Short term trading vs. long term trading

[ElectricSavant]

Would you calculate labor? Commision cost? Difference in tools cost?

If the daytrader lost, in this hypothetical contest, in a low volatility environment would he be less effective in a higher volatility environment?

Michael B.

Quote from SumJurk:

If you gave two traders $10,000, and one was a daytrader and the other was a swing trader, and they were both equal in trading skill for their perspective styles.

Then, you set a time limit of say one month to a year, I believe the daytrader would make much more money than the swingtrader.

IMHO...

 

[neutrino]

Quote from ChartingMarkets:

I have found in my experience over 12 years that swing trading in the 1-10 day time frame and position trading with a 20 trading day holding period in mind is much more profitable then daytrading back and forth all day and knocking your brains outs for small profits. Many will argue but that is my opinion.

The meat of any good swing trade is the first 3 days anyhow. It is in that time period where you will capture 75% of the profits. Then you will get pullbacks and continuation patterns that set up if the stock is going higher in the long run. Visa Versa for shorts.

Thanks CM. What I am trying to figure out is does it pay to jump from longer term to shorter term trades. If I can use your trading as an example, let's say that you are in a position trade (that would depend on your position size I guess). What if the stock you are in has made a nice run up and you "see" that a minor trendline is broken and some nasty distribution is taking place. Wouldn't you rather unload some of the position (that will be an equivalent of a lower timeframe short trade!). Then the stock may start to form a small base or a continuation pattern and once it is broken to the upside, you get back in... Will that improve or impair your trading results? What is your experience?

 

[Virtuoso]

Quote from ChartingMarkets:

I have found in my experience over 12 years that swing trading in the 1-10 day time frame and position trading with a 20 trading day holding period in mind is much more profitable then daytrading back and forth all day and knocking your brains outs for small profits. Many will argue but that is my opinion.

From someone who has been on both sides of the stick for multiple years at a time I would have to wholeheartedly agree.

Swing and Position trading are not only much more profitable for me, but much much much more enjoyable on the whole. I think its high-time I stopped tick fucking these markets and got back to larger tf's.

Hope all is well with you my friend,
Commisso

 

[ElectricSavant]

Is short term trading, more gambling?

Is long term trading, more calculated?


Michael B.

PS. I am not biased, I trade both lengths. Treat these questions as a basis for debate, not opinion. We could easily reverse the questions. But if you want to voice your opinion then go ahead its not my thread.

P.S.S. Hope this helps

 

[SumJurk]

Quote from ElectricSavant:

Would you calculate labor? Commision cost? Difference in tools cost?

If the daytrader lost, in this hypothetical contest, in a low volatility environment would he be less effective in a higher volatility environment?

Michael B.

I don't know dude, good points. I know there are some pro traders out there that make a heck of a lot of money swing trading, too.

 

[neutrino]

Quote from ElectricSavant:

The outcome would REQUIRE a higher yield to compensate for like labor, no matter what length of trade it is. Assuming short term would require more time.

Also one must consider a simple question as to the effectiveness of their trading. Evaluate this simple study:

Is Close-Open>my numerous intraday trades? Otherwise, did I pull more than the range gave? My statement is this. If you do not achieve more than range consistently, why put in the labor? (commission cost MUST be figured into the bottom line when penciling this in, if we go deeper, but let's keep it general)

Michael B.

P.S. I believe rather than to get in to personal styles and what works for a trader, the thread will be best served by posting generalities. But if you want to go deeper, I can share my OPINIONS.

What you are saying is that if we don't incorporate labor into the model, we cannot compare the results, because labor has some opportunity cost. This of course is true. I would even say that the opportunity cost of being a day trader is being a swing or position trader

I'd like the discussion to tackle quantifiable rather than subjective variables like personal preferences etc. But any feedback is welcome

I'd be glad if you mention other factors we must consider when we look at this problem. Even if they would complicate it.

 

[neutrino]

Quote from ElectricSavant:

Is short term trading, more gambling?

Is long term trading, more calculated?


Michael B.

PS. I am not biased, I trade both lengths. Treat these questions as a basis for debate, not opinion. We could easily reverse the questions. But if you want to voice your opinion then go ahead its not my thread.

P.S.S. Hope this helps

More vs. less random perhaps ?

I tend to think that since the price has a fractal structure it would be equally difficult or easy to profit from different time frames. However since there are less traders that shape the smaller fractals, they would be probably more chaotic. Any individual trader would influence the price to a higher degree...

 

[ElectricSavant]

Ok, Well you must evaluate volatility IMHO. Volatility is necessary for a daytrader/shorter term trader to be successful. There was a joke about daytraders only open positions were the failed trades lol. In today's environment I believe longer term trading is more successful IMHO.

Personally I once traded the NQ with 3-20 day holds and made a lot of money, then I got bored and tried to scalp in the direction of my bias (swing NQ position that I was in). I lost. So, I think for me and what I enjoy, is to separate instruments and short term trading from longer term trading. Many swing players use a money management system(not trade management) based on historical system performance, so to mix styles could screw this up. They teach us money management is key to your success.

Michael B.

Quote from neutrino:

What you are saying is that if we don't incorporate labor into the model, we cannot compare the results, because labor has some opportunity cost. This of course is true. I would even say that the opportunity cost of being a day trader is being a swing or position trader

I'd like the discussion to tackle quantifiable rather than subjective variables like personal preferences etc. But any feedback is welcome

I'd be glad if you mention other factors we must consider when we look at this problem. Even if they would complicate it.

 

[ChartingMarkets]

Quote from neutrino:

Thanks CM. What I am trying to figure out is does it pay to jump from longer term to shorter term trades. If I can use your trading as an example, let's say that you are in a position trade (that would depend on your position size I guess). What if the stock you are in has made a nice run up and you "see" that a minor trendline is broken and some nasty distribution is taking place. Wouldn't you rather unload some of the position (that will be an equivalent of a lower timeframe short trade!). Then the stock may start to form a small base or a continuation pattern and once it is broken to the upside, you get back in... Will that improve or impair your trading results? What is your experience?

Good question and scenario. First let me address it with this:

When you decide to swing trade you have to be mentally ready to pay for the same real estate twice over. That means the following:

If you short a stock like LEH which by the way Broke the neckline of a Head and Shoulder pattern on the daily chart today. Neckline was near 81. I went short this today at 80.48 for 2500 shares. Now with a trade like this I don't know if its going to reach its implied long term target of 72 in 1 day or 1 million days. That I just don't know. What I do know through experience is that most H&S patterns that breakdown and follow through properly will at first go just about 38%-50% of the vertical distance of the pattern before coming back up to retest the broken support area. In this example of LEH I shorted 2500 at 80.48 I have already covered today after the fast drop 1250 shares at 78.09. This lowers my cost basis down substantially. Now as I write this LEH is beyond 38% but not at 50% so with this stock I will hold the remainder and probably cover the rest of it drops to 76 either today or tomorrow or whenever. If it then comes back up to the neckline a few days from now I will re-short again at resistance. This gets very subjective but the trick is to re-short at the point where you don't lost that much if your are wrong. Now if I cover the rest of my shares at 76 area and LEH continues to drop all the way down to 72 well thats the way it is. In my experience its a rarity of a H*S to make its entire vertical distance without a fight back up to the broken support area so I play the odds of past patterns and stick with my plan. Call it pot odds much like in Poker. Now I never knew when I put on this trade if LEH was going to drop this fast in 1 day or do it in 10 days or come back and stop me out. Thats the risk you take dealing with probability.

Now what I mean by paying for the same real estate twice is that when swing trading you have to be mentally prepared to let the stock zip back and forth giving up maximum profit at any given moment for greater reward later on. With the risk being you give up everything if you let the entire trade come back to your cost. The way I deal with this in order to minimize that effect is by scaling out of the trade at predetermined places based on past experiences with these types of trades.

I will post a chart here of LEH to illustrate this trade.

 

[ElCubano]

Quote from ChartingMarkets:

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Now what I mean by paying for the same real estate twice is that when swing trading you have to be mentally prepared to let the stock zip back and forth giving up maximum profit at any given moments for greater reward later on. With the risk being you give up everything if you let the entire trade come back to your cost. The way I deal with this in order to minimize that effect is by scaling out of the trade at predetermined places based on past experiences with these types of trades.

I will post a chart here of LEH to illustrate this trade.

ty for posting...I find this very hard to deal with...