Study says Daytrading for a living is virtually impossible.

[trdes]

Trading is a bit like being a magician.

Magicians appear to be able to do the impossible. You might dream up all sort of ways they achieve what they do.

When you meet a magician and they start to tell you how their tricks work, the reality is a lot less magical than you first thought.

So - you see in trading - all these ads for 90% win rates, hidden magical price levels to give you massive returns. That's people selling the magic.

Then you go see a successful prop trader with a 50% win rate - it all seems a bit disappointing...

I mean yes it's the case in some scenarios. I just don't understand why everyone uses 50% bench mark. You do understand there's ways to have edges above 50% correct?

A lot of what you say is true, but you're also leaning way too hard to the other side. Just to be clear I do understand you can have a 30% win rate and still make money, it's all about your profit factor. None the less if you can't get your win rate above 50% that generally means it will make it a lot tougher to get really out sized gains.

 

[JigsawTrading]

I mean yes it's the case in some scenarios. I just don't understand why everyone uses 50% bench mark. You do understand there's ways to have edges above 50% correct?

A lot of what you say is true, but you're also leaning way too hard to the other side. Just to be clear I do understand you can have a 30% win rate and still make money, it's all about your profit factor. None the less if you can't get your win rate above 50% that generally means it will make it a lot tougher to get really out sized gains.

Edge isn't in the win rate.

Edge is about recognizing skew in opportunity.

It's about going in small when you aren't sure and adding when you are. In fact, the very act of "having a little tickle" to feel the market out messes up with your win rate, which is why it becomes less relevant, the more experienced you become.

50% isn't a benchmark - it's simply what I've observed from more successful traders. They do not target 50%

 

[JigsawTrading]

"Is that because there are more retail traders?"

No, although there are more retail traders, but pro traders have advantage in accessing better and faster information and better trading equipment, that will more than offset it.

It is because pro traders are not allowed to take big risk, and since they are not allowed to do so, they lack experiences in making exceptional high returns, lack experiences in dealing with high risk situation.

Pro traders do have Bloomberg, Reuters and a few other feeds that put them ahead of CNBC et al

But they aren't generally trading an information edge.

They are just forced into a more rigorous development process than their retail brothers.

No retail trader was ever fired for switching systems every week, not doing a review and not focusing on continuous progression.

In terms of risk - pro traders can go pretty deep offside, they have way more risk capital than retailers, so quite often they can weather an adverse move way more than a retailer. They just can't do that till they have earnt the trust of the people putting up the moolah.

So - it's not a matter of going offside/scaling in each time a position goes against - but in cases, where there is still a decent chance of it going your way.

Like for example today - when Crude opens - we can probably expect a push up - you might weather a decent move against on any position but overall, as long as expectation is up a good trader will stay with it. That's not the same as scaling into every loser.

 

[lentus]

Pro traders do have Bloomberg, Reuters and a few other feeds that put them ahead of CNBC et al

But they aren't generally trading an information edge.

They are just forced into a more rigorous development process than their retail brothers.

No retail trader was ever fired for switching systems every week, not doing a review and not focusing on continuous progression.

In terms of risk - pro traders can go pretty deep offside, they have way more risk capital than retailers, so quite often they can weather an adverse move way more than a retailer. They just can't do that till they have earnt the trust of the people putting up the moolah.

So - it's not a matter of going offside/scaling in each time a position goes against - but in cases, where there is still a decent chance of it going your way.

Like for example today - when Crude opens - we can probably expect a push up - you might weather a decent move against on any position but overall, as long as expectation is up a good trader will stay with it. That's not the same as scaling into every loser.

What's "going offside"?

 

[JigsawTrading]

What's "going offside"?

Having a trade go against you because you still feel you are right.

Just it take experience to know the market is against you short term vs you being wrong about the premise of the trade.

 

[lovethetrade]

Not sure what's more annoying; sceptics that don't know how to day trade or how it works claiming something can't be done or the fact that these discussions lead to nowhere because no one is willing to prove the opposing party wrong.

If you can't do it and you're not fully informed on the subject, why hold an opinion on it? Just say, I couldn't do it and I'm sceptical because it seems awfully difficult to me. People that can't do it would be better served by inquiring from others that have successfully done it rather than playing this futile game that leads to nowhere.

Furthermore, anyone with a basic understanding of stats should know that this study has no credibility and most studies on this subject are meaningless. They are good at adding fuel to the fire for academics and sceptics but not for people that understand the reality of the market; the fact that very few can do it because it requires a combination of factors that are difficult to possess and acquire and the improbability of success is not due to the competitive nature and inherent limitations of the market.

 

[bbpp]

Pro traders do have Bloomberg, Reuters and a few other feeds that put them ahead of CNBC et al

But they aren't generally trading an information edge.

They are just forced into a more rigorous development process than their retail brothers.
No retail trader was ever fired for switching systems every week, not doing a review and not focusing on continuous progression.

In terms of risk - pro traders can go pretty deep offside, they have way more risk capital than retailers, so quite often they can weather an adverse move way more than a retailer. They just can't do that till they have earnt the trust of the people putting up the moolah.

So - it's not a matter of going offside/scaling in each time a position goes against - but in cases, where there is still a decent chance of it going your way.

Like for example today - when Crude opens - we can probably expect a push up - you might weather a decent move against on any position but overall, as long as expectation is up a good trader will stay with it. That's not the same as scaling into every loser.

No, taking risk is not that you put more money so you take more risk.
It is the portion of your total capital you put at risk that counts.
A pro have 10 million capital and he risk 1 million. A retail has 100 K and he risk 50 K. The pro risk significant more money ,but has taken significant less risk than retail.Because pro risks 10%,and retail risks 50% of his total capital.
The word "deep pocket," simply means he takes less risk,therefore can better weather adverse move.

 

[JigsawTrading]

No, taking risk is not that you put more money so you take more risk.
It is the portion of your total capital you put at risk that counts.
A pro have 10 million capital and he risk 1 million. A retail has 100 K and he risk 50 K. The pro risk significant more money ,but has taken significant less risk than retail.Because pro risks 10%,and retail risks 50% of his total capital.
The word "deep pocket," simply means he takes less risk,therefore can better weather adverse move.

Taking risk is relative to the opportunity at hand.

Risk on any specific trade is not simply related to you capital.

The market does not offer equal opportunity every time. The skill is on knowing when to risk & when to not to.

 

[bbpp]

Taking risk is relative to the opportunity at hand.

Risk on any specific trade is not simply related to you capital.

The market does not offer equal opportunity every time. The skill is on knowing when to risk & when to not to.

Of course risk is related to the portion of capital.
If risk is only related to opportunity, then the one risking $1000 and the one risking $100000(assuming they both have 100000 capital and take the same opportunity) are taking same amount of risk.

 

[lentus]

Having a trade go against you because you still feel you are right.

Just it take experience to know the market is against you short term vs you being wrong about the premise of the trade.

How does going offside work with stops? Does that mean that a trader doesn't execute a mental stop or cancels a stop that's already in the system? Or he never had a stop in the first place?