Day Trading and Swing Trading


Q.: Should I trade intraday or end-of-day or both?

A: Whether you choose to trade intraday or end-of-day is not important IF you have a system. What is important is that you stick to just one strategy until you find your feet. Dabbling with intraday trading and end-of-day trading at the same time for instance can be dangerous. When I started trading the index my equity trades immediately suffered so I dropped them and made considerable progress. I gradually got back into both and made a good call in January to close my equities near the top. Nearly all those gains were lost last week on the dead cat bounce (bear trap). The reason why the two don't mix is really quite simple. If you trade end of day (EOD) you will quite likely see a different trend to those who are trading a different timeframe. If you trade intraday you will be seeing different trend directions depending on what time frame you are trading. So an uptrend on end of day could be a downtrend on the one hour chart and an uptrend on the five minute chart. Using multi-timeframes as per Elder is useful to identify consistent trend direction but trying to trade different timeframes at the same time often in different directions confuses the emotions imo. Another issue is that risk: reward will be completely different as will money management. They will also mess up your emotions and discipline.

 

Q.: But do you do any kind of mental preparation?

A: erm, no, I don't think so. Nothing specific. Actually I am motivated all the time... I see trading more as a sporting challenge and try to eliminate thoughts of money. I love the trading and acknowledge that losses are part of it - but I don't like them and when I have a run of losses as I feel I am having at the mo, I tend to tell myself to 'step aside, you've dropped your mojo!'.

Q.: Why is there so such volatility in some markets?

A: A trader who I've known for sometime asked me the other day where there is so much volatility in oil/gold/FTSE/eur/usd during certain hours... My take is that I believe that all moves are random and unpredictable. Some moves have a higher probability than others but when and by how much is entirely random. Computers are set to take advantage of high probability moves even to the point of recognising news announcements. This is why gaps always seem to get filled and why pivot targets get hit. In particular, volatility is just as random as price imo. That's all good news for us private traders. It means that almost everything is 50/50 over the long term so all we have to do is keep stops tight and let profits run with constant money management and we should make a profit. This is easier with stocks because we have fundamentals on our side providing you only trade non-speculative, profit making stocks with a decent history or a good story.

Q.: But how difficult is day trading? How long does it take to be successful?

A: Day trading is easy. Profiting from it is the tricky part. I have tried it myself and find that I lose as much as I gain, plus it is too stressful for me, not to mention it is very boring just staring at the screen. So, day trading is not for me. I swing instead. Yeah, baby, yeah. It suits my personality. You need to try them to be able decide which trading style (day, swing or position) suits you.

Length of time for successful retail traders: I've heard anything from 6 months to 2 years.

Q.: What do you think about swing trading?

A: Response by Henry, expert chartist. The thing to remember with swing trades is that they are not always available. They tend to come in gluts at the end of a major index (say FTSE) pull back. Other times the pull back of an individual stock can look good but it may be because there is good reason for the fall in price such as a profit warning or a director selling. You must check the fundamentals are still sound and there is no bad news before trading.

Why I like these swing trades is because they are so simple. Just one moving average and buy the up day candle crossover then use a down day candle crossover as your stop:

Swing Trading with CFDs

Swing Trading

Nothing works all the time so imo swing trading is best done on the most liquid larger cap stocks with tight spreads with profit hopes for 5-10% per trade. Even decent smaller companies can be more difficult to short term swing trade. It would have been hard to make much out of RHL:

Swing Trading with CFDs

Smaller companies can be more difficult to short term swing trade

Q.: Any recommended firms for retail scalping of Dow or related?

A: The very idea of scalping indices with a CFD sounds awkward to me. It seems to be clear that if you trade the market you can scalp the very bid/offer spread, by acting as a market maker and 'quoting' your own prices. But if you trade the contract for difference, with or without spreads, the quote will always be taken from the market, so you're just there looking at the market and waiting for it to come to you.

In addition, you are there competing against other players who ARE properly setup, not the market. There's only a set amount of profit that the market can offer so probabilities state those with years of scalping experience and proper setups will get the money. Always exceptions to the rule, but hardly any because it's the cost of doing business + market access/speed that's always going to be the nemesis of the small trader.


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