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You need to measure your performance against what you could get by simply buying an S&P 500 Index fund. Also, how long have you been "successful" day trading? If you don't have at least a 5 year track record, then you don't have enough to go on, and I really don't even think 5 years is enough data.
Very true. I would say you need at least 20 years of data beating the S&P 500 after taxes and trading fees to be considered a reliable day trader. Anything less is more likely to be dumb luck. Boring index funds FTW!
Very true. I would say you need at least 20 years of data beating the S&P 500 after taxes and trading fees to be considered a reliable day trader. Anything less is more likely to be dumb luck.
You guys are way off on this point. You do realize that DAY TRADING means buying and selling the same stock on the same day, right? A typical day trader does maybe 3 or 4 of these round-trip trades each day. That's about 750 to 1000 trades each year, 3750 to 5000 trades after 5 years, 15,000 to 20,000 trades after 20 years. LOL, you think it takes at least 15,000 to 20,000 trades (20 years) to prove that one's successful trading methodology is not a fluke??? Or even 5000 trades (5 years)? That's nutty.
BTW, trading INTRA-DAY, like day traders do, has little to do with the LONG-TERM direction of the market, so a successful DAY TRADING record for a year in which the market went up isn't necessarily "confusing genius with a bull market." If it were, you wouldn't have so many (bad) day traders LOSING money in a bull market.
90% of the people that attempt to day trade lose. I believe this statistic is somewhat misleading due to the ease of entry into the business. All you need is some trading capital and a dream to start. A lot of people view trading as "easy money"; all they have to do is buy/sell when their "extra special technical indicator" flashes a signal. Throw in a little bit of greed and fear. Add a dash of ego. A recipe for failure.
Look at all the charlatan's out there on the internet selling "trading systems"; there must be thousands of them. These "systems developers" wouldn't bother advertising if the rubes didn't bite and buy. I ask you, if any trading system was successful why would the creator sell it to other traders? Why wouldn't they trade it themselves?
Even if a person educates themselves there seems to be a lot of advice to use technical indicators. While some of the indicators are useful as decision support tools they are all lagging price. They are great if you want to see what happened in the past. Professional traders KNOW you are using these indicators and will use them against you.
Lets say you do find a trading plan that is consistent in back testing. Many people do not follow their plan due to psychological pressures. The fear and greed take over and the plan goes out the window. "I know I should puke it out but it's going to come back" or " I am going to hold on even though it has reached my target price, I am going to get rich!"
Another downfall for the 90% is poor money management. Nobody is going to be right 100% of the time and in fact if you are right over 50% of the time you are doing well. You need to limit your exposure on each trade to 2% or less of your trading capital. A lot of aspiring traders start trading undercapitalized leaving little room for error.
This is just a short list of the challenges. People have written books on the subject. It is no wonder why the failure rate is so high. People don't look at markets like they should. It is nothing but a two way auction based on the participants perception of value.
90% of the people that attempt to day trade lose. I believe this statistic is somewhat misleading due to the ease of entry into the business. All you need is some trading capital and a dream to start.
Yep. In my estimation, at least half of those taking up day trading take it as seriously as a trip to the casino--and put just as much work/study into it. Based on that fact alone, the high failure rate shouldn't surprise anyone.
Make no mistake about it, day trading is generally difficult to do successfully, even for those who take it seriously and put in the work. Wartrace mentioned a few of the reasons why. But it absolutely can be done, and done very well compared to market returns/volatility.
I don't want to spend a ton of time defending my strategy. I simply buy the index I prefer, and try to catch the intraday swings. For example, when I feel like trading the S&P500, I use SDS and SH to short, and SPXL and SPY to catch upside. I trade different indexes, but mostly the s&p over the past year. I try to catch both the upward and downward momentum, while also using these inverse ETFs as insurance against potential loss against one another.
I don't know if that makes sense, but it doesn't have to. I don't want to convince anyone that what I do can be replicated. It's very risky if not executed properly. I use a fair bit of math and number crunching to pick my preferred entry point during the day. It's been making me exceptional returns, but it's admittedly a very stressful way to go about it.
I don't want to spend a ton of time defending my strategy. I simply buy the index I prefer, and try to catch the intraday swings. For example, when I feel like trading the S&P500, I use SDS and SH to short, and SPXL and SPY to catch upside. I trade different indexes, but mostly the s&p over the past year. I try to catch both the upward and downward momentum, while also using these inverse ETFs as insurance against potential loss against one another.
I don't know if that makes sense, but it doesn't have to. I don't want to convince anyone that what I do can be replicated. It's very risky if not executed properly. I use a fair bit of math and number crunching to pick my preferred entry point during the day. It's been making me exceptional returns, but it's admittedly a very stressful way to go about it.
I hope you didn't read my post as an attack on day trading Andy; I was attempting to explain WHY day trading has such a dismal success rate in general. I love the analogy that Longarm made of it being like a casino.
I always say stick to whatever you are good at... if you aren't good at one thing, that doesn't mean your neighbor won't be good at it too. With that being said, it's always good to remain humble and remind yourself there is still a lot to learn. The market has been in an uptrend since 2009, so it's very easy to make money with ANY strategy. I personally do a mix of trading and investing. This is what works for me. I mainly use moving averages, stochastics, volume and chart patterns. I'm not a day trader, but I actively trade. However, I also have long term positions as well.
Yep. In my estimation, at least half of those taking up day trading take it as seriously as a trip to the casino--and put just as much work/study into it. Based on that fact alone, the high failure rate shouldn't surprise anyone.
Make no mistake about it, day trading is generally difficult to do successfully, even for those who take it seriously and put in the work. Wartrace mentioned a few of the reasons why. But it absolutely can be done, and done very well compared to market returns/volatility.
I view it as continuously going to the casino. You may do well in the short-term or for the first few trips, but in the long run (years), the odds favor the casino and they will get their money back (and more). The fees and taxes make it very difficult to be a successful day trader in the long run. Are there any mulit-billionaires that made their fortune through day trading?
I view it as continuously going to the casino. You may do well in the short-term or for the first few trips, but in the long run (years), the odds favor the casino and they will get their money back (and more). The fees and taxes make it very difficult to be a successful day trader in the long run. Are there any mulit-billionaires that made their fortune through day trading?
The taxes on futures trading are much lower than stock trading or wage income due to the section 1256 rule that taxes all futures contracts as 60% LT capital gains and 40% short term.
Fees? 4 dollars a round trip per contract is not excessive.
As far as it being a casino; it is only a casino if you treat it like one. Most traders are not looking to become billionaires, they do it for income. A lot of people made a good living trading at the CBOT as floor traders before the move to electronic trading.
Last edited by Wartrace; 10-06-2014 at 11:10 AM..
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