Is Day Trading Necessary?

[sidm]

I have read the book Misbehavior of Markets and the whole fractal hypothesis has gotten me thinking.

Basically, most of the mathematical finance theory does not really stand up to empirical testing, and even the hallowed bell curve is a total nonsense in context of the markets.

There is one hypothesis, however, that seems to have stood repeated empirical tests: markets display characteristics of a fractal. Simply put, no matter how far you zoom in or zoom out on a price chart, the essential pattern remains the same.

If this be the case, then the same trends and variations should be present on a day-to-day chart as there are on a 5-minute scale, and similar pattern should exist on the microsecond chart that HFT play with. Just the scale is different.

Hence a shorter time-frame, intraday chart used by day traders should present same profit opportunities as a longer term chart used by, say, swing trader. [Frankly, I think all this silly jargon needs to be retired and we should just specify the average holding period, but that's another topic.]

All this tells me that one can make same amount of money regardless of your average holding period. I would like to know others' thoughts on this.

 

[NoDoji]

If this be the case, then the same trends and variations should be present on a day-to-day chart as there are on a 5-minute scale, and similar pattern should exist on the microsecond chart that HFT play with. Just the scale is different.

I have found this to be valid on the 1-min, 5-min, daily, and weekly scale. Even a 10-tick chart seems to present the same patterns and follow-through (or lack thereof).

 

[wrbtrader]

...All this tells me that one can make same amount of money regardless of your average holding period. I would like to know others' thoughts on this.

Losing traders will disagree with your thesis. In contrast, profitable traders will agree with you.

 

[IAS_LLC]

While the same trends may exist at all time scales, the number of opportunities increase with a decrease in timescale. That is my thought anyway...

 

[Redneck]

What I think (you did ask)

I think the notion that the mkt is fractal in nature is bullshit

Fractal = identical repeating pattern

Nothing in the mkt is repeated identically

Buying and selling are repeating behaviors – but when/ how much / how long / how fervently – are never identical

Mkt goes up / down / sideways – but again – when/ how much / how long / how fervently – are never identical

=================

Trading shorter times vs longer (day vs swing)

Each has their nuances – and each have their advantages / disadvantages

To determine if one can make the same day trading as swing trading – or vice versa

One would need to compare

The same trader – trading the same instrument – over the same period – both intraday and swing



RN

 

[IAS_LLC]

I believe Jack Hershey has a method saying how the optimal strategy is to trade ALL time frames simultaneously. You may be interested in giving it a read if you haven't.
http://www.elitetrader.com/vb/showthread.php?s=&postid=411188

 

[sidm]

While the same trends may exist at all time scales, the number of opportunities increase with a decrease in timescale. That is my thought anyway...

The number of opportunities increase, but the scale decreases. For example, there will be more peaks and valleys on a minute-chart compared to a daily chart, but the difference between peaks and valleys on a minute-chart will be much less than the daily chart.

So shouldn't they balance out?

 

[sidm]

I believe Jack Hershey has a paper saying how the optimal strategy is to trade ALL time frames simultaneously. You may be interested in giving it a read if you haven't.

I am very interested. Can you link to it?

 

[sidm]

What I think (you did ask)

I think the notion that the mkt is fractal in nature is bullshit

RN

I agree that my hypothesis regarding daytrading MAY BE bullshit. I am skeptical too. Hence my request for others' opinions.

But you are disagreeing with a lot of empirical research if you think the fractal hypothesis is bullshit. Refer to the book if you don't believe me.

 

[Redneck]

I agree that my hypothesis regarding daytrading MAY BE bullshit. I am skeptical too. Hence my request for others' opinions.

But you are disagreeing with a lot of empirical research if you think the fractal hypothesis is bullshit. Refer to the book if you don't believe me.

Books / research & academics - Ha....

I'll stick to the mkt

eta = I defy anyone to show a (mkt) fractal over different time periods

Same instrument
identical pattern
occurring at different times

popcorn anyone

RN