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One of way of looking at it would be to examine a value trading meetup group I attend. Only one member had a negative return last year because he let his politics get in the way of his investing by continually shorting equities.
So 95% of our group is profitable and there are no marginal differences between traders in different markets?
Higher win rate in equities doesn't attract other retail traders because of return.
Equities investor/trader - Trader hopes to beat the S&P, last year 20% annual ROI
Forex trader - Traders hopes to turn is 10k into 100k by the end of the year. - leads to the much lower win rate
Volatility is good for the market and trading.
Preservation of capital is the most important concept for those who want to stay in the trading game for the long haul. - Van Tharp
The question of this thread was whether day trading can be profitable for retail traders. All the discussion and all the data has been about short-term day trading.
This means it was not about value trading. You can't trade value on a time horizon that is only a few hours.
I'm not saying your point is wrong -- nor that it's right -- just that none of the comments that you argued against had anything to do with value-based trading or investing.
It's great that 95% of your group had a profit. But when someone says there is no marginal difference between markets, and he means short-term trading and you mean long-term trading in an equity bull market, you are talking apples and oranges.
Now, maybe long-term value trading is better.... fine. No one was saying it wasn't. At another time, we might discuss that, pro and con. For that matter, if you had said that long-term value-based equity trading gives better returns than short-term in-and-out day trading, many would say that is a reasonable view. Someone else might argue the point, and it could get interesting -- but it is not the present discussion.
So, if you just want to say that your equity value trading will make people money, that's cool. What do you think about day trading for the retail trader, which is what we're talking about? Is it a good idea or not? Why?
Bob.
Update: I realize that I may have misunderstood your point, and if so I apologize.... but then, fill me in. Are you talking about day-trading time horizons or something longer term?
No worries. I responded earlier that scalping high frequency trading unlikely for most, but trading on a daily basis most definitely can be profitable even trading /es. (Yes very rarely and I'm round turn on a trade in a day)
Scalping high frequency on /ES is unlikely mainly because of unrealistic expectations and under capitalized. But they're several on here that are very profitable
I trade on a daily basis (adjustments to positions) Equities, options and futures /es with a retail platform. Does that make me a day trader?
My friends say" oh he owns ... and is a day trader" I use to say well "not a scalping day trader...." but it is not worth wasting my breathe anymore.
The eminis and forex are perfect instruments for scalping trading, I don't know why someone would try to scalp equities (PDT) on a retail platform. If we are talking about penny or pharm stocks, yes the low win rates would probably be the same
Volatility is good for the market and trading.
Preservation of capital is the most important concept for those who want to stay in the trading game for the long haul. - Van Tharp
Seems like your argument rests on a very narrow generalization of equities and FX traders and trading style (beta exposure) such as:
and incorrect assumptions such as:
You can match your first order risk measures like vol simply by adjusting leverage.
The supporting data for no-arbitrage between asset classes is staring in your face even without my input. There are huge asset managers that are in the business of finding inefficiencies between asset classes and their rebalancing decisions may include moving $1B from value stocks in 1 Asian market to another, or $1B from commodities to equities, or developing country FX pairs to US equities. Harvard's endowment is in the business of moving hundreds of millions from Brazilian lumber to US equities on a low frequency. We know that there's almost no such asset manager with >2 Sharpe, so their R^2s must be extremely weak, meaning there's very few advantages from choosing between equities or FX.
Bear in mind that a significant portion of the accounts I deal with are institutional in nature, including fairly large hedge funds, which do not shoot to turn 10k into 100k. Also, 2000+ is also a much larger sample than your meetup group.
Diversifying, beta, sharp ratio. I agree there are few advantages for having fund managers other than admin and for them to consistently beat the market. That has led to index, target funds.
As far as institutional, yes myriad of reasons for trading forex, hedging risk.
But as a retail trader (this thread) with no global implications, Leverage and Return are the main drivers
Specifically referring to your chart on win rate(trades forex 79%losers) 1:5 win
There are significant differences. My personal experience (equities) it is much higher and Im not an outlier.
Are there any scholarly studies with evidence of this over the long term? Equities having a 1:5 win rate ratio
Volatility is good for the market and trading.
Preservation of capital is the most important concept for those who want to stay in the trading game for the long haul. - Van Tharp
Excellent way to sum things up. Now why would one trade a negative risk/reward opposed to a positive risk reward. High probability and lower probability trades. I tried continuing a thread about harmonic rotations here:
I'd really like to continue this conversation and get more specific. The video near the end at around 1:42:00 was about giving the trade room to work, keep the stop at an area that your no longer right. This confuses newer traders …
It seems like a better way to control stops and targets, although there are missing pieces here as well.