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Intraday Trading is gambling

Allan (Arcferreira)
Dec 17 2017 at 08:25
50 комментариев
I really does not agree. Or agree at all. Let me explain:
All type of investment is a gamble. Even when you buy US treasuries you are gambling, because you don't have 100% garantee that US government will pay you in 10 years.

But the biggest difference between insvesting and gamble is risk management. There is a lot of formulas to calculate risk management. Find one and trade following it. A common risk management is using winning ratio and risk/reward per trade.

A day trade can achive easily 60-80% winning ratio trading only a specific price action candlestick formation called inside bars, using 1:1 risk/reward ratio. It is possible but it nedds at least 3-4h in front of a computer. At this pace he can find 4 or 5 setups daily, 80 to 100 setups a month.

Let's use a 60% winning ratio for this exercise:
60 winning trades x1 - 40 losing trades x1 = 20.

If our daytrader has 100.000 and risks 0.25% of his capital in every trade (daily risk here is less than 1%), we have:
20 x 0.25% = 5% monthly or 5.000 USD. A 2% risk per trade means 40.000 USD. But in a bad day, a 2% risk per trade can result losses at 8-10k, while 0.25% means only 1.250 USD.

Here goes another point... after losing 10.000 USD, our daytrader will keep his mental health and will keep following his risk management??? The answer for 90% of traders is NO, HE WON'T.


Another mistake from wannabe daytraders is the wrong Broker. Daytrader needs low spread, low comission, ECN brokers with rebates over high trade volumes. If you have a 2 pips spread, and your TP is 10 pips and your SL is 10 pips - your reward risk is not 1:1, but 0.8:1
Make the calc again:
60 winning trades × 0.8 - 50 losing trades x1 = -0.2!!!! A negative return.

What am I saying here is:
1) create and test your trading strategy
2) create a risk management strategy that fits in your trading strategy
3) follow 1 and 2
4) with real results, verify if 1 and 2 give the predicted return
5) improves 1 and 2.
Trade safely... Remember, a high Drawdown means a high risk!
Allan (Arcferreira)
Dec 17 2017 at 08:25
50 комментариев
A mistake...
60 winning trades × 0.8 - 40 losing trades x 1 = 8
8 x 0.25% = 2% monthly or 8x2% = 16% monthly.
Trade safely... Remember, a high Drawdown means a high risk!
kieran (snapdragon1970)
Dec 17 2017 at 16:18
1948 комментариев
Low spreads are important,but are you really going to worry about tiny details like that ,unless your Scalping or Algo trading, fast execution with no re quotes,24hr help desk are just a few things you should be thinking about,forget about rebates on trading volume,1 or 2 trades per day is more than enough to make good money ,over trading is a major problem in the Retail industry to your Brokers delight.Mistakes in the math above well spotted Allan,there is a stat in statistical trading possibility of 10 losses in a row.
"They mistook leverage with genius".
Allan (Arcferreira)
Dec 18 2017 at 07:22
50 комментариев
snapdragon1970 posted:
Low spreads are important,but are you really going to worry about tiny details like that ,unless your Scalping or Algo trading, fast execution with no re quotes,24hr help desk are just a few things you should be thinking about,forget about rebates on trading volume,1 or 2 trades per day is more than enough to make good money ,over trading is a major problem in the Retail industry to your Brokers delight.Mistakes in the math above well spotted Allan,there is a stat in statistical trading possibility of 10 losses in a row.

If you are trying to daytrade, small details are important, but a good strategy and risk management are more important. Agree with you about overtrading... but the number of trades for a day is based in your strategy. If a trade fits all rules, why not trade it? Or if any trade fits your trading rules, is better stay away and not trade...

I prefer to use Elliott wave theory to find a good trend, trying to spot a good wave 3 or C in larger timeframes. After this, the good and old price action takes care of the rest in lower timeframes. But I can't consider myself a daytrade... in the last 3 months I did 70 trades for 2400 pips. My average duration was 2 days... and 6 days for longest trade. I use dsily, 4h and 1h charts. And I spend 1-2h/day for trading.

My maximum leversge these 3 months was 4. So you can imagine that I don't have a huge profit (3-6% monthly). And this year I received near 450 USD in rebates, for 450 rounded traded lots.
Trade safely... Remember, a high Drawdown means a high risk!
Allan (Arcferreira)
Dec 18 2017 at 07:22
50 комментариев
Sorry 45 rounded lots, not 450...
Trade safely... Remember, a high Drawdown means a high risk!
vontogr (togr)
Dec 18 2017 at 09:51
4862 комментариев
Arcferreira posted:
I really does not agree. Or agree at all. Let me explain:
All type of investment is a gamble. Even when you buy US treasuries you are gambling, because you don't have 100% garantee that US government will pay you in 10 years.

But the biggest difference between insvesting and gamble is risk management. There is a lot of formulas to calculate risk management. Find one and trade following it. A common risk management is using winning ratio and risk/reward per trade.

A day trade can achive easily 60-80% winning ratio trading only a specific price action candlestick formation called inside bars, using 1:1 risk/reward ratio. It is possible but it nedds at least 3-4h in front of a computer. At this pace he can find 4 or 5 setups daily, 80 to 100 setups a month.

Let's use a 60% winning ratio for this exercise:
60 winning trades x1 - 40 losing trades x1 = 20.

If our daytrader has 100.000 and risks 0.25% of his capital in every trade (daily risk here is less than 1%), we have:
20 x 0.25% = 5% monthly or 5.000 USD. A 2% risk per trade means 40.000 USD. But in a bad day, a 2% risk per trade can result losses at 8-10k, while 0.25% means only 1.250 USD.

Here goes another point... after losing 10.000 USD, our daytrader will keep his mental health and will keep following his risk management??? The answer for 90% of traders is NO, HE WON'T.


Another mistake from wannabe daytraders is the wrong Broker. Daytrader needs low spread, low comission, ECN brokers with rebates over high trade volumes. If you have a 2 pips spread, and your TP is 10 pips and your SL is 10 pips - your reward risk is not 1:1, but 0.8:1
Make the calc again:
60 winning trades × 0.8 - 50 losing trades x1 = -0.2!!!! A negative return.

What am I saying here is:
1) create and test your trading strategy
2) create a risk management strategy that fits in your trading strategy
3) follow 1 and 2
4) with real results, verify if 1 and 2 give the predicted return
5) improves 1 and 2.

You first need to have strategy that long terms provide
60% win profitability with 1:1 risk reward ratio
And dont forget spreads will eat a bit
Allan (Arcferreira)
Dec 19 2017 at 07:13
50 комментариев
togr posted:
Arcferreira posted:
I really does not agree. Or agree at all. Let me explain:
All type of investment is a gamble. Even when you buy US treasuries you are gambling, because you don't have 100% garantee that US government will pay you in 10 years.

But the biggest difference between insvesting and gamble is risk management. There is a lot of formulas to calculate risk management. Find one and trade following it. A common risk management is using winning ratio and risk/reward per trade.

A day trade can achive easily 60-80% winning ratio trading only a specific price action candlestick formation called inside bars, using 1:1 risk/reward ratio. It is possible but it nedds at least 3-4h in front of a computer. At this pace he can find 4 or 5 setups daily, 80 to 100 setups a month.

Let's use a 60% winning ratio for this exercise:
60 winning trades x1 - 40 losing trades x1 = 20.

If our daytrader has 100.000 and risks 0.25% of his capital in every trade (daily risk here is less than 1%), we have:
20 x 0.25% = 5% monthly or 5.000 USD. A 2% risk per trade means 40.000 USD. But in a bad day, a 2% risk per trade can result losses at 8-10k, while 0.25% means only 1.250 USD.

Here goes another point... after losing 10.000 USD, our daytrader will keep his mental health and will keep following his risk management??? The answer for 90% of traders is NO, HE WON'T.


Another mistake from wannabe daytraders is the wrong Broker. Daytrader needs low spread, low comission, ECN brokers with rebates over high trade volumes. If you have a 2 pips spread, and your TP is 10 pips and your SL is 10 pips - your reward risk is not 1:1, but 0.8:1
Make the calc again:
60 winning trades × 0.8 - 50 losing trades x1 = -0.2!!!! A negative return.

What am I saying here is:
1) create and test your trading strategy
2) create a risk management strategy that fits in your trading strategy
3) follow 1 and 2
4) with real results, verify if 1 and 2 give the predicted return
5) improves 1 and 2.

You first need to have strategy that long terms provide
60% win profitability with 1:1 risk reward ratio
And dont forget spreads will eat a bit

You are correct! If you have 1:1 reward risk and 60% winning ratio... you will be profitable.
Yes, easy. But there are variables in this equation: Patience and learing curve.
I spent near 2 years to have patience enough. Market has its own time - you need to be patient to wait price action.
After learning patience, your learning curve take cares of the rest.

 
Trade safely... Remember, a high Drawdown means a high risk!
Mario (SwingFish)
Dec 29 2017 at 20:29
32 комментариев
daytrading does not work with 1:1 ratios, as the noise is too large.

in daytrading it is by far more profitable to have a much lower win rate but a larger ratio.

as you can compensate over serval trades.

i myself have a hit rate of 44% only but thanks to the large Ratio, i can have 10 losers in a row and still get out of the day green
Mario (SwingFish)
Dec 29 2017 at 20:44
32 комментариев

Make the calc again:
60 winning trades × 0.8 - 50 losing trades x1 = -0.2!!!! A negative return.

there is one other major flaw (not in your message but in the day trading dream itself)
in order to make a living, you need to have the capital to trade with.
lets say you cheap and go with 50k or so ..
but then in order to capitalize on a 10-15 pip move on a decent risk-reward ratio.
there are 2 more problems.

1. slipage
2. quotes

slipage is somewhat controllable (if you know what you are doing)
but regarding the quotes, as most traders use software like metatrader, this will become a loosing game.

try to fill like 35-50 lots via marketorder, if your order line is then like 10 pips above the price, thats not slip, thats just the market has no quote for your size at the displayed price.
you will need to have software, broker and connections that actually support this kind of orders.
(order book, DOM and so on)

even with a limit order on MT4 there is very very very little chance, you get the price you are asking for. as the software is designed to do just that (not give it to you and make sure you have no proof of it afterwards)

i do daytrade as well, and especially in low voaltility times, this distances can be massive.
so if you buy like 50 lots for a 15 pip move at a 5 pip stop
you get filled 3 above (if you lucky) that puts your stop to -8 instead of -5 .. and makes your risk far greater.
the target also is 3 pips closer, which will cost you on the reward side as well.

on TP fill (this are market orders) you will have another 3-4 pip slip and if there is no momentum this will be likely negative.

totals: 5 pip stop becomes 8
8 -20 = 12 - 4 slip = 8 .. and your 1:3 trade becomes a 1:0.8 (if you lucky) because you have a higher risk due the longer distance to the stop and a shorter gain distance. as well.

there is a difference in trading if you trade with 1% risk of 100 bucks or 1% of 100.000 bucks!
kieran (snapdragon1970)
Dec 29 2017 at 21:47
1948 комментариев
SwingFish posted:
daytrading does not work with 1:1 ratios, as the noise is too large.

in daytrading it is by far more profitable to have a much lower win rate but a larger ratio.

as you can compensate over serval trades.

i myself have a hit rate of 44% only but thanks to the large Ratio, i can have 10 losers in a row and still get out of the day green

Agree with your statement ,45-60% is the normal hit rate for professional institutions, RR is where it makes a huge difference.
"They mistook leverage with genius".
kieran (snapdragon1970)
Dec 29 2017 at 22:02
1948 комментариев
If slippage/spread/re quotes is effecting your trading its time you where looking for another Broker,or re thinking your strategy.
"They mistook leverage with genius".
SwapTrader
Jan 03 2018 at 07:57
24 комментариев
togr posted:
prakash104 posted:
Major drawback in intraday trading is watching 5 or 15 minute or 30 minute charts all day.
This will make you sick and your eyes will be under severe pain.You will need a doctor because now you are addicted to intraday trading.

Well you need to see from another point of view.
Trading is about forecast future. You need to estimate if pair move up or down.
It is like weather forecast. They could do it for today or perhaps tomorrow. For a week or month? It does not work:)
So IMHO trying to forecast future for very close time has better success than for long term.

Try mixing fundamentals with technicals. Fundamentals to forecast direction, technicals to time entry and exit.
mlawson71
Jan 03 2018 at 15:38
1487 комментариев
That is the best approach. Even if you don't do detailed fundamental analysis, it's good to have at least some understanding of it so as not to be caught by surprise by market events.
Christian De Mar (RSTAR)
Jan 04 2018 at 08:04
1 комментариев
if you have a solid system you can trade 15m charts like i do. Most of off my transaction end in less than 1hr.
vontogr (togr)
Jan 04 2018 at 08:15
4862 комментариев
SwapTrader posted:
togr posted:
prakash104 posted:
Major drawback in intraday trading is watching 5 or 15 minute or 30 minute charts all day.
This will make you sick and your eyes will be under severe pain.You will need a doctor because now you are addicted to intraday trading.

Well you need to see from another point of view.
Trading is about forecast future. You need to estimate if pair move up or down.
It is like weather forecast. They could do it for today or perhaps tomorrow. For a week or month? It does not work:)
So IMHO trying to forecast future for very close time has better success than for long term.

Try mixing fundamentals with technicals. Fundamentals to forecast direction, technicals to time entry and exit.

How to achieve the right forecast is completely different story.
Not surprisingly it cannot be covered by Fundamentals to forecast direction, technicals to time entry and exit.

TribalBoc
Jan 04 2018 at 12:45
14 комментариев
Why not?? I thought that is what the big boys do?
Justice1024
Jan 08 2018 at 07:24
210 комментариев
TribalBoc posted:
Why not?? I thought that is what the big boys do?

LoL, I guess so!
willtradr
Jul 29 2019 at 11:02
26 комментариев
Trading and Gambling are similar,they both try to create capital gain over a short period of time without creating wealth. Trading and Gambling involves capital transfer without capital creation that is why they are viewed skeptically especially when their outcomes are unpredictable.
Thang (Minhthang2603)
Jul 30 2019 at 03:17
20 комментариев
prakash104 posted:
Major drawback in intraday trading is watching 5 or 15 minute or 30 minute charts all day.
This will make you sick and your eyes will be under severe pain.You will need a doctor because now you are addicted to intraday trading.
Forex trading is gambling?
It is both right and wrong.
It is true because the definition of Forex trading is exactly the same as gambling.
It is wrong because the trader can increase 'trading advantage' over time to learn knowledge and learn from experience - this is very difficult to do with gambling.
Thang (Minhthang2603)
Jul 30 2019 at 03:42
20 комментариев
togr posted:
TheSlyFox posted:
Crazy.... you are going to blow your account if you continue at that pace lol

He is used to blow accounts
I agree with you.
Day trading may not be gambling. But 400% in 2 days is definitely gambling.
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