We have heard many day traders say they prefer day trading because that way they leave less money lying on the table. They bemoan the plight of the poor position trader who is unable to extricate himself from a bad trade as quickly as can the day trader.
They are of the opinion that they are able to extract profits quickly, while they are available. They enjoy the thrill of daily combat in the market place. Day traders also are of the opinion that they have more opportunities than do position traders. Finally, and importantly, day traders feel comfortable in not holding any positions overnight, and therefore are able to sleep without fear that they will awaken to some horrible unexpected gap in prices that will wipe out any profits that may have accrued, and which could result in a huge loss. Of course, position traders hold just the opposite view. They feel that it is the day trader who is leaving the most money lying on the table.
They feel that day trading erodes their capital base with excessive transaction costs. They pity the day trader who has to fight his way into a trending market numerous times throughout the day, often getting badly beaten up for his trouble, whereas they, the position traders, get to take advantage of the longer term trend. Position traders are not burdened with sitting in front of a screen throughout the day. They would rather be free to enjoy other aspects of life, and avoid the frantic trading often required of day traders. Position traders contend that with so many choices from which to choose, there is no lack of opportunity for entering well-thought out, well planned trades. Finally, position traders take great comfort in knowing that when a market truly begins to trend and yields huge rewards relative to risk, that they will be in the market and will not miss the move. Who is right? They are both right, or they are both wrong. It depends upon your point of view and where you are most comfortable.
The choice of time interval in which to trade is a function of comfort level: economic comfort level, emotional comfort level, or psychological comfort level, maybe all three. It is also a function of financial capability and trading acumen. It is the knowledgeable trader who makes the most money. The trader who knows himself, knows how to read a chart, and is knowledgeable about the inner workings of the markets makes the most money, but even then, only if his knowledge is accompanied by disciplined action, disciplined decision making, and sufficient capital to comfortably support his style of trading and the time frame in which he attempts to trade. Sometimes a combination of both day trading and position trading is in order.
Combining the two may be a good strategy for the position trader attempting to optimize his entries to and exits from the market by day trading an intraday chart at the specific times of entry and exit. Combining the two may be a good strategy for the day trader who determines to hold a winning position overnight in those situations where a protective stop loss is able to be moved to where it is a profit protecting position. Each trader will have to give up something in order to gain a feature enjoyed by the other. For example, the day trader will have to give up not holding overnight and miss being able to enjoy the benefits of the longer term trend. The position trader, provided he has the time and ability to monitor the market during the day, will have to acquiesce to being tied to a screen for whatever amount of time it takes to day trade his entries and exits in an attempt to optimize them. If unable to watch during the day, it will be rather difficult to optimize entries and exits.
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