Position Versus Intraday Trading

You not only have to decide whether to trade judgmentally or non-judgmentally, you also have to consider the time frame that best suits you. Then, you need to be sure the time period you have chosen is best for the approach you are using.

With respect to applying the methodology this book teaches, it is easy. Essentially you apply the same general criteria to a five minute chart that you would apply to a monthly. Whereyou best belong is the tougher question.

My experience indicates that it's suicidal for a new trader, operating off the floor, to trade intraday. What's "new?" "New" is anyone trading actively for less than one year. If you are a part time or casual trader, you had better give it three to five years before going to intraday trading. The better question is however: What's intraday? My definition would be a trader who is actively observing price action during the day and making decisions based on what he believes is unfolding at that time.

A daily-based (or above) trader may choose an entry or exit point to be acted upon during the next day without being construed as being an intraday player.

What's a position player? The true answer is, it depends on perspective. To a floor trader, the five minute trader is a position player. To a daily-based trader, a weekly-based trader is a position trader, and so on. For our purposes however, we'll consider a position trader as daily-based or above. As you drop the time frame, the decision making time is compressed and the stress is increased. As you drop the time frame, the number of decisions increase radically. You have seven times the number of decisions going from daily- to hourly-based, 12 times the number of decisions, going from hourly to five minute. The opportunity is certainly accelerated, but I wouldn't expect a savvy boxing promoter to put a promising newcomer into the ring with Mike Tyson, just to see if he could learn to handle the big time more quickly. After all, he might lose more than his ears in the process!

DISADVANTAGES OF INTRADAY TRADING

1. You need experience - lots of it - with particular emphasis on order entry techniques and a thorough understanding of floor operations.
2. You need excellent brokerage and clearing services.
3. You have high overhead costs in software, quote delivery fees, equipment, and transaction costs.
4. So much of your time is taken up by the trading activity, you can't make money doing anything else.
5. Stress levels increase dramatically.

ADVANTAGES OF INTRADAY TRADING

1. You can trade many more contracts with a given amount of capital.
2. You will have many more trading opportunities than a position trader.
3. If your trading capital is severely limited and you are otherwise qualified, you have trading opportunities that will allow for much closer stops. Obviously the typical range on a five minute bar is smaller than the typical range of a daily bar. This point is really a variation of # 1.

You should be able to restate the above to define the advantages and disadvantages of being a position trader.