US Equity Day Trading

Article43

This thread is for US Equity Day Trading only - it has absolutely nothing to do with trading Irish or UK stocks, or any other financial instrument.

Please respect the general rules regards posting - off topic and all that stuff, as I am sure that the majority of us are not here to waste our time replying to non relevant posts.

This does not mean that someone can't ask a question - no matter how silly it may seem, and people are actually encouraged to ask relevant questions - but those who post off topic and start tit for tat posts with others, will be asked to be banned from posting in this thread with the assistance of the mods.

Posters will not be corrected on spelling or "grammer" - after all, this is a thread about daytrading, not elocution lessons

In summary, those that want to learn something about daytrading US stocks will find some useful information here, those that don't, won't, so please don't waste your time posting here if you don't want to learn about this topic.

The content in this thread will be in direct proportion to the questions asked - no questions - no content!

I will start shortly with a some US stocks in the DOW 30..here are the 30 of them for you to go and look up - but for daytrading all we need to know is the ticker symbol - but I know you will all go and look them up anyway

At 12:11PM ET: 12,504.35 44.29 (0.35%)

http://finance.yahoo.com/q/cp?s=%5EDJI

AA
AIG
AXP
BA
BAC
C
CAT
CVX
DD
DIS
GE
GM
HD
HPQ
IBM
INTC
JNJ
JPM
KO
MCD
MMM
MRK
MSFT
PFE
PG
T
UTX
VZ
WMT
XOM

Article43

As most trading decisions are based on chart reading - I will kick off this thread by posting a chart.

Note: It may not be the type of chart you were expecting

Article43

Now - before I am accused of posting off topic, I can assure you I am not.

This chart is very relative to trading - does anyone know why ?

Minder

it is in the eye of the beholder - different people will see different things...

Article43

Minder wrote: »

it is in the eye of the beholder - different people will see different things...

Exactly Minder - but maybe we should say "different people will see the same thing differently" for the object is what it is - it is not the object that changes, it is the perception of the viewer that changes.

As we all know, magic shows are based on perception, and likewise, anything that we visually experience will take on a logical meaning depending on the context it is viewed within.

So, why is it any big surprise that most people who try to make money trading lose!

Firstly, they are surrounded by vast amounts of information that relates to the stock market, and what one derives from that information will be in exact proportion to their previous experiences - actually, I will now say that someone who has absolutely no idea of what the stock market is, or how it operates, has a far greater chance of pulling money out of the markets on a dialy basis with daytrading, than those with the highest level of 3rd level education in the financial industry - all things being equal of course.

This is not a ploy to suck peope in to ask, that will lead on to some training or tuition - this is a statement based on experience and our knowledge of how well most traders fair out when they try - and we know that most fail, what we don't really know, or what we should be asking ourselves before we even consider risking our money, is:

"Why do most traders lose when they place a trade"

Anyone want to give their answer to this question ?

Thomas_S_Hunterson

Article43 wrote: »

"Why do most traders lose when they place a trade"

because they don't have insider information.

Article43

Sean_K wrote: »

because they don't have insider information.

While that answer can be considered as correct - as by having access to insider information would result in them placing winning trades - it can be ignored, as insider information is for the elite few and does not even warrant mentioning for the potential daytrader - it can be considered on par with winning the lotto!

Now - what if you told a new daytrader that in order to win you must be able to lose

"What the hell are you talking about - I want to make money not throw it away"

Reality check - for those who want to learn about daytrading, that is - if you think that you can win most of the time then forget it - for unless you can tell the future, the outcome is unknown, and if the outcome is unknown then you are taking a gamble - if you want a known outcome then put your money in the bank or credit union, as they will be very happy to see you coming in with it.

When you gamble you MUST control the only thing that you can control - -and that is how much you are going to lose on each bet.

Horse racing gamblers do this all the time - so they at least have the risk per gamble bit sorted out - but the odds are so much in the bookies favour that the bookie can't lose.

And, to move on quickly, as the only way to leran is to trade, that brings us on to the next important topic - the ODDS.

What are the odds of your trade being a winner as soon as your entry price is filled in the market - so, if I buy 100 CVX now at 84.56 what are my odds of winning on this trade.

Not as easy as it sounds at all - is it

Minder

Greed and fear. Plan the trade and trade the plan. Once the position is open, the direction that the market takes has no relevance to the descision that led to the trade. But traders allow themselves to become distracted by the news - the information coming at them - their losing position is compounded by decisions they take after placing their bet.

Fremen

Article43 wrote: »

"Why do most traders lose when they place a trade"

Because in the short term, transaction costs far outweigh the tendancy of the market to rise. Not only does a trader need to make profits in excess of transaction costs, he also needs to make profits large enough to live on if he is self-employed, or to make him profitable to his employer if he works for a company.
People trying to support themselves probably don't have enough money and/or risk-management skill to cope with a large down-swing in profits, either.

Fremen

Article43 wrote: »

What are the odds of your trade being a winner as soon as your entry price is filled in the market - so, if I buy 100 CVX now at 84.56 what are my odds of winning on this trade.

The commonly accepted idea in academia on this topic is that in the short term, you're just trading "noise". An arbitrarily-chosen stock is almost exactly as likely to go up as it is to go down over a short space of time, say one trading day. In other words, your odds are 50/50.

Article43

I am long 100 CVX @ 84.56 - what are my odds of winning on this trade ?

Article43

Fremen wrote: »

The commonly accepted idea in academia on this topic is that in the short term, you're just trading "noise". An arbitrarily-chosen stock is almost exactly as likely to go up as it is to go down over a short space of time, say one trading day. In other words, your odds are 50/50.

The odds on EVERY trade is 50/50 - as it can go either way.

If you know that your odds are just 50.50 - then it is going to be very hard to make money daytrading.

The only way to make money daytrading - is to have your winners bigger than your losers - and the number of winners vs.losers will be a function of the traders skills from live trading experiences - the amount lost per treade will be constant for losing trades - so what we must try and do is get as much out of our winners as posisble - locking in profits when realised, and re-entering trades if, and when, the charts say to do so.

I will continue this discussion later, or tomorrow, as I am called away now.

Have a nice evening all.

Article43

Fremen

Article43 wrote: »

the amount lost per treade will be constant for losing trades

What makes you say that? are you using limit orders?

Article43

Fremen wrote: »

What makes you say that? are you using limit orders?

As a general rule - limits for entries the majority of the time - sometimes for exits depending on action, but every trade must have a loss amount decided before the trade is placed - to daytrade any other way is bordering on stupidity.

Maybe I will re-phrase it - your potential loss on every trade has to be worked out in advance and taken no matter what happens - remember, re-entry is but a click away - and when you are in control you can exit and re-enter very quickly.

If you buy/sell to hold for a set time - then you have to accept the risk, and the fact is that the market can move anyway once you are filled- as you can never know for sure, for if one was able to do that one would have wealth beyond their wildest dreams.

No matter how much one argues with me - the fact remains that trading is gambling, and if you are going to gamble, then you owe it to yourself, and your family, to put the odds in your favour as much as possible.

Article43

Article43 wrote: »

I am long 100 CVX @ 84.56 - what are my odds of winning on this trade ?

I am not trading at the moment - planning to resume in the next few weeks, but the reason I said long on CVX as opposed to short was simple - the price was moving upwards, not downwards.

As you can see from this chart - sorry but this will have to do for now - the MRL for the 25/3 was not taken out - so if we used that area as our max risk on this trade - the risk would have been 84.56 less 84.20 - or $0.36 on 100 shares to give $36 - this is a very acceptable risk for a person learning to day trade.

http://finance.yahoo.com/q/bc?s=CVX&t=5d&l=on&z=l&q=l&c=

I will expand on this later on when I start live tyrading again- as sometimes a swingtrade is good trade to do, depending on how the markets trade into the close - but we must always remember that with any swingtrade there is always the possibility of a Gap against you - so, reward is always relative to risk.

I know that I have said "never hold overnight" - but what I say does not mean anything if the markets are moving upwards - one must always trade what they feel is best - and then deal with the result as it unfolds - good or bad.

We must remember that we really know nothing about as to what the markets will and will not do- so if we are to gamble, we must gamble as best we can depending on what is in front of us at the time -trying to predict what will happen is not wise - better to take the risk on as and when it looks like the odds are in our favour - well at least at that particular time.