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OatTrader@xxxxxxx wrote:
> Thru the years and thousands of daytrades, at least it seems, has worn me
> out.
I've only been daytrading for a few years myself, but there's no question that
this can be much more taxing than longer term strategies. If and when this starts
becoming an ordeal, it is probably advisable to look to other methods. On the
other hand, some traders, like myself, still relish the high degree of
involvement.
> All the countertrend trades would pay me an occasional large profit, but a ton
> of losers.
I used to find this myself, but in the last little while, I've been finding myself
doing a lot of these trades, and if anything I've found them *more* reliable,
although I've tightened up the entries and exits, which has helped considerably
where the percentage of winners to losers is concerned. It's probably true that
any strategy within a given timeframe can be rendered profitable, provided the
right adjustments are made.
> I believe one of the largest enemies of trading is overtrading,
> especially if one is starting out.
When one is starting out, one faces some pretty big obstacles using this style.
The shorter the timeframe, the higher the potential for error making, simply
because there are so many more opportunities to screw it up. If a trader is
making these decisions every couple of minutes, or tick by tick even, this is
going to require a great deal more trading skill, and a much higher degree of
dicipline and psychological fortitude. On the other hand, if one has the
resources and patience, there really isn't any substitute for on-hands learning if
one wishes to become a short term trader. If they are fortunate enough to survive
this period, the payoff is that they may be in a position to take advantage of the
greater efficiency and better risk management this offers.
> Since I for the most part consider myself a long term trader, at least
> that is where 90% of my profits arrive, intraday trading is a very costly
> endeavor, more trades which means more slippage/commissions and less money per
> trade.
I've found that some traders, particularly those with a preference toward the
longer term, tend to overemphasize these trading costs. The bottom line is the
only thing that matters here, of course, which is the size of one's return in a
given day, week, etc. This is not to say that overtrading doesn't occur, but it
seems to me that what most often what defines this isn't the amount of trades
made, it's more the manner in which they are made. For instance, in the situation
you describe, if you're finding that your intraday trades are less effficient
overall, then these particular trades may be better traded with a longer holding
period. Profit per trade, though, isn't relevant here, as we need to look at
solely at profit per period, where for some traders, higher trading costs may be
welcomed. For instance, one may close out a position that has stalled, even if
they expect it to go higher later in the day, with a view to re-enter (with
additional commission and slippage) if the circumstances later warrant, while in
the interim use this capital for more promising ventures, and have this work out
more efficiently than simply holding the original position. Moreover, such an
exit would lock in your profits (or mitigate current losses) in situations where
the expected near term move is significant enough to render these extra trading
costs as a worthwhile option, aside from opportunity costs. In other words, if
the likely move against you ends up being more significant than the extra costs to
re-enter if needed, exiting may be more efficient than holding.
> I use the 40 simple moving average on the dailies and 60 minute
> bars, closes above on both - only buys, closes on both - only sells. This will
> have me trading only in the strongest of trends.
I used to trade successfully with technical indicators, but have since found that
sticking to price action is more to my liking - it's probably more of an art, but
seems to me to be the only real way to eliminate the delay that is involved with
the lookbacks that are referenced with indicators. If one is skilled enough, this
allows for a much higher degree of accuracy where entries and exits are
concerned. However, there's no reason why anything can't work as long as the
elements of the plan are sound and it is traded properly.
Best of Luck,
A.J.
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