So this isn't BBV, but I'll start off with a brag. I've had a great year running garden variety automated strats in equities and futures. But I'm open-minded and think it's worthwhile to explore areas that most auto traders are not.

That said, what can we learn from successful daytraders? I'm talking about the discretionary/manual traders with holding times that I'd characterize as MFT, ranging from minutes to hours (and occasionally multi-day swings). I've been keeping tabs on a few of the highly followed ones on Twitter, and if they are being mostly transparent, then it appears they have real edge.

A few observations on the equities ones:
*They generally traffic super high volatility, small and midcap names, often flavors of the week, e.g. ebola, oil/russia, $cuba, pot stocks, bodycams, biotech/drug approvals, huge earnings movers
*They love their chatrooms. Haven't sat in on any of these, but are they all jumping in/out of the same name and the same time? Perhaps collectively they have enough size to create short-term momentum.
*Mostly TA with a bit a tape reading, also occasionally what appears to be pump n dump and stock promoting, especially the guys with a bunch of lemmings tailing their trades.
*Predominantly momentum traders, especially in the low float super movers (20+% daily range)
*Mean reversion trades come off as martingales; average down until goes in their favor.

So can we draw any conclusions where the successful manual daytrader's edge comes from? The best I've come up with so far is that they are great at table selecting so to speak, by choosing the right type of names to engage in short-term momentum trading and occasionally what could be perceived as manipulation. The mean reversion guys appear to have a decent feel for when a move is exhausted, typically characterized by something like abnormal range extension/flush out with heavy volume, but often they come in early and keep averaging down. Or is there edge in fact not all that great on a risk-adjusted basis, and they are doing best by selling premium chatroom services and how-to-trade DVDs along with using their herd of followers to move names in their favor and dumping into them?

"If they're being transparent" means you have nothing. If they aren't posting real time entries/exits in a time stamped third party non deletable medium, you have nothing.

Anyone selling DVDs either isn't a winner or doesn't have a legitimate scalable strategy.

And congrats on doing well, but a simple "buy the dip" algorithm would have cleaned up this year.

called inventory management in mm world...

Wonder what percentage of winning day traders this year can truthfully say that their short sells showed a profit.

I have also long held this opinion, but more recently, I've observed these heavily followed daytraders tweeting in real-time (or close to it) their entries and exits. I may just have a selective memory but it does seem that they have been winning over the past few months on both the long and short side. You are right though that they may be deleting bad calls.

Selling DVDs telling others about your winning strategy does seem counterintuitive and sketchy, but I'm trying to think if we're missing something. Besides possibly just being what it is - selling snake oil, perhaps they can derive edge from convincing others to follow an arbitrary set of rules in names that can be manipulated intraday with relatively small size. Same goes with the chat rooms.

And I agree that the scalability isn't great, but based on their holding times and the liquidity of the issues they are trafficking, I suspect they could scale to $2-10mm annual net p&l with a decent risk profile, which is definitely more than enough to justify exploration for automated strats, especially since the infrastructure requirements are minimal.

Hehe.

Specific to equities, I'd expect the majority. There are so many individual issues which exhibit big selloffs intraday. If we were talking about a multi-day timeframe, I'd be a bit more suspect (and at the very least, I'm guessing the risk profile was much worse).

So in essence I run about 2 automated strategies that might look like 7 because there are many variants of the same thing. There are a lot of guys doing automation in our office and I've gathered that the most successful don't trade a myriad of strategies but are focused on a small number. I think this is the case because good automated strategies generally take a lot of time and work to automate and a decent amount of upkeep. You may know a dozen discretionary strategies but it can be very difficult to automate any of them especially a great number of them.

One our automated strategies came about from a strategy everyone was already trading manually. What we found that was a real game changer was our manual trading was good, but when we automated, we could trade the same set ups but not nearly as well. The game changer is that by automating and widening/optimizing parameters we were able to find about 10x as many set ups. Increased frequency smoothed pnl, minus the fact that automation underperformed manual trading, by finding more independent events, and it enabled us to scale up more efficiently since we were trading more symbols with different pools of liquidity.

I'm gonna assume you work for a prop like Bright, WTS, FNYS, etc. Are most discretionary guys at these firms all piggybacking the same trades/strats? If so, does this lead to competition over fills and any gamesmanship to squeeze your "colleague"? Or perhaps it is better to agree not to compete against each other and setup some type of p&l split arrangement?

It's hard to draw comparisons between those firms but I'd guess that pretty much all discretionary guys at all firms are piggybacking off the same strats.

There's only one strategy where entire firm has had an "official agreement" as to competition/position sizing. The bigger guys decided that no one should be in more than X size, but it's really a non factor. The last noteworthy trade if you were in the "max size" you would have made $59,500, so it does come into play with the smaller guys like me but I'd guess some of the bigger guys are hitting those numbers.

This is an awfully precise pnl to a specific trade. Are you just taking your result and extrapolating it to the 'max size'?

Yeah, basically. Some strategies everyone will have similar if not the same entries/exits.

I know a lot of day traders that are short biased or exclusively short. I'd argue it's easier to find short opportunities on smaller time frames.

That's true for the most part but a lot of people are making money from strategies that aren't scaleable. And Sang Lucci sells dvds and it seems like he's doing something similar to what you do

Sounds like a bunch of degenerate gamblers to me.

DJIA 1/2014 = 16.5k
DJIA 12/2014 = 18K

I wouldn't call yourself a successful trader yet.

Depends? Were they trading energies The overall long term direction doesn't really matter as much as you may think to successful day trading. Inner day counter trend moves can be very powerful and set up very nicely for quick short term scalps.

i don't know a ton about this but i know alot about the stock market in general.

i think the 2p2 poster who i haven't seen for awhile (redman or something like that) had it right. you can't be competing with goldman sachs etc. for trades.

so i think it makes alot of sense to get to know the hot areas of the market and trade in there. just don't fall in love with them.... also, perhaps swing trade the market on a weekly cycle type basis... but i think trading anything liquid very short-term is competing against people with far far more firepower than you.

i remember an article about a guy in canada who turned $100K into $5MM trading junior resource stocks and quit his job to do it full-time. unless he bailed on the resource sector in general i would bet he's round-tripped it back to the $100K... fyi, he traded pretty small stocks, not things like ABX or SU.

Depends on time frame. This was my biggest concern when I first entered the trading pits at the CBOT way back when. The other side of every trade I made was Goldman, Merrill, Bear Sterns, Lehman, etc. In retrospect maybe going against Bear and Lehman was solid But the point is very short term market makers make their living going against the big houses and funds.

This is also why I think short term fundamental trading is ill advised. I want no opinion! Technically I can do what the market tells me to do and I will very often be trading along with the big boys instead of getting in their way. But fundamentally? Trading the energy markets for example I will never know what Goldman or Exxon or OPEC or Boone Pickens know and trying to compete on market knowledge is what I consider a fools errand. Opinions may differ

I feel like teaching trading is really really hard. I've got a pretty good thing going with longer term value-ish investing/trading... And I seriously doubt I could teach someone else to trade like me.

The problem is that, for me at least, my 'trading system' is actually just my framework for understanding the world. I know things and have opinions (all of which changes pretty regularly) that I'm willing to put money behind... But short of telling someone 'buy or sell x' I don't think I could transfer those opinions and knowledge easily... Because what matters isn't the decision but WHY I made the decision, and the process is complicated as hell.

If you want to find traders you hire a bunch of really smart people and give them some basic info about markets and see what the come up with imo. You can't teach someone to trade like you anymore than you can teach them to be you.

This certainly isn't true. Scaling the scalable, has many moving parts, ie, expenses, risks, time, regulatory oversight, etc

Winning trading strategies tend, through compound interest, to rapidly reach scale. It's just not that hard to find financing for a scalable trading system. If it hasn't been proven to be scalable it probably isn't because the vast majority of systems aren't scalable OR permanent.

My point is, scaling it sometimes isnt worth the 'headache' for some, in comparison. And, depending on what you're doing, both facets can exist.
There are many scalable strats in function today. It depends what vehicle you're focusing on.

Define scale or scaleable as it can mean many different things. A lot of scale issues come from people not wanting to scale up/bet more simply because they are content with their results.

You can scale a trading strategy by increasing your commitment to a trade, or system. Increasing your risk capital, or risk exposure ie more shares/capital per trade or entry point.
Some strategies will ensue diminishing returns as you increase your workload and slowly break away from your discipline.
For example a successful strategy to trade an equity like $BAC, prob wont be successful to trade $AAPL if parameters are kept symmetrical. Usually as a result of the liquidity a particular stock can offer.
You can also scale a strat by multiplying it over more systems, whether it be individual traders that your entity is behind, or systems which are programmed to your parameters.
As your operation increases in breadth, revenue can follow that lead; as can inherent risks, regulatory oversight, time management, expenses, etc

You type "1000" into the buy box instead of "100". It's not rocket science or hrd labor. The most regulation from <$10mm/year is maybe large trader reporting.

The idea that someone is sitting on some brilliant money making strategy that scales but don't scale it up because of risk aversion, time (as opposed to websites/subscriptions/DVDs??), expenses (??? everything from transaction costs to margin gets cheaper in larger size) or regulation (what specific regulation?) is ridiculous, frankly.

If this is your idea of scaling a trading strat, ok.


If you're sitting in an office/home somewhere, with your own DMA platform, 4xing a margin acct intraday.

But, a scalable operation, has significant overhead



Even some of the most brilliant, have risks. IE Getco buying Knight.

My point was that, because someone/thing offers advice/mentoring proprietarily for profit; does not mean that their system isn't profitable if applied correctly

Yeah. If you were trying to show how little you understand of trading strategies ToothSoother you managed it with this sentence.

mindset and roll managment is key...

and what i mean is that they take only the easy trade, and by easy i mean the one where everyone could see what the price action will do, so that they have ton of momentum, ton of liquidity to get out, and stuff like that. they never force the trade.

NEVER add to a losing position, unless, you haven't already had that in plan, always consider the stop before entering in the trade.

the trade where you make a ton of money are the homerun setups, so you have only to go for momo, don't try to get the reverse move.

almost always best trade is no trade, sometimes there are only 1 or 2 names available for profit, but they don't go were we want or they don't do what they're supposed to do, so better not touching the keyboard in that case. patience is the key, more in day trading than in poker.

take trades only where you can make 2 or 3 times the money you risk, enter the trade where you know algos will start to put the money in and enter if and only if you can make that amount of money, otherwise, don't trade... and by that i mean, if there is some resistence and you're allowed to make only 1$ risking 1$ the trade doesn't exist.

actually i pruchased a really valid dvd, i thought it improved my daytrading skill, and of course it did, i know for sure, but the results are difficult to manage, i mean... even if i'm a noob at tennis and federer starts to coaching me it will take several month before i became good enough to compete in a decent tournament..

what i have to say is, the most of the time people sell program that doesn't work, or coaches when they don't trade anymore cause they're bust or stuff like that... you know the old saying "Those who can, do; those who can't, teach", BUT there are exception, for the case i found, and if you think clearly, why shouldn't you produce a dvd which is a 1 in a lifetime effort and provides you revenue for the times to come? it's not a private lesson coaching 1 on 1 or a webinar, it's a 1 time for a lifetime... i would think twice about not producing it..


oh, and about the "buy the dip algoritm".. everybody can buy the dip, the trade is in play until is closed, so if you don't know where to sell you are no better than the others...