Day trading

BriNylon

I have been day trading recently as the market is so volatile.  I have been having really good success with Lloyds shares.  Does anyone on here day trade, or have recommendations for any particular shares?

Thrugelmir

Day traders eventually run out of luck. The broader market has access to information well before us mere mortals. 

doe808

BriNylon said:

I have been day trading recently as the market is so volatile.  I have been having really good success with Lloyds shares.  Does anyone on here day trade, or have recommendations for any particular shares?

No. Its a mugs game.

bowlhead99

BriNylon said:

I have been day trading recently as the market is so volatile.  I have been having really good success with Lloyds shares.  Does anyone on here day trade, or have recommendations for any particular shares?

I remember in the mid 2000s my dad had some Bradford and Bingley shares which he had got for free on the demutualisation at a valuation of about 250p at the turn of the century, and he observed that the price would typically fluctuate up and down in a range from 250p to 350p, or perhaps 350p to 450p (I forget), like clockwork, and he commented that it seemed like it would be a smart move to buy more of them next time they went cheap, with the idea of selling them the next time they went high. 

I discouraged him, as he didn't know anything about the fundamentals of valuing bank equity, let alone the impact of macro and microeconomics on the dynamics of financial markets, and just because something looked like an easy trade with hindsight on a chart it was not necessarily going to be a winner going forward. Fair enough he said, it was only an idea.

One time the BB share price dropped through 300p was in September 2007. By the following May in the middle of the 'credit crunch', the share price was 159p and they decided they needed to do a discounted rights issue to raise more money at half price, offering shares for 82p. The price plummeted to close to that level, so they repriced the rights issue at 55p. There was some interest in a takeover bid which briefly allowed the price to jump up from the 60p range to more like 80p; But then the potential backer pulled out, and the price fell again overnight, so most people didn't catch the exit point. By late August / early September 2008 it was about 40p. By the end of the month, a year or so after it had been about 300p, it was 20p. The government stepped in and took it over, deciding that a fair level of compensation to the equity holders was £nil. 

With hindsight, my dad is happy that he had not gone ahead with the brainwave that the share price of that company 'looked like a good one to trade'.

Old_Lifer

The problem you face is that shares go down as well as up and can fall rapidly,  especially after an upward movement when some people take profits and the price suddenly falls.      You then have the problem of deciding whether to sell at a loss or hang-on for an upturn.   If you hang-on  and  there is bad news , or  others simply lose interest in the share, the price may go even lower.  So  how long do you wait ?  For days, weeks, months or even  longer ?   How would you feel if you were sitting on a loss ?   Would you buy more shares in a company of which you probably know very little and perhaps make the situation even worse ?  Of course there is also the question of charges  for each sale and does the share have a narrow or wide spread.

Others on the Forum would probably share my own views that for most people day-trading is a mugs game.    Just because you have 'recently' started trading  and have  been lucky with a single share  (and if you are new to shares it probably is just luck)  your success should not make you completely overlook the considerable risks.

Xbigman

I traded Taylor Wimpey in the run up to xmas 2008. The trading range was around 16p to 21p and I made about 40% in 10 days.
At one point I had 136,000 shares. Just before xmas I was in cash and they spiked up into the high 20's and I waited for the drop. It never did. If I had simply held onto those 136k shares I could have cashed out close on 300k (ish) by now. 

So here we are. I have some money in L&G. it has been up around £2.60 and back down into the low £2.40's several times. 
Am I tempted, well just a little bit. Am I pulling the trigger? Nooooo...
At some point they will go up when I am in cash, or down whilst I own. Eventually I would lose.


Darren 

Ray_Singh-Blue

I don't day trade with individual shares, but a few times I have dipped in an out of an index fund. This feels a little safer, as it avoids the Bradford and Bingley trap described so nicely by Bowlhead99.

I was not sure whether this has netted any £ at all, allowing for missed dividends while in cash, the buy/sell spread, dealing fees, and one occasion where the market ran away and I had to buy back in at a higher price.

So I crunched some numbers and to my surprise am about £16K up from doing this over several years. On a portfolio of £320K.

However I suspect I could just as easily be £16 K down. Or maybe £20K down to be fair, for the reasons listed above.

Username999

BriNylon said:

I have been day trading recently as the market is so volatile.  I have been having really good success with Lloyds shares.  Does anyone on here day trade, or have recommendations for any particular shares?

If you are "day trading", you will lose money.
QED.

bowlhead99

Ray_Singh-Blue said:

I don't day trade with individual shares, but a few times I have dipped in an out of an index fund. This feels a little safer, as it avoids the Bradford and Bingley trap described so nicely by Bowlhead99.

Yes, the good thing about trading an index with 'gut feel' compared to individual stocks is that you don't need to have some magic stop loss strategy, because if the index drops by a chunk of value it's not going to be because it's on the way to going bust. Of course with specialist single-market indexes you can still get onto trouble (as the history of Nikkei or TOpix would show), but generally a safer way to play with slightly limited risk.

In the long term (generalising), equity investments will make money as the businesses and economy grow their asset values and economy, but in the very short term (like a day) there's no reason to expect them to, because the underlying companies haven't had time to actually improve their performance and it's essentially a zero-sum game between buyer and seller. If you see the market goes up or down by 5% in a day, fair enough you get the ups and downs and might make money if your timing is lucky; but remember if it falls by 10% you need to get 11% to go back up from 90 to 100; if it falls by 50% you need it to go up 100%, etc.

HansOndabush

Not quite a zero-sum game due to the trading costs; spread, dealing charge, and possibly stamp duty on purchases depending on the share. So your expected return on day-trading is negative.

dunstonh

 Does anyone on here day trade, or have recommendations for any particular shares?

Most amateurs doing day trading lose money.   So, the best advice is not to do it.   Most professional investors don't attempt it either.  So, what do you think makes you special that you will buck the trend?