Can Short Term Trading Be More Profitable Than Long Term

[kut2k2]

The only true edge in trading is capital and the prudent use thereof.

In the context of trading and other competitive arenas, the word "edge" is a slang term that means advantage, as in an advantage over your competition. Capital is not an advantage unless you're trying to corner an illiquid market. Capital is necessary, yes (so is breathing), but that doesn't make it an edge.

As for "prudent use thereof", I assume you mean money management. Again: necessary, but not an edge UNLESS you're bringing in a unique approach that few other traders are able to take advantage of themselves, e.g., adaptive position sizing. If all you have is the old 2% rule that practically everybody and his grandmother is also using, that may be prudent but it's not an edge.

 

[lucysparabola]

Capital is necessary, yes (so is breathing), but that doesn't make it an edge.

lol this is the best reply to date towards that ad nauseum dialogue. perfect.

 

[loyek590]

In the context of trading and other competitive arenas, the word "edge" is a slang term that means advantage, as in an advantage over your competition. Capital is not an advantage unless you're trying to corner an illiquid market. Capital is necessary, yes (so is breathing), but that doesn't make it an edge.

As for "prudent use thereof", I assume you mean money management. Again: necessary, but not an edge UNLESS you're bringing in a unique approach that few other traders are able to take advantage of themselves, e.g., adaptive position sizing. If all you have is the old 2% rule that practically everybody and his grandmother is also using, that may be prudent but it's not an edge.

not so sure I agree. "Take care of your losses and your profits will take care of themselves" or "Cut your loses short and let your profits ride" are nothing more than money management techniques that have served me well. Is it an edge? It is if you are the only one doing it.

 

[Buy1Sell2]

In the context of trading and other competitive arenas, the word "edge" is a slang term that means advantage, as in an advantage over your competition. Capital is not an advantage unless you're trying to corner an illiquid market. Capital is necessary, yes (so is breathing), but that doesn't make it an edge.

As for "prudent use thereof", I assume you mean money management. Again: necessary, but not an edge UNLESS you're bringing in a unique approach that few other traders are able to take advantage of themselves, e.g., adaptive position sizing. If all you have is the old 2% rule that practically everybody and his grandmother is also using, that may be prudent but it's not an edge.

That's why I indicate that capital AND the prudent use therof is the only true edge in trading. Someone with capital who does not know how to manage the capital will fail. If all the traders who knew about the 2 percent rule, implemented it, then why have so many accounts blown up? Just the mere fact that Lucy is holding disdain towards this, is realization and confirmation that traders do not place heavy emphasis on prudent use of capital. The concept is discounted in favor of a need to be right concept.

 

[kut2k2]

not so sure I agree. "Take care of your losses and your profits will take care of themselves" or "Cut your loses short and let your profits ride" are nothing more than money management techniques that have served me well. Is it an edge? It is if you are the only one doing it.

No. First you won't be the only one doing it. Far from it. Everybody has heard these rules. The fact that a few reckless types won't heed it won't uniquely advantage you, it will also advantage most of your competition. Hardly an edge for you.

More importantly, trading strategy is composed of two main categories: timing and sizing. Money management is sizing. "Cut your loses short" is timing. "Let your profits run" is timing. No overlap.

 

[lucysparabola]

You are confusing responsibility with an edge, and then extrapolating my sole viewpoint as a blanket statement against all other traders. to quote the mighty atticus, "from what clown college did you matriculate?"

 

[Buy1Sell2]

You are confusing responsibility with an edge, and then extrapolating my sole viewpoint as a blanket statement against all other traders. to quote the mighty atticus, "from what clown college did you matriculate?"

What you're calling responsibilty IS the edge.

 

[loyek590]

No. First you won't be the only one doing it. Far from it. Everybody has heard these rules. The fact that a few reckless types won't heed it won't uniquely advantage you, it will also advantage most of your competition. Hardly an edge for you.

More importantly, trading strategy is composed of two main categories: timing and sizing. Money management is sizing. "Cut your loses short" is timing. "Let your profits run" is timing. No overlap.

"Cut your losses short" is nothing but money management in it's purest form. Has nothing to do with timing. As a matter of fact it is the exact opposite of timing. "I don't care what the market timers say, I want out! I've lost enough on this trade."

Now...Let your profits run? Oh man, that is all timing. No money management law will help you when you are out there. The people saying it will go higher are the same ones who were saying it has gone too high. So you can't trust them. The market has already divorced itself from any known historical norm. And there you are, all by yourself, sitting on top of the world. Only question is, "When is a good time to get off?"

 

[kut2k2]

That's why I indicate that capital AND the prudent use therof is the only true edge in trading. Someone with capital who does no know how to manage the capital will fail. If all the traders who knew about the 2 percent rule, implemented it, then why do so many accounts blow up? Just the mere fact that Lucy is holding disdain towards this, is realization and confirmation that traders do not place heavy emphasis on prudent use of capital. The concept is discounted in favor of a need to be right concept.

Your statement "capital and the prudent use thereof" is all about sizing. It completely ignores the timing side of trading, which is where true edge begins if you're to have one. Knowing when to enter and when to exit a trade gives you a big advantage over those who are just guessing and winging it.

When the pros say most small traders don't have a trading plan, they mean most of them don't have a timing strategy that amounts to much. Even the 2% rule is overtrading if you're on the wrong side of the zero-sum game. So combine a small or nonexistent positive expectation with leverage borne of desperation and there's no mystery about account blow-ups.

First get the true edge: consistent profitability from a good timing strategy. Then you can go to work on a sizing edge if you want to maximize the edge you get from good timing.

With a timing edge, even the 2% rule will keep you in the game.

But without a timing edge, your sizing strategy won't matter in the long run.

 

[Buy1Sell2]

A Chimpanzee throwing darts at a board of instruments will be a winning trader with capital and the prudent use thereof. --Prudent use of capital IS the edge in trading. Good timing is nice. Good timers will blow out their accounts without proper money management skills. Proper money managers will not blow out their accounts.