Sunday, August 14, 2011

Finding your comfort level in trading

In comments,  Amarrdiip Kumaarr suggested that emphasis on swing trading could cause confusion in mind sof readers. He posted an article written in his blog which says that he is more comfortable with day trading.
Well, what I said was that in my tests (quite comprehensive, I assure you), swing trading makes more money while day trading does not respond well to automated trading. These are test results. The fact is that traders must find their own comfort levels. All kinds of trading is good if it is good enough for you. You really need to find your own comfort level.

Why does swing trading become troublesome at times? The answer lies in the nature of markets. Sometimes, markets are almost perfectly oriented towards swing trading. Sometimes they become volatile, almost random when the only method that makes money is intraday.

However, when you add up all the gains and the losses over a large period of time - my tests are from Janaury 1, 2007 to date, giving about four and a half years, swing trding makes most money.

No matter what trading method you follow, you have to understand that there will be times when the systems simply go out of sync with the current market.


 

3 comments:

Amarrdiip Kumaarr said...

Thanks for your precision guidance.

daytrader said...

dear sir

i think all trader have his own style ,its trader duty to know his comfort and stic to it after all the colour of the money doesn't change for day trading and swing trading ,also both trades are for active traders.

thanks and regards
ur follower

Pi said...

i totally agree with sudarshan ji that its difficult to make money in intraday trading and much easier with swing trading in equities. but even there, I have put in the disclaimer that the current environment is a tough one to make money even with swing trading. And the reason being that there is no clear cut trend. We've had a sideways to down trend since last 1 year, but it has not been a strong trend. The downmoves have all mostly been slow and dragging down interspersed with massive short covering rallies. I think traders should wait for long term uptrends to resume ( Mkt price>200DMA, 50DMA>200DMA) and then do swing trading from the long side.

If you want to trade on an intraday timeframe I would suggest trying to trade commodities on MCX. Gold, Silver, Crude, Copper, other base metals etc have very good intraday moves which are very tradable. Again the strategy there has to be trend following. I made good money in silver when silver was in play from feb-june, trading both long short whichever direction intraday trend was present. Currently I am doing the same in gold. Give it a try. But whatever you do, remember to have stop loss defined and take a small loss when you are getting one, preserve capital so you may come back and make money some other day. Because margins in gold, silver are very low its very easy to get caught up in a losing position and lose your entire capital in a matter of days.