I Took a Couple Years Off of Work to Swing Trade. Here’s What Happened | Hacker News Reader

I Took a Couple Years Off of Work to Swing Trade. Here’s What Happened

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38 pointspaulpauper32 comments

"A lot of people have flipped a coin 10 times and had it come up heads only 4-6 times, but I had it come up heads a full 7 times, so clearly I have an extremely proficient coin flipping technique. Sit down and listen to me discuss the wrist exercises I did!"

A lot of people have tried to do what the author did and lost all their money. He recounts how he lost tons of money on different occasions. He says it's been bad for his mental health. He freely admits that much of the limited success he did have was luck, and mentions that doing it during a bull market made everything much easier. But even so he product calculates that, once he mastered this skill hes...

...failed to beat the market. Ouch.

For anyone who skimmed the article (which spends about 90% of it's length talking up "swing trading" and making it sound like the author thinks it's a great idea), make sure you read to the end:

> So what should you do with your time instead of mastering swing trading? Find what you really want to do with your life that adds value to the world, and get to work!

Quite right. (Well, assuming for the sake of argument that swing trading is actually a thing, and that it's something that can be mastered.)

What’s swing trading ? Is that like day trading where you try to buy low and sell high on small fluctuations ?

From Investopedia [1]

> Swing trading attempts to capture gains in a stock (or any financial instrument) within an overnight hold to several weeks. Swing traders use technical analysis to look for stocks with short-term price momentum. These traders may utilize the fundamental or intrinsic value of stocks in addition to analyzing the price trends and patterns.

> ...

> Day Trading vs. Swing Trading

> The distinction between swing trading and day trading is the holding position time. Swing trading involves at least an overnight hold, whereas day trading closes out positions before the market close. Day trading positions are segmented to a single day only. Swing trading involves holding for several days to weeks. By holding overnight, the swing trader incurs the unpredictability of overnight risk resulting in gaps up or down against the position. By undertaking the overnight risk, swing trades are usually done with a smaller position size compared to day trading, which utilizes larger position sizes usually involving leverage through day trading margin. Swing trading can utilize the overnight margin of 50% if the account meets the pattern day trading (PDT) rule of maintaining at least $25,000 in account equity. Swing trading on margin can be extra risky in the event a margin call triggers.

> A swing trader tends to look for multi-day chart patterns. Some of the more common patterns involve moving average crossovers, cup-and-handle patterns, head and shoulders patterns, flags, and triangles. Key reversal candlesticks, such as hammers for reversal bottoms and shooting stars for reversal price tops, are commonly used in addition to other indicators to devise a solid trading game plan. Stop-losses tend to also be wider when swing trading to match the proportionate profit target.

For anybody who wants to take a stab at something like this to see how easy it is to lose some cash, Investopedia has a fun simulator [2]. You start with $100k and can do traditional investing or shorts.

---

[1] https://www.investopedia.com/terms/s/swingtrading.asp

[2] https://www.investopedia.com/simulator/home.aspx

Trend, swing, momentum trading, all generally mean the same thing. In theory, the idea is that you buy something underpriced/overpriced when your technical momentum indicators tell you that momentum is increasing/decreasing. Can be used in all time scales (daily, weekly, monthly)

I was really interested in finance, technical analysis (Alex Elder books), etc for a bit, but don't really have the capital to do anything, and is probably soothsayer type stuff anyway. Best real strategy is passive ETF vanguard type investments

Yes. The idea is it's day trading, except you hold for a couple days, not a couple of hours, and you focus 100% on trying to figure out patterns in the stock and ignore all fundamentals. So you completely ignore like, whether the stock is cheap, or whether the company is doing well, and instead try and look for patterns in the stock price.

One he mentioned in particular was cup-and-handle; you can see a description here: https://www.investopedia.com/terms/c/cupandhandle.asp

The idea is, if you see a stock that slowly declines for a bit, it's possible that at some point it might start to slowly increase for a bit. And further, if it does, it might STOP increasing at the price level it originally started decreasing at. and then decrease for a bit instead.

Could this happen? Sure.

And if it did happen, and I bought at the bottom of the cup, and then sold at the top of the handle, I'd make money right? Yep.

But tons of patterns start by "slowly declining for a bit", how do I know this is a "cup-and-handle" pattern, meaning I should buy, and not one of the ones where it just, you know, keeps declining? You don't.

And if the company announced some really bad results, or loses or lawsuit, or something, halfway through the second half of the cup, right after I'd bought, I'd lose a fuck-ton of money? You sure would!

And I have no idea which one is which until it's too late? Yep.

So if I go around trying to recognise these patterns, will I make money? Oh hell no. It's like coming out ahead playing video poker at a casino; you might win once, but the odds are heavily stacked against you if you keep playing.

It's like day trading, in that _it's total nonsense._ Reading tea leaves of patterns in charts of 'cup and handle', 'double top', 'flags and pennants' is what your gut tells you. It's astrology, dowsing, EVP -- our brains' amazing ability finding patterns in noise.

Once in a while, someone lucks out, or at least enough to turn it into a proselytizing grift. Y'know, like writing and selling a few thousand copies of an Amazon book or making a youtube series (totally something a successful investor would do!) Looks like this guy bought into it -- pity him!

> Being frugal, I still wanted to dabble with money-making opportunities at my disposal.

> Swing trading was one option, so I tried it.

> As a business teacher, I already knew a lot about trading and personal finance.

I can't believe these three sentences occurred in sequence. This man is a caricature of a Dunning-Kruger profile. Even a "frugal" "business teacher" succumbs to the lure of magical get-rich-quick thinking! I doubt he would have much pity if his own students indulged in such willful stupidity...

So heed exactly zero of his foolish advice -- it's a litany of what not to do in investing. Save for the warning not to pursue this folly.

Also note: the hottest version of this scam is in bitcoin: https://uk.tradingview.com/chart/BTCUSD/JwruXpQx-Head-and-sh...

The quoted passage is textbook rationalizing.

The clipped sentences, the defensive clauses "Being frugal", "was one option", "as a business teacher" and the rest of the article, all point to a man who wasted a chunk of his life in a rabbit hole and refuses to admit it.

At some point, justifying becomes gibbering. The author has reached it.

> succumbs to the lure of magical get-rich-quick thinking!

When it works, it works. Is it gambling? Probably no more so than ISOs.

https://www.reddit.com/r/wallstreetbets/comments/80e7x2/the_... (/r/wallstreetbets | The Big Long - Made $2.5 million in January off $100k options investment)

I'm not sure about the metaphor. With a little practice, one can certainly flip one's desired result with high probability. It's a pretty simple physical system (which is why coin flips in more fair circumstances usually mean letting the coin hit the floor, adding some complexity).

> A few years into swing trading, and I can say I learned a lot. I’ve made more than I’ve lost. I’m up about 16% ROI year to date.

The article was published December 15th 2017, so he made 16% since January 1st.

If he had bought the S&P500 on January 1st 2017 (2276.98) and sold on December 15th (2675.81) he'd be up > 17.5% (and who knows how much he paid in commissions).

Not to mention how much it cost in time to do all that work. Index funds don't incur any opportunity cost overhead in terms of your own time, they are fire and forget.

This! I am convinced that with a lot of careful work, you can beat the market a little. But to do so, you've got to work at it more than full time. To get paid for your time, you've got to be working with a ton of money so that a 1-2% beat gives you a good salary.

Otherwise, just invest in the major indices, diversify your portfolio so that it's appropriate for your current and future needs, and do something else with your life.

He also may have lost quite a bit on taxes.

If you qualify as a day trader according to the IRS rules, then different tax trader rules apply.

https://www.tradersaccounting.com/2017/11/28/trader-tax-stat...

  Traders can deduct interest expenses on Schedule C

Only business-specific interest.

Author waits until almost the very end of the article to say this:

> Put another way, if I never did any swing trading and invested all my money into a handful of diverse Vanguard or Dimensional funds, I would have gotten 8%-14% ROI from sitting on my butt!

Negative Alpha, in other words.

And the DJIA was up 25%; NASDAQ was up 28% (per CNN). Another Medium triumph.

If he had bought in Jan 2018 what would happen to him today? Index funds are a sound idea when the market is pumping but remember if we really were going into a recession, which we are not as the market is fine, you would have a chance to lose your job which in turn would cause you to sell your index fund investments to maintain your lifestyle, which in turn would be taking a significant loss. Something like a lazy portfolio would help in this scenario where you have money in bonds/stocks and ladder GIC's to be able to buy the dip.

I prefer options and it seems the write of the article is fairly new to trading, excepting to do great in 2-years is like being a neurosurgeon in 2-years, really challenging. The market has its way to chew and spit people out, there is so much to learn from money management, to risk tolerance, to finding a working edge. It takes decades to find something consistent.

Winning in the markets is the toughest profession out there so you have to work at it, but you also have to have capital to work at it. It's hard to turn $5k into $30K, but turning $100K into $150K is much easier.

> Being frugal, I still wanted to dabble with money-making opportunities at my disposal.

That... does not sound frugal to me. Frugal is working some part-time job during your time off, keeping your expenses low, and maintaining your savings, not gambling in the stock market.

Being frugal has nothing to do with one's income. Your advice to work a part-time job is no less irrelevant to frugality than his to engage in other ventures.

I've done some trading (2010-2014 was probably when I did the most) and played poker full time, among other things. Profitable at both. The only problem is that's it's tough on your mental health, stress levels, and while it's easy enough to be profitable (my education was in economics which is a great background for both activities), it's tough to be more profitable than a decent full-time job while also growing your bankroll if you start with a modest amount. I probably could have kept it up if I lived somewhere with a very low cost of living or was willing to give up my lifestyle, but in the end I decided the stress wasn't worth it.

I read an analysis of technical trading that demonstrated that the theoretical best return is buy-and-hold in a bull market, and only do technical trading in a down market.

[1] http://www.philosophicaleconomics.com/2016/01/gtt/

It's bullshit. There's no reliable way to time the market. Horoscopes would be just as accurate as predicting recessions as pseudo-intellectual articles like this.

You don't need to time the market though. People act as if traders go all in on every stock purchase betting everything. That's not how it works.

If you are engineer there are better use of your time than trading.

I say from experience lost a good chunk, learned a good chunk but most importantly lost my mind in the process. Thankfully woke up after few months and realized what harm I was doing.

I certainly learned a lot about business, capital markets and common life patterns.

What does common life patterns mean?

Momentum is the number #1

It's terrible for your mental health, that's for sure.

it takes at least 4-5 years to become a profitable trader. 1-2 years is nothing. just to learn the mechanics it will take couple of years.

This exactly. It's like starting a business, more so, a bootstrapped business. You have to make sacrifices to achieve your goal. You probably would need to spend 16-18 hours a day testing all the different ways you can find your edge. It's a never ending cycle as well, so once it starts to work, you have to keep refining it. The first few years are pretty challenging but when it pays, it pays. Many businesses fail, similarly, many traders fail as well.

it takes at least 4-5 years to become a profitable trader.

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