Is active trading sustainable?

Active Trading
#1

Hi guys, I have been an active investor from the start of my investment journey. I do a little passive investing however I mostly buy into individual companies (mostly mid/large cap).

I build my own DCF models, sometimes I do sensitivity analysis. I use consensus analyst data (consider high/low ebit projections) and build models in companies that I’m interested in and can understand.

This is not easy (to project accurately all the time) and I don’t always get it right however in the long term I am happy with my estimates and build my portfolio on these estimates and assumptions (I use a margin of safety in my assumptions). I’m diversified by sector however I am overweight on growth.

I have read countless investing books (cashflow, economics, market cycles, valuation, personal finance etc).

However I have never been interested in trading (probably because I thought thats for high frequency traders). Or maybe because in my mind there is this dogma that trading is not sustainable and social media gives trading an ugly perception. Every one that I speak to down plays trading (none of them day trade) and I included, maybe this is me being shortsighted - we’ve all heard 80% or whatever % traders lose money.

My question is - Is day trading actually a sustainable way to make money month to month?

If so:

How long have you been trading?

What is your average profit per month?

What do you trade stocks/fx?

If not:

Why did you stop?

Thanks

#2

IMO no, the market is random and over time you will have ups and downs and eventually you will tire out and the market will catch up with you. For short periods like a year or 2 you could make money but think over long periods, 5, 10, 20 years, how can you keep trading and beating a buy and hold strategy is very difficult… look at today for instance, suddenly people realize the market is going up and jump in but tomorrow could be down etc., if you keep trying to time the market and jump in and out you’ll just go crazy trying to predict the highs and lows.

ps. highly recommend taking time to read this free book: http://site.iugaza.edu.ps/wdaya/files/2013/03/A-Random-Walk-Down-Wall-Street.pdf

3 Likes
#3

From the amount of people that didn’t respond. I think its clearer now.

Don’t get why people try trading when you can invest long term and sustainably grow your own portfolio.

#4

We can all google the best of the best day and swing traders of all time ~(both dead and active today) - replicating their success is a different story. This is the reason why, for some people, it is better to just stick to long term hold aka investing because day trading requires a lot of hard work.

#5

Perfect summary. I’m a big advocate of this book and it completely changed my outlook

#6

It depends how much time and money you have at your disposal for playing. I have been trading from past 15 years. My strategy is a mix of both worlds (active {A} & passive {P} ). I have learnt one thing if you go too much passive or too much active both can result in diminishing results. I have experiented with various strategies and reaislised that using mix of both A & P can produce better results rather doing just one of them. One of the point many passive investors forget is that no asset have infinite life. Most companies do not last for more than 40 years. I. E. We have to find a right exit point for every investment. If we have enough time at disposal then we should continue to watch our portfolio and keep wouching for right exit points for existing assets and right entry points for new assets. Some times these exit points come in few years, some times they come in few months and if you have done investment in highly volitile securities then they might come same day.

2 Likes
#7

Generally day trading is not viable for the vast majority of people. There are outliers, which may be worth studying if it’s something you’re interested in, but on the whole it doesn’t work for most people. I’ve seen discord groups with day traders and it seems they just want a shortcut, so laziness just seeps into everything they do.

I’d say there are definitely some short term trades that can work - I’ve made some myself (10% of portfolio into one stock which goes up 30% in value due to excitement). But if you set out to day trade, you would be always betting on suboptimal trades - cuz you have nothing else to do.

Jack Schwager did an interview with one day trader/technical analyst who made it work, but his success (+30% a year) was more due to risk management than anything.