Quote from Buy1Sell2:
A day trader believes they have less exposure because they are watching the screen and can be out with a tight stop. Thus, they believe they can use high margin. This is not true. The exposure is just the same during the day as it is overnight, so it is best to trade the size that would make you comfortable overnight or through a report.
Not necessarily. Time equals exposure.
The more time one is in a trade, the longer one is exposed to the unknown. One who trades overnight with X positions risks more than a daytrader who trades with the same size.
Daytraders, especially those undercapitalized and overconfident, ARE often tempted to take on more risk by taking on more positions, which adds exposure. Adding positions actually in a sense speeds up time.
Likewise, the longer a person lives, the more likely he will die from a plane crash, or be struck by lightning. Given enough time, those fates would happen to everyone (not that I am expecting that to happen to me, knock on wood
).In other words, a trader who takes on 1 position might suffer a max drawdown of 20% over ten years. Another trader with the exact same system/method who takes on 5 positions with the same margin would tend to suffer that same drawdown every two years and to risk totally blowing out every ten years (20X5=100%).
