Risk management and odds

Cesko,
What is your nationality ? (I am Hungarian) lived here
for over 20 years and maybe I am bitter and sceptical and
cynical...I have earned it. I see too many young people
get into trading as it's a hobby and a casino. Don't get
me wrong I love to gamble !!! I played poker, lived in Las
Vegas, played stocks and traded futures on the floor. Basically a hard core gambler. But guess what I am not
rich and can't just retire as we all like to. I also
studied Technical Analisys and if knowlege of that would
make anyone rich I would be sitting on a beach somewhere.
The biggest Con going around now ,fooling the world and
mainly Americans is DayTRading. Despite the media's somewhat
somber notions. PLeople are just ignoring facts !!!
Oh, yes, I worked for Robbie Stevens, and Morgan Stanley
and noone in the trading community "daytrades" at all.
They think of Daytraders are a bunch lions looking at a
Antilope !!!!
 
Just thought I'd post my thoughts on the discussion that mgregar and zarrarr are having on which vehicles are best to trade.....

I have a basket of stocks (275) that i follow that range accross a wide # of sectors, they are large and small, thin and highly liquid, some have very large intraday ranges and some rarely ever move more than 1.50 in a day......

I have been trading this basket for a considerable amount of time with some additions and deletions, but mainly the same vehicles. What I have found is this.....

1) Risk is almost always proportional to reward......
What I mean by that is; if i get a set-up on a thinly traded less volatile stock it may only call for a .25 stop wheris i'll be looking to scale out once my position moves in my favor by .50-.75 and then trail the rest....with that said i may get the same set-up on jnpr or cien which calls for a 1$ stop in which i'll be looking for 2 to 3 before i scale out....since im risking a fixed % of my account on both plays they will yield the same return.....don't think just because a vehicle only has a range of .75 a day that you can't make money trading it

2) Classic Patterns or Clearly Defined patterns on a highly monitored TF of the most widely traded stocks rarely ever perform in the manner in which the set-up's probabilities suggest.....It is common knowlege or at least it should be that a market moves in the direction that will hurt the most participants or better put the path of least resistance....what happens with alot of the widly followed "glamour stocks" is that traders start front-running these classic patterns as soon as they show signs of developing....so the chart may create the illusion of the path being down where in reality since so many people have been front running and preparing for the pattern the path is no longer in the direction that the pattern suggest at least not without some major unexpected whipsaws created by the front runners. Therefore I try to avoid classic or very clear patterns on the widely followed vehicles... Actualy some of my biggest gains have been made on trading failures or in the oppisite direction that the pattern suggested.....:)))))

There are many other observations that I have made but I have to get back to programming my easylanguage....

PEACE and good trading,
COMMISSO
 
andrasnm,

Could you explain how how day trading is not a good way to earn a living, this would really help me understand it better. Of course, I think day trading is great, if you know what you're doing, and not following conventional wisdom. I cannot picture a $10 billion money manager not day trading and allowing his holdings to fluctuate in long term commitments or overnight. Are you saying that such a money manager would watch his positions slide negative and positive and not do anything about it because he is not a day trader. Perhaps I am not completely understanding why this is so.
 
Comisso,

Trading is a psychological war between perception and reality and where emotions play a role. This is the essence of day trading, thinking like a market maker in all respects. Thanks.
 
andrasnm

I just had to reply to your statement,

"The biggest Con going around now,fooling the world and
mainly Americans is DayTRading"

While I do agree that there are alot of people rushing into trading haphazardly with pipe dreams of becoming rich overnight and retiring 2 years later. There are also people out there that have taken day trading on as their livlihood and are doing fantastic.

I have been trading/investing for almost 10years now, but I am only 21....I graduated High School in June of 98" and came right out to persue trading as a full time career.
While it was extremely challenging in the beginning, I finaly got to a point where I could pull out CONSISTENT money and earn a nice living......

While I don't like to put labels on what type of trader I am, I guess it would be fair to say I am a "swing" trader that takes signals and set-ups on all tf's....therfore I take alot of intraday plays that are opened and closed in the same session, which i suppose puts me in the conformed definition of daytrader.....

Anyway I could care less what Morgan Stanley or Robbie Stevens are doing but "day"trading can be an excellent livihood for some. It is not only extremely rewarding financialy (I will make 6 figures in salary as a 21 year kid with no formal education past HS who works out of his home with only his own capital which is also over 6 figures) but it also very very very rewarding spiritualy and mentaly......

When you make statements such as you did you are scaring away many newbies that may one day try and take this up as their own livlihood....while trading is not for all and it is not easy it can be and it is for many a very very very rewarding livlihood......

Just because you have not become rich and retired on a beach after 20 years in this game does not at all mean that others wont......

PEACE and good luck trading,
COMMISSO
 
Commisso,

You mention that it was challenging in the beginning, could you eloborate how, and the remedies you administered if any.
 
Zarrar,

Of course a $10 billion money manager is NOT going to engage in day trading. Can you imagine what size lots he'd have to trade?

He could probably move a stock 5-10 points just trying to get in. They invest mostly intermediate to long term, and use sound money management to control their losses. And they will usually scale into a position, rarely buying their entire desired amount of shares at once.

That's not to say they just sit there and watch their portfolio deteriorate without doing anything. But to them, a stock moving several points against them is probably not going to make them lose sleep. And yes, they certainly do hold positions overnight.

Remember, it's these guys who actually move stock prices. Everything else, including market makers and daytraders is just pure noise.
 
mgregor,

Thanks for the clarification. However, I think you misunderstood me, I was referering to whether or not someone with such a large holding day trades at all, with or without using 'all' of their assets. I agree with you on this, but my point was that they do day trade their positions. With the hypothetical $10 billion, they might be holding on to countless positions of importance, having said this, I believe it is unlikely that none of those positions are traded intraday. The post from andrasnm suggests that they do not day trade at all, i disagree with that aspect.
 
Hedge funds - small or large are also exclusively into
swing and position trading - can you think of a reson why ?
Also Robbie Stevens prop accouont is not THAT big anyway
they make most of theit money for 4-6c per share from
the funds. Also this is why cheap commisions are a bit of a
farce, how come Peter Lynch was paying 6c a share and become
a legend ?
 
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