Originally posted by OldTrader
Whatever my friend. The markets have been here forever. And ALL the big traders have learned to sit, waiting for opportunities, and then sit, and wait for the trade to develop into fruition (as long as it doesn't do something counterproductive). That would include such noteworthies as Richard Dennis, a guy who started scalping in the pit, and later learned to trade a computerized system that made him a couple hundred million dollars. My hunch is that he would agree with the difficulty in scalping from off the floor.
In the era that Richard Dennis made his millions and became famous, computerized off-floor trading was not available. Trading short-term time frames (not only pure scalping, but also taking 10-15 cents on a stock or 1-2 pts on SP/ES) was not viable off-floor at the time.
By the time Richard Dennis became famous and started managing funds, the liquidity would not have been available for him to trade short-term time frames even if the computerized order entry system was available. Any hedge fund example that you bring up will by its nature have to hold for longer time frames because of the dollar amounts involved and completely different risk/reward/incentive parameters compared to indvidual trader's account.
Now it may be noteworthy to understand that Richard Dennis and other long-term traders (i.e. Turtles) like Sands, Dunn, et al often hit drawdowns in the
40-50% range during any given year. I know of
many short-term traders that have
never hit drawdowns of anything worse than 20%. In fact, there are
many short-term traders both retail and prop firms that will have have months with no or only a couple down days.
The nature of trading on short-term time frames is that you cycle your money faster. You make more trades and let your positive expectation do its thing. In my personal experience and from other successful short-term traders that I've personally talked to, both retail and prop firms, both futures and stocks, this results in a smoother equity curve, more profitable days, and more trading opportunities on trading days where other methods may get chopped or not trade at all.
Of course, you need a method that gives you that edge first and foremost. But my point is that using the Richard Dennis/ hedge fund examples is comparing apples-to-oranges.
