On short-term traders

[deisik]

After a lot of thinking, I came to a somewhat counterintuitive conclusion that despite popular opinion short-term traders are preselected to be successful. How come? Read further to find out

The popular opinion has it that short-term traders are essentially gamblers. But that's simply not possible due to the very nature of short-term trading as losses in this trading setup are set to accumulate quickly, so whoever tries it and fails has to wind up and do that fast unless he loses all and is stopped by his empty stomach. In this way, short-term trading brutally weeds out those who can't earn consistently in the long run. It is a type of natural selection where short-term traders are selected to be successful if they are to remain in the game, and this selection works fast at that

On the other hand, long-term traders have the option of turning into long-term holders and ultimately into bag holders if they are unable to earn consistently long term. Ironically, it is also kind of natural selection, though in this case in works in reverse, i.e. it is a negative selection which essentially favors losers, even though it takes years to reveal itself. Considering these two types of selection and their effects on different strata of traders, we have to conclude that the percentage of successful short-term traders should be way higher than among other types of traders

The bottom line is that whoever claims that short-term traders are losers en masse has probably fallen victim to a number of biases, misconceptions and prejudices as these traders definitely know what they are doing. Otherwise, they simply can't stay in the game for long and that's it for now

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[wheelz1200]

Who says the participants in the playing field stays completely static.  New short term traders come along all the time until the machine spits them out.  2017 everyone was a successful trader, tell me how many of those traders that had the same success short term trading in 2018.  It's a circle when things are good everyone knows what they are doing, when market is bear no one knows what they are doing.  Dont tell me all these traders that were left after the natural weeding out were all on the sidelines from dec 2017 all the way to Jan 2019 then jumped back in and started to do their thing.

Heres the deal with crypto trading as with most other things, if you cant spot the fish in the room it's probably you.


Edit: randomly went back to Nov 2017 and found a poll.  Bitcoins price prediction 32 enter 32 miserably wrong.  It's tough man.  Not many people can make it as traders.  If all 32 people thought this way in that poll and had money to back they certainly would have bought the entire slide.

https://bitcointalk.org/index.php?topic=2371222.0;viewResults

[exstasie]

Who says the participants in the playing field stays completely static.  New short term traders come along all the time until the machine spits them out.

This is a big part of it. I'm not sure whether it's a truism, but it's commonly said that 90% or more retail traders lose money. The brutal realities of day trading are constantly weeding losers out of the market, but new traders are entering the market every day. The OP doesn't seem to be accounting for this turnover.

Plus, I've come across many traders who seem to approach day trading like degenerate gambling. They lose over and over and keep reloading their accounts. They aren't truly trading to make profits. It's for the gamble, the adrenaline rush. I'm not sure how many of these people exist in the market, but they definitely exist.

In my own anecdotal experience, my win rates suffer when I trade very low time frames. The signal-to-noise ratio is too much to overcome. Higher time frames are much more predictable.

[pooya87]

i disagree with calling short term traders, gamblers even if most of them are actually gambling.

people who do this:

2017 everyone was a successful trader, tell me how many of those traders that had the same success short term trading in 2018.

are gamblers but that doesn't mean short term trading is gambling. basically people who do this and are only successful when price is rising are not even trading, they are making a bet of buying something and selling it later for a higher price. but trading is not that. trading means riding the market movements no matter in which direction they are going and making profit from those movements.
so if you were a trader then you should be able to make profit in both 2017 and 2018 despite the different trends.

[adaseb]

Statistically around 95% of all traders end up losing money. This is based on stock, futures and forex trading, however I am pretty sure Crypto isn't too far off.

The shorter the time frames you trade the harder it is to make money, I think that day traders who are succesful and do it full time are less than 1% of all active traders.

The longer time frames, it becomes easier to predict the market however most people don't have the patience or capital to wait that long to make some money. So most people prefer to trade on margin and want money in an hour or a day and they usually end up losing in the long term.

[magneto]

The popular opinion has it that short-term traders are essentially gamblers. But that's simply not possible due to the very nature of short-term trading as losses in this trading setup are set to accumulate quickly, so whoever tries it and fails has to wind up and do that fast unless he loses all and is stopped by his empty stomach. In this way, short-term trading brutally weeds out those who can't earn consistently in the long run. It is a type of natural selection where short-term traders are selected to be successful if they are to remain in the game, and this selection works fast at that

On the other hand, long-term traders have the option of turning into long-term holders and ultimately into bag holders if they are unable to earn consistently long term. Ironically, it is also kind of natural selection, though in this case in works in reverse, i.e. it is a negative selection which essentially favors losers, even though it takes years to reveal itself. Considering these two types of selection and their effects on different strata of traders, we have to conclude that the percentage of successful short-term traders should be way higher than among other types of traders

The bottom line is that whoever claims that short-term traders are losers en masse has probably fallen victim to a number of biases, misconceptions and prejudices as these traders definitely know what they are doing. Otherwise, they simply can't stay in the game for long and that's it for now

I don't think that short term traders are gamblers at all. Given the fact that they probably need to rely on more technical indicators, as opposed to the fact that you can much more easily analyse the fundamentals if you're investing for the long run.

Nor do I think that short term trading is necessarily something that is unprofitable for everyone. If you have the necessary capital (extremely important if you want to influence the market), knowledge, and leverage - you can certainly be successful.

However, the point I think most people try to make about short term investors is that there is a lot of traders with absolutely no knowledge, that base their trades off pure emotion and no technical indicators or fundamentals that play in the short term markets. Not to discount short run swing trading or the like as a profitable long term venture at all.

[deisik]

Who says the participants in the playing field stays completely static

No one says that

I specifically point that out by referring to a market selection which is a never-ending process. The fact that a process never ends doesn't make it static (though I definitely see your confusion). And as this process is pretty fast at eliminating wannabe short-term traders (unlike with other trading approaches), the end result is that most "long-term" short-term traders have to be survivors. But to be a survivor in this activity means being profitable, as simple as it gets

but it's commonly said that 90% or more retail traders lose money. The brutal realities of day trading are constantly weeding losers out of the market, but new traders are entering the market every day. The OP doesn't seem to be accounting for this turnover

The timeframe for this turnover is pretty short, which I also mention in the OP. So it is not like I don't account for it. Moreover, it is the basis of my assumption. It is exactly the short timespan within which the market proves that you are not a short-term trader that makes it a valid assumption

[YuginKadoya]

I really think that short term traders have a little risk in not making their targets because of the range of their trading points, Yes this still count as gambling but with a little risk involved, And even though they are basing their assumptions on the previous market flow there is a high chance in winning by taking that chance than to do a long term trading.

[onrise]

I really think that short term traders have a little risk in not making their targets because of the range of their trading points, Yes this still count as gambling but with a little risk involved, And even though they are basing their assumptions on the previous market flow there is a high chance in winning by taking that chance than to do a long term trading.

Short term trading is a better option as you are less prone to volatility which could happen in the mid or long term. Though markets recover in the end but if you need immediate money in between than may have to sell even in losses which may be really disappointing thing to do in the crypto as you can make a good return in crypto markets if stayed invested and in short term can book profits regularly.

[wheelz1200]

Who says the participants in the playing field stays completely static

No one says that

I specifically point that out by referring to a market selection which is a never-ending process. The fact that a process never ends doesn't make it static (though I definitely see your confusion). And as this process is pretty fast at eliminating wannabe short-term traders (unlike other trading approaches), the end result is that most "long-term" short-term traders have to be survivors. But to be a survivor in this activity means being profitable, as simple as it gets

but it's commonly said that 90% or more retail traders lose money. The brutal realities of day trading are constantly weeding losers out of the market, but new traders are entering the market every day. The OP doesn't seem to be accounting for this turnover

The timeframe for this turnover is pretty short, which I also mention in the OP. So it is not like I don't account for it. Moreover, it is the basis of my assumption. It is exactly the short timespan within which the market proves that you are not a short-term trader makes it a valid assumption

I know people that restock their balance time over time, that doesnt mean they are survivors.  If someone keeps putting in $50 a week into their accounts to trade and lose a lot of the time I would not consider them survivors even though they have been short term traders for awhile.  Crypto trading is an addiction for some dont assume that everyone who hasn't been "weeded out" is playing with the same initial bank roll.  Also there are people that both hold a portion of their crypto long term and short term trade.  They restock their trading accounts with some profits from their longs. 

There are so many different scenarios why people short term trade for an extended period of time, not all those scenarios are ones in which they are survivors

[klaaas]

I really think that short term traders have a little risk in not making their targets

It is. At the end the daily losses and gains over x period have to equal out or do better to keep in the profit zone.

There is always a unsure factor in trading so i would pick Gamblers out of the 3.

[deisik]

There are so many different scenarios why people short term trade for an extended period of time, not all those scenarios are ones in which they are survivors

But what does it change in the bigger picture?

I agree there might be people in this activity (that we call trading) who are in mostly or primarily for the thrill of it (as we all love the thrill of trading to a certain degree). But should we call them traders in the first place, and still less short-term traders in the second place just because they happen to make plenty of trades in a while? These people are hardcore gamblers deep inside but how many of them are out there?

[wheelz1200]

There are so many different scenarios why people short term trade for an extended period of time, not all those scenarios are ones in which they are survivors

But what does it change in the bigger picture?

I agree there might be people in this activity (that we call trading) who are in mostly or primarily for the thrill of it (as we all love the thrill of trading to a certain degree). But should we call them traders in the first place, and still less short-term traders in the second place just because they happen to make plenty of trades in a while? These people are hardcore gamblers deep inside but how many of them are out there?

I would say the majority (over half) of people who shor term trade are in it somewhat for the thrill.  Stocks are a little different but you might have more groups in crypto that short term trade with advance knowledge of certain events and market movers that can make markets swing by themselves or with groups they are in.  TA in crypto on the short term is very fickle.  News swings the crypto market more than stocks (i.e. certain exchanges can say they are going to delist or add a certain coin and you will get wild swings simply based on that).  Those announcements can not be predicted on an accurate basis (unless you are in the know).  Things like that completely wreck any TA.  Long term I think you will get most everyone in this forum thinking bitcoin will rise further than today's price, for the next couple weeks who knows, maybe it pulls back maybe it goes to 9k?  It's a crapshoot.  That is why I think short term trading is gambling whereas long term hold (on the right assets) is less of a gamble.

[deisik]

There are so many different scenarios why people short term trade for an extended period of time, not all those scenarios are ones in which they are survivors

But what does it change in the bigger picture?

I agree there might be people in this activity (that we call trading) who are in mostly or primarily for the thrill of it (as we all love the thrill of trading to a certain degree). But should we call them traders in the first place, and still less short-term traders in the second place just because they happen to make plenty of trades in a while? These people are hardcore gamblers deep inside but how many of them are out there?

I would say the majority (over half) of people who shor term trade are in it somewhat for the thrill

How do you know that?

And please keep in mind, it is not like half of short-term traders are in this business "somewhat" for the thrill. They should be in it exclusively for the thrill alone since otherwise you have no reason to call them gamblers in the first place (and in the second place market selection instantly kicks in). With that said, your assumption basically leads to a suspicious conclusion that there are more gamblers in trading than gamblers in gambling, which would be a paradox (read, it is highly unlikely). Further, you can't make big wins with short-term trading by definition as this approach to trading is about accumulating small profits now and then, here and there. Definitely not something which true gamblers are looking for (big wins without much ado)

[dothebeats]

The popular opinion has it that short-term traders are essentially gamblers.

They are gamblers, yes but with a systematic and somewhat genuine approach of beating the house on its own game. That might sound rosy and inviting but in reality, a lot of short-term traders are still losers though simply because their judgment doesn't match what the market has in mind or what other traders want to do.

But that's simply not possible due to the very nature of short-term trading as losses in this trading setup are set to accumulate quickly, so whoever tries it and fails has to wind up and do that fast unless he loses all and is stopped by his empty stomach. In this way, short-term trading brutally weeds out those who can't earn consistently in the long run. It is a type of natural selection where short-term traders are selected to be successful if they are to remain in the game, and this selection works fast at that.

Well to simply put, the house always wins, and that is in relation to the notion that short-term traders are essentially gamblers.

On the other hand, long-term traders have the option of turning into long-term holders and ultimately into bag holders if they are unable to earn consistently long term. Ironically, it is also kind of natural selection, though in this case in works in reverse, i.e. it is a negative selection which essentially favors losers, even though it takes years to reveal itself.

This I couldn't agree more. Most long-term traders (or hodlers) are simply biased to the thought that whatever it is that they're holding are going to make it big someday. Well I'm guilty of that but it works for me so yeah... Anyways, the hardest part perhaps of being a long-term trader is knowing when to continue holding or when to stop it since it's already a dying asset continuously deprecating value as time passes by.

[tippytoes]

I really think that short term traders have a little risk in not making their targets because of the range of their trading points, Yes this still count as gambling but with a little risk involved, And even though they are basing their assumptions on the previous market flow there is a high chance in winning by taking that chance than to do a long term trading.

Short term trading is a better option as you are less prone to volatility which could happen in the mid or long term. Though markets recover in the end but if you need immediate money in between than may have to sell even in losses which may be really disappointing thing to do in the crypto as you can make a good return in crypto markets if stayed invested and in short term can book profits regularly.

That's when priority comes into play. It depends on your situation why you are doing the short-term trading. Either for fast turnaround of investments or need of money. Either way, it is up to the trader how he will manage his portfolio. As long as he is responsible with his actions, there's no problem with that. At the end of the day, it is his money at stake.

[wheelz1200]

There are so many different scenarios why people short term trade for an extended period of time, not all those scenarios are ones in which they are survivors

But what does it change in the bigger picture?

I agree there might be people in this activity (that we call trading) who are in mostly or primarily for the thrill of it (as we all love the thrill of trading to a certain degree). But should we call them traders in the first place, and still less short-term traders in the second place just because they happen to make plenty of trades in a while? These people are hardcore gamblers deep inside but how many of them are out there?

I would say the majority (over half) of people who shor term trade are in it somewhat for the thrill

How do you know that?

And please keep in mind, it is not like half of short-term traders are in this business "somewhat" for the thrill. They should be in it exclusively for the thrill alone since otherwise you have no reason to call them gamblers in the first place (and in the second place market selection instantly kicks in). With that said, your assumption basically leads to a suspicious conclusion that there are more gamblers in trading than gamblers in gambling, which would be a paradox (read, it is highly unlikely). Further, you can't make big wins with short-term trading by definition as this approach to trading is about accumulating small profits now and then, here and there. Definitely not something which true gamblers are looking for (big wins without much ado)

I have been in the presence of pepe who trade 3 letter acronyms with no understanding of what they are buying or selling.  After being on this forum for years a large portion of people have little to no idea why they are buying something outside of the idea that someday they are going to be rich, so yes long term holders too are gambling a lot of times.  You seem to have been here a long time.  Can we not agree that people buy crypto in which they just hope it goes up?  If you ask them why I would reckon some would have no idea what they bought other than the drivel they read in one of the [ann] threads.  Throwing your money at that I would consider a gamble, whatever their motives might be.  I think we can agree on that right?

[LimLims]

I am completely agree with you.
I also believe that short-term traders have less risk  compare to other ones.
They are less exposed to volatility in my opinion.
Also as the OP mentioned they also have sure profits coming in that short period of time.
Really its a wise work to do.
They too take a little risk if we see in other prospective.
So they are indeed gamblers upto a certain extent.

[wheelz1200]

I am completely agree with you.
I also believe that short-term lenders have less risk  compare to other ones.
They are less exposed to volatility in my opinion.
Also as the OP mentioned they also have sure profits coming in that short period of time.
Really its a wise work to do.
They too take a little risk if we see in other prospective.
So they are indeed gamblers upto a certain extent.

This isn't a thread about lending though, it's about short term trading.  Lending is a whole other topic.

[pereira4]

Fundamental value investing is all that matters and were people get rich. Get in on something you consider to be undervalued after research, and have patience, lots of it.

Never saw anyone getting rich off a bunch of continuous trades in a row. Those people usually lie and sell their premium trading courses and other online content which is where they make the actual money.