tag:blogger.com,1999:blog-30128229.post4804157924945928520..comments2023-09-30T07:11:55.493-06:00Comments on MarketFN.com: Some Day Trading IssuesInvestment Househttp://www.blogger.com/profile/14771320644915759241noreply@blogger.comBlogger13125tag:blogger.com,1999:blog-30128229.post-80510062273368982562008-03-05T10:23:00.000-07:002008-03-05T10:23:00.000-07:00Dear Anonymous-Pattern day trading is a designatio...Dear Anonymous-<BR/>Pattern day trading is a designation by SEC applying to any individual who buys and sells a particular security in the same trading day at least four times in a five-day period, and for whom same-day trades make up at least 6% of the trader's activity during that period. Pattern day traders are subject to special rules. While that may not seem to make sense in the scenario you set out, it is the SEC's definition. You should check with your broker to find how they apply that to your own situation and determine whether they have any additional special requirements if your trades fit the requirement of pattern day trading.<BR/>Bill KraftBill Kraft, MarketFN.comhttps://www.blogger.com/profile/08274803638438137352noreply@blogger.comtag:blogger.com,1999:blog-30128229.post-41953342008842030382008-03-05T08:48:00.000-07:002008-03-05T08:48:00.000-07:00I ma not clear on the NASD requirement. Can you he...I ma not clear on the NASD requirement. Can you help clarify the following scenario?<BR/><BR/>If I buy (not sell) an option (no pither positon held), all I am risking is the amount of the option. If the option trades @1.50, my maximum risk is $150. now if the option goes to 1.70, and I sell it the same day, and let's say I do the same thing 4 times in a day for 5 consecutive days is it day trading? Why would I need 25k to rick $150?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30128229.post-12215916583121127052007-12-15T09:58:00.000-07:002007-12-15T09:58:00.000-07:00Hi George, I quoted and paraphrased the NASD infor...Hi George, I quoted and paraphrased the NASD information because it adds to trader awareness. I'm not against "buy and hold," as you suggest. I would just like to know the answer to the question I last posed to you: "Hold until when?" Apparently you have the mistaken impression that I trade short term only. I personally do hold a number of positions for quite a long time, but I always try to have an exit strategy going in; when the exit is hit I'm out whether the hold has been long or short. Through practical experience, I have found that I am taken out of many positions within relatively short time periods (up to 6 weeks or so) and thereby often avoid moves opposite to my position. I am in other positions for longer times because the profits continue to run. All trading, whether short term or long term, involves risk. One added risk of day trading about which the day trader must be aware is that two commissions will be paid every day on every position. The additional cost obviously adds risk since the trader must make higher profits to cover the many commissions. The buy and hold investor, on the other hand, runs the risk of sitting through deep, deep retracements that may or may not ever get back to profitable before the trader dies. Suppose, for example, that one were a buy and hold investor and bought the Q's (QQQQ Nasdaq 100 tracking stock) at $120 in March of 2000. Now, almost 8 years later, the Q's sit near $57, less than half the price. How happy would that buy and hold investor be today? What did he do to cut losses? It seems your quarrel is more with NASD than with me. If you want justification for their position, it might be better to check with them.Bill Kraft, MarketFN.comhttps://www.blogger.com/profile/08274803638438137352noreply@blogger.comtag:blogger.com,1999:blog-30128229.post-80325975642400999552007-12-14T22:12:00.000-07:002007-12-14T22:12:00.000-07:00Hi Bill, Thanks for taking time to clarify your qu...Hi Bill, <BR/>Thanks for taking time to clarify your quoting NASD's comments on high risks of day trading.<BR/> <BR/>The point I tried to make originally is that day trading is not any riskier than any other styles of short-term trading like what you have been doing in the last 9 years.<BR/>You brought up the 911 as a black- swan event, don't you think that this event just hurt the swing traders who longed stocks right before 9/11, while the day traders might even benefit from this black swan event. So how do you justify that "day trading is much riskier" as what you quoted and paraphrased from the NASD's comments?<BR/><BR/>Apparently, you don't believe in long-term buy-and-hold strategy; being a proprietary trader, I don't think that is a sound strategy either. What contradictory is that you're practicing short-term trading yourself but quoted NASD's comments as a fact that day trading is a high risk venture. Don't you think that the financial economists who advocated for long-term investing consider your short-term trading style to be high risk as well? i.e., the misconception that you have for day trading is exactly the same as what the academics have on your trading style.<BR/>It certainly would be interesting to read you book, especially to see how you differentiate the trading risks of holding equities for one day or few weeks.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30128229.post-57301390557913009462007-12-14T11:14:00.000-07:002007-12-14T11:14:00.000-07:00Hi George. Please remember that I was quoting and...Hi George. Please remember that I was quoting and paraphrasing the NASD's comments on day trading. I am not a buy and hold trader and I have been trading for my living for quite a number of years now with pretty reasonable success. I may be trading "noise" as you say, but, for me over the last 9 years it certainly has not been a 'losers game' in practice. I think "black swans" are simply something traders need be aware of and I doubt (though I haven't investigated) that they hurt longer term traders any more since they are, indeed, rarities which a trader may use to his advantage on occasion, but against which all traders should guard. With respect to mathematical formulae, how can one construct a formula that accounts for a 911 event or the indictment of a CEO or a swift market reaction to a surprising and spectacular news announcement? Please understand that I am not saying that mathematical formulae do not have a place -- they do. I am saying that I do not think one can be constructed in such a fashion as to be a "holy grail." I fear too many do seek such a "holy grail" of trading and I think that is a mistake.<BR/><BR/>George, you say the academic studies say buy and hold is the <B>only</B> way to go. If that is so, please answer the question: "Hold until when?" "Buy and hold" suggests that profits never be taken since there is no message about when to exit. Holding until death does little for the investor, but may serve his heirs greatly. Lastly, are we able to identify any academicians who have become wealthy through investing? I'm sure there must be a few.<BR/><BR/>Please don't get me wrong, I do believe 'buy and hold' can be a wonderful strategy, but I also believe there must be some predetermined exit even for the buy and hold trader. Otherwise how does one succeed in following the sage advice to cut losses? I hope you'll take the time to read my new book, "Trade Your Way to Wealth: Earn Big Profits from No-Risk, Low-Risk, and Measured-Risk Strategies." I set forth a number of strategies beyond buy and hold offer profits on a shorter time line than holding forever and some even assure a profit upon entry while some have literally zero risk provided we have a stock market and a country. The book will be released in January and is now available on pre-release at amazon.com.Bill Kraft, MarketFN.comhttps://www.blogger.com/profile/08274803638438137352noreply@blogger.comtag:blogger.com,1999:blog-30128229.post-20306635013357447942007-12-13T16:23:00.000-07:002007-12-13T16:23:00.000-07:00Billl, all the academic studies based on mathemati...Billl, all the academic studies based on mathematical models claim that day trading and short-term trading as well are trading with noises (as Fischer Black put it, short-term traders are 'noise traders'), which is a loser's game, buy-and-hold is the only way to go. If you don't believe the market can be modeled mathematically, then there's no reason to believe that day trading has much higher risks. <BR/>Regarding the 'black swans' don't you think they hurt the longer-term traders even more ?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30128229.post-14493175482648399142007-12-11T07:47:00.000-07:002007-12-11T07:47:00.000-07:00Well, George, I never met Mandelbrut, but I do agr...Well, George, I never met Mandelbrut, but I do agree that it all comes down to the temperament and style of the individual trader. For example, I do not believe that the market is soluble by mathematical formulae alone because they cannot account for the timing and breadth of emotional moves, the so-called "black swans" that move the markets through extremes of fear or greed.Bill Kraft, MarketFN.comhttps://www.blogger.com/profile/08274803638438137352noreply@blogger.comtag:blogger.com,1999:blog-30128229.post-37354981722457704332007-12-10T10:14:00.000-07:002007-12-10T10:14:00.000-07:00Way to go, Chuck. I guess some have more unsettli...Way to go, Chuck. I guess some have more unsettling complaints though it might be worth talking to your broker about the lack of notice issue to see if they would take you off the 'cash account' status. There are a lot of brokers in the world. Anyway, sounds like you have had a great first year.Bill Kraft, MarketFN.comhttps://www.blogger.com/profile/08274803638438137352noreply@blogger.comtag:blogger.com,1999:blog-30128229.post-11003976397290447222007-12-10T09:12:00.000-07:002007-12-10T09:12:00.000-07:00Hi Bill,As pointed out by Mandelbrot, the key char...Hi Bill,<BR/><BR/>As pointed out by Mandelbrot, the key characteristics of market volatility is fractal or self-similar, hence shortening the trading time frame does not increase the trading risk at all, but indeed reduce it to the square root of its original intensity. Moreover, going flat at the end of a trading day can also eliminate the over-night price surprises. Of course, the trader has to be more agile to capture the daily price fluctuations. Although the price trend within one day is small, traders can have much higher leverage to compensate for that. However, it all comes to the temperament and style of each individual to determine the best fit for each individual. Definitely not because day trading is more risky than the other trading styles. Apparently, the buy-and-hold investors lost much more than all day traders combined during the 2001 stock market debacle. Holding stocks over-night already exposed one's hard-earned capital to unnessary risks, the longer holding period, the more risks you expose your money to. Trading longer term actually has more risks than day trading, provided that a day trader is disciplined and has good money management skills in taking advantage of the higher leverage. <BR/>After all, discipline and money management skills are critical to longer term trader as well.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30128229.post-61206745907021061502007-12-09T23:10:00.000-07:002007-12-09T23:10:00.000-07:00Informative article to me. I have only this year b...Informative article to me. <BR/>I have only this year began trading.<BR/>I did 143 trades since April with $102,843 in profits and $23,600 in losses so far. I sell my holdings immediately when they turn negative against my costs. This is when my brokergae characterized my account as a "DAY TRADER", and my only intent was to avoid losses that may get away from me. <BR/>I bought AAPL in June and sold the JUL 140 Calls against my shares for $15,124 profit in July. My biggest gain.<BR/>I recently paid down $93,000 in short-term debt. However, my brokerage never gave me five days notice when my account dipped below $25K the end of Nov. This has hurt me this past week although<BR/>I have substantially more money than $25K in the account. <BR/>My brokerage never gave five days notice that my margin account was converted a 'cash' account.<BR/>I was forced to buy 1500 AAPL options instead on being long the AAPL shares. Who am I to complain :)Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30128229.post-86182374156962404692007-12-09T13:00:00.000-07:002007-12-09T13:00:00.000-07:00That's great, Anonymous. How many trades did you ...That's great, Anonymous. How many trades did you make? Nothing wrong with $100 a day; that's $36,500 a year. Hope your trades continue to do well.Bill Kraft, MarketFN.comhttps://www.blogger.com/profile/08274803638438137352noreply@blogger.comtag:blogger.com,1999:blog-30128229.post-2261768242639775532007-12-08T16:37:00.000-07:002007-12-08T16:37:00.000-07:00All I ever do is day trades and I have had only on...All I ever do is day trades and I have had only one loosing trade all year. In a ten day period the profits average 1000/ what is wrong with that?Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-30128229.post-46194213104944604612007-12-08T11:43:00.000-07:002007-12-08T11:43:00.000-07:00Very good articleVery good articleAnonymousnoreply@blogger.com