Jump to content

Welcome to the new Traders Laboratory! Please bear with us as we finish the migration over the next few days. If you find any issues, want to leave feedback, get in touch with us, or offer suggestions please post to the Support forum here.

  • Welcome Guests

    Welcome. You are currently viewing the forum as a guest which does not give you access to all the great features at Traders Laboratory such as interacting with members, access to all forums, downloading attachments, and eligibility to win free giveaways. Registration is fast, simple and absolutely free. Create a FREE Traders Laboratory account here.

MadMarketScientist

Who Makes More Money?

Who Is More Profitable?  

46 members have voted

  1. 1. Who Is More Profitable?

    • Short term trading (shorter time frames, scalping)
      73
    • Long term trading (longer time frames, swinging)
      93
    • Investing (Warren Buffett style)
      36


Recommended Posts

most powerful force in the universe - compounding interest/inflation :2c:

 

Unless of course you want to say i made 100% in a few days.

There are benefits to both depending on circumstance, but IMHO if you talk about absolutes and the most money - there is no debate assuming you are profitable - one has a 'glass ceiling'

 

For many of those really profitable scalpers - ask - are they scalping or market making, HFT?

Share this post


Link to post
Share on other sites

I saw a report on Bloomberg about a HFT firm that makes $300,000 on average EVERY DAY in the ES alone.

 

I thought that was pretty cool.

 

I think it's more about the velocity of money. You can certainly make a lot of money very quickly if you have developed a skill in short term trading - thats why so many are drawn to it.

 

However, the shorter the time frame, the more adaptable you have to be if you want to keep making money. This makes it more difficult as it's way more competitive.

 

Looking at the other end of the spectrum, investing is perhaps more certain, but the rewards will be lower.

 

SIYUA makes a good point about compounding interest for example. However, at the moment, that gig is bust. Consider this:

 

Inflation is approx 2-3% (assuming you're in the western world)

Margin rates are typically 4-6% to finance positions

Tax will be say 20-30% of any profit.

 

Given a bank deposit will be paying out around 3%, you will lose money (inflation will take away the returns - which will be taxed).

Given govt bonds are paying out 2-4%, you will lose money.

Good dividend paying stocks will return 5-6% - you will lose or scratch after bro' - assuming the price remains the same.

Given good investments (structured products, hedge funds etc) are yielding 10% if you're lucky, you may end up with say 2%. Most are returning 6% or so - so again, you will end up just above 0.

 

These figures are approximations - and just there to show that at the moment, yield investing is dead - until interest rates start to rise again. Speculation is the only choice at the moment.

Share this post


Link to post
Share on other sites

Tax will be say 20-30% of any profit.

 

Hi Dude,

 

My understanding was that the likes of Warren Buffet avoid taxation through a variety of measures, such as purchasing puts to lock in profit on a position rather than selling to close - with the profits insured in this way they then borrow against the stock they hold - and there's no tax on borrowed money (even though you can still buy mansions and yachts with it).

 

How easy it would be for the average investor to implement these measures I don't know.

 

BlueHorseshoe

 

ps. I continue to be mystified by the reported earnings of HFT firms in CME markets - they're FIFO - just how the hell do they do it!?!?

Share this post


Link to post
Share on other sites
Hi Dude,

 

My understanding was that the likes of Warren Buffet avoid taxation through a variety of measures, such as purchasing puts to lock in profit on a position rather than selling to close - with the profits insured in this way they then borrow against the stock they hold - and there's no tax on borrowed money (even though you can still buy mansions and yachts with it).

 

How easy it would be for the average investor to implement these measures I don't know.

 

BlueHorseshoe

 

ps. I continue to be mystified by the reported earnings of HFT firms in CME markets - they're FIFO - just how the hell do they do it!?!?

 

But you still have to pay borrowed money back - or do you let them keep the stock (purposefully default) and not roll over the puts?

 

BTW, my figure above re HFT was wrong - it was closer to $400k per day!!!

 

High-Frequency Trading Prospers at Expense of Everyone - Bloomberg

 

Although not a big fan of 'trading books', Irene Aldridge's High Frequency Trading explains the basic algorithms and concepts if you're interested and have a good understanding of maths, stats, equations etc.

Share this post


Link to post
Share on other sites

I think it's more about the velocity of money. You can certainly make a lot of money very quickly if you have developed a skill in short term trading - thats why so many are drawn to it.

...............

SIYUA makes a good point about compounding interest for example. However, at the moment, that gig is bust. Consider this:

 

 

Good point....absolutely the velocity of money is important if its profitable.......you will still hit the ceiling, plus scalping v HFT v market making - i think these need to have clear distinctions.

 

Re the compounding of interest - i should also have added the compounding of profits (either corporate or speculative).

 

for me the issue is the scalability will limit you.

Otherwise....who one scalper might make more than a swing trader for the same amount of money......until you change the amount of money.

 

Blue - a lot of taxation issues revolve around "where are trading decisions made/implemented" - the server might be in one country, the business might be in another.

The regulatory taxation arbitrage is pretty good (getting harder), whereas the effect of compounding often elinimates the requirement for taxation to reduce the long term profits.

ie; you as an investor are better than the government at making money.

 

So - leave tax out - too many variables

Share this post


Link to post
Share on other sites

My understanding was that the likes of Warren Buffet avoid taxation through a variety of measures, such as purchasing puts to lock in profit on a position rather than selling to close - with the profits insured in this way they then borrow against the stock they hold - and there's no tax on borrowed money (even though you can still buy mansions and yachts with it).

 

That is very interesting ... thanks for that golden nugget!

 

MMS

Share this post


Link to post
Share on other sites
But you still have to pay borrowed money back - or do you let them keep the stock (purposefully default) and not roll over the puts?

 

Thanks for the Aldridge tip - most of the better trading books that I've read have been those recommended to me on TL. :)

 

BlueHorseshoe

Share this post


Link to post
Share on other sites
I'm totally going to do this the next time I want to cash out my $200MM in company shares

 

MMS

 

Are moderators allowed to be sarcastic? :)

 

See the proviso at the end of my original post: "How easy it would be for the average investor to implement these measures I don't know" . . .

 

BlueHorseshoe

Share this post


Link to post
Share on other sites
See the proviso at the end of my original post: "How easy it would be for the average investor to implement these measures I don't know"

 

Average investors can totally do this, I was just being making reference at the fact some people are cashing out $200MM! Geez ...

 

MMS

Share this post


Link to post
Share on other sites
Average investors can totally do this, I was just being making reference at the fact some people are cashing out $200MM! Geez ...

 

MMS

 

Assuming there is some sensible postion sizing going on, then the mind really boggles when you consider the size of the portfolio they must hold!

 

BlueHorseshoe

Share this post


Link to post
Share on other sites
So what does everyone think? Do scalpers collect enough pennies throughout the day? Or do the swing traders make more compounding their position?

 

MMS

 

 

Maybe the questions should be more specific. Are we talking about retail traders or specialized firms?

 

E.g., retail traders cannot copy the trading techniques of HFT firms, but at least they have a fighting chance to copy swing trading or "certain" investing techniques.

 

Note: I say "certain" in the latter sentence, as the investing techniques of Buffett - to which the poll relates - are not that easily to copy... the various books describing his "value investing" style do not reveal in detail how he developed the foundations of his huge fortune. I've read once an interview with someone who followed his paths for many many years (forgot who it was) and this person said that Buffett made his fortune mainly by taking controlling interests in companies and influencing the way the businesses are run, which is basically the private equity model of investing; hence, difficult to copy by retail investors (yes, he must have been successful before in order to be able to buy controlling interests). Maybe there is even more to it, but what I'm saying is that there is more to it than just 'buy what you understand' and 'buy cheap' (I'm simplifying here) and you'll get rich... Not saying though, that this is a bad idea to invest like that, but many authors writing about Buffett's style sell it like everybody can do it... this sells the books much easier than telling everyone that it's "slightly" more complicated than that...

Share this post


Link to post
Share on other sites
Maybe the questions should be more specific. Are we talking about retail traders or specialized firms?

 

E.g., retail traders cannot copy the trading techniques of HFT firms, but at least they have a fighting chance to copy swing trading or "certain" investing techniques.

 

Note: I say "certain" in the latter sentence, as the investing techniques of Buffett - to which the poll relates - are not that easily to copy... the various books describing his "value investing" style do not reveal in detail how he developed the foundations of his huge fortune. I've read once an interview with someone who followed his paths for many many years (forgot who it was) and this person said that Buffett made his fortune mainly by taking controlling interests in companies and influencing the way the businesses are run, which is basically the private equity model of investing; hence, difficult to copy by retail investors (yes, he must have been successful before in order to be able to buy controlling interests). Maybe there is even more to it, but what I'm saying is that there is more to it than just 'buy what you understand' and 'buy cheap' (I'm simplifying here) and you'll get rich... Not saying though, that this is a bad idea to invest like that, but many authors writing about Buffett's style sell it like everybody can do it... this sells the books much easier than telling everyone that it's "slightly" more complicated than that...

 

I agree with what you're saying about the institutional/retail dichotomy. In fact, as far as HFT is concerned, even being 'institutional' is far from sufficient - the HFT firms basically make money by milking the liquidity provided by other institutions.

 

However, Buffet may be almost uniquely imitable amongst investors . . .

 

All institutions are required by the SEC to report long equity positions within 45 days of the end of each quarter using the 13F form. So shortly after Buffet/Berkshire buys shares in a company you can do the same. This wouldn't work for tracking a fund with shorter holding periods - they might already have closed out the position before the end of the reporting window. But Buffet's holding periods are famously "forever".

 

You can retrieve any fund's holdings by visiting the EDGAR database here:

 

Filings & Forms

 

BlueHorseshoe

Share this post


Link to post
Share on other sites
I agree with what you're saying about the institutional/retail dichotomy. In fact, as far as HFT is concerned, even being 'institutional' is far from sufficient - the HFT firms basically make money by milking the liquidity provided by other institutions.

 

However, Buffet may be almost uniquely imitable amongst investors . . .

 

All institutions are required by the SEC to report long equity positions within 45 days of the end of each quarter using the 13F form. So shortly after Buffet/Berkshire buys shares in a company you can do the same. This wouldn't work for tracking a fund with shorter holding periods - they might already have closed out the position before the end of the reporting window. But Buffet's holding periods are famously "forever".

 

You can retrieve any fund's holdings by visiting the EDGAR database here:

 

Filings & Forms

 

BlueHorseshoe

 

 

You are right about that. But doing that won't make you a billionaire within the next 40-50 years (he will be gone soon anyway and nobody knows whether his successor(s) can maintain the returns he was able to generate), i.e. his returns were much higher at the beginning of his career than they are now. Not saying that it does not make sense to copy his positions, though.

Share this post


Link to post
Share on other sites
So what does everyone think? Do scalpers collect enough pennies throughout the day? Or do the swing traders make more compounding their position?

 

MMS

 

Thanks for brainstorming! For me, both can make significant money. variable is time and price, but controllable factor is you. The contest is in the future.

 

Cheers,

Share this post


Link to post
Share on other sites

The Scalper trades with lower risk whereas the Swing trader has larger risk (Stop Loss) - so it is highly dependent on the risk tollerance of the trader.

Some scalpers can make +500% in 3/4 weeks and others struggle to make 25% in a week.

Swing traders can place trades on several charts and make good profits, perhaps not in a week but certainly over a month.

The pressure on a Scalper is enormous - that is why they, for my money, are the traders who can make the most.

No one can say with any certainty who makes more money over a given period, but short term potential it is the Scalper who will win out - but at a stress cost.

I always say, if you can trade the DOW, you can trade anything.....

TEAMTRADER

TL.pdf

Share this post


Link to post
Share on other sites

 

for me the issue is the scalability will limit you.

Otherwise....who one scalper might make more than a swing trader for the same amount of money......until you change the amount of money.

 

 

this is really the essence isn't it?

 

A competent trader will make the most money by trading the smallest time frame that can accommodate their account size and time allocated to trading.

Share this post


Link to post
Share on other sites

A competent trader will make the most money by trading the smallest time frame that can accommodate their account size and time allocated to trading.

 

As you reduce the timeframe though, and the average profit along with it, your costs (spread, slippage, commission, exchange fees etc) remain pretty much fixed per contract/unit.

 

BlueHorseshoe

Share this post


Link to post
Share on other sites

The best of the best ( Buffet, Soros, and similar) make on the average 25-35% per year over long term ( over their life time as traders). You have to keep that in mind when some claim 100% or more return, bcos it is not going to last ( if it is even true). Anyone can have a good run, for a while and project that long term, but it is not realistic.

 

Just imagine if you can do 500% a year... In short time you would be able to buy universe thanks to compounding effect :)

Share this post


Link to post
Share on other sites
I remember as a child debating with my buddies who was the best baseball player.

 

Then I grew up. :shrug:

 

And eventually the discussion lead to why one was better\different than the other ... and hopefully you remembered that lesson the next time you were on the field. And don't you have fond memories of being a kid? Growing up sometimes sucks doesn't it?

 

MMS

Share this post


Link to post
Share on other sites
And eventually the discussion lead to why one was better\different than the other ... and hopefully you remembered that lesson the next time you were on the field. And don't you have fond memories of being a kid? Growing up sometimes sucks doesn't it?

 

MMS

 

i did laugh at Suntraders comment however - never loose that sense of imagination, awe and wonderment MMS :) and even worse dont grow old before your time and become a grumpy old man claiming - it was better in my day......WALOR

Share this post


Link to post
Share on other sites

Join the conversation

You can post now and register later. If you have an account, sign in now to post with your account.
Note: Your post will require moderator approval before it will be visible.

Guest
Reply to this topic...

×   Pasted as rich text.   Paste as plain text instead

  Only 75 emoji are allowed.

×   Your link has been automatically embedded.   Display as a link instead

×   Your previous content has been restored.   Clear editor

×   You cannot paste images directly. Upload or insert images from URL.


  • Topics

  • Posts

    • Bitcoin Cash (BCH) Breaches More Resistance Zones, As Bulls Gain More Grounds Key Resistance Levels: $275, $300, $350 Key Support Levels: $200, $160, $120 BCH/USD Price Long-term Trend: Bullish Bitcoin Cash has maintained its bullish run as the resistance at $240 and $260 were broken. Unfortunately, BCH reached a high of $280 but was resisted. The bears pulled back to the low of $260. The market is holding above $260 support. On the upside, if the bulls sustain price above $260 and the $280 resistance is broken, BCH is likely to reach a high of $350. On the other hand, where the bulls fail to overcome the current resistance, price will fall to the low above $260. BCH/USD – Daily Chart Daily Chart Indicators Reading: Bitcoin cash is above 80% range of the daily stochastic. This means that BCH is in the overbought region of the market. It also means that sellers may emerge at the $280 overbought region. The downward move has already began. Although, the extend of the downward move is unclear. The 26-day EMA is acting as resistance to the coin BCH/USD Medium-term Trend: Bullish On the 4-Hour chart, BCH is in an uptrend. BCH is making a series of higher highs and higher lows. BCH has reached a high of $280. The price is retracing from a high of $280 to a low of $260. BCH/USD – 4 Hour Chart 4-hour Chart Indicators Reading BCH has risen to level 54 of the daily Relative Strength Index period 14. BCH is above the centerline 50 which means that it is in an uptrend zone. The moving averages are sloping upward indicating the uptrend. General Outlook for Bitcoin Cash (BCH) Bitcoin Cash has moved closer to the uptrend zone as the market reaches a high of $280.The bulls are yet to break above the current resistance after being resisted twice. The price is currently consolidating above $260 to resume an upward move. Source: https://learn2.trade   
    • GBPJPY Recovers Momentum Beyond The Level At 134.00 GBPJPY Price Analysis – April 8 The British pound got some momentum and pushed the GBPJPY cross to fresh session highs, above the level of 134.70. The claim that UK Prime Minister Boris Johnson has been reported to be in a stable state, although he continued in ICU, appeared to be the only variable that contributed considerable strength to the pound. Key Levels Resistance Levels: 147.95, 138.68, 134.72 Support Levels: 130.49, 127.54, 122.75 GBPJPY Long term Trend: Ranging In the broader context, ongoing development implies that market behavior at a level of 122.75 (low) is simply a horizontal consolidation trend which has been concluded at 147.95 level. Bigger downward trend from level 195.86 (high) and that from level 251.09 (high) may continue. The 122.75 level break may approach the 195.86 to 122.75 forecast of 61.8 percent from the next level of 147.95 to 102.76. The trend would in any way stay bearish as long as the level of resistance stays at 147.95. GBPJPY Short term Trend: Ranging GBPJPY stays in the corrective increase from the level of 123.99 and the trend remains intact. Another increase may be observed, but the upside would be constrained by a retraction of 61.8 percent from 144.95 to 123.99 at 136.92 levels to restart downward movement. On the downside, a break of 129.85 minor support levels can alter the downside bias for a low level of 123.94 retests. The sustained break of the level at 137.00 may, nevertheless, improve the chances of trend reversal and shift emphasis to the level of resistance 144.95. Instrument: GBPJPY Order: Sell Entry price: 134.72 Stop: 135.00 Target: 133.39 Source: https://learn2.trade 
    • Date : 9th April 2020. FX Update – April 9 – 4 Key Events Today.Narrow ranges have been prevailing in currency markets ahead of some big event risk items on today’s calendar.Asian and European stock markets, and US index futures, have retained buoyancy amid hopes that the peak global coronavirus infection rate may be approaching, which could mark the end of “phase 1” of the pandemic, with “phase 2” being how to exit from lockdowns while there is, as yet, no vaccine or cure.EURUSD has posted a 40-pip range so far, with a two-day low at 1.0840 marking the downside limit. USDJPY has been idling in a 26-pip range, with 109.06 marking the upside cap. Cable has settled in the mid-to-upper 1.2300s, below yesterday’s one-week high at 1.2421. UK Prime Minister Boris Johnson remains in intensive care for what is now a fourth day. Official updates, as of yesterday, reported that he was responding well to treatment, but after downplaying his condition ahead of him being admitted to hospital and then an ICU, there is a degree of uncertainty about the accuracy of this. AUDUSD has edged out a 24-day high at 0.6246, buoyed by the current optimism in stock and commodity markets. USDCAD has posted a range of 1.4000-14054, holding within yesterday’s range. Ahead today, attention will be on:   The recommencement of the EU finance ministers’ meeting, at 15:00 GMT after yesterday’s meeting failed to find an accord on a region-wide fiscal plan to offset the impact of virus-containment measures. The OPEC+ group of oil producing nations will also begin its teleconference meeting, from 14:00 GMT.Markets are looking for an agreement to slash crude output by 10 mln barrels a day. There is significant scepticism among oil analysts that even a cut of this magnitude would be sufficient to offset the level of recent demand destruction. In the US, the weekly jobless claims report will once again take top billing (it’s expected to once again paint a dismal picture), along with ongoing deliberations in the US Congress on fiscal relief measures. Finally, FED Chair Powell is scheduled on a conference call from the Brookings Institution in Washington DC. Note that trading will thin into the long weekend and tomorrow’s Good Friday holiday.Always trade with strict risk management. Your capital is the single most important aspect of your trading business.Please note that times displayed based on local time zone and are from time of writing this report.Click HERE to access the full HotForex Economic calendar.Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE!Click HERE to READ more Market news. Stuart Cowell Head Market Analyst HotForex Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • Date : 8th April 2020. April 8 – Europe and EUR update.Sentiment collapsed further in European session on the news that EU finance ministers failed to reach deal and also on the announcement from German institutes, which they estimated nearly 10% contraction in Q2, the sharpest decline since records began in 1970. This topped the concerns of pandemic and related shutdown of the economy.EU leaders will meet again tomorrow. Discussions on how to finance a European wide response package to the pandemic have not yet found a compromise. Demands for Eurobonds clashing with the red lines against mutualising debt in countries such as Germany, which would make the introduction of new financing measures a lengthy affair even if officials were to agree to such a step. The southern European states (especially Italy) are keen to have debt mutualisation (“coronabonds”) as part of the package. The most likely outcome is a use of ESM funds to finance immediate aid measures, coupled with funds from the EU budget and the EIB investment bank to finance economic measures not just through the immediate crisis, but to kick start the recovery once lock downs have been lifted.Last but not least for European economy, is the fact that ECB lowers collateral standards, to keep credit flowing. The central bank announced that it will temporarily lower standards for the collateral that banks can use to access ECB funds. The move is aimed at keeping credit flowing through the crisis and will also allow Greek debt to be used. Furthermore the haircut applied to collateral, which will allow banks to borrow more money against the same amount of collateral. As a result the ECB will take on more risk onto its own balance sheet, but the hope is that by strengthening banks’ access to funds the central bank can boost lending to households and businesses. For Greece it will also give the government more room to finance its measures to get the economy through the pandemic. The central bank stressed that the “measures are temporary for the duration of the pandemic crisis” and will be reassessed later in the year.Hence as risk-on has turned today into a risk-off, the EUR weakens so far today on USD strength. It will be very important for the long term stability of the bloc that there will be a clear signal of solidarity at tomorrow’s juncture.EURUSD concurrently declined by almost 0.5% in making a low at 1.0829, resuming the bearish outlook in the daily picture for the asset. Yesterday’s rally spread concerns whether the EURUSD possible trend revernsal however today’s swing lower again along with the decline for 7th consecutive day below 20- and 50-day SMA suggest that yesterday’s rally was just a correction.In the 1-hour chart, EURUSD is moving within a tight downchannel since 1.0925 peak, with lower ups and downs seen since then. Hence in the near term any recovery within the channel could be interpret as a correction prior a pullback. Intraday momentum indicators are mixed with RSI at neutral zone posting lower lows since yesterday, while MACD lines have been zeroed suggesting that bulls have lost the control today. Additionally, the mark of a hummingbird by Bollinger bands pattern, which indicates a bearish signal in the daily chart, could signal further weakness in the near term.In order the near term picture to turn to positive again, the hourly RSI needs to sustain a move above 50, while we need to see a swing outside the channel and above the confluence of the latest up fractal and the 20-hour EMA, at 1.0892. Meanwhile, in the medium term outlook, the asset is facing a strong Resistance area at 1.0950-1.0965 (50% Fib. retracement from 1.1146 downleg and 50-day SMA). A decisive breakout above this area could imply to the continuation of a recovery for the asset.Always trade with strict risk management. Your capital is the single most important aspect of your trading business.Please note that times displayed based on local time zone and are from time of writing this report.Click HERE to access the full HotForex Economic calendar.Want to learn to trade and analyse the markets? Join our webinars and get analysis and trading ideas combined with better understanding on how markets work. Click HERE to register for FREE!Click HERE to READ more Market news. Andria Pichidi Market Analyst HotForex Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in FX and CFDs products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.
    • Successful trader is a myth. Everything depends on time and circumstance, also the behavior and approach used by the trader. Right time trade and right judgments can make all difference in winning and losing. 
×
×
  • Create New...

Important Information

By using this site, you agree to our Terms of Use.