Is Daytrading dangerous?

Sudhir_Gupta,
This was a good book ,the few i have read.Actually it depends more on Comfort Level,i am comfy to short in Fut ,but get scary in Cash,& for Swing
the SL is not so tight as in Day Trading ,hence i feel more relaxed not to use full Margin.Your method,which is giving money to you is best for you but not necessarily can this be best for all ?

Asish

You are right. I'm just giving my side of story. Not advocating/promoting anything.
Also, I'm aware that nobody will put his/her money on stake just because a book suggests a method of how to go about it.

with best regards.

Last Words

Just trade a timeframe where you have an edge and where you can actively manage your risk ( difficult to do EOD ), do your own research and make up your own damn mind, if you need others to decide even your timeframe of trading you better stop thinking about trading and start thinking about being an analyst.

No, not the last words.

How can one evaluate where one has an edge at all?
how can a 'damn' mind do a research ?
Instead of generalisations, we must have specifics of how to do it while not loosing money.

What market players do in each time frame ? Here is a very interesting explanation from Voodu

PREDATOR OR PREY?

Each timeframe in the market has a completely different set of players. Each one has its own predators and its own prey. Do you know your timeframe? The scary part is that if you don’t know and stick to your timeframe, you’re going to be someone’s prey and never know why.

Ok, so what are these timeframes? Let’s use a pond and fish analogy. The first pond is the 2 minute timeframe. The others are the 5 minute, 15 minute and daily ponds. Don’t worry too much about the physical property of these ponds. For instance, fish in the 2 minute pond can feed on fish in the 15 minute pond. But, the pond analogy is still useful.

The 2 minute pond is the group that takes money in a way that we call slippage. The nasty little devils are fast and furious. It is amazing to watch them. They are really big fish, with tiny little mouths. They spend their day eating teenies. It takes a lot of teenies to satisfy them. So they have to be quick and repetitive. They’ll choke on big pieces of meat (large positions for a long time), so they keep their bites small. These fish are comprised of Market Makers, Specialists, Arbridgers, and scalpers. These guys are trying to take money from all the other fish-including each other.

The 5 Minute pond is full of day traders trying to take money from the 15 minute pond. These are the fish looking for intraday trends. Their mouths are built ¼, ½ or full points. Where the 2 minute fish worry about not getting enough volume, these guys worry having too much. “Who am I going to buy 3,000 shares from and how will I unload ‘em.” If they try to eat too much at once, their prey might panic and run away.

The 15 Minute fish are big ones. These guys work all day long to fill one order. These are the institutional traders or Market Makers acting as traders. They also worry about how much volume they move, but sometimes they just can’t hide it. So, they can’t buy or sell all at once. They also have to hide their tracks, because the 5 minute fish are trying to spot them and eat from the same plate.

The daily pond is a funny mix. There are two main groups. There are the Mutual Funds and Investradors. (I call them this because when a position goes away from them they become Long Term investors, and when they are making money, they are traders. This confusion between Investor and Trader begets the term Investrador.) Investrador are the bottom of the food chain. They supply the money for all the other fish. Very kind of them really. Fortunately, 80% of them are philanthropic, so there is always a stream of new funds.

The Mutual Fund fish are really big. They move from place to place in the pond, swallowing great masses of Investradors. How can they do this? Can’t everyone see them coming? Aren’t they the slowest fish in the pond? Yes to all of the above. So the Mutual Funds must use bait. Mutual Funds swim around with their mouths open wide. Around this mouth are numerous goodies to tempt the Investradors. They dangle Research Alerts, Upgrade/Downgrades, Sector Analysis, cover stories on Fortune Magazine, etc.

Let’s take a look at this food chain from to bottom. All the money comes from the Investradors. The mutual funds eat them alive. However, in order for the Mutual Funds to move around they need the help of the Institutional Traders. Kind of the tug boats pushing a freighter around the bay. So once the Mutual Funds fish eats all the Investradors on one path in the daily pond, he calls in the Institutional Trader fish to help change direction. These fish move millions of dollars worth of Investrador flesh. So they tell Mutual Fund, “OK, I can do it, but you’ll have to wait a day or two.” Then they take the flesh to the 15 minute ponds and start moving it. This creates eddies in the waters of the 15 minute pond. A good institutional trader with a small amount on Investrador flesh in a big 15 minute pond can’t even be seen. However, the larger the order and smaller the pond, the bigger eddies.

Now the astute 5 minute fish is watching the waters of the 15 minute pond. Here he notices something – a trend. The waters of the 15 minute pond can be very murky. However, it is little easier to spot these moves in the 5 minute pond. That big fish sometimes gets too close or makes a mistake and the Daytrader Fish spots his action. He jumps in front of the Institutional Trader and steals his pound of flesh and moves on. Institutional Fish don’t like Daytrader Fish.

During this entire process, the 2minute fish run around cleaning up all the little leftovers. Finally, all the Investradors flesh is gone. The pond is red with blood, but the fish are fed.

What pond do you play in? There is money to be made in each pond. But only if you know who your prey is and who is your predator.

You can be a 2 minute fish. Are you fast? Are you happy with making teenies? But remember these guys are cannibals.

You can be a 5 minute fish. Are you patient? Do you mind scanning constantly looking for signs of 15 minute fish? But when it is time to act you better be fast and decisive. And you better like ½ point mouthfuls.

You can be a daily fish. Can you handle the big swings in price? Can you watch your stock drop 3 points, while waiting for it to gain 9?

And how to evaluate your time frame competition .....

Attached Images

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dear sudhir gupta

it was interesting and educative i understand clearly that you are not promating or adertising but could you put something specific pl. specialy judjing the time frame amritbanga

read the attachments in last two post. you'll clearly understand what odds are in each time-frame. then choose one to your 'taste'.

Excellent...

Hello Sudhir

Competition in trading is a myth and there is simply no competition b/w players at different time frames ergo I completely disagree with the mentioned article. Order Flow is not contrained by time but by liquidity and is independent of time.Financial markets are not stationary time-series to behave with time regularity of any manner which taking a bit further applies to so called patterns.

Talking about edges, if one does not know how to calculate one's edge then one doesnt have any.

Rgds

sudhir_gupta/subrata_berra,
There is an analogy that "How can there be a OB / OS situation ? becoz Mkt is continuously discovering the PRICE ,hence at that moment of time ,Mkt has fully PRICED (the valuation) the Instrument ,so at that moment it is neither OB/OS" , to be OB / OS one has to refer a fixed arbitary point (PRICE),which again varies with Time.These are endless Logics.
One thing is Pure Mathematics ,any data ,whatever Random may be it's occurence,can be plotted.When ploted it MUST have a Mean ,and majority of datas can be Tamed (those erratic random) within a Band of this Mean.So datas on the Extreme end of this Bands possess a Greater Probability of Converging to-wards the Mean.
So we get a OB/ OS ,in reference with a Point (Mean),(which may be Dynamic) , so "Oscillators" are Born.
Without a reference point it is virtually impossible to Trade,these reference points (Means) DO CHANGE of the same instrument,in different Time Frame,becoz a 5min(O/H/L/C) will constitute 5 no 1 min(O/H/L/C).
Hence let us follow our belief system.

Asish