Swing Trading $5K (How to lose most of your cash)

DeletedUser86 · Apr 30, 2015

Going to post a progress thread of sorts. Put 5k of my tax return into my scottrade account to swing trade. We'll see how this goes. Already made first trade:

4/20/15 Bought 300 shares of PE @ 16.51
4/29/15 Sold 300 shares of PE @ 17.60
+6.1%, $327
4/30/15 Bought 62 shares of TNA @ 84.82
5/8/15 Sold 62 shares of TNA @ 86.20
+1.6%, $85
5/8/15 Bought 335 shares of PE @ 16.00

Balance:$5,541

DeletedUser86 · Apr 30, 2015

Bought 62 shares of TNA @ 84.82

MJ DeMarco · Apr 30, 2015

Generally investing 90-100% of all of your risk capital into 1 trade is a dangerous way to play the market.

Nonetheless, I wish you luck as I will follow along.

DeletedUser86 · Apr 30, 2015

I understand putting your egg in one basket is highly risky. It's only 5k tho, and this is a form of online gambling, with better odds

Unknown · Apr 30, 2015

Don't forget about short term capital gains taxes. Good luck

ZCP · Apr 30, 2015

@mrgray03 Without giving away any exact system / details you have..... it would be interesting to hear your decision matrix for each buy / sell.
You going on % swing, ratios, dead animal bounces, the Force, darts, etc........

DeletedUser86 · Apr 30, 2015

I am aware of short term capital gains tax- they treat it like earned income. I also know that if you take a loss for the year you can only claim a $3k deductible per year, and that losses would carry on the following years. ZCP-I don't have any mind-blowing system really. I got into elliot wave theory a few years ago that is about the extent of my technicals, that and trading within a range. I've been burned before doing options, solar stocks, and being short when the market took off and never stopped. I like leveraged ETFs and can make a killing during volatility. I also like stocks that have a lot of price movement, wait for it to get hammered then buy on a down day and chances are very good that you will catch a rebound. I usually see about 5-15% per trade and I'm only looking to hold for the short term. Compound interest gets fun when it is daily, weekly, and monthly.

brickco · May 1, 2015

Let's say you wanted to triple your money over the course of one year doing swing trading (i.e., you wanted to make only $10K on top of your $5K). This means you would need a 9.59% return per month. Historically, the average monthly return of all stocks over a given month is 1.04% with a standard deviation of +/-4.44%. This means you need to work out to 1.92 standard deviations above the mean for 12 consecutive months. There's a 1.37% chance of you getting a 9.54% return in one month. To get that return for 3 months, your odds are 1 in 388,900. To triple your money by making many single trades within one year would be an anomaly. It may seem counter intuitive, but your odds in swing trading are actually better making less trades, because the more trades you make, the more likely your return will be closer to the mean of 1.04% per month and also the more fees are going to eat your capital.

I hate to see someone waste their time.

In fact, a good idea might be to find people who just swing trade (there are lots, sadly) and bet them that they won't make more than 30% over the whole year. You would win that bet 76% of the time.

biggeemac · May 1, 2015

brickco said:
Let's say you wanted to triple your money over the course of one year doing swing trading (i.e., you wanted to make only $10K on top of your $5K). This means you would need a 9.59% return per month. Historically, the average monthly return of all stocks over a given month is 1.04% with a standard deviation of +/-4.44%. This means you need to work out to 1.92 standard deviations above the mean for 12 consecutive months. There's a 1.37% chance of you getting a 9.54% return in one month. To get that return for 3 months, your odds are 1 in 388,900. To triple your money by making many single trades within one year would be an anomaly. It may seem counter intuitive, but your odds in swing trading are actually better making less trades, because the more trades you make, the more likely your return will be closer to the mean of 1.04% per month and also the more fees are going to eat your capital.

Yes, this is similar to a wantrepreneur always looking to cash in on a whale.....instead of chasing much smaller meals and consolidating them into the equivilent of a whale.

DeletedUser86 · May 8, 2015

Sold TNA @ 86.20. Was a lot of price movement, too bad I bought just a little too soon. Waited to it to pick back up enough for a tiny profit. Bought 335 shares of PE @ 16.00. Account now sitting at just above 5500. I broke 10% in a couple of weeks

Fraix · May 8, 2015

brickco said:
Let's say you wanted to triple your money over the course of one year doing swing trading (i.e., you wanted to make only $10K on top of your $5K). This means you would need a 9.59% return per month. Historically, the average monthly return of all stocks over a given month is 1.04% with a standard deviation of +/-4.44%. This means you need to work out to 1.92 standard deviations above the mean for 12 consecutive months. There's a 1.37% chance of you getting a 9.54% return in one month. To get that return for 3 months, your odds are 1 in 388,900. To triple your money by making many single trades within one year would be an anomaly. It may seem counter intuitive, but your odds in swing trading are actually better making less trades, because the more trades you make, the more likely your return will be closer to the mean of 1.04% per month and also the more fees are going to eat your capital.

The stocks are not moving in a straight line.
Prices are up and down along the way.

A swing trader will be entering and getting out of the market with some frequency.
The idea is to beat the market.

Triple the money is very hard, yes, but not impossible.

It has been done many times.

DeletedUser86 · May 11, 2015

I always knew that I would get into the market if it crashed. Once it did, I paid off all my debt and put all of my extra money to my account. The first trade I did was a solar stock and it was up 15% the next day! I quickly got out of the buy and hold mindset and started trading. The thing is I have to wait 3 days for the money to completely transfer from a sale. So i can buy a stock (takes 3 days to clear), sell it right away, buy more stock but I can't sell within the 3 day window because the previous funds haven't cleared. This is known as a free ride and is federally regulated. I got my account to 30K and traded that to 50K in a 5 month period. During this time I would use my account as an ATM, 1,000 here, 1,000 there. My best trade was when I bought a short ETF "FAZ" aftermarket and it went 10% overnight. I made 4,400 overnight! I got cocky and jumped into options. Put 20K in at first, and was up 4,000 my first trade. I was short and this was in 2010 when the market just took off. I didn't realize how much decay options had, and the fact that they expire worthless added that much more risk. I got out of the market and put my extra money into my mortgage. This year I'm going to go a different route then saving 4.76%. Trading 5k ain't sexy, not as sexy as 50k was.

brickco · May 11, 2015

Fraix said:
The stocks are not moving in a straight line. Prices are up and down along the way.

Doesn't matter. This is called deviation. This is why we calculate probabilities for normal distributions with "standard" deviations. It accounts for normal variation.

Fraix said:
A swing trader will be entering and getting out of the market with some frequency. The idea is to beat the market.

And I have quoted the odds of beating the market by swing trading. 1 in 388,900 over a 3 month period. If you think you have a "better strategy" let me tell you the hard truth. You don't. Investment banks spend billions on salaries for people called quants. They are much smarter than you and I. They would average marginally higher than 1.04% per month.

Fraix said:
Triple the money is very hard, yes, but not impossible. It has been done many times.

Yes, on a single trade 3 out of 1,000,000 trades will triple in value if held for a year. There are close to 1 billion trades per year on major markets. This means approximately 1,000 trades triple in value each year - it does happen all the time. If you trade more often (swing trade) vs. buying and holding, the more likely your returns will be closer to average.

This is the math. It doesn't lie.

I'm not saying it's a waste of time. Just be comfortable with your (inconceivably low) odds.

Edit: I changed my mind. I know the people on this forum with results don't beat around the bush. This IS a waste of time.

DeletedUser86 · May 12, 2015

I'm not looking for the big score. I'm looking for 5-15% in days or weeks. Hitting 10% 10 times is much better than simply doubling your money. I'm not sure how you think it is a waste of time, I'm making money by clicking a mouse. And I could lose money just as easily. What would you suggest I do with the 5.5k?

brickco · May 13, 2015

It depends on how much time your spending and how much you value your time. You can expect a return of about 10% per year (historically). Much less than 1% chance you will get greater than 40% for a year (no matter how many individual trades you make over any given timeline). If you're in the top 2% of traders in the world you will make 20% per year. That would be $1100, which is approximately 100 hours of work if you think you're worth $11 an hour.

But it's not realistic to think you can be in the top 2% of traders in the WORLD by working 100 hours per year. The top 2% of traders are working 100 hours per week and they are constantly looking for an edge that isn't considered INSIDERS trading and they have years of built up networks that allow them this advantage, which is why they have billion dollar portfolios.

I'm not trying to discourage you from reaching some potential. You could very well be the prodigy trader that consistently gets higher than average returns. But you're only going to get there if you have an deep ability and understanding in mathematics. Right now, you are completely ignoring statistics (see my posts above).

I don't know what you should do with 5500 bucks. But if you're hell bent on investing it in the stock market, I would suggest a low-fee ETF. Boring, I know, but historically higher returns than the average of all mutual funds (i.e., people who do this professionally for many years).

As a side note, I have a small piece of my overall portfolio that I dabble in individual trades for fun. But I recognize it for what it is, gambling, and that's why it's limited to about 1% of my total. FWIW, I was down 25% in that portion last year...

brickco · May 13, 2015

Wow, I just noticed the Forex thread. Just be happy you're not like them... 50 pages of basically useless banter about strategies that have no basis in reality. Yikes.

DeletedUser86 · May 14, 2015

Sold 335 shares of PE @17.70. Account is at $5939, almost at 20%. PE is fun to trade

Fraix · May 17, 2015

brickco said:
It depends on how much time your spending and how much you value your time. You can expect a return of about 10% per year (historically). Much less than 1% chance you will get greater than 40% for a year (no matter how many individual trades you make over any given timeline). If you're in the top 2% of traders in the world you will make 20% per year. That would be $1100, which is approximately 100 hours of work if you think you're worth $11 an hour.

But it's not realistic to think you can be in the top 2% of traders in the WORLD by working 100 hours per year. The top 2% of traders are working 100 hours per week and they are constantly looking for an edge that isn't considered INSIDERS trading and they have years of built up networks that allow them this advantage, which is why they have billion dollar portfolios.

I'm not trying to discourage you from reaching some potential. You could very well be the prodigy trader that consistently gets higher than average returns. But you're only going to get there if you have an deep ability and understanding in mathematics. Right now, you are completely ignoring statistics (see my posts above).

I don't know what you should do with 5500 bucks. But if you're hell bent on investing it in the stock market, I would suggest a low-fee ETF. Boring, I know, but historically higher returns than the average of all mutual funds (i.e., people who do this professionally for many years).

As a side note, I have a small piece of my overall portfolio that I dabble in individual trades for fun. But I recognize it for what it is, gambling, and that's why it's limited to about 1% of my total. FWIW, I was down 25% in that portion last year...

You can't compare the top traders moving billions of dollars in hedge funds with the regular guy that start an account with 5000 usd.

The top traders of the hedge funds can't trade like the small guy because they will move the market.
Also in hedge funds risk is top priority. They are usually trend traders in many markets, risking less than 1% of the capital in each operation.

The small guy won't move the market with 5000 usd and can risk more than 1% of the capital in every operation, then can reach 15k usd in some months with a good trading.

That is very difficult, yes, but not impossible. That has been done many times before and still doable.

A strategy that can make 300% in one year can't work ad infinitum, because at some point you will move the market and interfere with your strategy. So the small guy has a an advantage, really.

DeletedUser86 · May 18, 2015

I'm not sure why we are stuck on 300% in a year. I don't have a set goal as far as the trading goes. I do have a number and that number is 4k a month to where I could retire and have a comfortable life. How do I get there? I have 67K left on my house, I want to pay that off and buy another and rent that out for semi passive income. But then I think about it and usually people only make 12% in the rental markets a year. I would need about 6 rental properties to reach my number. I made more than 12% in a month. Diversification I suppose. I did have a thought, not sure if anyone else has tried this. If you look at inverse 3X ETFs, they consistantly lose value. I'm thinking about putting a grand in my options account and buying puts on ETFs like FAZ and TZA. Not anytime soon, but it may be worth checking out

brickco · May 19, 2015

Fraix said:
You can't compare the top traders moving billions of dollars in hedge funds with the regular guy that start an account with 5000 usd.

Yes, you can. My numbers are based on the returns of all traders over time. It has been proven, statistically, that the smaller portfolios actually return very slightly LESS than larger portfolios, before fees.

Fraix said:
The top traders of the hedge funds can't trade like the small guy because they will move the market.

See above.

Fraix said:
Also in hedge funds risk is top priority.

This is simply categorically false. They have funds in all risk categories.

Fraix said:
They are usually trend traders in many markets, risking less than 1% of the capital in each operation.

Would love to see the data on this.

Fraix said:
The small guy won't move the market with 5000 usd and can risk more than 1% of the capital in every operation, then can reach 15k usd in some months with a good trading.

A strategy that can make 300% in one year can't work ad infinitum, because at some point you will move the market and interfere with your strategy. So the small guy has a an advantage, really.
That is very difficult, yes, but not impossible. That has been done many times before and still doable.

The math on this is actually done earlier in this thread. If you disagree with the math, I'm happy to debate that. Otherwise, your anecdotal evidence is meaningless.

Fraix · May 19, 2015

brickco said:
Yes, you can. My numbers are based on the returns of all traders over time. It has been proven, statistically, that the smaller portfolios actually return very slightly LESS than larger portfolios, before fees.

See above.

This is simply categorically false. They have funds in all risk categories.

Would love to see the data on this.

The math on this is actually done earlier in this thread. If you disagree with the math, I'm happy to debate that. Otherwise, your anecdotal evidence is meaningless.

Take more anecdotal evidence:

http://www.worldcupchampionships.com/live-stats-3

brickco · May 19, 2015

mrgray03 said:
I did have a thought, not sure if anyone else has tried this. If you look at inverse 3X ETFs, they consistantly lose value. I'm thinking about putting a grand in my options account and buying puts on ETFs like FAZ and TZA. Not anytime soon, but it may be worth checking out

I actually applaud the math-based approach here but this idea has one flaw:

Inverse ETFs constantly lose value because they can't make up lost value. Let me use an example:

Fund A (FA): $100
Inverse 3x Fund A (I3FA): $100

If FA goes up 10%, then I3FA goes down 30%:

FA: $90
I3FA: $70

FA then goes up 11.11% , I3FA foes up 33.33%.

FA: Back at $100
I3FA: Only goes back to $93.33.

Inverse ETFs will naturally go down, like you say, over time. This is actually 100% certainty in volatile markets. It's called "volatility drag" and it hampers returns on any leveraged positions over the long term. Volatility drag on non-leveraged positions is actually a myth, but "experts" like to spout it like gospel (so be careful). Unfortunately, the short options for these leveraged ETFs (if they even exist) have this already built into the price. This is because you can actually calculate the volatility drag and factor for it.

You're headed in the right direction though.

brickco · May 19, 2015

Fraix said:
Take more anecdotal evidence:

http://www.worldcupchampionships.com/live-stats-3

I can't tell if you're being sarcastic, but in case you weren't sure, that IS anecdotal evidence. 5 people who have above average returns from an unknown sample size is about as useless as me arguing with you (i.e., very useless).

I recognize there are very good returns made by a very small percentage of people. See math above.

Fraix · May 19, 2015

brickco said:
I can't tell if you're being sarcastic, but in case you weren't sure, that IS anecdotal evidence. 5 people who have above average returns from an unknown sample size is about as useless as me arguing with you (i.e., very useless).

I recognize there are very good returns made by a very small percentage of people. See math above.

Under your logic is statistically proven that start a business is a bad idea because most of them fail.

So MJ DeMarco is just anecdotal evidence.
Great.

brickco · May 19, 2015

Fraix said:
Under your logic is statistically proven that start a business is a bad idea because most of them fail.

So MJ DeMarco is just anecdotal evidence.
Great.

MJ started a business that adds value for people. Remind me who you're helping by trading stocks? Oh right, no one.

By the way, it's not my logic, it's math.

And yes, most new businesses do fail. That's why people seek out advice and try to gain an advantage. Trading without an advantage (i.e., without INSIDERS trading or some other mechanical advantage) is just gambling. In my world, my customers pay me money because I help them with a problem. The more problems I solve, the more money I get. That I can prove statistically if you'd like.

MJ DeMarco · May 19, 2015

C'mon guys, you've hijacked the dude's thread. :eek:

Fraix · May 19, 2015

brickco said:
MJ started a business that adds value for people. Remind me who you're helping by trading stocks? Oh right, no one.

By the way, it's not my logic, it's math.

And yes, most new businesses do fail. That's why people seek out advice and try to gain an advantage. Trading without an advantage (i.e., without INSIDERS trading or some other mechanical advantage) is just gambling. In my world, my customers pay me money because I help them with a problem. The more problems I solve, the more money I get. That I can prove statistically if you'd like.

You were saying that there were 5 traders that made great returns (by the way I see more than five in the list) and are anecdotal evidence.
In your small world to make a return of 300% is impossible.

Your math is shit. If I eat 2 roasted chickens and you zero, statistically we ate one roasted chicken each one.

Make a great return is very difficult, but not impossible. That has been done many times.
Make a great business is very difficult, but not impossible. That has been done many times.

Speculation is very important in a free market system, and of course add value. I won't discuss that.

Fraix · May 19, 2015

MJ DeMarco said:
C'mon guys, you've hijacked the dude's thread.

Sorry, I already made my point and I won't discuss it anymore.
So if anybody disagree, it's ok and good luck.

brickco · May 19, 2015

MJ DeMarco said:
C'mon guys, you've hijacked the dude's thread.

Noted and moving along.

MJ DeMarco · May 19, 2015

Fraix said:
So if anybody disagree, it's ok and good luck.

brickco said:
Noted and moving along.

Thanks gents.

I just hope the OP posts his losses. So far, he's only posted winners. I will assume if he suddenly *disappears* and the thread goes dead, we will know what that means.

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Swing Trading $5K (How to lose most of your cash)

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