Everybody, happy Friday. So a good question came in about, you know, fellow starting his career and he asked, should I try day trading or swing trading? And I think it’s a great question. You know, you should do both, right? You come to a fork in the road, take it.
To me, and there are obviously nuances, if you ask the people who are actually doing it. I see the biggest one is really holding period, right? So you have to figure out for yourself, if you find things and you have a good sense of timing and it’s making you money, you know, when do you feel comfortable taking those profits? Shorter term data is very random data. If you look at random, randomness is everywhere and it’s omnipresent.
So there’s that. Now are there short term patterns? Of course there are. Look, there’s plenty of people making a lot of money.
When I read the books, though, and I get to know the people who were doing the short term, the scalping and the day trading, those who succeeded, their money grew so much, they lost capacity. So they either had to get used to trading a fixed risk unit, which means as their capital was growing, they’re making less and less now per trade because there’s no more capacity in the market for the type of trading that they were doing. So they’re kind of capped usually by number of shares, like how can you get enough on, right? So if you think you have that type of skill, you might consider learning how to swing because that becomes an easier solution for you than trying to cram, you know, tens of thousands of shares up someone’s ass while you’re day trading, you know, small caps, for example.
But I think you should try both because I’m not a dream killer. I think you can do both. I think it’s a great market.
There’s so much volatility. It’s great for either one of those types of strategies. It might come down to how do you feel about taking risk home overnight, right? Because the disposition of your assets through over the course of the day kind of answers the question where, you know, certain types of scalping, you could be risk on, risk off and do that four or five times a day, subject to like a daily loss limit might be 100 bucks.
Doesn’t matter to me what it is, whereas swing trading, you might wait for a certain setup, catch the move and then sprinkle some sell orders out to lighten your load so that when it does, if and when it does come back, it’s doing so with a fraction of what you originally had in the drawdown, excuse me, on the price doesn’t hurt you financially. Swing trading, of course, can happen throughout the day, but it could also happen over the course of a couple of days. So you might say, okay, I bought a stock at 20.
My stop was at 19. I got a good sense of timing. It ripped to 23 the first day.
I put my stop in at 22 on the full piece. Maybe I sold half at 23. I have half left for sale, a dollar below the market.
And now I’m just going to let that run. In options trading, it’s something similar, like folks taking risk off, they buy a certain number of contracts and then once they buy an option at a dollar, it rips to two, maybe three. At two, and you sell half, so now you got a free trade, but it also means that if the thing stalls and doesn’t go anywhere, you’re going to be flat overall on your portfolio.
I’m still a working class mutt, and so I like to get paid on everything, so I wouldn’t start to think about moving inventory till at least three to one, because at least at that point, if I sold half, now I’m going to be up 50% on the trade if the rest of the position craps to bed and doesn’t amount to much. So I think a lot of the trading in general is defined by our holding periods. And you’re not going to really know that until you go to bed at night with real money on the line.
You can back test it and day trade it, I mean paper trade it as much as you want. Both are legit. I know plenty of day traders and swing traders.
It’s definitely legit and it’s a good, either way, you could make money with both. I think they both take a lot of screen time, and so you have to have that built into your program as well that you want to find yourself sitting in front of the screen all day, especially for day trading and scalping, like it’s mandatory. Whereas with swing trading, I think you can put your buy orders in, adjust your protective stop.
You could kind of still do other things, because you can set alerts and then offset inventory as those certain levels are achieved. And I know that at the professional firms, they have resources that are beyond what a lot of do-it-yourselfers at home have. So I’m not talking to that pro crowd that has different types of resources in terms of the technology.
That’s very unique. It’s not available to everybody. So these lessons are more geared for the regular Joe, the folks who are trying it that way.
But I mean, both are legit strategies. I do know also to consider, though, that somewhere between 95% and 97% of the people who want to try to do this, they don’t make it. And I know a lot of them are attracted to the shorter term, because it seems easy.
I’ll put my money to risk. I’ll make some money. I’ll go to cash.
I’ll sleep like a baby, and I’ll come back, and I’ll do it. And the market will kind of become my cash register. That’s the thought, right? That’s the onus that wants to bring you to that type of strategy.
But not everyone can get a job working at one of these prop places where they’re actually going to pay you a salary. You don’t need to use your own money. And they’re willing to make an investment into you and to your training.
Most people don’t have that. So that’s a whole other game, right? That’s learning a craft from people who are pros and going about it that way. So I would say try both and see how it feels to take real risk home.
Obviously, you need to have financial advisors that can help you figure out if this is appropriate for you or not. But think about risking $10. If you bought 10 shares and you carried it home overnight, how does that make you feel? Because if you’re anxious about losing money, it’s going to be hard to trade in general never mind day trade and be sitting on top of your screen where you could program your mouse or your hotkeys and this and that to move size and to act very, very quickly.
But I would encourage you to actually take the action, though. Don’t sit there and be like day trading or swing trading, day trading or swing trading. Just do it.
Figure it out on the way. Because you don’t want to waste opportunity. You don’t want to waste time.
And there’s no right answer. There’s only the right answer for you. And that’s going to come from your own experience.
This is an experiential type of existence. And you’re only going to know it and do it. I’ve always said that the best trading coach is the actual doing of the trading.
You’re going to be able to learn a lot about how you think, a lot of how you feel about making and losing money. How do you feel about being right or wrong? I came from an accuracy world. I was a very good student.
So going to the market and having to live in a world now of expected value was very different from living in a world of accuracy. And I had to get used to that. And it took me a while.
So I would say just either start paper trading or go into one of these kind of accounts where you pay $50 a month and test your ideas and see like, OK, if this was real money, do I have the money to lose? Because it’s like a form of tuition for you to learn your craft. Right. And I will say that there’s a big difference between losing it on paper and losing it that when losing real money anyway.
Thanks very much for being here. Thanks for all your comments. Go to Martin.
I was going to say Martin Chronicle. Go to Trader Mindset and get your copy of the inner voice trading. And have a great weekend.
I’ll see you next week.
