There was an article in the “New York Times” a few weekends ago about day trading:
http://www.nytimes.com/2010/03/28/business/28trader.html?hpw
One can have any opinion of the article that one wants to have (and I encourage all day traders) to read it, but as someone who has been trading for almost 25 years now (going on 15 full-time) and as someone who is lucky enough to be affiliated with a firm at the forefront of a lot of day trading technology/routes, I want to go over a few things which I agree and disagree with.
Myth: “And perhaps you assumed that the twin calamities of the Internet crash and the Great Recession had doomed the day-trader species in the unruly jungle of American capitalism.” Two of my best trading years happened to be in 2001 and 2008. Where most day traders get into trouble is trying to create profits in a non-moving environment and suffering little knicks or fading markets such as being long throughout most days intra-day in 2001 or 2008 or short throughout most trading days intra-day in years like 2009.
Myth: Most day traders are “Surrounded by the playthings of his daughter — a toy oven, a doll house.” Every successful trader I’ve known as had to be secluded in a home office or in an office away from home. Trading is hard enough without being distracted by (admitted much more pleasurable) things like making lunch for one’s kids.
Fact: Re- “Today Trader…a two-year-old Internet venture that is “about helping traders find success through virtual technology,” as it says on the company’s Web site. The company charges aspiring traders $199 a month for a live, real-time view of Mr. Lindloff’s computer screen, along with the running banter, commentary and advice that he and Mr. Gomez provide through the morning.” This type of thing indeed can and indeed does help. The free chatroom (audio, video, and old school typewritten) I’ve been honored to help anchor has helped many people based on feedback and certainly has kept me sharp in evaluating all kinds of ideas I’d never see without it.
Fact: “It might read like a teenager’s idea of a haiku, but this is the new frontier in do-it-yourself trading. Today Trader and its rivals are tiny operations, and they have modest followings. But they are harnessing all the crowd-sourcing features of the Internet circa 2010.” It is true. There are all kinds of interesting utilities such as chatrooms and amid the Facebook Era of social networking, trading can be made seemless locale-wise as well as allow people to help each other like never before.
Both Facts: “About the most we know is that the day traders skew male, and the number of trades per $100,000 in client dollars is a little less than half what it was back in 2000, according to the Charles Schwab brokerage firm.” It is indeed a male-dominated business and trading volume is not what it used to be as volumes have fallen overall. Stocks like C can skew things electronically volume-wise, but the overall pace of activity is not nearly as frenetic as it once was.
Myth: “Mr. Gomez and Mr. Lindloff are among the few who started day trading in the late ’90s and never stopped. At a late breakfast, just after that $60 morning, the two are sitting at a sidewalk cafe. You expect them to be revved up and antsy. Instead, look like members of a mellow Southern California rock band that split up 15 years ago. The most agitated either gets while trading online is the occasional “goddangit,” Mr. Lindloff’s idea of an outburst.” Overall, most successful day traders are not quite as relaxed as these two gentlemen which may stem from the fact that they have a side business. Most of the time, if traders take time off to do things like have breakfast routinely- particularly in the early part of the trading day at, say, 9:45AM when it is most active- they tend not to be successful over the long-run.
Fact: “It is, to be sure, an odds-defying performance. The great mass of studies point to the same conclusion: trading is hazardous to your wealth, as an academic paper memorably put it. The losers far outnumber the winners.” Very true. Depending on the numbers one looks at, over 90% and as high has 99% of day traders don’t make it. Usually, this Is due to things like lack of discipline or too much fear in one’s trading.
Myth: So why do people persist in this line of work?
“The technical term is thrill-seeking,” says Hersh Shefrin, a professor of behavioral finance at Santa Clara University in California and author of “Beyond Greed and Fear,” an exploration of investors’ mindscapes. “There’s an adrenaline rush. And the thing about day trading is that it gives you pretty quick feedback. If you buy and hold, a lot of things need to happen before you see a result, and much of what happens relates to external factors that are beyond your control. With day trading, you’re in charge.” Much of this is not true. People persist in this line of work because they think they can beat the markets. People (like myself) want and need to earn a living. I don’t trade for thrills. I trade because I happen to be decent at numbers and need to do something to pay the bills. Next, day trading does give quick feedback but a lot of things need to happen as well in day trading. It’s not a crapshoot. Furthermore, one is in charge only if one can control one’s emotions and if one does not take positions over and above what one should. Then, one loses control.
Myth/Fact: “Asked about the Today Trader method of buying and selling, both men seem momentarily stumped, as if they never saw the question coming. Then they talk about the search for “set-ups,” which seems to translate roughly as “golden opportunities,” but they struggle to put a finger on what set-ups are, or how to spot them.
It has something to do with tracking trading volumes of stocks and buying heavily traded stocks as they rise in price. But how to know a stock will keep rising? Intuition, they say. It tells them whether they’ve arrived at the party too late (in which case they won’t buy), at the right time (in which case they buy), or just before it ends (time to sell). “
I do not know if this is journalistic license, a misunderstanding by the reporter, or the fault of the gentlemen in explaining what they do. However, many services offer ostensibly nonsense in their forums whereas many others actually have something of value. It is up to the trader to determine what makes sense. If something is clearly amiss and the anchors of said chatroom constantly change their story and methodology, it’s a warning sign otherwise if definable with criteria laid out in black and white, the information usually tends to be fairly good overall.
Myth: “Some of those forces are hard for the Today Trader duo to fathom, too. Mr. Gomez says that day trading has become far trickier in recent years because of the rise of robo trading — the use of computers to automatically buy and sell huge numbers of shares in superfast bursts, based on algorithms. “ It is true that many of the moves aren’t as smooth as they used to be, but there are other factors at stake too such as the decline of the VIX in recent months as well as decimalization which has created more ‘noise’ amidst a move. However, if one does one’s homework, there are always moves to be had.
Fact: “About the most Mr. Bettinger will say about day trading is that it’s a “tough gig.” “You’re competing against mega-institutions that are trading in hundredths of a second.” The competition one goes up against is among the wealthiest and most intelligent on the planet.
Fact: “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.” Attitude is what it is about. Psychology. Control emotions. Discipline.
So, it’s interesting to see we’ve made it back into the “New York Times,” but as with anything, the articles are always worth parsing and dissecting.
In Asia, markets were up 0.5% in Hong Kong and 0.6% in Tokyo. The gains have only been magnified in Europe with prices up 1% to 1.5% across the board. Oil is up slightly, gold is down 1%, and the dollar is broadly ahead with bonds lower. The main impetus has been a stronger-than-expected jobs report which gives credence to a good Ism report on Wednesday. Futures are sharply higher and still going. ISM Services of about 53 is due out at 10AM. For the day, the bulk of the action is likely to occur in the first portion of the session as traders head out for their long weekend. Look for the gains to hold pending a poor ISM report at 10AM. Focus on not overtrading in a narrow band as the move for today has likely already occurred, staying out of trouble overall, and relative weakness plays particularly post 10AM ET.
Good- The following stocks have good news and/or a strong technical pattern
TTWO- good earnings
FNSR- good earnings
COO- good earnings
HRB- good earnings
ULTA- good earnings
NFLX- closed near a high
AAPL- closed near a high
AMZN- closed near a high
TIN- closed near a high
HWD- closed near a high
DNDN- closed near a high
EXPE- closed near a high
SCMR- closed near a high after posting earnings
FSLR- closed near a high
WYNN- closed near a high
SPRD- closed near a high
DIN- closed near a high
BORN- closed near a high
CML- closed near a high on takeover speculation
Bad-The following stocks have bad news and/or a weak technical pattern
ARST- poor earnings
SEAC- poor earnings
WLT- poor earnings guidance
CLDX- PFE pulled out of drug development deal
Earnings:
FRI SEP 3 BEFORE
CPB
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
Joseph R. McCandless- Managing Partner
D. Timothy Seaquist- Managing Partner
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