To make/lose money trading stocks you only need to do 2 of 3 things.

1. You buy/sell at price A
2. You sell/buy at price B above A
3. You sell/buy at price C below A

The problems arise in the way the person thinks when they are in a trade - like the window, they think that they know exactly when the glass is going to break, but nothing is further from the truth, and anyone who thinks like this is not in the real world, even though they think they are, and funny enough, most seem to think this way :eek:
 
If you look at if from a probability point of view, day traders are climbing a very steep mountain.

Imagine if the long term average return on the stock exchange is 20% per annum. (in reality it's much less than 20% of course).

This is roughly a 0.055% increase every day.

Every €100 invested would return about 5 cents every day. This would be an excellent average rate of return.

If a day trader with no special knowledge invests €100 in a random company, the probability is that s/he will sell at the €100.05 at the end of the day.

I don't know what the commission is when buying and selling, but I'm sure you probably lose a 1/2 % in total when buying and selling.

So instead of getting €100.05 at the end of the day, the probability is that you would get €99.55 (if the market is rising at an average of 20% per annum).

Unless someone has insider knowledge (and using insider knowledge is of course illegal), or knowledge which is not known to the market, nobody can possibly make a profit from day trading in the long term, the laws of probability make it impossible.
 
Whiskey said:
If you look at if from a probability point of view, day traders are climbing a very steep mountain.

Imagine if the long term average return on the stock exchange is 20% per annum. (in reality it's much less than 20% of course).

This is roughly a 0.055% increase every day.

Every €100 invested would return about 5 cents every day. This would be an excellent average rate of return.

If a day trader with no special knowledge invests €100 in a random company, the probability is that s/he will sell at the €100.05 at the end of the day.

I don't know what the commission is when buying and selling, but I'm sure you probably lose a 1/2 % in total when buying and selling.

So instead of getting €100.05 at the end of the day, the probability is that you would get €99.55 (if the market is rising at an average of 20% per annum).

Unless someone has insider knowledge (and using insider knowledge is of course illegal), or knowledge which is not known to the market, nobody can possibly make a profit from day trading in the long term, the laws of probability make it impossible.
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Hey WHiskey,

I will have to disagree with your analysis.
While it appears to make sense, upoin analysis it is flawed.

Firstly - you are making a direct comparison between daytrading and buy-and-hold by using a nominal 20% gain.

Daytraders and position tradres(i.e. holding a position for a week or 2 or so) make money on volatility - not on long term gains.

SO - using your example above - lets say it rose 20% from one end of teh year to the next.
In this scenario the buy-and-old merchant will make 20%.

So - lets say for arguments sake that thos asset started at 100 and ended at 120 on year end.
Howver - it is quite possible that during the year it couild have risen to 150 - then dropped to 50 - risen to 140 - dropped to 60 - and eventually risen to 120.

The daytrader will attempt to make money from all these swings.

What you were doing is only looking at the start and end price and calculated the average daily gain to see what a daytrader would have made.
But as i say - it is the volatility where the day trader hopes to make his gains.
The buy-and-hold merchant on the other hand only compares the start price to the end price and ignores the volatility in between.
 
Whiskey said:
If you look at if from a probability point of view, day traders are climbing a very steep mountain.

Imagine if the long term average return on the stock exchange is 20% per annum. (in reality it's much less than 20% of course).

This is roughly a 0.055% increase every day.

Every €100 invested would return about 5 cents every day. This would be an excellent average rate of return.

If a day trader with no special knowledge invests €100 in a random company, the probability is that s/he will sell at the €100.05 at the end of the day.

I don't know what the commission is when buying and selling, but I'm sure you probably lose a 1/2 % in total when buying and selling.

So instead of getting €100.05 at the end of the day, the probability is that you would get €99.55 (if the market is rising at an average of 20% per annum).

Unless someone has insider knowledge (and using insider knowledge is of course illegal), or knowledge which is not known to the market, nobody can possibly make a profit from day trading in the long term, the laws of probability make it impossible.
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Now, do not take offense, but I did mention when I started posting that it is very common for people to post based on what they have read, and not on experience.

I have experience with daytrading, and what you talk of has absolutely nothing to do with making money.

The secret is "control" - with respect to time and emotions, for unless you have both working together at the same time, you will make a mistake, and mistakes cost money when trading.

Depending on the market, namely NYSE or Nasdaq, then it can be best to utilise slightly different approaches, or setups.

All short term trading success hinges on the traders ability to read a chart, and I don’t mean the type of chart reading that is out there for the majority, with the myriad of TA indicators such as MACD, Stochs, RSI, CCI, etc, etc.

All you need is price, and in some instances volume, but sometimes it is better to ignore volume on a certain timeframe, as many stocks are manipulated in order to get the public to buy, or sell.

I can honestly say that one can make money daytrading, and what is more, if you are set up correctly, in the right frame of mind, and utilise the correct process for the market in question, then you can make money each and every day, not easy to make it every day, but it is possible, and once you get to this level, you will find that losing days are due to emotional issues, nothing to do with the process, as the process is a proven method that is tried and tested for many years now.

It is irresponsible to say that trading is simple, it is not, it is actually extremely very hard, and not for the faint hearted, or those who don't want to gamble, as it is gambling, and nothing we say can change that fact.
 
NikolazTesla said:
It is irresponsible to say that trading is simple, it is not, it is actually extremely very hard, and not for the faint hearted, or those who don't want to gamble, as it is gambling, and nothing we say can change that fact.
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WHile I agree with a lot of what you say, i disagree with the statement that it is gambling.

YEs - it can be gambling - but doesn't have to be.

ANy serious trader wll have backtested their system and will have calculated their systems epectancy.

I'm not usre if you have calculated teh expectancy of your systen but if you take the daytrading seriously i'm sure you have.

And anyone that uses a systme with a good positive expectancy combined with good money management can stack the odds in their favour.
 
qwertyuiop said:
WHile I agree with a lot of what you say, i disagree with the statement that it is gambling.

YEs - it can be gambling - but doesn't have to be.

ANy serious trader wll have backtested their system and will have calculated their systems epectancy.

I'm not usre if you have calculated teh expectancy of your systen but if you take the daytrading seriously i'm sure you have.

And anyone that uses a systme with a good positive expectancy combined with good money management can stack the odds in their favour.
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Any outcome that is not known in advance is a gamble.

Expectancy is only for those that have attained the highest level of professional gambling, and I still have a bit to go yet.

Most make the common mistake of back testing a system to see what the results will be - they are trying to predict the future, which no matter how much we argue for, is not possible.

What Expectancy is good for is to determine your allocation of capital to various strategies, that, after being analyzed with vast amounts of "LIVE" data, will give you average return per dollar risked.

So, if the Expectancy of my NYSE process is 2.5, and the Expectancy of my Nasdaq process is 1.8, then:

NYSE vs. Nasdaq = 2.5 / 1.8 = 1.38

So, for every $ I risk on my NYSE process, I will, on average make 1.38 times more than when using my Nasdaq process.

BUT - and remember, as I keep mentioning, with all things in life there is always a but ,

Expectancy on its own is not much use - you must look at the opportunity.

Nasdaq opp = 20 trades per day
NYSE opp = 5 trades per day

NOW - let’s see what happens,

Nasdaq = 20 x 1.8 = 36
NYSE = 5 x 2.5 = 12.5

So, the reality is that, even though my NYSE process has a greater Expectancy than my Nasdaq process, when I take the opp into account, I get.

Nasdaq vs. NYSE = 36/12.5 = 2.88

If you were me which one would you use - btw, there is a lot more to this than meets the eye, and I will see if anyone can come up with a few answers.

As I keep saying, be careful of what you read in books, as when applied to real life scenarios the result can be completely different.

One mans opinion is another mans downfall
 
Yes - ytou are quite right in that the number of opportunities is also crucial to the system.

However - when you use the term gambling it suggests to me that if you win then you are lucky.

There are many people who trade succsssfuly on a consistent basis.

These cannot be said to be lucky.

Yes - any one individual trade is a bet - but putting all these bets together can take the luck element out of it.

E.g. if someone offered to pay ne 6/4 on heads and even money on tails that means the odds are stacked in my favoiur if i constantky call heads.

And on any individual flick of a coin there is still a 50/50 chnce of success/failure.
i.e. each individual flick is a gamble.

However - it i employ good money management and always choose heads them I will eventually win due the expectancy of 0.2. => not gambling.
 
qwertyuiop said:
Yes - ytou are quite right in that the number of opportunities is also crucial to the system.

However - when you use the term gambling it suggests to me that if you win then you are lucky.

There are many people who trade succsssfuly on a consistent basis.

These cannot be said to be lucky.

Yes - any one individual trade is a bet - but putting all these bets together can take the luck element out of it.

E.g. if someone offered to pay ne 6/4 on heads and even money on tails that means the odds are stacked in my favoiur if i constantky call heads.

And on any individual flick of a coin there is still a 50/50 chnce of success/failure.
i.e. each individual flick is a gamble.

However - it i employ good money management and always choose heads them I will eventually win due the expectancy of 0.2. => not gambling.
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Maybe you have misunderstood parts of what I have said.

I believe that there is no such thing as "luck".

It is a word used to make an excuse for the inability to logically deduce the outcome of an event.

When you look at all of the variables that can occur at any given time, trying to predict what can happen at a future point in time is a fruitless effort. This is a logical conclusion.

Your example of the coin is one of these fruitless efforts - again, I am not attacking you, but we must try and apply logic to everything we do.

One person flicking a coin will give different results than another, due to many variables, to name a few, how the coin is angled, how much pressure is applied to the flick, what are the conditions at the time, and so on.

I will again state the fact that any event, where the outcome is not known in advance, is a gamble, as the outcome can be one of several due to the variables that can happen, all of which we can never account for.

What we should be talking about is probabilities, but not like the flicking of a coin, as we need to talk about the subject matter, and that is trading.

Point is, the markets are controlled to a degree, by those who have the money. Thru certain types of chart reading, by looking at the patterns of price movements, it is possible to see patterns that might repeat over time.

As the price is nothing more than the traders act of buying and selling, then what we are looking at it human behavior.

It is know that human beings exhibit a trait that is called a habit, and this is due to the way the subconscious and conscious mind work together.

What I am doing, is showing how science can be applied to the trading game, as the purpose of science is to produce repeatable results by applying various techniques.

Let us try and forget about all the books, as the majority of them are rubbish, and look at it from a practical, common sense, logical view.

Even after applying scientific analysis the results can still be way off, for, we are trying to apply science to the human mind, and when we don't even know how the mind works, then we are at nothing from day one.

What we need to do, is use what science we can, but at the back of our own mind, keep telling ourselves that, in the markets,

"anything can happen at any time"

This is why "control" is the key - as you can react in a second to what is happening right if front of your eyes.

The majority will continue to provide cannon fodder for the big boys, and like many events that have transpired, this will not change for a long long time to come, for most.

Each person has it within themselves to get exactly what they want, but the first part on this journey is to become aware of what is required - for,

"everything happens for a reason"

It is called "Cause & Effect".
 
NikolazTesla said:
Firstly, there is no such thing as "luck", and if someone enters the world of trading with this in their mind they are doomed to failure.

Every thing happens for a reason; the problem is that, it is very hard to logically work out the reason, prior to the event happening, in the majority of situations.

We can say, using math’s, that if an object is projected at a window, from a distance of 20M, and the object travels at a speed of 1 m/sec, then the window will be smashed in exactly 20 seconds from the time it is projected.

BUT - what about all of the variables that can happen!

What if we got a sudden wind gust blowing in the direction directly opposite the path of the projected object, we now might hit and break the glass in 19.99 seconds, so, whereas we thought we could tell the future with certainty, using our math equations, we now find that in order to do so we need to take some other unknown variables into account.

What if a tree fell in the path of the projected object and stopped it dead in its tracks - the window would never get broken!

What if, what if, what if?

The only thing that we can be certain of is that we are now in the present. The past is gone, so we can't experience that, and the future is not here yet, so that also can't be experienced.

A person can do whatever they so desire in the present moment, they have no control over what they will do in the future, no matter how hard they try to think otherwise, as it is just not possible.

To make/lose money trading stocks you only need to do 2 of 3 things.

1. You buy/sell at price A
2. You sell/buy at price B above A
3. You sell/buy at price C below A

The problems arise in the way the person thinks when they are in a trade - like the window, they think that they know exactly when the glass is going to break, but nothing is further from the truth, and anyone who thinks like this is not in the real world, even though they think they are, and funny enough, most seem to think this way :eek:
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NikolazTesla, you seem to be trying to promote day trading but this means absolutely nothing to me. I'm more re inforced now that day trading is only for the very astute investor, even then its probably hit and miss...everyone else should stay well clear!!!!!!!!!!!!!
 
Hi NikolazTesla, After lots of homework and investment type trading I am now doing some day/short term trading and agree with many of your points. The money I have made/lost has been nothing to do with good or bad luck but me simply not reading the market correctly - trading what I think it should be doing rather than what it actually is doing on that day, once the market opens you have to leave your opinions elsewhere and react quickly to what the market is telling you. I am spending a lot of time learning to read charts and am interested in your statement:

"All short term trading success hinges on the traders ability to read a chart, and I don’t mean the type of chart reading that is out there for the majority, with the myriad of TA indicators such as MACD, Stochs, RSI, CCI, etc, etc."

I'd love to know what kind of charts you are reading. If you are not using the typical TA indicators what do you use to assist you be a good day trader?
 
ingalway said:
Hi NikolazTesla, After lots of homework and investment type trading I am now doing some day/short term trading and agree with many of your points. The money I have made/lost has been nothing to do with good or bad luck but me simply not reading the market correctly - trading what I think it should be doing rather than what it actually is doing on that day, once the market opens you have to leave your opinions elsewhere and react quickly to what the market is telling you. I am spending a lot of time learning to read charts and am interested in your statement:

"All short term trading success hinges on the traders ability to read a chart, and I don’t mean the type of chart reading that is out there for the majority, with the myriad of TA indicators such as MACD, Stochs, RSI, CCI, etc, etc."

I'd love to know what kind of charts you are reading. If you are not using the typical TA indicators what do you use to assist you b e a good day trader?
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IG, and I assume you are in Galway :) I can tell from your post that you speak from experience, and not from a book.

I am happy to see that there are more lunatics out there, I was begining to think that I am all alone.

It is very hard to convey mths and mths of hard work in a few lines, but I will try and explain it a bit simple.

The type of chart setup will depend on the market traded, as NYSE moves diff to Nas - specialist vs mmkr, etc.

Nas is more suited to 2 Day High/Low breakouts, so for this approach you need multi monitors, say about 8 x 17", as the goal is to see where the institutions are putting their money early on.

Many traders will have diff setups, but the majority are based primarily on
3-4 timeframes, with some traders using the following, 1 min, x 4 hr, 2 min x 2 day, 10 min x 5 day, and 1 hr x 10 day.

You also need to watch the TRINQ and TICK - I hope you know what these are!

ES and NQ ftrs on 2dayx2min and 1hr x 10 day also.

AND - you must set up sector sections and 2 day line chart thumbnails for quick scanning of breakouts.

AND - you must have your % change from open box up.

AND - you need full T&Sales

AND - you need Level II for watching the price levels and seeing where u can exit quickly.

AND - you need a very fast order entry screen with live P&L feature and one click close all feature

I hope this helps to make it a bit clearer?
 
This is a nice setup - I mean the hardware btw, not the software, that is pure rubbish :)

[broken link removed]
 
And this is overkill :eek: - way too much to watch, the brain can only process so much information at one time, one needs to have the optimum balance and 8 monitors is just about right.

[broken link removed]
 
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