Swingtrading Versus Daytrading Debate

[daniel_m]

Originally posted by dotslashfuture
what about the old adage "cut your losses short, let your winners run" ? That is an old saying that rings true for most people. If you are an absolute purist at daytrading, then your rules will not allow you to do that. You will be closing winning trades at the end of the day just because it is the end of the day and for no other reason.

Bottom line is, is what you are doing making you money?

My answer (for me) is YES.

Who cares that I don't carry winners overnight. My average win size to average loss size has grown over the past couple of months to greater than two to one, whilst maintainig greater than 50% accuracy. It's a slight edge, yes, but one I exploit by making many trades.

The adage "let your winners run" is applied with respect to the timeframe traded. Your exit methodology will determine the right time to get out. Pretty simple.

 

[trader99]

Originally posted by dotslashfuture
someone made a valid point about a friend being a floor trader and doing well as a scalper. Well, there is hardly any reason to be a floor trader if you are not also a scalper, that is what that game is all about. However, it is a fundamentally different situation than most people find themselves in.

First of all, there is no such thing as truly "realtime" quotes for nyse listed stocks. There is always a delay, and to make matters worse, the delay is not always the same. Part of this delay is inherent in the fact that the prices get set by humans and then must be inputed into the computer, and part of the delay is the system itself ( upstairs traders get the closest to realtime without being on the floor, and if they have a doubt they can get on the phone to someone on the floor. ) Sometimes you may only be delayed a second, and sometimes you might be delayed 5 seconds, and you would not even have a way of knowing it. If you are trying to be true "tape reader" then you are really looking at a composite tape, and in a fast moving market the tape starts to drop information like volume in order to run faster. To you it all looks realtime because you have no frame of reference. It isn't realtime unless you are really there.

The second issue is of course, commissions, since if you are on the floor you don't pay commissions, you pay a flat amount for being there ( buy or lease a seat ), or someone else pays you a salary for being there.

The third issue is order flow. If you are handling order flow coming in from the wire houses then you are flat out running a volume business and you are not doing anything like being a retail trader. If you are a local, then you can get used to how the other guys work and figure out if they have big buy or sell orders and scalp from that.

If you are a guy in a trading room paying commissions, or if you are sitting at home on the internet and paying commissions, then you are at a disadvantage in the game of scalping.

Furthermore, the only way around this is to increase your time frame so that every tick doesn't matter, and so that the brokerage firm doesn't make more money than you do.

Yep. This point about commissions I must agree. Floor traders, by definition, are mostly scalpers. And eventually will give away to pure electronic exchanges like what happened with futures in Europe. And no reason why equities wouldn't follow the same way. But b/c floor traders don't pay commissions, scalping can be reasonable enterprise and even a lucrative endeavor.

But when you are not on the floor, commissions become a huge part of your expenses. Since I'm not a pure scalper, but I've scalp a little here and there and even when I'm not doing microscalp but more slighlty bigger move(20-30 cents), commissions takes up a large percentage of total profit. And I can't even begin to imagine how the % of profits eaten by commissions for those who scalp for 3-5cents move. Probably approach 70-80%?

This would be a good exerice. Do the following calculations: Take commissions/gross profit and figure out that stats. I try to trade for 20-30cents move and not very heavy trading and even then it that ratio (expense/gross profit) approaches 30-40% of gross profits! dang.

So, controlling cost is one way to increase profits. But as others have mentioned here, as long as you can make $$ consistently then maybe that's all that's enough. But it's still nice to try to analyze your trades and see the good and bad points about it.

trader99

 

[murray t turtle]

I day trade more[+slow] during bear trends. Plan it that way.

Swingtrade more during uptrends. Seems like NASDAQ stocks + TYC [etc...] trend longer during during uptrends.

Win ,,lose or sideways trend, daytading is more stressful to me.
Walk 30 minutes plus helps.{perday}

_____________________________

''He that showeth discretion {wisdom} concerning a matter shall find good''- mind of Solomon

 

[darkhorse]

the risk averse side of me prefers daytrading, but i have developed a strong focus on swingtrading anyway, for two key reasons:

1) Laziness / freetime.

I don't have to work nearly as hard for my money as daytraders do, and I have significantly lower stress levels and concentration requirements.

2) Long run size cap.

You can only go so far with scalping before size deterioration kills your strategy. I'd rather make 40% on three million than 400% on 100K.


Also, the fear of overnight blowups is highly overplayed. If you lose ten times your planned risk in a nightmare scenario but you only had one percent planned risk, you are still only down ten percent. Not fun but not all that hard to come back from. Plus you also get crazy moves in your favor too, and the ratio is arguably better than 50% to the positive if you are on the right side of market sentiment.

A lot of daytraders assume swingtraders are nuts because they don't understand that swingtraders use much less leverage than daytraders do (the smart ones anyway). They let direction do the legwork instead of size- which is why they can get much BIGGER size in the long run without experiencing deterioration. The bigger you get, the more you need directional 'room' to compensate for your girth.

 

[Ken_DTU]

Originally posted by darkhorse
They let direction do the legwork instead of size

nice post, and excellent quote, above - well spoken

 

[vulture]

yes. those are very valid arguments and points of contention. The daytrader argument against holding overnight only looks at the downside to the equation, but also assumes that the trader is short or long from the closing print. What about from much higher or lower and then holding on to the close. And what about the times you get the favorable movement between the close and the open as well. I like the comment on "leg work" and "de-leveraging". Smaller size for bigger swings with more capitalization, fewer trades with bigger profit targets, fewer entries, less commissions, less shakeout, etc...

It is a good debate regardless of which side feels they have the bigger edge...

 

[murray t turtle]

I thought of a good article on swingtrading with 10 day candlecharts,written in Active Trader mag.

Another interesting point was the article was written by Ken-
DTU. Day Trading University.

Do like the precision entry day trading requires; helped swing.
____________________________
''Names are important''-Solomon Cohen,Gazelle Hedge fund.

 

[Breakout]

Originally posted by trader99


However, I must say I actually like daytrading.

I think that pretty much sums it up...I tried swing trading
a few years ago. I was a basket case 90% of the time.

I'm the kind of trader that needs to know if I'm right,now!

A long term trade for me is 30 minutes...lol


Daytrading (and having profitable days) makes me happy.


To me, trading is a numbers game. If you're risking $300 to
make $900 on a swing trade or $30 dollars to make $90 on
a daytrade, both traders are getting a 3-1 ratio, and both
traders are going to make money if you can keep you're
winners around 40% or better.

I've personally never seen a swing trade method or a
daytrade method that did much better than 50%. So, I
don't think either style is superior or inferior.

 

[T/A_Bo]

I could make a long and impassioned post about why I think swingtrading is the only thing and why it works the best for me personally and the folks I’m teaching. But then I look over at Chris and Vadym, and the folks who are doing so well with that tape reading day trade style, and at Allen and his group who day trades the QQQ,... You can argue about specifics, but the “Best way” is whatever gives you consistent profitability.

Chris and I have had this conversation more then once. For me the worst stress I can experience comes from holding a highly leveraged position in some doinky small time frame position. Each tick adds to the stress level as I wait for resolution, never knowing if some bombing in tel aviv will spike the futures and ruin my day with some nasty slippage. For Chris, stress is defined as being stuck in some slow listed stock for a few days as it hacks and gasps it’s way along.

To each his own! You should expose yourself to as many styles as possible as you trade. Then you will know which suits you best, and which you will be able to stick with and specialize in over time.

Less then a month to the Anahiem expo!

See you there,

-Bo Yoder

 

[darkhorse]

Originally posted by T/A_Bo
For me the worst stress I can experience comes from holding a highly leveraged position in some doinky small time frame position.

my worst stress is when i'm running away and have to put my shoes on fast, when i get them wrong it hurts my feet all the way down the block and my insteps are sore the next day