What trading style is better...slow and steady..or hitting homeruns once in a while?
- Thread starter gimp570
- Start date
A high win rate with smaller wins and less variation is better (if the expectancy is the same).
Thats because a lower standard deviation translates into a lower risk of ruin. And with a lower risk of ruin you can bet bigger = win bigger.
From a human perspective the high winrate lower winsize is easier to trade because the drawdowns are rarer and smaller.
Thats because a lower standard deviation translates into a lower risk of ruin. And with a lower risk of ruin you can bet bigger = win bigger.
From a human perspective the high winrate lower winsize is easier to trade because the drawdowns are rarer and smaller.
Actually, there was a large article in last weeks local paper featuring interviews with long ball hitters Ken Griffey, Harmon Kilebrew, and Frank Thomas. Each of them explained that they did indeed many times try to hit home runs. Frank Thomas said it was usually a couple of times every game for him. The others had different variations of when it might be appropriate to try and jack one. But, they do try to hit homers.
Too funny. I just read that piece in the Sporting News.
Ill agree with this. Psychologically any low risk grind is easier to manage and will have less variance. You avoid the big ups and downs.
I was just talking to some of the other traders in the office about this. 2 tend to trade a more grinding style where as I make about 80% of my gains off 3 or 4 moves. The bottom line is do whatever makes you money
Quote from SiSePuede!:
I'd say emphatically that hitting big homers once in a while is better because that would likely mean that you either picked a company/stock with very strong reasons to do so and you can buy(or short) and walk away feeling very confident in your decision.
I started off as a buy and hold investor in small caps and where I've consistently made big gains. Sitting in front of the computer is more compulsive of me and the 5-10% of my capital that I "play" with is traded but but the other 90-95% is usually in buy and hold stocks that I'm confident have bright futures.
I can go on vacation for a month and not worry this way and if you have the ability(which many do) to find stocks with bright futures and can just buy them and hold them and make big gains and maybe take a few losses at the same time, I'd say you have a huge advantage over the guy who's stressed out over making consistent gains and essentially meeting quotas...add in to that mix paying more in slippage and having more paperwork to deal with, I'd take hitting homers anyday...even if you could do 20%/year(really really low return in my book) on a million dollars you can have a decent life. I'd rather invest $100k in 10 stocks that I think have bright futures and see 4 or 5 of them triple or quadruple while the others dwindle or don't move much either way and you're still going to blow away the guy who made 20%.
Sorry for the rambling.
As a scalper, I'm often envious of ppl who seem to have the knack for the buy and hold game due to its many advantages, but I've always found success easier in the shortest time frames.
You make some good points and I'm curious what sort of stock screening methods you use for your small cap picks. Also, do you ever play any large caps as maybe a hedge for some of the spec risk?
Thanks for your post.
Grinding:
Pros:
If you know what you're doing, you'll likely be able to ring the register almost every day.
You will be very in tune with the market as you follow it play by play.
Cons:
You're probably going to do tons of spins.
Homeruns/Holding Out for more than a scalp
Pros:
You will be more efficient with your spins if you're not in/out all the time.
Less mental effort involved.
Cons:
Sometimes those big plays just arent there, and you'll go through longer dry spells.
******************************************
Ultimately, as a short term trader, if you can find a way to grind it out, you're going to have some advantages.
A) You can always find a way to make money.
B) You're going to be very in tune with your market since you're following it play by play.
As you gain experience, if you can learn to identify which setups will let you take bigger winners and then use your scalping ability to time entries/exits, you will be on your way to being an exceptional trader.
The key here is that the trader's intuition needs to guide him/her to what the appropriate play is given what the market is presently saying.
Pros:
If you know what you're doing, you'll likely be able to ring the register almost every day.
You will be very in tune with the market as you follow it play by play.
Cons:
You're probably going to do tons of spins.
Homeruns/Holding Out for more than a scalp
Pros:
You will be more efficient with your spins if you're not in/out all the time.
Less mental effort involved.
Cons:
Sometimes those big plays just arent there, and you'll go through longer dry spells.
******************************************
Ultimately, as a short term trader, if you can find a way to grind it out, you're going to have some advantages.
A) You can always find a way to make money.
B) You're going to be very in tune with your market since you're following it play by play.
As you gain experience, if you can learn to identify which setups will let you take bigger winners and then use your scalping ability to time entries/exits, you will be on your way to being an exceptional trader.
The key here is that the trader's intuition needs to guide him/her to what the appropriate play is given what the market is presently saying.
The main benefit of a high win/loss method is that you can somewhat withstand periods where your win rate drops. Drawdowns can be larger, but a well researched method should hold up long term with minor adjustments periodically.
For those traders using a high win rate method, how hardy are these methods to changes in market direction and volatility? And how often do you need to "fine tune" your method as markets change?
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For those traders using a high win rate method, how hardy are these methods to changes in market direction and volatility? And how often do you need to "fine tune" your method as markets change?
st