I'll take a quick shot at that (Pure scalping based on Level 2 trading vs. TA holds of longer duration). Interesting question.
I shifted from "investing" to shorter and shorter term stock trading (swing trading, which I define as 1-30 day trades) about six years ago. Started daytrading (< 1 day holds, or as short as a few minutes or less - scalping) on Level II about 2 1/2 years ago. For the past two years, I have (and continue) to use a combination of the two trading styles. Today, my the duration of my stock trades are spread out from 10 seconds to 10 days, but they tend to average about 1-10 minutes for intraday stock 'scalp' trades, and 2-10 days for swing trades.
Overall, I have found it is possible to accrue much larger profits by using TA and holding positions several days. However, with that style of trading comes much larger risks - translating to greater volatility on your equity curve. With swing trading, you're exposed to the dreaded "overnight risk" caused by earnings pre-announcenments, global economic news, etc. However, these risks can be minimized with increased knowledge, technique, and caution. By daytrading/scalping, you can definitely achieve tighter control of your risk. You can also successfully daytrade with a smaller account. For swing trading, you really need to start with more equity, to handle the inevitable ups and downs, and carry multiple positions. And with swing trading, it can be more difficult to learn how to adhere to stops, since by definition the losses, when they do occur, will tend to be greater. It is best to try to "learn" swing-trading in a favorable (trending) market, at first. As with daytrading, you have to learn how to swing-trade in many different market environments, which is difficult - I'd say a 2-3 year learning curve to become consistently profitable.
It depends upon the market environment and the issue(s) you're trading, which style would be appropriate at any given time. When the market is 'running', you can put on several multi-day swing trades with trailing stops tailored to each stock. When the market is choppier, you'd want to day-trade and scalp for smaller profits. Rarely have I seen the kind of profits with daytrading, that are possible in swing-trading. However, the daytrading is definitely worthwhile, and profitable. Once you learn how to do it (generally takes 0.5-1+ yrs), it can be a nice profitable endeavor.
IMHO, swing trading requires more knowledge and experience, especially in TA, and in trading style, war stories/losses/comebacks, etc. You have to be prepared to lose more during the learning phase, to get good at it. But, the rewards are greater.
Greg and Oliver, out at Pristine Capital Management trade this way - a mixture of swing and day trading. Their seminars provide a good perspective (www.pristine.com); no affiliation, I'm just a private trader. There are of course many other good sources of info out there, of course.
Good trading! -Steve |
