Quote from Trend Fader:
I dont daytrade for a living.. I honestly tried it for a while and I wasnt making enough money worthy of taking the huge risks. If i have to put a huge amount of money on the line to make a few cents on a stock its not worth the real risk involved. Even during the day there are news pops, specialist rip offs... horrible fills that u have to deal with. Also its extremely physically demanding and u have to be on your toes from the open till the close. Very easy to burn yourself out after a few years. Bottom line in the long run its not worth it for me.
Since I hate taking big risk.. I never swing trade stocks.. preferably ETF's (except i play leader stocks in industries that have no ETF like NEM for Gold and TOL for homebuilders) . This eliminates all the bullshit upgrades, news releases, earnings that relates to company specific risk. Once in a while I fire off a intraday trade because I see a great risk to reward but I dont make a living off those profits.
I love playing sectors and specifically the IWM. I think the Russell is the smoothest index around and its liquidity is great. My bread and butter is fading extreme moves alongside the bias I have for that particular market. For example since this Jan. I have been fading every rally in the IWM and it has been working.. will continue doing it until my bias changes or it just stops working.
To answer your question I think there is a good reason why many people prefer daytrading as to holding for multi day/weeks. Most daytraders use 2 different methods... looking at charts/indicators and feeling the tape. If u think about it anyone can convince themselves that they can do this successfully. When it comes to longer term trading u have to understand fundemental trends and what catalysts are affecting a particular market. To me that is what draws the line.
Your avg. poster on ET does not care for fundementals nor do they know whats going on behind the numbers of the US and world economic engine. That involves a completely different type of analysis called fundemental ( catalyst) analysis... in most cases u need above average brains for this type of understanding.
Thats how longer term traders like Jim Rogers, Buffet, Soros make killings. They know whats going in that particluat market and are sure they are on the right side of the trend.. then their traders just play the pullbacks and breakouts but their difference is that they have a distinct edge over longer term trend analysis.
For that you need smart brains and a whole lesson in fundementals. You dont have to be a genious or have a high IQ.. but I believe u have to do as much research as possble. Its not taught in a seminars or trading books because the world economy always changes.. and u have to identify different cycles all the time.
To give u a real example. SAC combines traders with analysts for every single sector of the market. I believe that is the most strategic and profitable trading in the world. WHen u got guys that can read the tape well and are pretty good at moving size.. and u combine that will solid longer term fundemental analysis u are getting the best of the best. For example.. assuming u are a chip analyst right now and every piece of data u have is pointing to a huge rebound in the chip market.. if u work with a seasoned trader they usually know how to setup the trades with good timing and at great risk to reward levels... so although your fundemental timing might not be perfect.. when the big rebound does come.. u will be setup to milk the trend. Your average person does not have all those abilities and skills that are required. Very few people in the world can do this succesfully.. and the ones that can are the ones that make millions aka many of the Market Wizards like PTJ, Rogers, Kovner, many others etc.
You dont have to be as gifted or talented as some of them are.. but if u can combine fundementals and technicals with a decent degree of an edge.. u can make more $ than any daytrader can imagine. This requires a tremendous amount of hard work and dedication as is simply more than reading a chart or indicator.. experience is also essential. What it takes to really succeed in my opinion is everything u cant learn in a seminar, packaged CD rom manual, or read in a trading book.
--MIKE
