causes depend on the gist of the method, they may or may not change over time-frame
Day trading has a higher return than swing trading, but how?
- Thread starter iBelgium
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causes depend on the gist of the method, they may or may not change over time-frame
oh that's a new one. Let's all start grading our returns based on how many man hours we spent trading it. (And that doesn't even cover all the woman hours we spent finding comfort when the trade was in drawdown.)
That's (at least "partly" and probably "mostly") because you've picked an example that makes it comparatively hard to see.
That said, even "day bars/candles" can conceal quite a bit of activity. For example, there have been many days when a market has closed pretty close to its open, during which intraday traders could easily have made many ticks/pips in each direction.
So the basic answer to why intraday trading might end up being better paid than longer-period trading could be "increased opportunity". You make more from 10 ticks made 10 times in the day (some in each direction, often) than from 40 ticks made once. No big mystery here, surely?
Intraday trading is not a counterpart or opposite to "swing trading", by the way. Alan Farley, the author of the classic, acknowledged textbook on swing trading, takes quite a bit of space over its first few pages to explain that swing trading can be either intraday or over longer periods, so I think there's quite a lot of confused terminology in this thread!
Good day traders can make money at any time of day or night. Lets just say they always sleep better at night knowing that they are not holding onto any positions.
The first and most important question is: how good are you?
The answer to that question will limit a number of options for you about "living a good lifestyle". Your choice is limited by the options you have in reality.
I dream of being rich, not work and spent billions. But in reality that is not a option, although that would be much better than swing- or daytrading.
If you are only good in daytrading, then that will be for you "living a good lifestyle".
If you are only good in swingtrading, then that will be for you "living a good lifestyle".
If you are good in daytrading, and in swing trading, then and only then you will have a choice for your "living a good lifestyle".
So the determinating factor is: how good are you?
Most people here have very limited capital for trading, so as swing trading returns are much lower than daytrading returns, it will take a lot longer before they can give up their job.
A daytrader that makes 2 points net a day can stop working within a few months. With a starting capital of $3,000, a margin of $1,360 (standard CME) and $5 commission per RT, he will reach a size of 250 contracts per RT in 48 trading days. His net income per day will be at that point $36,250.
A swing trader should, with the same capital, have to make an average daily return of 10.60% net.
I can live with daytrading 15 minutes a day if I want. For me that's far better than swing trading. And my profit per hour is much higher than for swingtraders as an open position defines the time you are working.
The answer will depend on the trader, for some daytrading is the best solution, for others it will be swingtrader. And for many it will be not trading at all, as losing money will rather reduce their lifestyle.
IMO you can't become a great swing trader without first becoming a great daytrader. To get the best R:R ratios on swing trades, fine tuned intraday entry is mandatory.
Great post, thank you, but 250 contracts * 2 points per day = $25,000 per day.
If you can capture a certain % in a shorter timeframe...then that's better...because you can churn those revolutions faster -- for a greater compounded return.
...kind of like a Formula 1 engine/race car. -- to make an analogy....it runs at 18K RPM.
Contrasts that with a regular BMW road car...the F1 car can run laps around the track around the road car.
And to continue the analogy, the road car will last 100,000 miles while the formula1 car will last 500 miles. But it will get there faster!!