position trading questions?

Stay retail with your position trading, and when (or if) you decide to actually trade for a living....then and only then...do you want to make the leap to Proprietary trading.

Most of the money made by professional traders, as Gene pointed out, is made by those who go home flat (except for pairs, etc.)...this includes Specialists and even most Market Makers.

It is the Public and the Institutions who carry the overnight risk, and they are the people who take the losses.

Professional trading takes many forms, but holding positions for the longer term is not one of them.

My 2 cents worth is for you to stay retail unless you really decide to "go for it" - and there are 3 or 4 firms who can help you at that point.

Good Luck!!
 
Originally posted by Don Bright


Professional trading takes many forms, but holding positions for the longer term is not one of them.
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Are you on crack? Guys like Paul Tudor Jones and Louis Bacon and Monroe Trout make hundreds of millions per year position trading, and have been doing so for decades. That isn't "professional"? :confused: :confused:

I think u prop firm guys are intentionally being deceitful in trying to say that daytrading is the only way to go to be "professional," it is laughable to overlook the entire swing/position trading hedge fund contingent- none of those guys daytrade because even a measly 50 to 100 mil is too big to go for pennies with.

I would rather hold a few longs and shorts overnight with much less leverage, than to catch a bullet in the back of the head with the much bigger size that daytraders take on. Leverage is a two edged sword, and even if your trades last only three seconds, you do so many of them that you still have big volume exposure all through the day, do you not? I think the notion that position trading is more dangerous is a myth, plain and simple- the math just doesn't back it up because u daytraders have to take on positions ten times as large.

I know this is a daytrading site, but why be dishonest on the sly? Don't harsh the man's style, I guarantee that no daytrader has ever made or ever will make as much total dollar profit overall as the best position traders take down (using the term "position" very loosely here also, as you imply it simply means overnight risk).

One last thing: u say daytraders don't take any losses? Killing me here.
 
darkhorse,

thank you for your perspective on my position trading question. in fact, i have been position trading for several years while working a full time job in financial services and have previously been a floor trader on the cbot where i did my share of both "scalping" and position trading futures and options.

i agree that one can make a decent (or better) livelihood position trading if one stays informed on the macro picture and doesn't leverage beyond their means.

i am new to the site and did not understand that it was primarily a daytrading site. i don't have anything against daytrading... but it seems to me that highly leveraged positions, held for very short periods of time are subject to their own outsized risks..bad fills, no fills, thin markets, etc...and the same unpredictable events that position traders suffer through but in a shorter time frame.

i do have a couple of questions ...do day traders use technical analysis primarily?...or are they more moved to trade by earnings prospects, special situations like takeovers, bankruptcies, etc ?

thanks again..
mbs
 
MBS:

Daytraders vary in style just as much as position traders do. Some are 100% technical while others trade off "catalysts" i.e. watching the news wires, reactions to earnings reports and economic numbers, etc. etc.
 
I am not a fan of the prop carnival either. It has it's place but the guys who have shown up here have one idea and that's the only way to make money according to them...the only way to be "professional".

I have been hoping since I arrived that somehow, somewhere there would be a bit of useful swing trading discussion occuring. Each time that starts, some prop guys make the poor (usually small) position trader feel like crap because he isn't tied to a bloomberg scalping pennies generating big commissions for the pit boss.
 
...I would rather hold a few longs and shorts overnight with much less leverage, than to catch a bullet in the back of the head with the much bigger size that daytraders take on. Leverage is a two edged sword, and even if your trades last only three seconds, you do so many of them that you still have big volume exposure all through the day, do you not? I think the notion that position trading is more dangerous is a myth, plain and simple- the math just doesn't back it up because u daytraders have to take on positions ten times as large...
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If an atom in the room you are in right now reading this "split," the energy released would blow the entire block it is on to bits.

Now, think about this. There are quintillions and quintillions of atoms in your fingernail alone - forget about the number of atoms in the room. Yet, the scenario aboce may not happen once in a quadrillion(s) years.

It is not so much the "volume" that necessitates the risk, but the volume per time period held. Speaking of one without the other is like saying I ran 5 today - 5 what? yards, miles, feet, etc.

Clearly, it is possible to get caught in a trade when catastrophe strikes (I know I would have been in a position on Sept 11 if tragedy had happened at 9:45 EST as opposed to the time that it did) but most of these events, at least theoretically, are 6 standard deviation or more events.

I am not against position trading (in fact, a friend used to do very well trading the front month Treasury Bills against the back months, and holding on to that position) but, IMHO, I think that most successful position traders are in some sort of spread trade in order to flaten the risk to time held probabilites.

nitro
 
Originally posted by nitro


If an atom in the room you are in right now reading this "split," the energy released would blow the entire block it is on to bits.

Now, think about this. There are quintillions and quintillions of atoms in your fingernail alone - forget about the number of atoms in the room. Yet, the scenario aboce may not happen once in a quadrillion(s) years.

It is not so much the "volume" that necessitates the risk, but the volume per time period held. Speaking of one without the other is like saying I ran 5 today - 5 what? yards, miles, feet, etc.

Clearly, it is possible to get caught in a trade when catastrophe strikes (I know I would have been in a position on Sept 11 if tragedy had happened at 9:45 EST as opposed to the time that it did) but most of these events, at least theoretically, are 6 standard deviation or more events.

I am not against position trading (in fact, a friend used to do very well trading the front month Treasury Bills against the back months, and holding on to that position) but, IMHO, I think that most successful position traders are in some sort of spread trade in order to flaten the risk to time held probabilites.

nitro
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Nitro:

If you are arguing that blowup scenarios are so infrequent that they are almost inconsequential, then this cancels out the argument that daytraders make against position traders in the first place (that it is more dangerous to hold overnight).

If the true formula is Volume multiplied by time period, then position traders still come out ahead, because the day trader holds a 10X position throughout at least half the trading day when all his small trades are added up, whereas SUCCESSFUL position traders make very little use of leverage and earn their money with larger moves over time instead. Their volume X holding time still = less units of risk because the leverage is decreased by a higher factor than the time period is increased.

I also think freak moves happen more frequently than you imply: I can immediately recall four instances within the past two years where friends of mine either made or lost +$30,000 within five seconds or less due to price shocks (surprise greenspan rate cut, Procter & Gamble meltdown, 9/11, and one other I don't recall at moment). Two big price shocks a year is not a lot but still very statistically relevant.

You are right about the hedging, and its another reason why I feel safer as a position trader. I typically risk 1% or less per trade, I never have on more than 5 longs and 5 shorts at one time, and I never let the imbalance exceed 3 to 1 (i.e. if I have 3 shorts on I have to find at least 1 long before I am allowed another short). My use of leverage is far less than scalpers, I really could care less about slippage as long as it is within reason, I make money consistently, and my method will work just as well with 10 or 20 million as it does with a hundred grand, and in all market environments. Call me a happy camper. :cool:
 
Nitro:

If you are arguing that blowup scenarios are so infrequent that they are almost inconsequential, then this cancels out the argument that daytraders make against position traders in the first place (that it is more dangerous to hold overnight).
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Yes.

If the true formula is Volume multiplied by time period, ...
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Close! Its volume * time * volatility of holding period (or "shocks")

then position traders still come out ahead, because the day trader holds a 10X position throughout at least half the trading day when all his small trades are added up, whereas SUCCESSFUL position traders make very little use of leverage and earn their money with larger moves over time instead. Their volume X holding time still = less units of risk because the leverage is decreased by a higher factor than the time period is increased.
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How can this be? Since this multiplication is commutative, we can then treat this argument over the field of the Reals. Therefore, say I hold for an average of 5 minutes as a scalper. 10 * that is 50 minutes. But you use no leverage, but may hold overnight or for days - that is certainly more than the 10x in my multiplier:confused: Besides, as I stated above, it is (at least) a three dimensional number (vector) and even if the multipliers were close, volatility over holding period would change everything. Perhaps you believe the multidimensional risk parameter ("number") is a matrix. This would certainly change things, as matrix multiplication is not necessarily commutative!

I also think freak moves happen more frequently than you imply: I can immediately recall four instances within the past two years where friends of mine either made or lost +$30,000 within five seconds or less due to price shocks (surprise greenspan rate cut, Procter & Gamble meltdown, 9/11, and one other I don't recall at moment). Two big price shocks a year is not a lot but still very statistically relevant.
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Hehe, you are quite correct in _PRACTICE_. Theoretically, the 1987 crash was something like a 20 standard deviation event - something that is supposed to happen "only" once in something like 3 million years!!

You are right about the hedging, and its another reason why I feel safer as a position trader. I typically risk 1% or less per trade, I never have on more than 5 longs and 5 shorts at one time, and I never let the imbalance exceed 3 to 1 (i.e. if I have 3 shorts on I have to find at least 1 long before I am allowed another short). My use of leverage is far less than scalpers, I really could care less about slippage as long as it is within reason, I make money consistently, and my method will work just as well with 10 or 20 million as it does with a hundred grand, and in all market environments. Call me a happy camper.
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Most (successful) traders understand the risk/reward nature of a probabilities game like the markets. You don't really believe that very short term traders not understand this?

I believe you that your method scales well to the bigger numbers. But be careful, I have first hand experience when we (back in 1988) thought trading futures with a 50 million account was the same as trading a 250 million account...

nitro
 
The amazing thing about trading is that it is so subjective, i.e, as many styles exist as there are succesful traders discovering, creating and employing them. Bottom line is that if you're consistantly making $$$ you're right for you and will eventually find ways to improve and expand. If you're consistantly losing then you'll learn or perish.
I position trade and daytrade in two separate accnts. A partitioning of mind set if you will. They are separated by goal, the intent of the action. Some times position trades turn into day trades if I don't like the action, day trades never turn into position trades. Darkhorse and Nitro both make excellent points from their distinct points of view. In my experience the serious $$ are in the longer term exposures which of course entials more risk. Each has to make their own risk reward choices.
 
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