Despite so many warnings from experienced traders, it never ceases to amaze me that newbies continually wish to day trade.
For anyone out there just beginning I would love to know your thoughts on why.
I have day traded, and sucked at it, but I also know there are others who do well.
From what I can see the people who tend to thrive at it are also those who are big video gamers, can play 10 games of online poker at the same time, and generally have quick reactions under pressure.
That’s definitely not me.
The reasons I think new traders like the idea of it is because
1 - they like the idea of making money every day
2 - being sat at a computer all day feels like a real job
3 - they are scared of holding positions overnight
What puzzles me is that many want to trade because of the freedom it brings, but day trading makes you a slave to your trading platform.
While I don’t want to use this topic as a place to slam day trading I think the success rate of beginners would go up if they curbed this fascination.
Absolutely agree. I’ve certainly had the experience of being told by absolute novices that my long-term trading is not “real trading”. Of course, it never happens twice, these guys aren’t normally around long enough to argue the point, my guess is they wipe out pretty damn quick.
But the industry loves day-trading because its addictive and day-traders have to continually top up their accounts.
This is potentially a very, very important thread topic - if it gets the attention and input that it seriously deserves.
You are right that many long term traders (including me) will confirm from their own experience that day trading is one reason why there is such a high percentage of failed accounts. But there are others (also including me!) that have a consistent track record based on day-trading! And there are other experienced traders that will still recommend trading methods that are very short-term in nature even though they are longer term traders themselves!
So where does the truth lay in this issue?
To start with I think it is important to define exactly what we mean when we are referring to day trading. It certainly does not (have to) mean sitting in front of a PC all day every day. For example, a scalper may decide only to trade 1min charts during the 3 to 4 hour London/NY overlap and then walk away for the rest of the day… My own short term trading is based on 1 hour charts, looking for specific set-ups. This means only a quick check on the hour and, in practice, only focusing on the screen when a set-up seems imminent. And once a trade is opened it is usually on a “set and forget” basis unless a new set-up occurs in the meantime.
Day trading also means the freedom not to trade. There are days when we either don’t feel like it or have other things to do and, of course, the luxury of never having an open risk over weekends!
But there is no doubt that very short term trading often ends up in just treading water, going nowhere, and even in complete failure. And it can also involve incredible stresses and strains in one’s life.
There are many trade journals on this site and I would encourage short-term readers to read through this award-winning journal, which gives an open and very honest insight into the “day-in-the-life-of-a-day-trader”.
I consider the author, @alphahavoc , a personal friend even though we have only met on this site, and I am sure he will not mind his journal being linked to this thread in this way:
I would also link here an article that arrived yesterday in my email from Nial Fuller, in which he posts a damning critique of Day Trading:
But, on the other hand, I could point to one simple trading method called “The Three Ducks”, devised by Captain Currency which has been around for years and has established threads on many forums as well as twitter feeds, e-manuals, and so on. It has been on this site since 2007 and is still running:
I have seen many experienced traders recommending this method because it is based on multiple TF’s but it is still a method based on discretionary entry/exits off a 5min chart.
The point I am making here, by way of a discussion stimulant rather than an answer, is what exactly is day trading. After this, we can more clearly look at what works and what doesn’t - and why.
Yes im sure not all day trading involves being screen tied. For me though the times i start using intra day charts my mind starts locking into the ‘checking constantly mode’.
Im personally a short term trader - but use daily charts - maybe in a week at tops.
I personally think this is best for newbies - it allows for need to “ring the cash register” but without the noise of day trading.
I know what you mean! Like when setting up a long term trend position with a possible 2-week projection - and then picking up the mobile after 10 mins to see how its doing? Yep, been there!
Although for some day traders that “noise” is their market! But that type of trading is not for Newbies. It requires vast quantities or discipline and accuracy. And often needs a better judgement of when not to trade rather than when to push the button…
I have often been amazed to see how quickly some newcomers start posting advice to others just after their introductory post states they are just beginning in the BP school! That is one of the drawbacks of a site designed primarily for Newbies - Newbies teaching Newbies the same stuff that has been fed to them without the authenticity filter or the experience - but that is why threads like this occur and frequently. Normally, they are more generically called something like "Why do traders lose ". They are all valid threads and the fact that they recur underlines the rapid turnover in newcomer traders.
Very true! I have often felt that over-energised enthusiasm is one cause of over-trading and where strategic trading becomes gambling. One could almost say that it is only when trading becomes “boring” that one finds the patience to let the trade come to you rather than chase them all over the place all day long!
Actually, I think this points to an underlying issue that I personally feel contributes to many mistakes by both Newbies and other traders (again, including myself). The physical set-up of online trading means that the price is so visible that it is literally right “in your face” if you let it be so.
I mean, when one buys shares they are generally put in a securities account in your bank and most such investors don’t bother to look at the current price more than maybe once a week or month even. One doesn’t stare at the price going up and down on a screen all day, panicking every time there is a dip!
But trading via a broker screen provides exactly that scenario. One can set up a whole range of lines and indicators and design a complex set of rules for entries and R:R - and then, when the trade is open, all one stares at is the current price candle soaring up and down and all logic and rules are out the window. I would ask all Newbies, how often do they find themselves with their finger hovering over the mouse button, with heart pounding, wondering whether to close the position with a few pips profit or to get out with a few pips loss?
That is not trading, it is gambling. Trading is a pre-planned series of moves based on a strategic formula that has been shown to produce overall profitable results over a period of time. It is not dependent on “this current trade that I am sitting here sweating over”!
But I don’t want to be applying “over-energised enthusiasm” (in my own words) to your thread so I will “give way to my honourable friends”
For all newbies out there i would highly recommend the book Enhancing Trader Performance from Brett Steenbarger - not cheap but the closest youll get to real advice on structured development of your trading skills.
These are the types of books you need to digest not the ‘How to make a fortune in trading with hangover’ type of books.
Whether a person day trades or swing trades i think comes down to their personality and how it fits with their lifestyle. You can be profitable both day trading and swing trading. I tried a few methods over the years and day trading works for me.
Remember just because you are a day trader doesnt mean you trade daily. It just means you’re in and out of a position within the day.
It depends what people mean by freedom. Some want freedom from a boss or going to work somewhere where you dont enjoy. So even though I day trade and am reading analysis, following news daily, i enjoy it. It doesnt feel like work so yes I like the freedom trading brings. It all comes down to what method makes you profitable.
Its Funny I actually saw this topic and decided to read it. I have been thinking “I need to start day trading” even though I have several trades that have been doing well for the last few weeks. For some reason my mind thinks I should be day trading. While I do want to be a better day trader, your correct that would mean more time at my computer working.
Thanks, I may pick one or two days a week and choose a few pairs that would be good for day trading. But I wont take it too far.
While I dont really think day trading is good for newbs i do think traded on demo day trading reinforces pattern recognition and implicit learning much quicker than end of day for obvious reasons
I think there are many reasons but probably two of the most common are:
A misconception that it is safer, more controllable and produces concrete results quicker. Somehow, the fact that we can watch it online gives a psychological comfort factor that we can jump out as soon as it looks threatened, or snatch those last pips before it goes into the red, etc.
The fact that many beginners have very little capital, even 50-250 USD, and simply cannot afford to set the kind of stoplosses that longer term trading requires in order to give the trade room to “breathe”. It would represent too large a percentage of their limited capital.
But that is not to say that day trading cannot work consistently if approached correctly and intensively disciplined. It can be an enormously emotional roller-coaster.
1 - The mindset of “the more trades I take, the more money I’ll make”.
2 - undercapitalization.
If someone can make money day trading, go for it. I’ve seen successful day traders. I, however, cannot day trade successfully, and most people cannot, and they learn it the hard way.
That is one of the drawbacks of a site designed primarily for Newbies - Newbies teaching Newbies the same stuff that has been fed to them without the authenticity filter or the experience - but that is why threads like this occur and frequently. Normally, they are more generically called something like "Why do traders lose ". They are all valid threads and the fact that they recur underlines the rapid turnover in newcomer traders.