Genesis
Legendary Member
- Joined
- Mar 28, 2005
- Messages
- 5,952
- Hatteras Model
- 45' CONVERTIBLE-Series II (1984 - 1992)
Day trading is VERY VERY VERY HARD to make money at.
Why? Because of transaction costs.
Consider that if you spend $8 to get in and $8 to get out, that's $16 per trade. If you always exit before the end of the day, then you're always spending that much on each deal - win, lose or draw.
Now $16 doesn't sound like a lot, but in fact it is. On a $1,000 profit its 1.6%. That's a lot, when you consider that 2% moves in a day are somewhat rare....
MOST daytraders lose money over the long haul for this reason.
I position trade. The core of my portfolio is indexed - either in funds or, for some, in fixed income (muni closed-end). My average holding time on those positions is measured in years, many of them. Recently I traded out of a QQQQ posiiton that I had held for five years (and into a different index). That's pretty typical for my "core" holdings.
Then there are stocks I intend to hold for more than 12 months when I buy them. I may sell early, but my INTENT when I buy is to hold for at least a year.
Finally, there are position trades held for less than a year. Options are in this category, but those are NOT daytrades. They're held for anywhere from days to months. Same for short positions.
Right now I am short over $250,000 worth of positions, which is the first time in five years I've had ANY material short positions. I rarely short, because I can usually find better candidates for my investment money than shorting.
But right now, shorting mortgage-related companies is like shooting fish in a barrel. Its just too damn enticing; I shorted Countrywide four days ago and already made 8% on it. In four days. That's an insane annual rate of return, and I'm loving it. NEW (New Centry) was even better - I bought PUTs a week ago; they're worth 130% more than they were. Just today I bought some LEND puts, and they're up 22%. DSL got PUTs bought on it yesterday; they're up 33% - in one day.
None of these are likely to be held long. The NEW position will probably get closed tomorrow. FMT likely for another week or so, same with a few others. Most of the other shorts I'll hold until just before earnings, then get out - holding them through earnings is too dangerous for me.
My other option holdings are all hedged. That is, I can only make (or lose) a certain amount - I don't do open-ended trades in general. The exception, of course, are all these shorts.
This sort of opportunity RARELY comes along, but when it does, you're nuts not to jump all over it. The market was down 2% today on a broad basis - my portfolio, including the 80% that is in "regular long investments" (which was down like everyone else!) only lost 0.06%. That's the power of trading trends like this - you can ride the gains and avoid most of the losses.
I've got protective stops set under all of these; of all my short-related positions not one is losing money at the moment. That's extraordinary.
BTW, if I blow it trading my portfolio I'll be handing out carts at WalMart when I'm 60 - so I tend to be more conservative than some!
Why? Because of transaction costs.
Consider that if you spend $8 to get in and $8 to get out, that's $16 per trade. If you always exit before the end of the day, then you're always spending that much on each deal - win, lose or draw.
Now $16 doesn't sound like a lot, but in fact it is. On a $1,000 profit its 1.6%. That's a lot, when you consider that 2% moves in a day are somewhat rare....
MOST daytraders lose money over the long haul for this reason.
I position trade. The core of my portfolio is indexed - either in funds or, for some, in fixed income (muni closed-end). My average holding time on those positions is measured in years, many of them. Recently I traded out of a QQQQ posiiton that I had held for five years (and into a different index). That's pretty typical for my "core" holdings.
Then there are stocks I intend to hold for more than 12 months when I buy them. I may sell early, but my INTENT when I buy is to hold for at least a year.
Finally, there are position trades held for less than a year. Options are in this category, but those are NOT daytrades. They're held for anywhere from days to months. Same for short positions.
Right now I am short over $250,000 worth of positions, which is the first time in five years I've had ANY material short positions. I rarely short, because I can usually find better candidates for my investment money than shorting.
But right now, shorting mortgage-related companies is like shooting fish in a barrel. Its just too damn enticing; I shorted Countrywide four days ago and already made 8% on it. In four days. That's an insane annual rate of return, and I'm loving it. NEW (New Centry) was even better - I bought PUTs a week ago; they're worth 130% more than they were. Just today I bought some LEND puts, and they're up 22%. DSL got PUTs bought on it yesterday; they're up 33% - in one day.
None of these are likely to be held long. The NEW position will probably get closed tomorrow. FMT likely for another week or so, same with a few others. Most of the other shorts I'll hold until just before earnings, then get out - holding them through earnings is too dangerous for me.
My other option holdings are all hedged. That is, I can only make (or lose) a certain amount - I don't do open-ended trades in general. The exception, of course, are all these shorts.
This sort of opportunity RARELY comes along, but when it does, you're nuts not to jump all over it. The market was down 2% today on a broad basis - my portfolio, including the 80% that is in "regular long investments" (which was down like everyone else!) only lost 0.06%. That's the power of trading trends like this - you can ride the gains and avoid most of the losses.
I've got protective stops set under all of these; of all my short-related positions not one is losing money at the moment. That's extraordinary.
BTW, if I blow it trading my portfolio I'll be handing out carts at WalMart when I'm 60 - so I tend to be more conservative than some!
I missed that on the Hatt option list. 
Oh when will it end 
