Re:Definition of Daytrader
It can be defined anyway one likes. However, IMO it is one of the most misunderstood terminologies in the trading industry. In fact, I would call the term "daytrading" a misnomer. Closing your position simply because it's 4pm seems highly artificial. Most great traders,including daytraders, (Market Wizards-I,II, Supertraders, TASC interviews, et al?) I have read about and a few I know use the "close" to their advantage. Gaps tend to be an exaggeration of the trend already in progress. Thus, great traders keep a position overnight when they expect a possible gap to be in their favor. Personally, in my 10+ years of trading, with about 1000 trades a year, I have noticed a steadily decling number of gaps going against me each year. And increasing number of gaps in my favor. This is most likely a result of my improved ability to recognize trends. In fact, I have not had a significant gap (2pts or more, I trade mostly $15-$60 stocks) goes against me in 3 years. I short as easily as I go long, uptick rule notwithstanding.
So, when I see Steve and others, warn against holding stocks overnight, I tend to disagree. Although, for beginners, it may be prudent. When stocks such as OXHP, INTC, and now DANKY are mentioned as examples of not holding overnight, I say BullHockey. They should be held overnight, as SHORTS. In all above cases, no decent trader worth their their moving average would have been long those stocks. I could not have predicted their gap downs, but I could have predicted down days with high probablity.
No matter what, never risk more than a small % of your capital in one trade. I risk no more than 10%, meaning the $ value of my position is no more than 10% of my trading money. Realistically, a good back-tested "stop" should protect you from a drawdown no worse than 1-2%.
Good Trading |
