I have followed your articles and posts all around the web, and I actually met you and your brother [Bob Bright] at a trading expo a few years back. I think you and your brother have set a great example for traders who trade with your firm.
I read something you wrote recently that seemed to imply that daytrading has lost its luster, and perhaps you guys are focusing on other methods of trading.
Would you please let me know if you’re still daytrading, or if your traders have forsaken it altogether? — OHinvest
Thanks for the kind words, and I am the first to acknowledge that my brother has always been my beacon, if you will, and has led the way for our firm over the last few decades.
Now, let’s focus on your question about daytrading. Let me assure you that our traders do indeed engage in basic daytrading. However, over the last few years, many of them have focused on longer-term strategies as well. As traders, we must always continue to adapt to the marketplace. We cannot stay stagnant, or we will be eaten alive.
Let me quote myself from an article I wrote 10 years ago for this magazine (“Survival Of The Fittest,” January 2003; you can visit the article archives at Traders.com for the complete article):
Back then, we had gone through some major changes in the marketplace, thus requiring our traders to adapt to everything from new trading instruments (ETFs, SSFs, and so on), to new ways of analyzing individual stocks. As the Internet grew, so did the amount of information made available to traders. We have grown accustomed to having so much data available that we wonder how we ever got along without it. Allow me the liberty of quoting a bit more from the same article, and then I’ll share what we’re doing differently these days.
You see, even the term daytrading has often amused me. If we buy and sell shares the same day, I guess we’re “daytrading.” We still trade the opening-only strategy, and for the most part, we close those positions the same day. Sometimes we plan on selling shares back the same day, but the market conditions (that is, price, as in we’re losing on the trade) dictate that we take those shares home. In my mind, that’s how swing trading came on the scene — nothing more than a daytrade gone bad!
Our traders are using the openings to enter trades often, and some do exit completely by end of day. Others — and this is where I think you may have gotten the idea that we are not favoring going home flat with no positions — prefer to plan position trades (okay, “swing trades”), or even more likely, well-planned, correlated pairs trading (see my past Q&A columns on pairs trading, available at Traders.com).
In addition, our traders plan out their longer-term trades — whether simple directional plays, pair trades, or even mergers — taking into account such things as cost of carry, seasonality, and other variables. This planning can save the traders a lot of money when done correctly. As a result, they tend to keep a little more money in their accounts to allow for lower interest costs, and so on. Again, the term adapt comes to mind.
The advent of subpennies and high-frequency trading has caused some concern, but after a few years of this, we have simply adapted to these things as well. I suggest becoming immersed in a group of fellow traders to keep up with these things. Hope this helps!