Why market wizards are not day traders?

[schweiz]

I'm sure all the daytraders who went broke in the last 12 months thought they were doing the right thing by avoiding the risk of overnight holding.

If you have no hard proof that these daytraders would be better off by going overnight, you are just guessing. So you are guessing as there is no hard proof they would be better off.

If daytraders cannot control risk within RTH, how can they have better performance by staying in 3 times longer?

I daytrade because I am too stupid to make/keep money overnight. In fact the one time I wiped out my account with a +50K loss, was because I tried to take the position overnight. If I would have cut the loss before the close I would not have been be wiped out. Overnight I got hit very hard. The damage was done while I was sleeping.
So my personal experience was just the opposite of what you say.

 

[qxr1011]

===I'm sure all the daytraders who went broke in the last 12 months thought they were doing the right thing by avoiding the risk of overnight holding.===

they were doing the right thing if they were day trading, but that is not the only thing , actually its a last thing that should be knwon

Seriously, I have to bet that most new traders think the only form of trading worth trying is daytrading. And 90% of all new traders go broke inside their first year. Maybe, maybe there's some connection?.........

people broke because they did not know what they are doing

 

[tomorton]

If you have no hard proof that these daytraders would be better off by going overnight, you are just guessing. So you are guessing as there is no hard proof they would be better off.

If daytraders cannot control risk within RTH, how can they have better performance by staying in 3 times longer?

I daytrade because I am too stupid to make/keep money overnight. In fact the one time I wiped out my account with a +50K loss, was because I tried to take the position overnight. If I would have cut the loss before the close I would not have been be wiped out. Overnight I got hit very hard. The damage was done while I was sleeping.
So my personal experience was just the opposite of what you say.

Yes, I have no hard evidence. But anecdotally, most new traders are daytraders and most new traders go broke.

 

[RedDuke]

overnight hold = uncontrollable risk, way outside intraday's parameters

Depending what instrument you trade. It could be quite controllable when trading CME futures for the example.

 

[RedDuke]

Yes, I have no hard evidence. But anecdotally, most new traders are daytraders and most new traders go broke.

Correct. That is because they think that they can turn 5k account into 100s of Ks. The thing is that even 10-15k account can grow into something substantial over time with swing much easier than day trading.

 

[Maverick1]

Marty Schwartz and Linda Raschke are the only two who were able to sustain things? The Shoenfeld quote suggests that the days of tape reading stocks are over...

 

[RedDuke]

Marty Schwartz and Linda Raschke are the only two who were able to sustain things? The Shoenfeld quote suggests that the days of tape reading stocks are over...

Of course they are. HFT reigns supreme.

 

[comagnum]

overnight hold = uncontrollable risk, way outside intraday's parameters

The day session LLD (locked limit down) is at -7%, -13%, & -20%. The extend hours secession LLD is -5%. You can take far larger losses in a shock event on the day session than on the extended session. The flash crashes were on the day session.

Stocks can gap up/down. With proper position sizing that becomes a non-issue. Over the long run most gaps will work in your favor if you not fighting the trend.

The extended hours close-to-close & close-to-open tack far more gains on avg then the day session. Over the long run this adds up to several hundred percent greater returns than just holding for the day.

 

[tomorton]

Depending what instrument you trade. It could be quite controllable when trading CME futures for the example.

Absolutely a good point. If you're planning to hold overnight, you also have a decision to make as to which instruments to trade, and this is very much a risk management decision.

 

[schweiz]

Yes, I have no hard evidence. But anecdotally, most new traders are daytraders and most new traders go broke.

Yes, but do they go broke because they don't go overnight???
Would they NOT go broke if they would go overnight???

That's the question. And then the answer is probably that they go broke during the day, not because they refuse to stay overnight, but because they are unable to make profits intraday.