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Why do so many people insist on trading intraday (Closing at the end of NY session) when the data shows its so much harder, has smaller moves, and is significantly more difficult?
This is an excellent question. There are different answers.
Futures margin requirements for positions not held over the daily close are much lower than normal exchange-required margin. (CME has no requirement for day trading margin at all, and it's entirely up to the broker. Some brokers have insanely low -- as in, risky -- margin requirements, but the difference does attract many traders. And it is not necessarily only people who are taking too much risk. It depends on the trader.)
Many traders only want to scalp short-term or very short-term. Why? Because it's what they do. There will always be a debate about short-term vs. longer-term, scalp vs. swing, etc, and everyone will bring out their own reasons, which they will find totally convincing.
In fact, very often, as Dr. Brett points out in this piece, the bigger moves happen before the regular open. But you will get successful traders who will only trade short-term, and it's not because they are too dumb to know there is an alternative. I think it's just a matter of different trading methods having different timeframes, not a matter of better or worse in an absolute sense, for all traders and for all time.
But I do think everyone should be aware of the simple fact that much of the big action does take place before the RTH open, and should consider what that means to them.
For myself, I'm getting up early now.
Bob.
When one door closes, another opens.
-- Cervantes, Don Quixote
I understand many of those reasons Bob, I just wasted so much money trying to "scalp intraday" that I'm hoping other people might read this post and Dr Steenbarger's article and save some dough. As an algo trader right now, I'm yet to find a strategy that trades only the open session and makes decent money, but maybe I just suck. I have heard from many other successful algorithmic traders, like @kevinkdog, that intraday is in fact much harder. So all these people face the intraday session without even the ability to backtest, validate, and then the money disappears... I just feel bad but I'm glad I figured it out myself before I was striked out of the game for good.
Anyway being in FL its easy to say you get up early and trade lol, in California the market open is at 630 AM. Luckily algos dont sleep...
Different Strokes I know guys who are awesome swing traders, and I know guys who kill it intraday (not me LOL.) Both work for some, don't work for others. People trade their personalities, even though that might not be aligned with their best chance at success.
Its really one of those things that are related to your personality, I get agitated overnight if positions are open, even the damn good options strategies, I do not like that feeling. I've tried countering this in many ways, I can't even do positional on sim trading account, no jokes.
Intraday I'm for whatever reasons very good, I take 2-3 trades, no more and usually with cover of sold calendar, straddles and strangles (we have weekly options of index). I usually close them EOD too. Yes, profits are limited, in fact due to hedging reward is not that high but it keeps my nerves in check.
What output you want out of trading is closely related to how you do things and how you do things is closely related to your personal built up.
There really isn't any secrete to it, I've built strategies that were largely successful over swing, I tested over 10 years data as well but I was never able to trade them in swing. Maybe in future when I've LOT of money and hopefully wife/better half to take that burden
Sadly, this worse half sucks in swing trading, so I don't see why I should get my hands burned again and again.
There will always be a debate about short-term vs. longer-term, scalp vs. swing, etc, and everyone will bring out their own reasons, which they will find totally convincing.
