Daytrading with Triple Long: What can go wrong?

JEDI

Lifer
Sep 25, 2001
29,391
2,736
126
From this thread:
http://forums.anandtech.com/showthread.php?t=2171334


day traders margin = 4x margin
Stock = UPRO (Triple long). It corresponds to triple (300%) the daily performance of the S&P 500®.

so $10k cash = 40k daytraders margin = 120k if you buy UPRO.
you're leveraging $10k by a factor of 12!

Now buy UPRO (currently $70/share) after a pattern of it rising for 5 min. Sell when:
1) it's risen 1/2%
2) it falls to within $0.01/share of the price you bought it at. (After UPRO rises $0.02, set a stop loss at $0.01)

Rinse repeat. you can do it on your Lunch hour for some quick $.
note: there will be days where you wont spot a solid rising pattern due to the market being chopy. be patient and wait for it.

I think Wells Fargo offers free trades if you have X amount in the account.


So whats wrong w/my theory?
 

halik

Lifer
Oct 10, 2000
25,696
1
0
From this thread:
http://forums.anandtech.com/showthread.php?t=2171334


day traders margin = 4x margin
Stock = UPRO (Triple long). It corresponds to triple (300%) the daily performance of the S&P 500®.

so $10k cash = 40k daytraders margin = 120k if you buy UPRO.
you're leveraging $10k by a factor of 12!

Now buy UPRO (currently $70/share) after a pattern of it rising for 5 min. Sell when:
1) it's risen 1/2%
2) it falls to within $0.01/share of the price you bought it at. (After UPRO rises $0.02, set a stop loss at $0.01)

Rinse repeat. you can do it on your Lunch hour for some quick $.
note: there will be days where you wont spot a solid rising pattern due to the market being chopy. be patient and wait for it.

I think Wells Fargo offers free trades if you have X amount in the account.


So whats wrong w/my theory?

That
 

Alone

Diamond Member
Nov 19, 2006
7,490
0
0
Well in order to profit you'd likely exceed your free trades. There's a lot of fees involved with trading.

But what the fuck do I know?
 

Juked07

Golden Member
Jul 22, 2008
1,473
0
76
Agree with halik.

Fees hurt you even more, but unless you have +expectancy in your trade, you'd still fail without fees.
 

Mark R

Diamond Member
Oct 9, 1999
8,513
16
81
These 3x levered ETFs have very strict margin requirements. Most brokerages will only allow 25% margin:

so $10k in account = $12.5k buying power on UPRO.

Also, don't forget that you need a minimum $25k funds to day trade, due to exchange restrictions. If you day trade (actually hold stocks for less than 3 working days) with less, your brokerage may be required to freeze your account.
 

Doppel

Lifer
Feb 5, 2011
13,306
3
0
Before you use real money setup a simulation. Then you won't have to take anybody's word about what's wrong with it, you'll see for yourself.
 

JEDI

Lifer
Sep 25, 2001
29,391
2,736
126
Before you use real money setup a simulation. Then you won't have to take anybody's word about what's wrong with it, you'll see for yourself.

good idea.

got any links to real time simulation sites?
 

Miramonti

Lifer
Aug 26, 2000
28,651
100
91
Before you use real money setup a simulation. Then you won't have to take anybody's word about what's wrong with it, you'll see for yourself.

Atleast until he sees the impact of crappy executions, losing money, and how the mental aspect of winning and losing impacts oneself. But sure, atleast enjoy it on paper first.

And the basic most common misconception of the OP is how things are easier with greater leverage.

Decision making > leverage
 

JS80

Lifer
Oct 24, 2005
26,271
7
81
From this thread:
http://forums.anandtech.com/showthread.php?t=2171334


day traders margin = 4x margin
Stock = UPRO (Triple long). It corresponds to triple (300%) the daily performance of the S&P 500®.

so $10k cash = 40k daytraders margin = 120k if you buy UPRO.
you're leveraging $10k by a factor of 12!

Now buy UPRO (currently $70/share) after a pattern of it rising for 5 min. Sell when:
1) it's risen 1/2%
2) it falls to within $0.01/share of the price you bought it at. (After UPRO rises $0.02, set a stop loss at $0.01)

Rinse repeat. you can do it on your Lunch hour for some quick $.
note: there will be days where you wont spot a solid rising pattern due to the market being chopy. be patient and wait for it.

I think Wells Fargo offers free trades if you have X amount in the account.


So whats wrong w/my theory?

lol 1 cent stops on a 3x ETF? The computers will pwn you.
 

JMapleton

Diamond Member
Nov 19, 2008
4,179
2
81
I don't know where you can trade on 4x margin. I've never heard of more than 2x.
 

JS80

Lifer
Oct 24, 2005
26,271
7
81
huh?

explain pls

There are computer trading programs specifically designed to beat traders like you. If you put a 1c stop on such a volatile stock, the overwhelming majority of your trades will be losers.

Let's say statistically/historically your trade works, the only way to implement it would be to write an algo and have your computer sell at the stop price when the bid quote hits it. Even then, if you start to win, the market makers and other traders will notice your trades and figure it out to manipulate your algo.
 

Juked07

Golden Member
Jul 22, 2008
1,473
0
76
There are computer trading programs specifically designed to beat traders like you. If you put a 1c stop on such a volatile stock, the overwhelming majority of your trades will be losers.

Let's say statistically/historically your trade works, the only way to implement it would be to write an algo and have your computer sell at the stop price when the bid quote hits it. Even then, if you start to win, the market makers and other traders will notice your trades and figure it out to manipulate your algo.

I think you're overestimating his volume by several orders of magnitude. You seem to imply that he might originally be an expected winner (pretty much certainly not the case), and professionals will take time to specifically defeat him (certainly not true as well).
 

Miramonti

Lifer
Aug 26, 2000
28,651
100
91
40-50x margin isn't uncommon for forex iirc (due to the much lower volatility.)

Two ways to lose money real quickly...using too much leverage (it works both ways), and too aggressive stops, since generally the more stops you have, the more you lose.They might limit potential for a huge loss, but by aggressively locking in losses or limiting gains, you also lock out potential profits (and at sh!tty prices.)
 

JEDI

Lifer
Sep 25, 2001
29,391
2,736
126
There are computer trading programs specifically designed to beat traders like you. If you put a 1c stop on such a volatile stock, the overwhelming majority of your trades will be losers.

Let's say statistically/historically your trade works, the only way to implement it would be to write an algo and have your computer sell at the stop price when the bid quote hits it. Even then, if you start to win, the market makers and other traders will notice your trades and figure it out to manipulate your algo.

why would people want to defeat my trade?

and how can they see my stop loss? i thoiught only ask/bid?
 

kooroo

Junior Member
Nov 3, 2009
6
0
0
I think you're overestimating his volume by several orders of magnitude. You seem to imply that he might originally be an expected winner (pretty much certainly not the case), and professionals will take time to specifically defeat him (certainly not true as well).

it's all algorithmic. It's not really a function of people crafting algorithms to specifically target him. It's more of a function of the fact that the system already accounts for simplistic trading patterns like this and he'd likely just get rolled up.

The thing is, at a 1c stop, you likely won't even need the computers. My guess is, one slightly slow execution and a decent sized shakeout and this will fail fantastically.
 

halik

Lifer
Oct 10, 2000
25,696
1
0
Your 1 tick stop will get filled 99.999... % of the time, given the expected volatility in 5 minute time frame.

Also 5 minute "pattern of rising" amounts to nothing but blind luck and certainly won't cover the million 1 tick losers you'll lock with the stops.
 

JJChicken

Diamond Member
Apr 9, 2007
6,165
16
81
From this thread:
http://forums.anandtech.com/showthread.php?t=2171334


day traders margin = 4x margin
Stock = UPRO (Triple long). It corresponds to triple (300%) the daily performance of the S&P 500®.

so $10k cash = 40k daytraders margin = 120k if you buy UPRO.
you're leveraging $10k by a factor of 12!

Now buy UPRO (currently $70/share) after a pattern of it rising for 5 min. Sell when:
1) it's risen 1/2%
2) it falls to within $0.01/share of the price you bought it at. (After UPRO rises $0.02, set a stop loss at $0.01)

Rinse repeat. you can do it on your Lunch hour for some quick $.
note: there will be days where you wont spot a solid rising pattern due to the market being chopy. be patient and wait for it.

I think Wells Fargo offers free trades if you have X amount in the account.


So whats wrong w/my theory?

I don't understand what informational advantage you are exploiting with this strategy.

Day trading is best left to investment banks/hedge funds with the infrastructure to support it.

A safer way for you to make money in the markets is to study an industry you are familiar with, say you work in IT, then study the IT sector. And then invest wisely in stocks.

If you have any questions, let me know.

An easy way for you to simulate your model is to collate past price data (lets say for a year) and put it through Excel, with the relevant formulas telling you when you buy/sell etc. If you are into this stuff, read the book 'Way of the Turtle' by Curtis Faith. Alot of the ideas he mentions are appealing and the book is easy to read for beginners. Now keep in mind Curtis Faith, a once successful trader, has lost alot of his fortune in recent years, indicative in many ways that day trading is really a gamble.

/work in investment_bank + currently completing masters in quant. finance