Day Trading (Split from FF post)

IBY, So much is written on this board about market timing and very little on money management. Just want to learn something new everday.

JB, Isn't the same problem with daytrading. You lose out on the gap ups and gap downs. Trying to chase the market after it gaps could be worse, if it's a gap n crap reversal. In your experience have you found daytrading more profitable than swing trading ? Opinions differ on this matter. Just curious what your experience has been.

JB,

Isn't the same problem with daytrading. You lose out on the gap ups and gap downs. Trying to chase the market after it gaps could be worse, if it's a gap n crap reversal. In your experience have you found daytrading more profitable than swing trading ? Opinions differ on this matter. Just curious what your experience has been.

IF you read it, Index trader and I tossed this around in another thread.

The reason daytrading offers -- IMO -- much more opportunity is RANGE vs. net. Today, the S&P netted 2.3 points -- but had a range just above 6 from lowest low to highest high. It is NOT unusual for a day to offer runs that total MANY time the net for the day. I've seen 25 point range days with a close of nearly ZERO.

Gap to crap is a JOY for me. That what I look for -- fading gaps -- in the AM. (That and a breakout of the AM range). I've posted about this several times. In a bear market IT move running strongly down, 60+% of the days open with UP gaps of some size. If I just held short, I'd miss those up gaps to get a potentially better price for a short.

If you care to, with S&P futures --

1 -- Pick any 30 trading days -- even in a strong trend -- and get intraday charts for each 30 days. Add up the intraday ranges of each of those days.

2 -- Then using daily charts of that 30 day run determine the net point move as if you just bought on open on day one and sold on the close of day 30.

3 -- subtract the points of #2 from the points of #1.

That little exercise should give you a strong indication of how much more profit is available intraday Vs "swing trading" -- WITH (S&P) FUTURES!

Since, the majority of the time, each intraday range offers 2, 5, 10 times the net for the day, I just don't worry about missing trades...in warm weather, it means I can get in 9 holes.

Since, the majority of the time, each intraday range offers 2, 5, 10 times the net for the day, I just don't worry about missing trades...in warm weather, it means I can get in 9 holes. 

One more comment --

When I first started looking at intraday charts to look for patterns (like time of day, and others), one of the first charts I looked at was a day with a range of about 30-31 points, that ended about net 1 point (up, FWIW).

It opened without a gap, rose about 10-11 points in the first half hour, then reversed and fell 30 or so to about minus 19-20 with that move ending about noon. It then meandered around until about 1pm and then rose back to plus 5 or so, and then fell to about -8 and back to plus 1 at the close.

So from the open, it move ABOUT 10 points up, then 30 down, then 25 up, then 13 down, then 9 up.

That was a total of 30 point range -- with 85-87 points "available" -- on a day where it netted ONE.

This was not a usual day by any means, but NOT rare at the time either!

As I see it, were ARE talking about "swing trading", just in a time frame where you have to be set up and ready to make decisions FAST.

JB ...I am more interested in your experience, if you don't find that nosey. Are you able to net more points trading the intraday swings than what you would have netted in a multi-day swing trade ? Because trading the intraday swings would also mean lot of whipsaws. Also, does this method work in a non-volatile market environment ?

NAV --

We, evidently, were typing at the same time. I think the last post indirectly answered some of your questions.

In any case:

The short answer to: Are you able to net more points trading the intraday swings than what you would have netted in a multi-day swing trade? is most of the time absolutely yes!

Today (this is me breaking a rule I have about posting about trades, especially after the fact) --

I took two trades. One a long at 10:30 when the S&P moved up at a TOD (time of day) where I find that moves continue a majority of the time. It moved about 1 1/2 points and then failed. I made 0.60 points. Then the market moved into a tighter and tighter range, forming a triangle. 80-90% of the time, that mean breakout and soon, by the time it reaches the point of the triangle.

I put stops above and below (near) the point of the triangle, and was stopped in long and got 3.75 points. (less commissions, but these are net after slippage).

BAD range day...good trading patterns.

I've seen BIG range days that kill you with whipsawing and small range days that make you want to say "man, this is easy".

IMO -- you can NOT over trade. I take no more than 3 trades a day, during time periods where history tells me the patterns I look for work. I used to take 4, an additional one at the close of the bonds -- but -- the bonds and the S&P disengaged a long while back. (that trade was, at the close of the bonds: 1 -- S&P in lower 1/4 of daily range, with 2 -- bonds up more than 1/2 point -- look to go long on move of tick UP or visa versa.).

I bought Tradestation and a real time data feed and spent over a year "living", tick by tick, with real time 1/5/10/30/ and 60 minute charts. Plus, I did a lot of work with determining turning points based on daily/weekly/month charts -- AND -- near term support and resistance points from AM and PM lows/highs, plus opens/closes of the previous two days -- ALL before I took my first trade.

Mark may remember this from a conversation we had on the phone, but on my first trade I made a TON of money..in 25 minutes. I then proceeded to give it all back and then some in the next few weeks...overtrading. I went back to the drawing board and then looked hard at TOD and repetitive patterns. Over a period of another year+, I developed my 4 trade windows, and about 10 paterns I looked for during those periods. Then, I started trading ONE contract..period for about 6-7 months and learned to forget -- instantly -- about those that got away.

After 8 years of making our living doing this, I really can say YES to: Are you able to net more points trading the intraday swings than what you would have netted in a multi-day swing trade?

My point is, it works much better than swing trading -- but it took a lot of work and time -- for me at least...and (MOST of all) the developing a discipline to stick to a simple system condensed from a VERY complex set of choices...and STRICT risk/money management!

In order to work on this and support my family, I took a night job (with the support of my wife and her belief in me) so I could do all of the above.

What more can I say? It is NOT easy. It is NOT simple...but it can be done!
It is worth it.

BTW -- This is all is with the full S&P, not the e-mini.

Thanks JB. Much appreciated.

JB, I (and I'm sure many others here) really appreciate you laying all that out. All I can say is that night job would have to be pretty special before my wife would let me watch ticks for a year I am fired up about getting good enough at this racket to make it more than a hobby. I have a long way to go, coverting the wealth of information I'm taking in and turning into knowledge. When you talk about ranges, it seems similar to those that make the argument about swing trading rather than IT trading. More points in less time. For the amateur, it of course mean more losses in less time.

JB,

You make some interesting observations and i can't dispute the facts that you have presented. Mathematically the cumulative intraday swings far exceed the buy and hold approach for a given number of days. No doubt about it. I am more interested in your experience, if you don't find that nosey. Are you able to net more points trading the intraday swings than what you would have netted in a multi-day swing trade ? Because trading the intraday swings would also mean lot of whipsaws. Also, does this method work in a non-volatile market environment ?

The reason i am asking you these questions are, i am a swing trader. I have tried daytrading in the past without much success. The only days i daytrade are large range days. Just trying to understand others experiences.

Nav:

To put this into perspective:

Had you bought at the bottom tick on the ES on 11/21/03, and sold at the high tick on 1/26/04, you would have netted approximately 120 points over the period of 43 trade days, or 2.79 points.

Today, we had a range of 7.25 points in the ES. But the approximate distance travelled intraday today was around 45 points. Note that some days travel more. Most probably don't travel much less.

I think you will find that almost ALL of the big moves work out to something between 2-3 points per day average. Now whether you could have actually bought the bottom tick and sold the top tick is another issue.

Could you average a couple of points a day? I can't answer that for you. But a few advantages that exist today that did not exist years ago are 1) lower commissions. I currently pay $4.80 per round turn on the ES. You can do better I might add. A tick is $12.80. 2) Platform. I can make a trade almost instantly via a direct access platform. This is vastly superior to the way I traded at one time over the telephone. 3) The range of analytical tools today is huge in comparison to what it was at one time...if you use them.

Finally I should point out that in day trading you can trade bigger size, because you don't have the overnight risk.

There are alot of days that I just daytrade. Sometimes I swing trade. Almost never to I hold for long periods of time. I don't think the returns are worth the risk. And I know you've noticed, how many times the futures traverse the same areas.

IndexTrader

Had you bought at the bottom tick on the ES on 11/21/03, and sold at the high tick on 1/26/04, you would have netted approximately 120 points over the period of 43 trade days, or 2.79 points.

IndexTrader,

You make a good point here. Even on a near parabolic move, the average gain per day was mere 2.79 points. I wonder what would be the gain in a market with a lower degree of ascent. 2.79 points can be made on any day in a single trade, if you are patient and wait for a good move. I guess as JB pointed out, it's overtrading that kills the daytrader.