Day trading can be very bad, sometimes it leads to people going off the deep end...http://www.cnn.com/US/9907/30/atlanta.shooting.06/

I kind of equate it to legalized gambling.

posted October 22, 2009

If smoking heroin is chasing the dragon, day-trading is riding it.

posted October 22, 2009

Certainly it depends in the currency your using and the technical indicators used in your orders. There is not absolute answer to this question!

Links:

• http://www.cfd.tradeviewforex.com/

posted October 22, 2009

like any other industry 9/10 fail and 1/10 attain wealth and success. so for every individual who will indicate that day trading can be a profitable and rewarding career path there will be ample individuals with contrary experience.

additionally, many professionals who advise for a living have a vested interest in demonizing the practice for self interested reasons.

risk is inherent to entrepreneurialism. moreover, given the outsized gains most seek as independent traders, they incure outsized risk/reward perameters coinciding with high probability of failure.

nonetheless, being an independent trader most certainly can be a fatal attraction because of its duality - both the lure of riches and extreme losses. unfortunately, most individuals endeavor to become traders without training and lack the gravitas and professionalism necessary. to reiterate: yes, it can be a fatal attraction, but it need not be.

posted October 22, 2009

Successful day trading is all about finding edges. It's concentrating on a few liquid stocks and identifying their tendencies, like intraday when they make their high and low of the day--a very high percentage of the time for many stocks do so in the first hour of trading. As a professional statistician, I look for metrics that track statistical -based properties. For instance, extreme negative values for the Commodity Channel Index identify conditions that are ripe for a rebound (think taught rubber band).

Consider the attached 2-min chart and trade for FUQI. The setup is the CCI(35) < -150 and RSI(2) < 10. The trade trigger is then a close above its 10-period moving average. After the entry, the FUQI ran $2 higher when, in this particular case, I sold Calls that expired in four days. This trade earned 15.76% over four days.

The second chart shows a more recent example for HSP. I find another edge is trading fundamentally sound stocks, ones that have an institutional safety net. The third chart is for V.

Day trading is difficult. It requires one exploiting edges and being disciplined enough to take losses when necessary, but it is possible to be profitable. I prefer to combine a day trade entry with a week-long term swing trade.

Links:

• http://twitpic.com/aem8r
• http://twitpic.com/khoft/full
• http://twitpic.com/86s7e

posted October 22, 2009

The reason why the economy is in the mess that it's in...

posted October 22, 2009

Can get addictive. Most times though it is like walking one step forward and two steps behind.

Not a good idea if one hasn't done one's 'homework' well or isn't nimble enough.

Rashi

posted October 23, 2009

Day-trading is not what the stock markets were created to do. They were created to provide better liquidity for owners of positions to be able to exit their positions and to be able to find buyers easier.

Day-trading is simply trying to make money without working. It is not investing. From what I see, most people are not profiting much overall; they are either losing or breaking even - after trading costs. It's a get-rich-quick scheme.

posted October 23, 2009

Day trading can be a profitable endeavor if you stick to a strategy and exploit it until it is no longer there. I have met a number of successful traders and many have said you should trade what you know best. In this day and age, it also takes technological advantages to be able to win consistently. If you can't get your orders filled quickly and at the right price, you have no chance of beating those that do.
I don't trade very often, but when I do, it's important to keep in mind that you are speculating not investing. Confusing the two is why many people lose money in the stock market. Money can be made both ways, but each takes discipline, goals, and a knowledge of whether you are investing or speculating.

posted October 23, 2009

If it were easy everyone would do it. I asked a company that trained 20000 people, how many were still doing it for a living and the individual contacting me repeatedly, stopped contacting me.

posted October 23, 2009

Day trading for one’s own account is by no mean easy. Unlike traders working for institutions, it’s the ultimate pay-for-performance endeavor. It’s not for those who want the stability of a regular paycheck.
To answer your question, I have been trading for over 9years now, and have not had net negative month for 108 consecutive months, so far.
So you draw your own conclusion.

posted October 23, 2009

I've been in the investment industry for nearly three decades and I have yet to meet a successful short-term trader who had success for anything more than the short-term - a year at most.

All of the successful investors I've known have been patient investors who invest for the long term, but many times in areas outside US stocks.

posted October 23, 2009

Hi Vinod,

Day trading is a zero sum game - "Day Trading" is a negative sum game when you include trading costs and lost opportunity costs.

You can ruin your life not understanding that "Day Trading" is gambling.

JC Brandon

Links:

• http://www.JCBCapital.com

posted October 23, 2009

I like this analogy. It certainly feels like a fatal attraction

I actively trade securities in the Hong Kong stock market but caution people from getting into this activity. It certainly can take on the form of gambling with increasingly volatile returns and loses.

If you play for the short-term, you will certainly become addicted to the WINS and not be able to stop! It will grab you like a Vegas or Macau casino table, suck you in and eventually clean you out. The fact is, you won't win every time and at some point you will get seriously burned. If you can't afford to loss money, then you should just best stay away from day trading.

As an alternative, become an investor instead of a day trader. Like Buffett says... 'only invest if you're prepared to sit on something for a good number of years' This way, you can ride out your losses and eventually take home some returns. Its safer, saner and lets you sleep a hell of a lot better at night.

posted October 23, 2009

Day trading can be a fatal attraction. Much depends on the person's personality and their ability to control their ego.

There is a perception women are better than men as traders. It may relate to their willingness to act directions, whereas men often want to drive their way out of it.

The book, The Disciplined Trader, is a good read for anyone considering it. I know a couple people who claim it helped change them for the positive.

Day trading is clearly not investing, but it is not so obvious any more that buy and hold is intelligent investing either.

Those who approach it as a get quick rich scheme are likely to get poor. Those who can find the right mental attitude and approach it as hard work may be rewarded.

With the decrease in commissions, day trading has become more viable.

I still think the sweet spot is in finding undervalued companies and waiting for the market to recognize the value. Whether it takes minutes or months.

Some day trading is really technically latching on to these corrective moves.

Links:

• http://www.pdf-search-engine.com/the-disciplined-trader-pdf.html

posted October 23, 2009

Requires your knowledge and experience, not the one from the guy’s book you read. Emotions have to be left out and strict rules on stop loss AND profit taking, greed and ego can be your worst enemies. Hard job and no pay-check, so it also asks for very little risk aversion and high aptitude to live with uncertainty.

Not something for everybody, gambling your money is easier than gambling someone else’s money, like prop traders at an institution, hedge funds or even private banking. Know 2 guys that have succeeded, many that have failed and lost everything and left with huge amounts of debt.

Zero sum game is the most usual outcome, as money has to be used for food, housing and much more. Take it into account. Everything else is your “bonus” at any institution.

posted October 24, 2009

Day Trading is definitely legalized gambling (pause for shock, awe, and outrage). But, in that light, so is....

a)Driving your car on the freeway
b)Taking a jump shot in a pick-up game
c)Walking your dog

The zero sum game rhetoric sounds juicy, but it turns out not to hold.
And even if it did, it would be a) nullified by what we politely call OMOs courtesy of the FOMC and their ability to inflate the money supply at a faster rate than asset prices can appreciate, but, b, that would also mean that every trade conducted was done singularly, without any hedge or in the context or respect for a portfolio and it's holder's ability to manage beta. Looks like the financial advisers just passed out.

So fatal, I don't think so. Does it require as much work as anything else to get good at? Unfortunately, yes. So, learn to paper trade.

posted October 24, 2009

When you know where to stop, then you can ride on

posted October 25, 2009

Vinod,

No doubts, it is. Both 'Fatal' and also 'Attraction''

People get 'attracted' by the stories of what someone gained during a single trading session or across a few trading sessions. Further, being such a short term focus, there is very little that some one understands and goes by market rumours and hear says. It is at this time, that the of distinction between trading and betting becomes thinner and thiner.

Like in cricket, when a non professional batsman 'tail ender' swings his bat and hopes that the ball will hit his bat (instead of the bat hitting the ball) and hopes that he will score in boundaries a day trader believes that his bets go right during a day. Yes this does happen a few times. But more often than not ends up loosing his stumps (shirt). Similarly, people end up loosing their money and thus get 'fatal blow' to their own finances.

Yes, from the industry perspective, they provide the necessary liquidity in the market, creates interest, they provide the necessary bread for a large number of employees in the broking community, they also spot new approaches in the market.

But, end of the day, as a community, Day Traders succum to their attraction to trading which more often than not is fatal.

KS
http://www.PowerMF.com
http://blog.PowerMF.com

posted October 25, 2009

Does risk reward expecation also get manifested into trading styles including for those who day trade. I also believe that speculation for those who can manage the risk associated with leverage, velocity can be a rewarding experience for those who wish to pursue it. Eventually it is a trading style and cannot be fatal at all times, otherwise speculation and its role in price discovery would inherently be non- existent.

posted October 26, 2009

I’ve warned and talked to a lot of people about the dangers of trading currency on margin for speculative purposes.

Let’s take a look at a few of the most common mistakes:

An old lesson, don’t gamble what you can’t loose!
Don’t bet it all at once, currencies can be a waiting game, and if you don’t have the cash flow to wait out a run you’ll be stopped out and forced to watch it run back on the sidelines. Be very careful with averaging down, it can be a very costly decision and eat up your capital quickly.
Long-term forwards are not always a good strategy – with current volatility you should be stopped out our taking profit within a day or two.
And here are some suggestions to help keep your money where it belongs:

Before every trade you should have a desired profit and a maximum loss with very limited alteration.
Always set your profit takes more than your stop losses – this will allow you to win less times but still end up on top.
Try and trade with zero emotion, you have to have rigid rules and act according to those rules with very little deviation.
Consider buying a plain vanilla option as a spec position – you purchase an asset and put it in your pocket, if upon expiry it’s worth anything you pull it out and take advantage, if not you throw it away and your loss is capped.
Currencies in the long run will often come back, just like real estate – however, the ability to provide the cash flow and willingness of the potential loss is a very difficult thing to withhold. If you can; generally you will be ok – one thing to remember is that we have seen currency rates take years or even never come back, so be prepared for this as an option.

Links:

• http://www.currencyhouse.com
• http://currencyhouse.com/blog/spec-trading-101/

posted October 26, 2009