A message to some day traders.

[LS1Z28]

We define ‘randomness’ as incomplete information as it relates to data produced from market activity/markets.

Here's something to think about. The entire concept of complete/incomplete information is flawed. There is no such thing as complete information. It doesn't matter if you're a scalper, day trader, swing trader, or long term investor, you will never have complete information when you make an investment. Even if you put your money in a savings account, you have no idea how inflation/deflation will affect its value. There will always be unknown variables.

Every investment imaginable carries some level of exposure to random unforeseen events. I'll agree with you on the basic theory that there is less randomness at higher time frames. I trust that US equities will go up during economic expansion and down during recession a lot more than I trust an intra-day trend to hold. But that doesn't mean that everyone trading at a shorter time frame is being fooled by randomness. It just means that the road to success is more difficult to travel.

 

[imjohn]

I never claimed that "trading less than a year time frame can't have positive expectancy" nor that a "day trader cannot have positive expectancy".

My mistake, edited post.

The market has more dimensions that factor in and wipe you out.

Could you list some examples of other dimensions that factor in to wipe a trader out. I didn’t fully understand. I know the market expands, contracts, trends up, trends down, trends sideways, consolidates, (all at various velocities and magnitudes), large/sporadic moves happen, liquidity dries up / expands, market closes abruptly due to various events. What am I missing? (Just speaking for equity indexes, I don't look at anything else).

 

[Heydrrich]

What if you structure all your trades based on a 1:1 risk reward ratio. Is it that you then eventually will be a breakeven trader ?

 

[imjohn]

What if you structure all your trades based on a 1:1 risk reward ratio. Is it that you then eventually will be a breakeven trader ?

Traders are price takers.. as such, there’s always a bit of loss due to the bid/ask.

Random entries shooting for 1:1 would produce a result that is less than breakeven over the long run until the account is drained.

 

[volpri]

Why wouldn’t a stop loss take an index intra day trader out of the market in the
event of a black buzzard? I have NEVER had ANY problems getting out on a stoploss in the ES. 99% of the time right where it was placed even in a fast move in seconds like a mini crash. That to me is the advantage of day trading a liquid market. Maybe once in a blue moon I get a tiny slippage of a tick or two but I cannot remember the last time I saw that happen with a stop loss. Maybe in less liquid markets? So why hedge such a market with options?

 

[volpri]

It just means that the road to success is more difficult to travel.

I see it totally different. I’ve held stocks long time. It can take a very long time to make money with stocks. Plus as long as you are in the market you are at risk to any black buzzards or tails ..bad luck..good luck..(as the theory goes that is propounded here) so ANYTIME money is in the market there is risk. However, with intraday I am exposed to risk for seconds or minutes or an hour or two. Plus intraday offers many more opportunities to make money. MANY MORE. 81 bars on a 5 minute chart. I easily can see 40 or more trading opportunities in ES on a 5 min chart. So my money is at risk and minutes later not at risk. Plus I can compound my profits in short term. J.M Hurst dealt with the issue of short-term vs buy and hold in his book. Short-term vs long term.

 

[volpri]

Here's something to think about. The entire concept of complete/incomplete information is flawed. There is no such thing as complete information. It doesn't matter if you're a scalper, day trader, swing trader, or long term investor, you will never have complete information when you make an investment. Even if you put your money in a savings account, you have no idea how inflation/deflation will affect its value. There will always be unknown variables.

Every investment imaginable carries some level of exposure to random unforeseen events. I'll agree with you on the basic theory that there is less randomness at higher time frames. I trust that US equities will go up during economic expansion and down during recession a lot more than I trust an intra-day trend to hold. But that doesn't mean that everyone trading at a shorter time frame is being fooled by randomness. It just means that the road to success is more difficult to travel.

Actually the entire concept of randomness being incomplete info is flawed. Wrong definition.

So if premise is wrong...definitions are wrong...conclusions will be _________.

 

[Heydrrich]

Traders are price takers.. as such, there’s always a bit of loss due to the bid/ask.

Random entries shooting for 1:1 would produce a result that is less than breakeven over the long run until the account is drained.

So then the only reason for bleeding out would be because of the loss due to bid/ask ?

 

[Wheezooo]

"I'll agree with you on the basic theory that there is less randomness at higher time frames."

- I have a question. Is this the same to you as saying that markets are more predictable over the long term?

I'm trying to understand if people think this, as I have heard variations of it repeated throughout the thread.

 

[Amahrix]

Is this the same to you as saying that markets are more predictable over the long term?

No. This is not the same as me saying that markets are more predictable over the long term.

Predictable things happening in the market does not make the market predictable.

I also believe it is text-book arrogance to claim one can predict markets.

Tail events dominate financial returns and thus creates an environment with infinite variance, meaning margin of error is infinite, thus invalidating prediction about the future. This is different than finding predictable things in the market. You have to look at it at different layers.

Try to learn more about Complex Adaptive Systems.