Day Traders VS Long-Term Trend Followers - Trading-Lab

Leth · #1 01-22-2008, 07:58 PM

Would like to see the members opinions on WHY there are more Day Traders than there are Longer Term Trend Following Traders and; why would you pick one over the other?

(Longer Term Trend Trading is not to be confused with investing)

Soverus Khan · #2 01-25-2008, 11:20 AM

Leth, I'd like to see the basis for the assumption that "there are more day traders than there are longer term trend followers".

How is this validated?

I see the cycle of day trader turned investor (humorously coined "investrador" as a trade goes south and they remain in it for several days, weeks, years). Many times that appears to be the result of following someone's "pick" as they have no idea on an exit strategy.

Pretty typical "first phase" of new trader psychology. It would appear to me that most "new" day traders do not last long. Not a scientific analysis and no facts to back it up, but this is my observation of the many chats and forums I observe or participate in.

If the OP assumption is correct, from my vantage point:

** I can use probabilities to my advantage intra-day (edge).

** I don't spend the 10 hours a day on research (exception is to researching long term investments). What a relief.

** I am usually done by 1200E

** I sleep very well at night

** strategies are adjustable as needed....money management and attitude remain the "golden goose".

** consistency is the refinement as opposed to "picking" the right stock.

My $.02

Leth · #3 01-25-2008, 12:46 PM

Quote:

Originally Posted by Leth

Would like to see the members opinions on WHY there are more Day Traders than there are Longer Term Trend Following Traders and; why would you pick one over the other?

(Longer Term Trend Trading is not to be confused with investing)

It is also my observation

ProTrader · #4 01-25-2008, 03:01 PM

who said there are more day traders than longer term trend following traders?

Soverus Khan · #5 01-25-2008, 03:06 PM

Quote:

Originally Posted by ProTrader

who said there are more day traders than longer term trend following traders?

Ditto.........

Leth · #6 01-25-2008, 05:19 PM

My bad...i should have been more specific.

According the the SEC and a publicist at the Wallstreet journal...and I honestly dont know how they know (I think it was a stupid WSJ poll)......10% of the market (volume) participants are stay at home short-term traders. 2% of that market (volume) are stay at home long-term traders. They didnt however say anything about the percentages of different types of funds and other professionals (investors). I saw this the other day on the net..and im still trying to figure out where I came across it so I can cut and paste it to this thread.
I was just curious about other peoples opinions on why such an 8% margin exists between the two. Why it seems that more people seem to prefer one over the other.
And if you are a day trader...why would you personally choose it over longer term trader? And if your a long term trader, why would you personally choose it over short term trend following?

Hope this helps...just trying to get a good discussion going.

aiki14 · #7 01-26-2008, 02:19 AM

Just to add a level of confusion, how do we define long term trend? I like a stock in a confirmed trend to trade the peaks and valleys, usually holding a day to two weeks. I will also trade intraday if a set up I like develops. where would I be in the aforementioned grouping?

Leth · #8 01-27-2008, 03:41 AM

aiki...excellent question!!!

there is an old addage that states "a trend begins with two ticks in the same direction."
i definately agree with this. however, it raises another question as you mentioned; how do you define it?
my answer is that a trend cannot truely be defined until its over. if its impossible to predict the future, then its logical to believe that no one knows when a trend will begin or end. this is why as a trend following trader, i sell lower lows and buy higher highs as supposed to picking tops and bottoms. all this does is put the odds in my favor that the trend will continue. which as we know, doesnt always happen. in fact, i only win between 30 - 40% of the time.
so..if i dont know how to pick a top or a bottom and i win only a small percentage of my trades; whats my edge? how do i stay consistantly profitable? money management. having MM rules in place keeps me stress free because i can always define (know) how much of my total account i can lose on any one trade. i do this by using fixed fractional betting (kelly betting) which coincides with game theory. the rules in thier simplest form are nothing new, in fact, they have been around for years..they are as follows...

1. cut losses
2. ride winners
3. trade with the trend
4. keep your bets small

compounding and time takes care of the rest

hope this helps some

this of course, is only my perspective...my view of risk may or may not be the same as yours.

daytraderB · #9 01-28-2008, 04:23 PM

leth,

did you find the WSJ article you were talking about?

I believe whether a trader prefers daytrading over longer term trading is a matter of finding out what works best for you. Every trader has their own personality and risk tolerance. Daytraders might consider longer term trading as more riskier than daytrading since you have an additional risk: overnight risk. Longer term traders might regard daytrading as more riskier due to higher commission and market "noise". It's a matter of what works best for you, guys.

Leth · #10 01-28-2008, 05:17 PM

I agree with your assessment DB.

p.s. Iim not having any luck finding that article. Argghh...

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#1 01-22-2008, 07:58 PM
Leth Super Moderator Join Date: Oct 2007 Posts: 621	Day Traders VS Long-Term Trend Followers Would like to see the members opinions on WHY there are more Day Traders than there are Longer Term Trend Following Traders and; why would you pick one over the other? (Longer Term Trend Trading is not to be confused with investing) __________________ Nothing is more difficult than the art of maneuvering for advantageous positions. - Sun-Tzu Trade with the trend, Ride winners, Cut losers, Keep bets small, Use Stops - Old School

#2 01-25-2008, 11:20 AM
Soverus Khan Senior Member Join Date: Dec 2007 Posts: 306	Leth, I'd like to see the basis for the assumption that "there are more day traders than there are longer term trend followers". How is this validated? I see the cycle of day trader turned investor (humorously coined "investrador" as a trade goes south and they remain in it for several days, weeks, years). Many times that appears to be the result of following someone's "pick" as they have no idea on an exit strategy. Pretty typical "first phase" of new trader psychology. It would appear to me that most "new" day traders do not last long. Not a scientific analysis and no facts to back it up, but this is my observation of the many chats and forums I observe or participate in. If the OP assumption is correct, from my vantage point: I can use probabilities to my advantage intra-day (edge). I don't spend the 10 hours a day on research (exception is to researching long term investments). What a relief. I am usually done by 1200E I sleep very well at night strategies are adjustable as needed....money management and attitude remain the "golden goose". consistency is the refinement as opposed to "picking" the right stock. My $.02

#4 01-25-2008, 03:01 PM
ProTrader Senior Member Join Date: Jun 2007 Posts: 109	who said there are more day traders than longer term trend following traders?

#6 01-25-2008, 05:19 PM
Leth Super Moderator Join Date: Oct 2007 Posts: 621	My bad...i should have been more specific. According the the SEC and a publicist at the Wallstreet journal...and I honestly dont know how they know (I think it was a stupid WSJ poll)......10% of the market (volume) participants are stay at home short-term traders. 2% of that market (volume) are stay at home long-term traders. They didnt however say anything about the percentages of different types of funds and other professionals (investors). I saw this the other day on the net..and im still trying to figure out where I came across it so I can cut and paste it to this thread. I was just curious about other peoples opinions on why such an 8% margin exists between the two. Why it seems that more people seem to prefer one over the other. And if you are a day trader...why would you personally choose it over longer term trader? And if your a long term trader, why would you personally choose it over short term trend following? Hope this helps...just trying to get a good discussion going. __________________ Nothing is more difficult than the art of maneuvering for advantageous positions. - Sun-Tzu Trade with the trend, Ride winners, Cut losers, Keep bets small, Use Stops - Old School Last edited by Leth : 01-27-2008 at 04:26 AM.

#7 01-26-2008, 02:19 AM
aiki14 Member Join Date: Jan 2008 Location: Philly Burbs, PA Posts: 82	Just to add a level of confusion, how do we define long term trend? I like a stock in a confirmed trend to trade the peaks and valleys, usually holding a day to two weeks. I will also trade intraday if a set up I like develops. where would I be in the aforementioned grouping? __________________ I read somewhere that 77 per cent of all the mentally ill live in poverty. Actually, I'm more intrigued by the 23 per cent who are apparently doing quite well for themselves. --Jerry Garcia The idea is to try to give all the information to help others to judge the value of your contribution; not just the information that leads to judgment in one particular direction or another. --Richard P. Feynman

#8 01-27-2008, 03:41 AM
Leth Super Moderator Join Date: Oct 2007 Posts: 621	aiki...excellent question!!! there is an old addage that states "a trend begins with two ticks in the same direction." i definately agree with this. however, it raises another question as you mentioned; how do you define it? my answer is that a trend cannot truely be defined until its over. if its impossible to predict the future, then its logical to believe that no one knows when a trend will begin or end. this is why as a trend following trader, i sell lower lows and buy higher highs as supposed to picking tops and bottoms. all this does is put the odds in my favor that the trend will continue. which as we know, doesnt always happen. in fact, i only win between 30 - 40% of the time. so..if i dont know how to pick a top or a bottom and i win only a small percentage of my trades; whats my edge? how do i stay consistantly profitable? money management. having MM rules in place keeps me stress free because i can always define (know) how much of my total account i can lose on any one trade. i do this by using fixed fractional betting (kelly betting) which coincides with game theory. the rules in thier simplest form are nothing new, in fact, they have been around for years..they are as follows... 1. cut losses 2. ride winners 3. trade with the trend 4. keep your bets small compounding and time takes care of the rest hope this helps some this of course, is only my perspective...my view of risk may or may not be the same as yours. __________________ Nothing is more difficult than the art of maneuvering for advantageous positions. - Sun-Tzu Trade with the trend, Ride winners, Cut losers, Keep bets small, Use Stops - Old School Last edited by Leth : 01-27-2008 at 04:32 AM.

#9 01-28-2008, 04:23 PM
daytraderB Member Join Date: Jun 2007 Posts: 63	leth, did you find the WSJ article you were talking about? I believe whether a trader prefers daytrading over longer term trading is a matter of finding out what works best for you. Every trader has their own personality and risk tolerance. Daytraders might consider longer term trading as more riskier than daytrading since you have an additional risk: overnight risk. Longer term traders might regard daytrading as more riskier due to higher commission and market "noise". It's a matter of what works best for you, guys.

#10 01-28-2008, 05:17 PM
Leth Super Moderator Join Date: Oct 2007 Posts: 621	I agree with your assessment DB. p.s. Iim not having any luck finding that article. Argghh... __________________ Nothing is more difficult than the art of maneuvering for advantageous positions. - Sun-Tzu Trade with the trend, Ride winners, Cut losers, Keep bets small, Use Stops - Old School Last edited by Leth : 01-28-2008 at 05:47 PM.