Day trading difficulties

Quote from wrbtrader:

The type of day trader you're discussing is a losing trader in the end. More importantly, you're talking about a trader that doesn't have enough market experience nor enough trading experience. I'll explain below how a profitable day trader would think in that type of price action you've described in other part of your quote.

In fast moving markets you will typically see a losing day trader wondering what the heck is going on...no understanding of why the markets went from contraction or being calm into a market that's expanding or being excited. In contrast, a typical profitable day trader most likely know what's going on and determines that he/she will not use their normal trade management. They will let the trade run further/beyond their usual profit target for a bigger than usual profitable trade.

Simply, profitable day traders typically are very good at knowing when to adapt to exploit fast moving markets or an unusual trade opportunity. Yet, losing day traders typically continues using the "one size fits all" mentality as if the markets will never change.

The markets are always changing and typical losing day traders usually don't have the market experience nor trading experience to adapt to such changes. Yet, profitable day traders typically are able to adapt and exploit in changing market conditions.

********
Therefore, the solution is market experience and trading experience.
********

Mark
More...

I want to say I think this post is bang on. I have been trading now for three years (three difficult years) and this post hits the nail on the head for me and my progression with the way I see the intraday markets.

I have now been profitable for 6 weeks in a row and it is mainly due to taking advantage of letting profits run when I see market conditions that will allow for it with little risk of it of reversing and knowing when to close out my positions. I could just be getting lucky for now but all the hours of screen time and trading experience certainly helps. I have a feeling this year will be my first profitable year (fingers crossed).

Thanks for the good thread everyone.

mindtrade
 
Quote from oilfxpro:

The market changes from bullish to bearish bias several times a day.It is really difficult to keep changing biases from long to short , several times a day.The mind can remember the previous market bias , and often rejects the change in bias and direction, hoping it is only a ranging market.

Small stops get triggered frequently, and changes in market direction frequently results in losses.Wide stops hurt positive expectancy , although probability of wider stops getting hit is low.


4 out of 5 trend set ups fail on a daily basis on intra day trading , leaving the one set up to make up the losses and a profit.There is too much bad news coming out during day time, sending the prices reversing frequently , to be profitable from trading currencies intra day.Some of the large trends breakout , in the middle of the night when I am asleep.

Should I just trade only when the trend has broken out?Often this leads to catching trends late.What is the solution?Should a day trader trade only in the direction of the longer term trend?

The difficult market conditions with so many fake moves, create psychological problems ,leading to stress and emotional responses and a breakdown in discipline.

I am thinking of changing to swing trading in the direction of longer time frame trend , i.e using daily time frame and wider stops.

Any opinions would be welcome.
More...

Trend still remains as the over all average sentiment...
A lighter explanation...... some (weaker or baby) bulls and bears keep getting tired through out the day .. yelling and showing fingers at each other.
 
Assuming you are trend trading the problem I found in making consistent positive returns when day trading is that intra-day trends are generally all random act, you never know which way its gonna go. So to cover losses incurred when trying to find the intra-day trend every trade must be taken in any random direction, no questions asked - be it short or long. Unless you have the ability to do it it's wasting time day trading because the trade you don't take always ends up the big winner of the day.

That scenario can easily be repeated for years day in day out until you tap-out. You can attend all psychology seminars/read books you want the results will not change if you inner-self says that any intra day trend is random. This is not the same with random wins/losses that every trade starts at be it day/short/long. It's about direction - short term trading direction is random whereas long term is not. So to make money on intra-day trends you have believe that every trade in any direction will lead to a big win. I found that I could not that even after years trying it. Thats where I failed day-trading I know the problem but I can't bring myself to take every trade in a random direction especially after several consecutive losses.

Now on the other hand in swing/long term trading unless you have a very poor strategy its easy to decipher market direction on a highly consistent basis. When I lose there I know exactly why and its rarely because of making bets for a random market direction outcome, its other issues that I can deal with or accept as an inherent flaw of being human or my strategy that I choose not to or can't change. I don't get too philosophical when I lose. The job is a bit easier here, simply because I know precisely what I'm doing relative to more predictable market direction outcome - in one way only (Long or Short but never indecision about which way.

I'm not suggesting that it's a surefire-thing way to make money but for me at least its a hell lot easier provided of-course all other skills are in place.

Contrary to common belief if you really know what you are doing you don't even need a big account to swing it ($5k is plenty assuming you have another day job to pay bills). But in day trading even if you know what you are doing you need a big account to give you the ability to take every trade for any highly random trend outcome that may end up as a big winner to pay for many losses associated with random direction outcomes and still be able make a living, if day trading you can't hold another job (not less than $20k to trade at least 1CL/Russell/6E and similar markets). Yes and forget making a living day-trading 1ES/YM/NQ it just can't be done.

I know many will argue otherwise and they could be right also but that just my experience.
 
Quote from wrbtrader:


First of all, profitable day traders obviously do not think like the typical losing day trader.

In fast moving markets you will typically see a losing day trader wondering what the heck is going on...no understanding of why the markets went from contraction or being calm into a market that's expanding or being excited. In contrast, a typical profitable day trader most likely know what's going on and determines that he/she will not use their normal trade management. They will let the trade run further/beyond their usual profit target for a bigger than usual profitable trade.

Simply, profitable day traders typically are very good at knowing when to adapt to exploit fast moving markets or an unusual trade opportunity. Yet, losing day traders typically continues using the "one size fits all" mentality as if the markets will never change.

The markets are always changing and typical losing day traders usually don't have the market experience nor trading experience to adapt to such changes. Yet, profitable day traders typically are able to adapt and exploit in changing market conditions.

********
Therefore, the solution is market experience and trading experience.
********

They are key variables (not the only ones) that separate profitable day traders from losing day traders. That's why you see some traders say they've studied the markets for 10,000 hours but still losing. They fail to understand that just because they stare at their screens studying charts or price action for 10,000 hours or reading hundreds of message posts at forums ...if you don't have enough market experience or trading experience...you still won't be able to deal with the stress of day trading with real money. More importantly, you won't have the ability to adapt and exploit when market conditions change from slow to fast or from fast to slow, range to trend or trend to range, contraction to expansion or expansion to contraction, fear to greed or greed to fear...whatever you want to label it.

Mark
More...

Spot on. Great post.
 
Our analysis of performance indicates day trading is treacherous, but not entirely a fool’s game. Heavy day traders, as a group, earn gross profits (before transaction costs). Thus, heavy day traders do appear to have a trading advantage over other investors. The
stocks bought by the most active day traders outperform those sold by 31 basis points per 21day. Unfortunately, the gross profits of heavy day traders are not sufficiently large to cover reasonable estimates of transaction costs. Thus, as a group, they lose money. In contrast, occasional day traders experience both gross and net losses. The stocks bought by occasional day traders actually underperform those sold, even before considering transaction costs

http://faculty.haas.berkeley.edu/odean/papers/Day Traders/Day Trade 040330.pdf
 
Quote from Shagi:

Assuming you are trend trading the problem I found in making consistent positive returns when day trading is that intra-day trends are generally all random act, you never know which way its gonna go. So to cover losses incurred when trying to find the intra-day trend every trade must be taken in any random direction, no questions asked - be it short or long. Unless you have the ability to do it it's wasting time day trading because the trade you don't take always ends up the big winner of the day.

That scenario can easily be repeated for years day in day out until you tap-out. You can attend all psychology seminars/read books you want the results will not change if you inner-self says that any intra day trend is random. This is not the same with random wins/losses that every trade starts at be it day/short/long. It's about direction - short term trading direction is random whereas long term is not. So to make money on intra-day trends you have believe that every trade in any direction will lead to a big win. I found that I could not that even after years trying it. Thats where I failed day-trading I know the problem but I can't bring myself to take every trade in a random direction especially after several consecutive losses.

Now on the other hand in swing/long term trading unless you have a very poor strategy its easy to decipher market direction on a highly consistent basis. When I lose there I know exactly why and its rarely because of making bets for a random market direction outcome, its other issues that I can deal with or accept as an inherent flaw of being human or my strategy that I choose not to or can't change. I don't get too philosophical when I lose. The job is a bit easier here, simply because I know precisely what I'm doing relative to more predictable market direction outcome - in one way only (Long or Short but never indecision about which way.

I'm not suggesting that it's a surefire-thing way to make money but for me at least its a hell lot easier provided of-course all other skills are in place.

Contrary to common belief if you really know what you are doing you don't even need a big account to swing it ($5k is plenty assuming you have another day job to pay bills). But in day trading even if you know what you are doing you need a big account to give you the ability to take every trade for any highly random trend outcome that may end up as a big winner to pay for many losses associated with random direction outcomes and still be able make a living, if day trading you can't hold another job (not less than $20k to trade at least 1CL/Russell/6E and similar markets). Yes and forget making a living day-trading 1ES/YM/NQ it just can't be done.

I know many will argue otherwise and they could be right also but that just my experience.
More...

As a swing trader you got plenty of time to see the set up developing, you wait patiently for the market to show a clear direction and as the market makes a move , jump with flow.The human mind and body can take a loss or few , but at least it has the time to decide before entering the next set up.Jessy livermore used to wait and wait and wait for the right moment.

With day trading you just do your brains in choppy markets.Demoralised , tired,hungry, upset and emotionally imbalanced after a few successive losses , the discipline goes.

Trading is a zero sum game , if you have a 20 pip stop and 20 pip target , trader will lose as a result of the spread and commission and incompetence.If trader is competent ,he will lose on a 20 pip target and stop loss as result of spreads and commissions.Only way he can beat the market is by getting a high success rate of 60 to 70 % .It is difficult to tell direction short term on intra-day basis.

Take a look at 6 year back test below .Stop is 20 and target is 22 , result is loss 1640 after 1402 trades, using a 30 pip move in one direction.
 

Attachments

Quote from oilfxpro:

Our analysis of performance indicates day trading is treacherous, but not entirely a fool’s game. Heavy day traders, as a group, earn gross profits (before transaction costs). Thus, heavy day traders do appear to have a trading advantage over other investors. The
stocks bought by the most active day traders outperform those sold by 31 basis points per 21day. Unfortunately, the gross profits of heavy day traders are not sufficiently large to cover reasonable estimates of transaction costs. Thus, as a group, they lose money. In contrast, occasional day traders experience both gross and net losses. The stocks bought by occasional day traders actually underperform those sold, even before considering transaction costs

http://faculty.haas.berkeley.edu/odean/papers/Day Traders/Day Trade 040330.pdf
More...

Is this supposed to be some sort of proof that daytrading profitably isn't possible?
 
Quote from oilfxpro:


With day trading you just do your brains in choppy markets.Demoralised , tired,hungry, upset and emotionally imbalanced after a few successive losses , the discipline goes.
More...

These are personal problems. Your personal traits have nothing to do with the market.
 
You must log in or register to reply here.
Back
Top