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Can Day Trading be profitable for retail?

  #37 (permalink)

North Carolina
 
Trading Experience: Beginner
Platform: NinjaTrader, Tradestation
Favorite Futures: es
 
Posts: 644 since Nov 2011

Yes, day trading futures can be profitable. However, most will not make money day trading. Also, most of the big money is probably not in strictly day trading. Sometimes the markets offer more day trading opportunities. Yes, it is very difficult to overcome costs if you are scalping and/or not taking much risk per trade. I am trying/have tried the latter. It is very difficult. Of course, if you can trade in that fashion profitably the sky is the limit because of the way the mathematics work.

But, just in terms of reality... the professional retail/professional trader today probably must draw from a wider palette of profit opportunity because the markets are rather efficient.

The following is the most likely portrait of the successful elite retail trader today:

1. The trader has significant discretionary trading ability and tracks the markets closely every day like is commonly viewed as a day trader. However, this trader is not limited to discretionary day trading but rather has various grayboxes that help highlight profit opportunities. This sort of trader is probably only using discretion in the first 1 or 2 hours and is careful to limit their trading frequency during this period. After the first hour or so, the trader probably switches to focusing more on the semi-automated and automated opportunities.

2. The trader probably has a low frequency day trading systems that trigger and also systems that aren't easily categorized. Because of recent risk on markets, the trader is likely holding positions over multiple days in many cases and/or day trading but not in the strict sense.

3. Most likely has automated strategies running as well of various types. May be hold options in addition to futures to limit risk.

4. The successful trader may also be tracking markets over long periods of time and waiting for exceptional opportunities.

5. Probably is very well capitalized with min 100k to 500k.

6. Devotes significant resources to both backtesting and training.

7. Performance is likely highly variable with insane returns over some weeks or months and then very bad returns over others.

The following is the proto-typical image of the day trader but one that is very difficult to achieve:

1. Day trades only 1 market, uses tight stops, risks only a tiny amount per trade, places many trades per day, and is profitable virtually every day. I have tried this. It is very, very difficult. Anyone doing this successfully surely are using some tricks/doing some things differently then common wisdom suggest.

The following is possible and some may be doing this

1. Day trades 1-2 markets, takes a large risk per day, and is profitable most days. This sort of trading style can be consistent but has large tail risk.
2. Mostly day trades but tries to get into some bigger trades that they can hold over a couple to several days and/or trades at odd times.
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The most common sort of day trading that can be profitable for the retail trader is focusing on capturing trend days and/or lower frequency day trading. This sort of trading can be profitable but opportunity is limited/narrow for professional trader.

Even if one is day trading in the "proto-typical" or idealized imagined fashion, most likely there are still periods of drawdown which is made worse due to the high trading costs.
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As an aside, I do not like traders that talk about consistently profitable without qualifying what they mean. How consistent? How profitable? The two do not need to go together and without specifics it is impossible to know what one means.


Last edited by tpredictor; January 27th, 2018 at 01:14 AM.
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