Harry,
I have a different perspective than the others on this thread. I am not a pure day trader, but would love to be.
My history is with position trading with a 2 to 8 week typical hold period. Never shorts due to most of the investing has been in IRA's. My plan is to continue this course, position trading with my capital and day trading with margin. Always closing the day trade by the bell.
My initial foray's into the day trading realm have had mixed results. Profitable, but not as well controlled as position trading. Day trading is a completely different game.
When I first started investing I assumed trading would follow the same relationships I had noticed in other things in life.
For example, I grew up in a cold climate with plenty of snow in the winter. Learning to drive involved learning how to deal with things like skids and fishtailing -- the fun stuff of driving in winter.
When I was a little older and got a car with more power, I discovered that all of the same rules and relationships that existed in a car on snow applied to a more powerful car on wet roads. Initiating a skid, cornering while sliding, all worked the same. However, the time constants were much shorter. Reaction time was much more important, but the skill set (method, not time) was the same.
Older still, still slightly crazy, and a much more powerful car. It turns out all of the same rules apply. If you have a car capable of doing it, dry roads react the came as wet ones. Skids are skids, snow, wet or dry. The only thing that changes are the time constants. On dry roads with a very powerful car, the techniques are the same. The time constants, however, are so short, very few people can execute the required actions in time, even though the required action is known.
The equities markets do not scale in this way.
The rule sets changes as your time horizon changes. The skills and indicators that work for the buy and hold for years guy are completely different than those used by the intermediate term trader.
The intermediate term traders rules are different than the position trader and all of the rules developed in these 3 areas are not appropriate to day trading.
Since I am new to this, I can't say any more because I haven't figured out what the rule set is for day trading.
I will continue to position trade, which means take them home for a night or weeks. But I will have analyzed them with that in mind. I will have evaluated the market and the company itself in much more detail. When I take a position in a day trade, I will always close it out, because I may not even know in detail what the company does! I may think to myself "evaluate this later for a possible position play", but I won't do it during the heat of the moment.
Enjoy the ride,
Ira |
