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Mathematical reasons why MOST DayTraders & scalpers fail?

  • #141
  • Aug 10, 2007 10:11pm Aug 10, 2007 10:11pm
hehhe just found this thread.

JohnFX just nailed it. if you are losing money scalping, you doing it wrong.

36k commission in 1 year? hmm how about 1000+% ROI annual through scalping. monthly returns around 80~100%. its doable and im not the only one. of course there are pros out there making more. well worth the damn price if you ask me. oh and its probably not 3 pips unless you are with a dd.
{Promotion Removed}
  • #142
  • Aug 10, 2007 11:43pm Aug 10, 2007 11:43pm
you are the ones getting scalped.

scalp on my fellow head hunters.
My favorite indicator is discretion.
  • #143
  • Aug 11, 2007 12:54am Aug 11, 2007 12:54am
Trading full lots on a $10,000 account in the first place? Yikes!!
  • #144
  • Aug 11, 2007 11:10am Aug 11, 2007 11:10am
I hate to break your bubble, but I am afraid none of you really know anything about scalping. I have been doing it for at least 10 years. As far as numbers go, here is the reality: I make at least 100 Round Turns per day. Many days I trade over 300 RT's. Most of my trades involve one or two contracts at a time. I am constantly making trades. Next, the issue of commissions. I trade Currency futures, and my commission and exchange fees are less than $6 per round turn, per contract. That is a whole lot less than the pip cost in forex. In other words, my "pip" cost is less than .6 of one pip.

Now for profit goals. I have a minimuml of 3 points (pips) per contract per trade. That means my profit is 2.6 points per contract per trade. That is a minimum, but it is rare for me to make more than 5 points per contract per trade.

I hope this clarifies the truth about scalping. I apologize that I do not have more time to spend giving advice, but my energies are pretty much spent during trading times. On the weekends I sometimes have a little of time for diversion, and that is why I decided to write this. Good Luck.
  • #145
  • Edited 5:33pm Aug 11, 2007 1:54pm | Edited 5:33pm
Many of the traders here on this forum seem to forget what they're talking
about. Perhaps if I try to explain something, you'll have a different perspect-
ive. Time is broken down to the second (without counting the micro)...then
the minute etc. The market is during the "day"....starting from the open and
ending at the close. We have only 24 hours in a day...unless you count in
some other method or problem. The only truth is the "tick" or "pip". The "tick"
following then becomes the truth, and the "tick" before that is now "history".
That "tick" becomes all the "time frames". So even if your argument is
against "scalping"....then what do you think you're doing when you think
you're a "long term" trader? No matter what you think about the different
"time frames"...you enter the market from a "starting point"...whether you're
a "scalper"...a "day trader"...or some other "moniker" that fits your style or
mindset. The "scalper" is looking only for a few "ticks". Ask youself this real
"question"? Do you have a better chance to make "6 ticks", or making "20
or 30" ticks? Regardless....the real trader knows "money management"
whether he is a "scalper" or otherwise. The double whammy here, in our
argument, is that the "scalper" probably has had enough experience trading
"long term" as well. He probably knows that there are only "5 kinds of trade"
and only two kinds of "markets". The "scalper" couldn't care less about
"tomorrow"..."next week, month or year". Now think about this....and put
it in your "back pocket": The forex is a 24 hour market, but is traded in
serial sections (USA..Asia...Europe etc). Each one of them have their
allotted time. The "market" starts with the "open"....."it OPENS in a 24
hour market". It's a "tick" that starts at the "open"...so in time it builds up
into all the "time frames" that they talk about. So no matter what "time
frame" you're in..."the Tick was there". Now take this statement...another
part of the one in your back pocket: If the market is going to go up and
be an uptrend...it will be mostly above the "open"...and should go above
"yesterday high" if you're a long time trader. Now...no matter...the "tick"
is going to go below the "open". Again....depending on what "kind of trade"
...it will go back and forth, especially the "ticks". So the "slope" is the
"heart and soul" of the market, no matter what "time frame". Each "time
frame" has it's own slope. The "ticks" are the "sitting ducks"...and it is here
that the "real Pro" knows all about the "sitting ducks" and their method of
hopping from one roost to another...and then starts to fly. In either case
it's the "right wings" of the "ducks" that either dip "down" or "up". Sometimes
feinting and then hops back to it's roost....it trying to "drop in your pants"
and then do nothing for a time. Then again...it may do its "feint"...and
sleep for awhile. Regardless....the longer the "ducks" roost in a row...the
closer the "slope" veers towards "zero"....in other words, the "tangent"
angle becomes a "secant" angle. The "highest roosting post" and the
"Lowest roosting post" become the limits.....the "range". No matter what...
if the "market" is going to go up, it has to keep breaking the "upper limit"...
or the "high of the range". There is a lot more to these "sitting ducks" than
I can expand on here in this forum. The "scalper" is concerned only about
the market as it progresses into the next "time frame". He knows where
the market is within the "5 kinds of trade". The "market" is either in a
Trend...or Congestion. The 5 kinds of trade: run (up or down), exiting
the "run", entering congestion, during congestion, and then exiting the
congestion. And then starting all over again. It all sounds easy....but it
ain't. If you learn and understand the 5 kinds....then you are ready for
that "unexpected"...and even then you will get bagged now and then.
But....SO WHAT? It's part of this business. And so is "gambling a business"
One can look at all this as a huge CASINO. And just how long do you think
you can stay in a "Casino"? Most professionals know how to stay there.
So if you think the "real scalper" is a loser, then it's because you don't
know what the professional scalper knows. The "Real Scalper" has found
the different kinds of "gloves" that fits his hand. He probably had to pay
a heavy price to find it. The glove that fits his hand, probably wouldn't
fit your hand. Try to remember this: it all starts from the "tick"....as "time"
goes on (and it goes into infinity....P=f(t))....the time frame becomes larger
and larger. It's all the time frames within the "day" that you'll enter the
market. So the "Day" is only within the "1st and 4th Quadrant"....and the
rest is within the "2nd and 3rd Quadrant". And within the "Day"...the
"time frame" starts from the "open"...the "tick", then "one minute"...the
"five minute" and so on thru the hours and finally the "close". Simple....
isn't it?......I don't think so. But there are plendy out there who will try
to say that it is. The odds against you are tremendous. You long time
traders....have you thought about this? If the "scalper" knows what he
is doing...then WHY wouldn't he turn that scalp into a longer time frame?
After all, he knows the 5 kinds of trades. And most of them do....
ciao
Tonyj
  • #146
  • Aug 11, 2007 2:48pm Aug 11, 2007 2:48pm
Quoting Fanat
Hello all. For a long while I have been thinking about many things trading related and ways to improve my trading... I am sure that all of you have heard the phrase that "Day trading and Scalping is not profitable and most day traders lose." So I've decided to do the math and see if it shows anything... I was surprised badly... Any ideas, comments?
Excellent post. I suspect that most people underestimate the effect of the costs involved; the shorter the timeframe the greater the costs, percentage-wise.

Having said that, I have no problem believing that there are folk, like JohnFX and Patrick Rhodes for example, who make a handsome living from scalping. Every trading approach has its pros and cons: http://www.forexfactory.com/showthread.php?t=24242

Trading is a personal venture. Whatever generates a profit for, and rests comfortably with, an individual is their "right" way.
______________________________________

Quoting mr.marketz
The title of this thread IS the reason why MOST traders fail... they'll put together some elaborate (usually mathematical) rationalizations to avoid the real reason...

Trading is a battle to the death with the greatest opponent you will ever face - yourself. Take all your mathematical equations, throw them out the window, and face the GD music.

I don't mean to sound combative, but that my friends is the ugly truth. Ask any broker who their biggest per dollar losers are, and they'll tell you that its usually successful engineers with big bank rolls from their 9 to 5. I think it's pretty logical why... they're pure number guys with grandiose math theories and nice salaries to try them out. However, what happens to them? That's right - Crash and Burn baby... the markets have much less to do with math and statistics, than they do with heart and soul.

Just my 2, take it for what its worth.

MM
If what you are saying is that faulty MM and/or psychology will burn out an account much more quickly than faulty method, then I suspect that's a very true generalization.

However, if successful trading required only MM and psychology, then every black box EA would be a winner. A robot doesn't have to face itself.

MM - calculating risk, position size, margin, etc - is all about math. I can't see a way around that.

Jack Schwager's Market Wizards are a diverse assortment of people from all walks in life. There are both mathematicians and non-mathematicians among them.
______________________________________

Quoting luqmanz
A very seasoned trader told me this.
1) Beware of the academic market fundamentalist
2) Beware of the academic market technician

I believe the main reason is because these people gives good idea/theories about the market, but wrong idea about making money in the market. Follow these people and you will be stucked in the hole of unprofitability without actually knowing what is the true reason because what academician says always make sense in a way or another. It's impossible to fix a mistake when you can't see the mistake, right ?
What do you mean by "academic"?

Every trading method begins with theories and ideas. Successful traders have discovered/developed/implemented theories and ideas that generate consistent profit.
______________________________________

Quoting tonyj
Why?....because we don't understand that Price is a function of time: P=f(t)....better yet: y=mx+b and the chart is a visual behavior of that function.
Are you saying that plotting price against time is, or can be approximated by, a linear polynomial? I don't understand.

David
  • #147
  • Aug 11, 2007 3:39pm Aug 11, 2007 3:39pm
Absolutely ridiculous. When you pay the spread on a winning trade-nothing has gone out of your account you just didn't get as much profit as you would have if there had been no spread.

Obviously every trade starts with a loss but earn that back if the trade is successful. Yes the broker made a profit because you paid a worse price then he can get from his market maker (unless he traded against you).
  • #148
  • Edited Aug 12, 2007 12:04pm Aug 11, 2007 5:28pm | Edited Aug 12, 2007 12:04pm
Quoting hanover
Excellent post. I suspect that most people underestimate the effect of the costs involved; the shorter the timeframe the greater the costs, percentage-wise.

Having said that, I have no problem believing that there are folk, like JohnFX and Patrick Rhodes for example, who make a handsome living from scalping. Every trading approach has its pros and cons: http://www.forexfactory.com/showthread.php?t=24242

Trading is a personal venture. Whatever generates a profit for, and rests comfortably with, an individual is their "right" way.
______________________________________



If what you are saying is that faulty MM and/or psychology will burn out an account much more quickly than faulty method, then I suspect that's a very true generalization.

However, if successful trading required only MM and psychology, then every black box EA would be a winner. A robot doesn't have to face itself.

MM - calculating risk, position size, margin, etc - is all about math. I can't see a way around that.

Jack Schwager's Market Wizards are a diverse assortment of people from all walks in life. There are both mathematicians and non-mathematicians among them.
______________________________________



What do you mean by "academic"?

Every trading method begins with theories and ideas. Successful traders have discovered/developed/implemented theories and ideas that generate consistent profit.
______________________________________



Are you saying that plotting price against time is, or can be approximated by, a linear polynomial? I don't understand.

David
David: Look at the charts....what do you see? What is at the bottom of
that chart? It's "TIME"...no matter if being from the "tick" to the monthly.
And the bars on the chart is: the open, high, low and close....all in PRICE.
Thus: price=f(t). (Price equals function of time). The heart and soul of the
market is the slope. Unless you understand the math end, you would have
a hard time knowing what the market is really telling you. To all those who rant against mathematics. You poor soul....why are you at your computer? If
it wasn't for Newton, Leibniz, Cantor, Euler, Bolzano, Weierstrauss, Rolle...
and ON AND ON.....you wouldn't have this opportunity to do your ranting.
In fact if it wasn't for them...you would be facing the "back end" of a
horse....now and then a few farts harmonium the squeak of the axle wheel.
Of course....you're probably too young to even know what it takes to
harness a draught animal or even know what "what the hell I'm talking
about"? What I'm saying is this....IT'S ALL MATHEMATICS. You don't need
math to trade...but it's there if you want to use it. Let me know how you
are able do your trading just counting (if) your fingers and maybe even your
toes. This not any slight against you...David. Yes...it's linear polynomial.
Take it from the "open"...look for some eye openers all the way from the
tick to the monthly time frames. Look for the answers in the Cartesian
coordinate. From there...everything should fall into place. The quadrants,
the daily being only in the 1st and 4th quadrant...then it shifting the
next day into either the 2nd or 3rd quadrant. At the "open" it's the first
"tick" and it's right at abscissa between the 1st and 4th quadrant....the
"line in the sand". Your slope is "zero" at this moment. You should be able
to understand the rest....there is a whole mine field to pick. You'll come up
with some of your own.
ciao
Tonyj
  • #149
  • Aug 11, 2007 6:17pm Aug 11, 2007 6:17pm
It would be ludicrous to flame anybody in here. If someone is making good money scalping, while you've tried it and failed or never tried it but read that people are failing, it just means that person making money knows something about him/herself that you don't and has a refined scalping technique.

How the hell do we know that most fail? It's all hearsay isn't it. We know nothing until we experience it on a personal level one way or another, that's just the way
life is.

Stranger:"This horse never wins"
You: -"Really? No bet for me on that one then!"
Stranger:"Yeah, you will lose if you do"
You -"O.K"

See thread

"long run profits impossible with short term trading?"
http://forexfactory.com/showthread.php?t=41627
  • #150
  • Aug 11, 2007 6:58pm Aug 11, 2007 6:58pm
.....I really don't know the point of this thread anymore...there is no mathematical reason simply because given a lim 1-> infinity trades with a profitability of > 0 can be achieved by an unlimited amount of ways and failed by another unlimited amount of ways.

You can randomly allocate nrs to both r/r, win % and pips used and so forth, and you can invent scenarios for either side. The whole thing is utterly pointless, as there's no way of proving or disproving either side.

The actual trading reality of any one trader is solely what counts and if there's people that can make a living off scalping every day and 300 trades in 24 hours - good for you. If you can make it trading weekly bars and 2 trades a year - good for you.
What suits one guy's style might be incompatible with another. There is no "one right way", but there IS a distinguishable amount of time and complexity in some approaches.
Nobody can tell me 300 trades a day are less stressfull than 2 a week and to be perfectly honest - if you really can make 100+% a month, how many months do you need to do that before actually leaving that behind and enjoying life to put it philosophically. Else I don't see the point in making the money in the first place...deviating now, so I'm gonna make it brief:

These sort of threads always end up in a "battle of styles and beliefs" and reminds me a lot of those cheap martial arts movies where different schools try to outdo one another or them hardcore gangster rappers beefin' up one another about who from da realest hood.

Whatever rocks your boat - if it works for you: good then!

There's way to fit any statistic and probability so it works for you, you just got to be able to PERSONALLY replicate it.

No point in starting peeing contests over it or expecting a formula to explain why your and only your trading approach can or cannot work. It can favor you or put you at a disadvantage, but you COULD always outdo it either way to either side - positive or negative. Some miss an elephant standing in front of it with a shotgun, some can hit a pea 500 meters away with a BB gun.

Whatever guys, but where's the educational value or point people are trying to make here...live and let live.

I'm not on drugs but 5 minutes from going to bed, so I might be a bit mellow. Too much fighting over no real point in the last pages I saw, so I'm just saying..

N8 & you're all scheduled for a group hug in the morning so don't be late!
Trust price. Know yourself.
  • #151
  • Aug 12, 2007 12:31pm Aug 12, 2007 12:31pm
Quoting bobblong
It would be ludicrous to flame anybody in here. If someone is making good money scalping, while you've tried it and failed or never tried it but read that people are failing, it just means that person making money knows something about him/herself that you don't and has a refined scalping technique.

How the hell do we know that most fail? It's all hearsay isn't it. We know nothing until we experience it on a personal level one way or another, that's just the way
life is.

Stranger:"This horse never wins"
You: -"Really? No bet for me on that one then!"
Stranger:"Yeah, you will lose if you do"
You -"O.K"

See thread

"long run profits impossible with short term trading?"
http://forexfactory.com/showthread.php?t=41627
Bobblong:

Hearsay? Have you heard of the word "brokers"? They were the ones
that revealed the facts.
  • #152
  • Aug 12, 2007 4:40pm Aug 12, 2007 4:40pm
I was still breaking even after 6months of trading ( being Ł150 in the account ), but I worked out my 360trades cost me @Ł950 doh!!!


Money sucks hey!!
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #153
  • Aug 13, 2007 9:26am Aug 13, 2007 9:26am
Quoting hanover

Are you saying that plotting price against time is, or can be approximated by, a linear polynomial? I don't understand.

David

Hah! David, you beat me to it. I couldn't believe that somebody would describe price as a function of time this way.

Price is not a function of time in the same manner as y=mx+b or P=mt+b. This would imply that the "slope" of P(t) is a known value. The past change in price is well-known, but we don't trade for the past, we trade for the future! Time runs forward. (And what would be the purpose of the "b" or y-intercept term??)

Slope is defined as rise/run or change in y-values divided by change in x-values. In our case: the change in price divided by the change in time. We are all pretty certain that we know how to measure changes in time - that is a known value. What is unknown is the future change in price! If you have a polynomial relationship given to you, you will always know every point on that line. For instance, y=14.3x+201. You can graph that and know every point on that line from negative infinity to positive infinity. No so with price/time charts.

Speaking about values known and unknown, I wanted to relate this to one of the reasons why most daytraders/scalpers fail. Actually this is more about inequalities in information - the only market participants able to exploit known information are the brokers. They know what the spread/commission is (as do the traders), and they profit from it since they know what the spread will be on future trades (this is key!). Traders do not make money from the spread - they make money by having profitable trades and the spread ends up being their main cost.

Traders deal with all sorts of unknown values since price is, by its very nature, uncertain. When will a trend end? When will a new one begin? How high will price spike? Where should I put my stop? What will the NFP numbers be? Will the Fed cut rates? How much are they likely to cut them by? What if I'm wrong?

Think about how valuable known information is (future spread) compared to uncertain information (future price). Traders lose money constantly even though their profits are (theoretically) unlimited! Brokers make money consistently even though their potential profits are quite constrained - a measly 2 or 3 pips per trade on the EUR/USD while the trader stands to make hundreds on just one trade alone. The relationship between potential profits for a trader are orders of magnitude above and beyond what the broker is assured to make! Information, and specifically the ability to profit from it, is unbelievably powerful. No matter what uncertainties the trader faces, the broker always knows the difference in the bid/ask. Though a small amount of pips, it is more than enough to make up for the uncertainies borne by the traders.

Since I started trading, I've realized that the more trading decisions I force myself to make usually mean the more chances I have to make an incorrect decision. For instance, if I have a system that relies on five different entry criteria, I have a lot of chances to make a wrong decision. If I decide to only buy in the direction of the long-term trend (or direction of positive interest rate differential/swap), I've taken a huge amount of decision-making out of the equation - I'm far less likely to make a bad decision! Even though I may pass up some good trades, look at the GBP/JPY and tell me whether you would have had a higher expectancy only taking long trades. You could almost have randomly entered long (no decision-making whatsoever) and made a killing.

When I think of a daytrader who is turning 5 or 10 trades per day, I can't help but think about all of the possibilities for bad decision-making. Just the stress alone can put your mind into a state that quality decisions become tough to make. Why not carefully select the best set-ups? When you take every potential set-up that comes along, you push your expectancy closer and closer to a 50/50 chance of being right. Paying the spread throws the house advantage to the broker in this situation.

In short, I think that trading on longer time frames allows me more room for error, pushes my chances for success farther in my favor, and at the same time reduces my costs relative to my gains. Somebody said in another thread that looking at a daily or weekly chart makes him think you'd have to be an idiot to lose. I am starting to think that he is right.
  • #154
  • Aug 13, 2007 12:54pm Aug 13, 2007 12:54pm
Seven baffling pillars of wisdom

1 Birch and Swinnerton-Dyer conjecture Euclid geometry for the 21st century, involving things called abelian points and zeta functions and both finite and infinite answers to algebraic equations

2 Poincaré conjecture The surface of an apple is simply connected. But the surface of a doughnut is not. How do you start from the idea of simple connectivity and then characterise space in three dimensions?

3 Navier-Stokes equation The answers to wave and breeze turbulence lie somewhere in the solutions to these equations

4 P vs NP problem Some problems are just too big: you can quickly check if an answer is right, but it might take the lifetime of a universe to solve it from scratch. Can you prove which questions are truly hard, which not?

5 Riemann hypothesis Involving zeta functions, and an assertion that all "interesting" solutions to an equation lie on a straight line. It seems to be true for the first 1,500 million solutions, but does that mean it is true for them all?

6 Hodge conjecture At the frontier of algebra and geometry, involving the technical problems of building shapes by "gluing" geometric blocks together
7 Yang-Mills and Mass gap A problem that involves quantum mechanics and elementary particles. Physicists know it, computers have simulated it but nobody has found a theory to explain it


if you want to read the whole article http://www.guardian.co.uk/uk_news/st...298728,00.html
  • #155
  • Aug 13, 2007 3:53pm Aug 13, 2007 3:53pm
Megadave 5000.... You are right in part of your argument. Evidently you are
not a Point and Line Trader...better known as a P&L'er. I have not only
Rene Descartes, but also Balzano and Weierstrauss to back me up. What do
you think that number on the chart is...if it's not the price? And what is it
down on the bottom of the chart. It's "time"....Price equals the function of
time. You said it....the run and rise. Of course you couldn't and can't see it.
Neither did Gann and the rest of the so called experts...nor anyone else in
whole trading field today. It took me over 20 years of trying to figure out
the 5-9 line in the P&L methodology. (I made mine in commodites and left
it over 20 years ago). It bugged me until I came over to the forex. It is still
bugging me...but I think I can prove the 5-9 mathematically. The other lines
in P&L Methodology was easy....like those: 5-1's, 5-2's, and all the 6's. You
evidently were looking at what you call the slope as a tangent angle. But
the tangent angle from "WHERE"? In the P&L system we have the heart and
soul of of its method called the "Dot". This Dot is a close as it can get to
the slope in my version called the Cartesian Coordinate System. The fact
that you can't see that price is a function of time....and you are unaware
of the real slope...means that you aren't aware of the slope becoming a
secant angle. Also you wouldn't be aware of the Rolles theorm before
that slope becomes a secant. Probably not aware of the exponential
and logarthmic function involved in the curve for which a trend on the
chart would seem to be going up....would in fact be going down. Not
only that but it could be just the other way around in the lower time
frame and jumping from what would be for a time being in first quadrant
and then in the next moment being in the fourth quadrant. But all of this
has to prove Rolle's theorm before it even becomes a secant and the
slope becomes negative. Everything starts from the "open"....and in the
forex the market is a twenty-four hour. In other markets....you have
shorter time.....and the reason for "gaps". Megadave....don't feel slighted.
Nobody else seen it either....except a couple guys like DeMark, Hurst...
and some others. But they all stopped at the door. There is a hell of a
lot more to this than I've gabbed here.
ciao
tonyj
  • #156
  • Aug 13, 2007 4:35pm Aug 13, 2007 4:35pm
I'm just gonna go pat Schroedinger's cat now.
Trust price. Know yourself.
  • #157
  • Aug 13, 2007 5:25pm Aug 13, 2007 5:25pm
Quoting megadave5000
Hah! David, you beat me to it. I couldn't believe that somebody would describe price as a function of time this way.

Price is not a function of time in the same manner as y=mx+b or P=mt+b. This would imply that the "slope" of P(t) is a known value. The past change in price is well-known, but we don't trade for the past, we trade for the future! Time runs forward. (And what would be the purpose of the "b" or y-intercept term??)

Slope is defined as rise/run or change in y-values divided by change in x-values. In our case: the change in price divided by the change in time. We are all pretty certain that we know how to measure changes in time - that is a known value. What is unknown is the future change in price! If you have a polynomial relationship given to you, you will always know every point on that line. For instance, y=14.3x+201. You can graph that and know every point on that line from negative infinity to positive infinity. No so with price/time charts.

Speaking about values known and unknown, I wanted to relate this to one of the reasons why most daytraders/scalpers fail. Actually this is more about inequalities in information - the only market participants able to exploit known information are the brokers. They know what the spread/commission is (as do the traders), and they profit from it since they know what the spread will be on future trades (this is key!). Traders do not make money from the spread - they make money by having profitable trades and the spread ends up being their main cost.

Traders deal with all sorts of unknown values since price is, by its very nature, uncertain. When will a trend end? When will a new one begin? How high will price spike? Where should I put my stop? What will the NFP numbers be? Will the Fed cut rates? How much are they likely to cut them by? What if I'm wrong?

Think about how valuable known information is (future spread) compared to uncertain information (future price). Traders lose money constantly even though their profits are (theoretically) unlimited! Brokers make money consistently even though their potential profits are quite constrained - a measly 2 or 3 pips per trade on the EUR/USD while the trader stands to make hundreds on just one trade alone. The relationship between potential profits for a trader are orders of magnitude above and beyond what the broker is assured to make! Information, and specifically the ability to profit from it, is unbelievably powerful. No matter what uncertainties the trader faces, the broker always knows the difference in the bid/ask. Though a small amount of pips, it is more than enough to make up for the uncertainies borne by the traders.

Since I started trading, I've realized that the more trading decisions I force myself to make usually mean the more chances I have to make an incorrect decision. For instance, if I have a system that relies on five different entry criteria, I have a lot of chances to make a wrong decision. If I decide to only buy in the direction of the long-term trend (or direction of positive interest rate differential/swap), I've taken a huge amount of decision-making out of the equation - I'm far less likely to make a bad decision! Even though I may pass up some good trades, look at the GBP/JPY and tell me whether you would have had a higher expectancy only taking long trades. You could almost have randomly entered long (no decision-making whatsoever) and made a killing.

When I think of a daytrader who is turning 5 or 10 trades per day, I can't help but think about all of the possibilities for bad decision-making. Just the stress alone can put your mind into a state that quality decisions become tough to make. Why not carefully select the best set-ups? When you take every potential set-up that comes along, you push your expectancy closer and closer to a 50/50 chance of being right. Paying the spread throws the house advantage to the broker in this situation.

In short, I think that trading on longer time frames allows me more room for error, pushes my chances for success farther in my favor, and at the same time reduces my costs relative to my gains. Somebody said in another thread that looking at a daily or weekly chart makes him think you'd have to be an idiot to lose. I am starting to think that he is right.
Dave: I made a comment elsewhere. Charles Drummond is the guy that
came up with the "Point and Line Methodology". Charlie D. is a genius...
and the sad fact is that very few people know who he is. The P&L does
try to predict the future. The wording "Point and Line" goes back to all
the greatest mathematicans in the past....like those of Leibniz, Newton,
Fermat, Abel, Bolzano.....on and on...who recognized that the line had to
be continuous. This baffled the greatest minds, back then and it wasn't
until Bolzano came along to prove it and then for Weierstrass to come up
with a formula for it. Even the word "limit" had all the greatest minds pulling
their hair out. The P&L has one indicator that submits or hints to the
prognostication of the next day. I'll give it to you...for whatever its worth:
H-L/2......(high minus low divided by two)...you add this to the CLOSE for
the next days HIGH....and subtract (H-L/2) from the CLOSE for the next
days LOW. Now there is and are a number of ways of looking at this...but
it's for you to play with it. Unless one has studied Charles Drummond's
"Point and Line"...and really understand it....it can be a very dangerous
thing. It's like having a stick of dyamite in your back pocket. I would suggest
you try to see and understand where the "slope" is in your trading. Your
y=mx+b......m is the slope (Y2-Y1)/(X2-X01)....or the tangent angle which
is the sine/cos. The price is the sine ...."time" is the cosine. Without
going into explaining the "limits" for which you determine the "point" on
the line and from there the slope. "x" is on the abscissa...b is the slope-
intercept form of the line. The market doesn't stay on a straight line...I've
tried to explain some of this in my other comment. So you're a bit confused
and taking certain things out of context without knowing what I'm talking
about. The PRICE is the sine....and the TIME is the cosine...and if you
don't understand this, I'm sorry...but I don't have the space here to run
thru all the facts and nuances that involves this method of looking at the
market. Everyone have been drudged with certain methods by those in
the past. It served it's purpose then...but today we are living in a different
world. It can still work today. I'm an octogenarian and stopped trading
when you probably were just a kid. Does this mean I'm an expert....NOPE.
ciao
Tonyj
  • #158
  • Aug 13, 2007 5:56pm Aug 13, 2007 5:56pm
Quoting Fanat
There are about 20 days in a month X 12 months. How many trades that make? A: 1,200.
What about the spread being paid? 1,200x3pips=3,600 pips. If you open a standard account, then it means that in a year you pay in the ballpark of 3,600x10=36,000$ spread fees!!!

Any ideas, comments?
You are perfectly correct. scalpers use larger volumes and with that, the pressure u feel from the spread alone is tempting to make u exit.

I've experienced that when i used to scalp
100% of traders are losers. Just that some win more than they lose!
  • #159
  • Aug 13, 2007 6:06pm Aug 13, 2007 6:06pm
and why people always take something as simple as this and blow it out of proportion?
100% of traders are losers. Just that some win more than they lose!
  • #160
  • Aug 13, 2007 8:08pm Aug 13, 2007 8:08pm
Quoting Fanat
Hello all. For a long while I have been thinking about many things trading related and ways to improve my trading... I am sure that all of you have heard the phrase that "Day trading and Scalping is not profitable and most day traders lose." So I've decided to do the math and see if it shows anything... I was surprised badly...

Lets check few things out:
Scalpers/Daytraders on average trade 5 trades per day (or 1 trade using 5 lots). I've heard some scalpers may do as many as 30 trades. Lets say that we opened a first account that is 10,000$ (we don't want to risk a lot and since we do only short term trades we do not need a big deposit.)

There are about 20 days in a month X 12 months. How many trades that make? A: 1,200.
What about the spread being paid? 1,200x3pips=3,600 pips. If you open a standard account, then it means that in a year you pay in the ballpark of 3,600x10=36,000$ spread fees!!!

36,000$ of 10,000$ account just for the spread. That means that you have to make MORE than 36k which is 360% on a 10k account just to break even. Nothing to say about the lossess which you WILL have.

Considering how tough it is to REGULARLY make 360%+ ROI, I can see that maybe this is one of the many hurdles why many short term (scalpers) lose.


Any ideas, comments?
Day trading has its advantage such as reducing risk and profiting from the ups and down if you can do it correctly. I have seen a signal provider make about 10% profits while the market is ups and downs about 200 pips per day in the past week. For a swing or position trader, it may make no money or be stopped out but the day trader makes profits.
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