What kind of trading is most profitable for ordinary people?

[TraderABC]

Hello all. I have a question that is crucial. What kind of a trading style is the most appropriate for someone who wants to make consistent gains enough to live on?

I have studied markets for a while and I've just got confused... I read almost every book I can find and questions just pile up. For example most if not all people are talking about how you got to position trade if you want to survive and grow your account. For example Alexander Elder (whose advice I value very much) is of that school. But one thing has to be taken into consideration, most books were written a decade or more ago when computers and internet was undeveloped. Today you can execute trades in seconds and price per transaction is very small. I have backtested DOZENS of systems and I always found a pattern, the shorter the time frame the MORE money it brings (taking spread into consideration). It doesn't make sense to hold and let profits run, it doesn't work as the markets do not go horizontally.
The time spent in a sideways market or retracement on the daily , could be used to fish 1000s of pips from dozen of trades... In all of my backtests switching the program to a shorter time frame made more gains. It doesn't matter what indicators my program used, the recent one uses none (other than price) and it was the best btw.

Pro's of position trading
- Possibly relaxed training
- don't spend as much time at the computer
-Big gains per trade
Cons
- Possibly much more stressful as sudden news can easily send a currency flying 100 pips against you (and stops may not work).
-True that you have fewer trades with small commision, but carryover costs
make up for those.
- Have to sit through retracements and sideway movements where you could
be gaining (or atleast not loosing money through carryovers).
- HUGE STOP LOSSES. You can lose a lot per trade, much more than if you day traded. In my backtests it has shown that the bigger the SL the more often you win... But what can a small sized investor do? So much for trying to offset this by buy 10 lots or so... 100 sl with 10 lots = 1000 pips... ouch.


Scalping
PRO's
-many small gains
-small stop lossess (which means a person can afford to trade)
-In a way less stressful due to the fact that you don't hold your positions for too long.
-Potentially you spend LESS time at the computer. I mean if you catch a quick trade with 10 lots, that could give you a decent profit for a day.

Con's
- You could spend much more time at the computer (especially if you are looking at a non-frequent set up)
- Potentially you could loose alot of them due to market noise and or changes (which are more likely to be noticed at lower time frames)
-Requires quick thinking.
- Slippage and or broker/chart may not give the same price and because of it seriously eat your profit...
- May require a kind of equipment not available to ordinary folks. I heard someone uses 9 monitors and bunch of computers... WOW. And I thought that adding another monitor to my pc was cutting edge for trading...


Anyone here makes a living from trading? Do you scalp, daytrade, swing trade or position trade? Why is all the statistic showing that position traders win and day traders loose? Maybe it is because those who position trade have enough money to start with. Those who can wait and tolerate large drawdowns can easily have 100% win percentage.... But ordinary folks with few dozen K cannot do that and profit well... Any ideas? Thanks.

[RedDuke]

Hello TraderABC,

I think that you will get a lot of different opinions on this thread. The best answer is: “It all depends…”. A lot depends on your psychology, what are you comfortable with. I’m sure you heard or read “Market Wizards” by Schwager. It is a perfect example of the bunch of successes about people who utilize most of the things that you mentioned. There you have a guy that does even look at charts, another one who makes around 3 decisions per year, another who scalps T-bond market and the list goes on.

I am personally an intra day trader with a trade time span from several minutes to several hours. I utilize a strategy developed by Mark Fisher called “ACD” which is described in his book “Logical Trader”, there also a thread on this subject, just search for ACD. Now, Mark is a very successful trader, who does not believe in “No pain, no gain” as related to holding position long term and living through drawdowns. His believes in immediate gratification. This is the style of trading that I am comfortable with, and this is what I use.

redduke

[foamgod]

Originally Posted by RedDuke

Hello TraderABC,

I think that you will get a lot of different opinions on this thread. The best answer is: “It all depends…”. A lot depends on your psychology, what are you comfortable with. I’m sure you heard or read “Market Wizards” by Schwager. It is a perfect example of the bunch of successes about people who utilize most of the things that you mentioned. There you have a guy that does even look at charts, another one who makes around 3 decisions per year, another who scalps T-bond market and the list goes on.

I am personally an intra day trader with a trade time span from several minutes to several hours. I utilize a strategy developed by Mark Fisher called “ACD” which is described in his book “Logical Trader”, there also a thread on this subject, just search for ACD. Now, Mark is a very successful trader, who does not believe in “No pain, no gain” as related to holding position long term and living through drawdowns. His believes in immediate gratification. This is the style of trading that I am comfortable with, and this is what I use.

redduke

How successful i.e. profitable have you found this to be? Care to share? Thanks.

[foamgod]

Originally Posted by TraderABC

- May require a kind of equipment not available to ordinary folks. I heard someone uses 9 monitors and bunch of computers... WOW. And I thought that adding another monitor to my pc was cutting edge for trading...

Are you SERIOUS?

What would that person do with 9 monitors? Are we talking about a human or a bug with look-around peripheral vision?

[TraderABC]

Originally Posted by foamgod

Are you SERIOUS?

What would that person do with 9 monitors? Are we talking about a human or a bug with look-around peripheral vision?

If I remember correctly a pro trader Linda Raschke has 20!!! computers (I have to find the article coz I am surprised as well and I may be wrong). What I do remember is that they definately warm her house really well...

The point is - Don't even think about developing a technical only system and expect to be one of the pros until you are a head of a Bank or have 1000s of dollars to spend on equipment....

[foamgod]

I still can't see the need I would have for so many computers...... gosh..............

[TraderABC]

Originally Posted by foamgod

I still can't see the need I would have for so many computers...... gosh..............

She scalps on 20 markets at a time. You know how you need to keep a close eye at all times on the markets and dont miss a moment.

[fairwind]

Greetings to all,

Getting back to Traders request, I think Red Duke got it right the first time with this "...The best answer is: “It all depends…”. A lot depends on your psychology, what are you comfortable with....". To find out what we are comfortable with when tradingf FX, requires time and study and patience and sometimes an of money that we can afford to lose. I am talking about 'practice, practice, practice, and study, study, study' until we can draw a logical conclusion about how we are going to trade FX.

My own experience ( this is really the only way I can make any pertinent comment ), has been to spend the time to find those things that make sense to me. I have decided on intraday, small account, minimal indicators, conservative approach. I will also trade this way until I can see a better way. I have taken 2.5 to 3 years to arrive at these conclusions, I am by nature a conservative type of fellow. Also, I have worked far too hard to earn the money I have to blindly dive into trading or investing in something I know too little about.

Trader, I hope this helps a bit.