That's right. To make any money at all you need knowledge equivalent to 30/60. There is no 1/2 in the market.

That said, a friend of mine (highly talented and skilled) started with 100k with a profit goal of 5 points per day. I traded with him in a chatroom just about every day, and he hit his goal almost every day. At some point we established it was best to quit after 10 points, so he didn't have any blockbuster days, but he made steady profits.

What a terrible mindset. You have a system, you work out how it works, what kind of markets its suited for, and you trade your signals. Your friends idea is the equivilent of just playing till you're up a buy in and leaving.

ive been transitioning into trading myself from poker. i would say ive made day trades maybe 5% of the time so i cant say how that goes. to be honest it would be way too fast for me. its hard enough trying to digest information never mind having to do it under a severe time restraint.

ive been doing this for the last few months and so far so good. im ahead on over 75% of my trades after a somewhat bumpy start. its pretty interesting and challenging stuff. but even though ive hit a good majority of my trades ive had a lot of help from w v solidly downward market the last couple months and a lot of advice from some friends who are traders/ hedge fund managers.

if you are interested in doing this, i would suggest 2 things. one is dont start out daytrading. prob in part bc i have an aversion to it but mainly before you do any sort of trading you need to be able to identify the signals you see whether on a hourly, daily, weekly, or yearly basis. and on a more compressed time scale its much more harder to verify those signals. for each of my decisions it takes me an absurd amount of research to come to one.
sometimes ill be looking at charts and past history all day or longer and still feel unable to feel comfortable w being able to identify what i see.

the second one is related to yr question. w 100k you can def make solid money. but that should be the last thing in yr mind. your first goal is to worry about making yrself systematic as all hell about yr trading and have a high win rate, i.e. consistently making money. thats the most important thing. THEN worry about what kind of money you can make.

if you dont get the systematic part down first you can def lose a big chunk of change before you know it. in my first 10 trades i prob burned through about 15% of my trading bankroll. it was pretty traumatic. and i was really really fortunate to not have lost more. not to say it cant happen in the future.

There seems to be a daytrading thread every week. Maybe Arturius' daytrading thread can be stickied or something.

This is solid advice. The primary goal of a trader should be to trade correctly and follow your plan. Maybe a little bit like how a poker player should make consistently +EV decisions. Once you are doing this with proper risk management, the money will flow. Traders/poker players who are always focusing on the money often end up tilting off their accounts.

Mmm. I seem to mention this every week too. It is not a high win rate that makes high profits - it is having a high expectation coupled with repeated opportunities within which to take advantage of that expectation. You win far fewer hands than you play, yet you can still make money playing poker since your average winners are far bigger than your average losers.

Obviously nobody is going to turn their nose up at a high win-rate, but I've seen people bust out trading with well over a 75% win rate - and they had good risk management.

well yeah thats an even better scenario. youre absolutely right. im just trying to make a point about overextending oneself too much. i can say almost every time ive done that in a v impsulve ive been burned. its a painful way to learn.

I would probably listen to my stock picks in the future................

Im in the business of making money.

Farmland, commodoties, and a few stock recommendations have flourished here at 2+2 that I've given out.

Stay tuned to this forum, will undoubtedly have some recommendations in the future that should make you money.

I guess I should've explained it better. He was hitting his target often before lunch. Then after lunch, being fat and happy, he had a tendency to take weak trades, and often lose back a large portion of what he made in the morning. We came up with a "max profit" idea to stop that. The bonus is he often would only have to work a few hours and then had the rest of the day off.

BTW, he lived in Canada, and could live like a king on 2 points a day(1000 share lots), so it's not like he was hurting himself by stopping early.

There was an SEC study during the bubble that examined actual brokerage records from a day trading firm and found that 95% of their clients went busto within a year. FWIW.

QFT

I have ALWAYS maintained at least 90% of the daytraders that I encountered in my carreer went bust.I also didnt know the SEC did a study on the subject?

You have a link DC?

GL,
Stephen

Not SEC, but here is one that was made in Taiwan.

http://papers.ssrn.com/sol3/papers.c...ract_id=529063


ABSTRACT:
When an investor buys and sells the same stock on the same day, he has made a day trade. We analyze the performance of day traders in Taiwan. Day trading by individual investors is prevalent in Taiwan - accounting for over 20 percent of total volume from 1995 through 1999. Individual investors account for over 97 percent of all day trading activity. Day trading is extremely concentrated. About one percent of individual investors account for half of day trading and one fourth of total trading by individual investors. Heavy day traders earn gross profits, but their profits are not sufficient to cover transaction costs. Moreover, in the typical six month period, more than eight out of ten day traders lose money. Despite these bleak findings, there is strong evidence of persistent ability for a relatively small group of day traders. Traders with strong past performance continue to earn strong returns. The stocks they buy outperform those they sell by 62 basis points per day. This spread is sufficiently large to cover transaction costs.

Note that exluding small accounts did not effect the results.

Also, out of the 20% who was profitable, only 2/3 of them remained profitable out-of-sample.

I do not think they say that how much earns at least their opportunity cost out of the winning 2/10 traders.

So the percentage that earns a living wage should be much lower than 2/3 of 20%.

Another ugly stat:


Day traders with a minimum of $NT 90 million in our six month ranking period incur average daily losses of $NT 7,338 during the subsequent month. On an annual basis this is equivalent to slightly more than $NT 2 million, over five times the average annual wage in Taiwan and two and a half times the mean annual salary for employees of financial institutions.

Of course, I expect some smartass to reply that the same stats are true for poker. However, since poker is cheaper is serves as a substitute for entertainment.

Also, the average day trader is much better prepared and has a higher aptitude than the average poker player. Anybody can deposit $50 to a poker site, but people who play the markets are much smarter and much better prepared on average. This goes back to my point that a lot of people treat poker as entertainment, but very few treat the market as entertainment.

Remember to use MARGIN also......this will double your bankroll.

All the big investment banks and investment companies have billions of dollars and hire the brightest minds to find market beating opportunities. I do not see how an individual with a small amount of capital, limited resources and no relevant background is going to outsmart these guys. After all if some people beat the market it will logically follow that their will be those that under perform the market. You really have to look yourself in the mirror and ask what advantage you have that makes you better.

People like to point to an individual that has been successfully for a period and show how it can be done. If everyone on 2 + 2 engaged in a coin flip prediction contest after 100 tosses their would be those who scored well over 60% correct. These individuals would claim to have superior coin flipping prediction skills and scoff at those who thought they did not.

well ya it's just a teeny tiny harder to find ways to beat the market with billions of dollars under management than it is with 100k.

do you see why?

seriously?

duh?

outstanding! brilliant originality! 5 stars!!

No I haven't, link?

Less diversification means more risk. You have to diversify more with billions then $100,000, so higher expected returns from $100,000 have to do a lot with taking more risk from concentrated positions. Also, there are more inefficiencies in small, thinly traded stocks which a small investor can take advantage of if he has the skills, but these are not day trading opportunities.

My coin flipping example was plagiarized from Warren Buffet.

Daytrading margin buying power is 4 to 1.

They don't have to. There are over 7000 stocks trading in the markets. You don't have to be "better" than everyone else to make money, you just have to make money. Maybe that's what's so wacky about the posters on this site. They have a poker player mentality that you have to win to make money. All you need to score a win in the market is have your play move your way by 2 or 3 cents.

Suppose by wildest coincidence that both you and the freaking wizard of Goldman Sachs both want to trade LEH. He decides he's buying 50,000 at a VWAP of no higher than 45.25. You decide it will go up a bit so you buy 1000 shares at 45.35. It takes off and runs to over 46, whereupon the GS prince of darkness starts dumping. You see the movement and sell at 45.85. Did the GS guy smoke your ass? Yes he did, but so what? You still made a half-point. It's not a contest.

I would be extremely curious to see anyone with documented returns of 40+% for many years.

If I had to guess I would think the best you could do long term is somewhere around 20% for someone v. skilled.

Correct. But the real question is sustainable annual returns for the best. And I would be willing to bet that Goldmans best trader is better than virtually ever y home daytrader in existence, and I would imagine if you asked him what he thought sustainable annual returns were he would tell you <40%.

Why bother posting your opinion (and challenging people) in this thread when you don't know what you're talking about?

This thread is about daytrading.

You need to read more.

Its simple, when dealing with small positions, you're able to enter and exit on a whim and not disturb the market. Large hedge/mutual funds have to play huge mind games with the market in order to unload its large positions to generate real alpha returns. This completely changes how the game is played.

Of course, you're also right, that this dilemma is solved by some of the brightest minds. But don't think for a second that most funds aren't run by incompetent idiots who spend more time jerking off to each other and also partake in some serious group think. Check out some insider books on Hedge funds (Daemon of our own design is a goodie) and you'll laugh at some of the weird and wonderful **** that goes on.

There are > 10,000 hedge funds. Most are started by Promoters.

You start a "family" of 10 hedge funds...
You make 20+2 on the winners...
You make 2 on the losers.

You kill off the losers...
And now you have enough survivor bias...
To be "outperforming" the stock market by, say, 5-10%.

You promote the hell out of the winners...
And just repeat the process until you are "managing", say, 100 million...
And you are making at least 5-6% risk free...
And managing the money by putting it in pseudo-index funds...
While flooding the world with the slickest promotional material.

A smart 16 year old would see right through this...
But most hedge fund investors have more money than brains.

And the 10% legit hedge funds... are Invitational Only.
There is no compelling reason for a genius-level fund manager...
To make money for random strangers.