For example, I don’t know if you know Shawn and Neil from TraderTV Live. They’ve made six figures, and sometimes even seven figures, per year from day trading, and they still keep long-term portfolios with conservative, “safe” investments. (and I know lots of other proffesionals that do the same)
And that raises a fair question: if they’re so successful, why don’t they just deploy 100% of their capital into day trading and scale it infinitely?
Because day trading has constraints: liquidity, slippage, execution quality, mental pressure / capital is a huge one also, and the fact that your edge can shrink as size grows. Long-term investing, on the other hand, is scalable and lets capital compound with far less operational risk.
So it’s not “either/or” at the high leve, it’s “both,” with the right role for each.
I was a professional trader for hedge funds. We have more resources, money and information than you will ever receive. Chart reading is mandatory and works on four hour charts and dailies bc it will capture everything we did that day. But during the market session, charts aren’t as accurate for you because we are forming the patterns and will change them because we can . We know when and at what price the day traders are more active, since they all behave like a herd, and it only takes one guy to clean them out, on purpose. You watch volume. We know the volume. Is the market maker net short or long and how aggressive is he and at what price can we do trades of different sizes? Which other fund is looking to buy or sell at any price? Who screwed who and is now getting punished? Blah, blah. Thousands of examples of a market small traders should not be in.
Thanks for writing this. Do long term investors become day traders? I always thought it's the other way around once people lose money day trading.
Yes, but the ones at the top do it the right way.
For example, I don’t know if you know Shawn and Neil from TraderTV Live. They’ve made six figures, and sometimes even seven figures, per year from day trading, and they still keep long-term portfolios with conservative, “safe” investments. (and I know lots of other proffesionals that do the same)
And that raises a fair question: if they’re so successful, why don’t they just deploy 100% of their capital into day trading and scale it infinitely?
Because day trading has constraints: liquidity, slippage, execution quality, mental pressure / capital is a huge one also, and the fact that your edge can shrink as size grows. Long-term investing, on the other hand, is scalable and lets capital compound with far less operational risk.
So it’s not “either/or” at the high leve, it’s “both,” with the right role for each.
I was a professional trader for hedge funds. We have more resources, money and information than you will ever receive. Chart reading is mandatory and works on four hour charts and dailies bc it will capture everything we did that day. But during the market session, charts aren’t as accurate for you because we are forming the patterns and will change them because we can . We know when and at what price the day traders are more active, since they all behave like a herd, and it only takes one guy to clean them out, on purpose. You watch volume. We know the volume. Is the market maker net short or long and how aggressive is he and at what price can we do trades of different sizes? Which other fund is looking to buy or sell at any price? Who screwed who and is now getting punished? Blah, blah. Thousands of examples of a market small traders should not be in.