Author Topic: Question about short term trading  (Read 3018 times)

InFlagranteDelicto

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Question about short term trading
« on: March 05, 2016, 08:27:54 AM »
Greetings all.
Am a newbie and dont know much about share trading (as will probably become apparent).
Wanted someone to point out the fundamental flaws in the below strategy for making extra cash with limited risk.

Scenario: Say you have 500k to play with in a share trading account. On days when the market is following a positive trend, you load in and purchase as many shares as 500k will buy in X company. You set a stop loss on the stock of say 0.5% below buy price.
You sell all stock before close of trading, so you have no exposure left, hopefully with a gain.
So by not being greedy and limiting exposure, could this be a successful strategy for making say 3-4k a month?
I do understand that not all trades would be successful as market can turn quickly, but by swinging for singles like this, could a modest retirement income be feasible?
Like I said I dont know much and am here to be educated so let me know why this wouldnt work. Any info welcome.

mrpercentage

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Re: Question about short term trading
« Reply #1 on: March 05, 2016, 08:37:02 AM »
Dear friend,
Read this first http://www.benvanvliet.net/Downloads/turtlerules.pdf

When you are done with that get a zero fee Robinhood account and try your genius with $500 instead. When you completely prove yourself there then go to town. Don't just jump in with $500,000. If you want to do that give it to me. I have ten portfolios up 6-10% year to date.

God bless

Seppia

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Re: Question about short term trading
« Reply #2 on: March 05, 2016, 08:40:55 AM »
You could also go to the casino every day and gamble on black / red for a half hour.
If you lose $2500 you leave.
If you win you pocket the money after the 30 mins and leave.
You have about the same probability of success (the zeros being the trading fees).

mrpercentage

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Re: Question about short term trading
« Reply #3 on: March 05, 2016, 08:51:39 AM »
You could also go to the casino every day and gamble on black / red for a half hour.
If you lose $2500 you leave.
If you win you pocket the money after the 30 mins and leave.
You have about the same probability of success (the zeros being the trading fees).

Eh, he has a little better than a casino and Robinhood would remove all the fees but generally speaking most can't do it (day trade). Its much easier to time investments you know will be around (or think you do) for a long time.

Seppia

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Re: Question about short term trading
« Reply #4 on: March 05, 2016, 09:03:55 AM »
I'm not an anti market timing extremist, on long term perspectives there are objective measures that can tell investors if they are buying high or low.

For example, I am now only investing new (monthly) money into a European index fund (80%) and an emerging markets one (20%), completely bypassing the US market* as
1- it is objectively valued much higher than the European and emerging ones.
2- I earn money in euros so the dollar being at an historical high only exacerbates the above point for me.

But

Day trading is exactly like gambling on black / red.
At least in poker and black jack some skill is involved.




*only with new money, I own the USA stock market obviously. Also: I am living in Europe.

whodidntante

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Re: Question about short term trading
« Reply #5 on: March 05, 2016, 01:20:57 PM »
So by not being greedy and limiting exposure, could this be a successful strategy for making say 3-4k a month?

No, that is not a successful strategy for making 3-4k a month.  You're welcome to try if you are convinced it will work though.  I encourage you to try with much fewer zeroes involved like mrpercentage talked about, or even use a trading simulator to try it for free. 

antifragilista320

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Re: Question about short term trading
« Reply #6 on: March 05, 2016, 04:58:55 PM »
Also remember liquidity might affect your returns.  There's not always 500k worth of shares available at a single price.  If you want to make 3k a month, try building a dividend portfolio that nets %5 annually.  Should get you pretty close with the benefit of holding a basket of stocks (aka the market always returns well over time).

If you are hung up on being an active trader,  what have you read?  If you'd like I can recommend a multitude of books for active traders.

mrpercentage

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Re: Question about short term trading
« Reply #7 on: March 05, 2016, 05:25:52 PM »
Also remember liquidity might affect your returns.  There's not always 500k worth of shares available at a single price.  If you want to make 3k a month, try building a dividend portfolio that nets %5 annually.  Should get you pretty close with the benefit of holding a basket of stocks (aka the market always returns well over time).

If you are hung up on being an active trader,  what have you read?  If you'd like I can recommend a multitude of books for active traders.

Awesome sauce. List some books and recommend some platforms please. Some people are inevitably drawn and perhaps if they are determined to try it they can get the non shyster information here.

I would also like to point out that the 30-100% wins look awesome until I remove all the 5-10% losses leaving a 10% gain for a few months (strictly trading). My long investing is doing great bringing into question the sanity of trading. Can't lie though. Sometimes I see serious opportunity and jump on it. I greatly limit the amount of capital with companies I don't want to be long in.

I would tell you more about what I do but because I am creating my own rules and still modifying them I see no point in passing something on unproven and would rather present more credible sources. I am of the opinion that with hand picked investment and trading we all ultimately make our own way. You could learn to paint the Mona Lisa if you dedicate your life to it but would probably be more satisfied painting you own pictures.

jim555

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Re: Question about short term trading
« Reply #8 on: March 05, 2016, 06:09:33 PM »
Don't forget about wash sales.  You can't buy back a stock with a loss for a month or the loss is not allowed.  (Actually the loss is delayed.)
Lots of moves are not intraday, but gaps open lower/higher many times.

mrpercentage

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Re: Question about short term trading
« Reply #9 on: March 05, 2016, 07:02:07 PM »
I am just illustrating. I seem to have good luck. I just wanted to caution those that think it's always winning. It is about limiting loss and being patient during losses knowing the big win will come. Not many can do this as it will really test you.


ScarElbow

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Re: Question about short term trading
« Reply #10 on: March 05, 2016, 08:05:16 PM »
I use 3-4 indicators for momentum trading (options). Candlesticks, MACD, RSI, and Chaikin Money Flow index. Using them together toward the same trigger will give you an edge. More studies will be needed if you want to implement it. Use them enough and bet small and probability will go your way eventually.