Comparison Between Styles, Costs, and Profits
Although “Day Trading” is the most widely talked about Trading Style for Retail Traders which is the Market Participant Group who has learned how to trade and invest from home, it is the least profitable of all the short-term Trading Styles. This is a little known fact that no one ever tells Retail Traders when they start to learn to trade.
This is because so many vendors make so much money from Retail Day Traders. The allure of Day Trading is that it is the “ultimate” style, pitting the trader against the wily Market Makers. The cost of Day Trading using the proper tools, time required to do it right, and lower percentage of profitable trades all consume more profits than any other Trading Style.
Market Makers have a far less important role these days due to the automation of the marketplace, and the extremely high liquidity generated by High Frequency Trading Firms. High Frequency Trading Firms actually provide the liquidity that used to come from the Market Makers.
So what Trading Styles are the most lucrative?
Both Swing Trading and Position Trading have a significantly higher “Return on Time and Expenses” than Day Trading. Trading for a living or even trading part-time is a business, or at least should be treated as a business.
As such, you need to “pay” yourself an hourly wage or a salary as well as cover ALL of your trading expenses.
Most of the time when I discuss this aspect of trading with new Students who have been trading for a while, they are baffled as they have not begun to consider how many hours they are spending, nor are they aware of all of the costs.
Some Retail Traders try to scrimp on charting software systems. Instead of getting the best trading charting software for their Trading Style, they try to do chart analysis with a free program. That is simply pinching pennies and throwing away dollars. If you want to make $1,000-$10,000 a month which is pretty typical for Retail Traders, then you need to stop wasting time and money, and get a proper set of charting software tools. This includes a charting program where you can save your work, build watchlists, and manage your trading in a professional manner.
Position Style Trading is the least used, yet most profitable Trading Style for more Market Conditions than other styles. Below is a chart example of a Position Trade.
Martha Stokes CMT
TechniTrader technical analysis using TC2000 charts, courtesy of Worden Bros.
Chartered Market Technician
Instructor & Developer of TechniTrader Stock & Option Courses
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