Quote from americanhero:
Read this article, including the Schonfeld letter link.
What do YOU think?
http://www.zerohedge.com/article/guest-post-here’s-proof-day-trading-dead
Also read the comments at the bottom of the above website.
Great article. A very good read. A lot of what the author described is very true.
Speed Trading - This is not so great anymore. There are very few opportunities for these kinds of trades these days. When they are there, they're usually very very good....still very rare.
Order Flow Traders - This has been gone for quite some time IMHO. I got started in this business 5 years ago and this was essentially on the way out. There was still opportunity, to make easy money off of specialists....but that opportunity then changed significantly and has changed much more significantly and dwindled considerably over the past 2-3 years and I cannot explain more b/c from time-to-time opportunity is there. Just one of those things, that if you don't know, you don't know...by the time you do know, it probably won't matter at all anymore. That said, the money to be made here is mostly gone for various reasons (market structure, order fragmentation, HFT, etc...)
Sector Relative Strength/Weakness - I never really got into this style of trading back then. I know guys that did, but I can't really say that I ever made money doing anything like this ever...therefore I can't speak on this. What the writer said in his article makes sense.
Intermarket Price Discrepancies - I also never really got much into arbitrage of any sort. I have a friend that used to do this. I followed him a few times in it back in the day -- it worked sometimes and sometimes it didn't. I guess that's trading. Either way, he doesn't much do it at all anymore that I know of.
Technical Analysis - I think it's funny that this guy said TA worked particularly well in 2007-2009, as if it didn't work well many other years over several decades. He did say that "technical analysis continues to be relevant in some contexts, it is far more suited as a tool in a trader's arsenal than a stand-alone trading strategy." I can't disagree with that statement. Computers definitely play games at intraday levels. I'm sure 10 years ago, people were a little less informed, computers were a bit less sophisticated, and breaks of key levels were just flat out cleaner (less false moves etc...).
I agree with the idea that traders looking to hold moves requires us to step up our timeframes, but I disagree that one has to go from a 1-min to a 5-min, or a 5-min to a 15-min to succeed...I had a recent epiphany with a new student that I'm mentoring and I believe this to be false. The crux of what I believe to be true is that moving from a 5-min to a 15-min, or a 3-min to a 10-min, or a 1-min to a 3-min or whatever is irrelevant in some respects. At the end of the day, the data is the same. The chart is the same. A 40-period SMA on a 5-min chart is still a 200-period SMA on a 1-min chart. Same shit. A lot of trading just comes down to managing yourself and adapting to different conditions. The chart itself isn't causing you to exit the trade prematurely, it's more than likely you and/or the proxies that you employ that are doing something wrong. Especially if you step up to a daily chart, your risk-to-reward definitely increases on both sides. No different than any other time IMO, you have to know what you're doing and manage your risk appropriately or you're gone.
Is daytrading dead. No. Has it changed? Yes. Is this the first time articles like this have been written? No. Is this the last time an article like this will be written? No. Is it highly likely that you will see an article in the future that touts "The Return of the Daytrader"? IMO, it's an emphatic yes.
Life is a circle. Markets are a circle. Traders adapt. Some don't. Things are always changing. Believe it or not, there are guys making money intraday and overnight right now. Figure it out or fuck off.
