This thread is obviously right in my wheelhouse. I have had periods of my trading career where I did alot of day trading, and although during those years I was profitable, it is a very difficult and stressful way to trade. I know many day traders, and a few who make money. However, most of them blow up at some point due to poor risk management. At times I might add to a position that I am holding for a few days if I get a move against it during intra day action. An example of this was yesterday I shorted the S&P and added to it 4 points higher than my original entry. The market ultimately rolled over some and the trade closed profitably. I held it overnight, so it was not a day trade, and exited this morning for a nice profit, which was enhanced by the intra-day add. Keep in mind that I have been trading for 25 years, so I have a little bit of experience doing this type of thing.
I know of no completely mechanical way of day trading that is consistently profitable, and I would be willing to bet that I have studied just about every one that is out there. I am just waiting for the next MIT grad who is a genius that figures out some knew way of curve fitting an oscillator to past data, that ultimately fails in real time action.
Alot of bad habits were created during the late 90’s due to the parabolic upmove that happened, where no matter what you did, it would ultimately come back if you hung on long enough. One of those years I had a 100% accuracy year, meaning that I did not have one single loss the entire year. This was not due to trading brilliance, it was due to a very biased market condition. This ultimately pushed me to go to 100% cash at the beginning of 2000 because I knew something was really wrong if I could make all those trades, many of which were bad trades, and still have them all make a profit. I made much less than many amateurs that year who just swung for the fences, and felt like a damn fool to be honest. However, in the end I had the last laugh and now advise many of these people.
Unfortunately many folks due to this one sided nature of the move, quit their jobs, began trading, and bragged at cocktail parties, but the music eventually stopped and most were cleaned out. They only knew one way to trade, so when the trend changed, they were blown up. I had one friend who made over 2M by owning every perfect internet stock, and knowing nothing about how to trade. I told him to sell out in Jan of 2000, which he did the opposite and bought more, only to lose about 1.8 of the 2M by the time he finally cried uncle.
I agree with 4plex in that nobody would sell an effective system for 3k. I would not sell my bond and S&P systems for a million dollars, as they can make me much more by keeping them to myself. There are so few trading systems that actually work in real time, that I am constantly approached by brokerage firms for a piece of the action with my bond system, which I refuse to give them. The only way I would sell it is if I saw its efficacy diminishing enough where I was not going to use it anymore. Under that circumstance, it would not be worth buying anyway.
The average person should stick to a more medium term horizon, but at the same time do not get sucked into this “were in it for the long term” crap the brokers are selling. Timing the general larger swings can have a huge effect on your overall returns, so it would pay to get some knowledge in this area. Stay away from day trading, we call it NINTENDO due to how similar it is to a video game just clicking away with your mouse.
Sorry for the long post, this is just an area where I feel like I can contribute something of value.
