Personally, I think day trading requires too much work for too little pay. The article in the NYT article Day Traders 2.0: Wired, Angry and Loving It reminded me of what I don’t want to do during the day: be nailed to my computer watching 3 minute bars.
I’ve written a few things on prop trading and day trading. You can search the blog for “prop trading” and you’ll see 5 pages of material to read.
Prop Traders Can Sit On Their Hands
A few other bloggers wrote about the NYT article too. Brett Steenbarger, who writes the excellent blog TraderFeed, wrote an extensive post on the article and listed what he thinks are the salient points to succeed as a day trader. If you are interested in this sort of material, Brett’s blog is about the best there is.
Dr. Brett wrote, “I’m in an interesting position, because–as a trading coach–I see the actual trading of actual traders, not the performance claims of wannabee gurus. I also see which traders have been able to sustain meaningful livings from their trading and which have not.”
I see the same things from my students whom I coach. But I don’t see it from the ones who’ve failed or blew up. We may be seeing the survivors only, or the ones who haven’t blown up — yet. You can teach everyone the tenets of trading down to a “T”, but getting someone to stay “on message” is something that is between them and their higher power. I have nothing to do with their successes nor failures when it comes to that. And if you haven’t begun trading yet, this is something you should put a lot of time into before you attempt to manage risk (trade).
Many of you might disagree with me, but it takes years and years to become a great trader. Michael Marcus blew up 2-3 times before becoming the best commodity trader in the world.
The NYT article ends this way: “Mr. Gomez trades his own accounts but spends much of his time answering questions posted in the chat room. One is from a subscriber, Rick, who asks, “What do you guys do to stop kicking yourself (emotionally) about missed opportunity?”
“The only thing you can control is your attitude,” Mr. Gomez replies into his microphone, moments after the question is posted. “Not looking back, not kicking yourself for not catching the whole move. You’re never going to be perfect. Nobody is going to be perfect.”
Not even Today Trader. By the end of the day, Mr. Lindloff has traded 60,000 shares and is up $165. It would be a satisfying return, but commissions on those trades cost $300.
“You know,” says Mr. Gomez, “a lot of people tell us that our down days are every bit as instructive as our ups.”
I tend to agree with Henry Blodget at Business Insider via his post Here’s What Day Traders Don’t Understand, but here’s my two cents on the NYT article:
– You decide not to kick yourself emotionally about missed opportunities, and then you go out and develop a better rake for your data.
– Program a computer to trade for you all day so you don’t have to sit there hour upon hour and waste the time of your life. Oh, and turn off the TV. Having it on is unnecessary to trade profitably.
– Losing days can be your best coaches. I agree with this.
– $165 for a day’s work at the screen is not a rewarding day nor a satisfying return. Lindloff has a tax bill on the gains but is cash-flow negative on the day, so it’s even worse.
– Learn to trade with the trend for stocks and commodities and use “End of Day” data. Enter your orders first thing in the morning and then go have fun. The market will go where it’s going to go whether you’re watching it or not. One of my best years (2004) was done this way.
– Sitting at your screen, double-clicking your mouse, listening to the financial MSM, following your Twitter feed, and IM’ing trade ideas to anyone who cares may be more of what you do to FEEL like you’re a trader, more than anything else.
Trading is managing risk. That’s all.
Everything else is behavioral and you do it b/c it makes you FEEL good (we are pleasure seekers). Or, it may give you confidence or reason to believe that you are a trader, when in reality you might actually just look like a trader.
I agree with most of the point in the article. However, as prop trader or firm partner the day’s result, if you include -$300 commission on settlement three days later, would basically reflect a loss of 300-165 or $135. For example, at the end of the year, I get one statement on a partnership K-1 from my firm, that nets gains, losses, and all commissions/secfees and the like. This net number is distributed as partnership gains or losses on schedule E. Some stock traders, who are licensed partners of firms with exchange membership, and also have mark to market accounting, are able to take advantage of this accounting method.
The rest of the article and comments were spot on. I am somewhere in between a completely active trader and fully computer automated. I would say my method is semi-automatic. Here’s to the fully automated guys and the guys that enjoy watching the screens all day!