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Discussion Starter #1
It wouldn't be a Federal Reserve-induced Tech Bubble without getting suckered into daytrading!

I've started a paper trading experiment with fake money. Phase 1 of the experiment will be to collect 20 days of data. Phase 2 is to collect another 30 days of data. I will not permit myself to consider real money until I have 50 days of data.

My approach uses a handful of leveraged/volatile ETFs for basic trend following, focusing on areas of the market I know pretty well. The prices and outcomes I record will include bid/ask spreads, but no fees. I will also record SPY prices for reference. All trades are intraday only. No overnight positions. I'm using some risk control by enforcing hedging, and there must be multiple positions. Being purely long or short the market is not permitted. All trades are subject to my own proprietary risk check.

Goal: the hope is to produce returns that are uncorrelated to the market. If the returns are correlated with the market, then there's no point to this.

What I expect: I expect to see a sequence of somewhat random daily returns. It will either have no pattern (no average gain) at all, or if there is a gain, it will probably be very weak or unreliable. I'm really curious to see what the results look like. This is a genuine attempt and if it actually works, I would consider opening an IB account for this.

I expect the results to be terrible. I won't post the trades (too much work) but I will share the results, the daily % result and corresponding SPY change.

The ETFs that I'm currently thinking of are: TQQQ, SQQQ, SSO, SDS, FAS, FAZ, TBT, TMF, GDX.

Today was the first result. For the timespan I was in the market, SPY was -0.06% and my trades produced +0.34%
 

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I’d caution you about your results...in the current market it’s almost impossible not to make money. I had a buddy make Double digit returns on a bankrupt South American airline, and he wanted to hold on for more returns until I talked him into selling.
when the market returns to “normal”, day trading will be much harder.
 

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Discussion Starter #3
I’d caution you about your results...in the current market it’s almost impossible not to make money. I had a buddy make Double digit returns on a bankrupt South American airline, and he wanted to hold on for more returns until I talked him into selling.
when the market returns to “normal”, day trading will be much harder.
Thanks, that's a good warning. It can certainly be a problem when short term results look encouraging (leading to overconfidence).
 

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Yeah, my buddy went from never making a trade to day trading in a matter of months. He’s screwed up a number of times, but the market has always Bailed him out so far... I keep warning him, and he keeps saying he knows, but he also keeps gambling and succeeding....I know how this is going to end, and he says he also knows as he rushes towards the light.
 

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Discussion Starter #5
Yeah, my buddy went from never making a trade to day trading in a matter of months. He’s screwed up a number of times, but the market has always Bailed him out so far... I keep warning him, and he keeps saying he knows, but he also keeps gambling and succeeding....I know how this is going to end, and he says he also knows as he rushes towards the light.
If you happen to know more details about his trading mistakes, can you share? Is it that he holds onto bad positions, and the generally strong market simply bounces the security back up (bailing him out) -- whereas in other weak markets, his bad picks would tank hard?
 

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There is definitely weird stuff happening out there. Tech, clean tech, and biotech has some insanity/bubble stuff going on. When electric vehicle manufacturers with zero sales are worth billions, and when more are going public every week with multi-billion valuations, and tech is making thousands of millionaires every few weeks it seems... it might take a long, long time to get a long term return on any stock with a P/E of 40, or even worse a P/S of 40.

This is much more reminiscent of 1999-2001 than 2007-08 though. The daytrading is a big clue. I would be really skeptical of growth stocks. There is a lot of value in non-bubble sectors that remain depressed, which also draws parallels to the tech bubble. You could see very strong returns in beaten up sectors over the next 3-5 years where tech could go up 100% from here but then could fall just as quick - no one knows.

If I was trading today, I would be trading into value that has momentum, and most cyclicals are entering into that phase. I am also invested in that space and am most comfortable there, even for 1-3 month periods. You could do this with growth momentum although I wouldn't, if you can try to capitalize on some electric car manufacturer or COVID-testing company with a ridiculous P/B of 50 or 100 or more. Take profits and run fast. You could make money in 1999-2001, but you do not want to be left holding the bag - companies lost 99% within 1 year periods and sometimes 99.9% or more. All you needed was a good trendy story and you instantly had a billion dollar company. That eventually ran out, but it did take years to fully play out.
 

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Discussion Starter #7 (Edited)
This is much more reminiscent of 1999-2001 than 2007-08 though. The daytrading is a big clue. I would be really skeptical of growth stocks.
Thanks, these warnings are really great. Like I wrote above, I'm expecting that my initial experiments will give terrible results, or perhaps random patterns. And hopefully my curiosity about daytrading will end there :)

I would normally dismiss speculative trading entirely, except for two previous experiences.

The first is my TSX growth and momentum stock-picking. I've been having good results for 4 years now, several percent CAGR better than the TSX. This isn't a very long track record though and the last 4 years have been a strong market, so I could just be experiencing high beta. Due to this suspicion, I still only have 30k invested in this portfolio.

The second is some weird currency trading I once did, non leveraged. I was exclusively trading AUD/CAD, and the results were uncorrelated to the underlying currency, which was interesting. My results net of fees were
2016: me +8.0% , underlying was -3.0%
2017: me +5.7% , underlying was +2.2%
2018: me +14.1% , underlying was -1.0%

That last year, I really seemed to hit my stride and I remember it was pretty thrilling. I stopped doing it because I was trying to squeeze the trading into my lunch break at my office job, and that wasn't so great (luckily the boss was also really into trading, and found my results fascinating). After 3 years, I decided to quit while I'm ahead, then I shuffled and amalgamated accounts, ending the trading.

The boss is actually quite the gambler, and he used to tell me to leverage and deploy as much money as I possibly could, into this. But I was actually sometimes coming late to after-lunch meetings (13:00 pacific is market closing time) and I didn't feel great about being delinquent at work. Even though the boss cheered on my trading.

Those FX results were surprising to me. The AUD/CAD over those years was basically sideways, net -2% for the three years. Somehow, I made +30%. Perhaps I was able to trade it easily precisely because it was just sideways, constantly swinging back and forth (link to chart). It could be another example of something I got lucky in, but it may not be repeatable... perhaps just random luck.

Still, over 5 years, these were two distinct trading strategies which both went well. Both could be somewhat lucky, random results, but I am tempted to try again.
 

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Interesting thread here....
I'm thinking of going "all-in". Would you guys say this topsy-turvy market will continue an upward trend til, let's say, Tuesday Nov. 3, 3020?
 

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there's always the "unknown factor" or course, that could upset things.
who saw covid-19 coming?
I have a weird feeling something might happen with Biden.....dont know what....before the election.
what effect would that have, on the stock market...?
 

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If you happen to know more details about his trading mistakes, can you share? Is it that he holds onto bad positions, and the generally strong market simply bounces the security back up (bailing him out) -- whereas in other weak markets, his bad picks would tank hard?
He’s not doing proper research, and still making money which reenforces his confidence, making him a bad trader in the long run. A bankrupt South American airline is a perfect example. He made money because the short sellers were trying to cover their positions, he had no idea that was why, took me about 10 minutes to figure it out.
 

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Interesting thread here....
I'm thinking of going "all-in". Would you guys say this topsy-turvy market will continue an upward trend til, let's say, Tuesday Nov. 3, 3020?
I think you missed the boat. The easy money was a few months back, now valuations are starting to get ridiculous again. I’m a big fan of Apple, but I don’t think it was Worth 1T before let alone 2T today. And Tesla’s over 2k/ share... we’ve gone from irrational to insane.
 

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every day since $300 im wondering if i should sell my aapl....but it just keeps going UP.
I guess it'll settle a bit after the split, but who knows...
 

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Discussion Starter #13
I think you missed the boat. The easy money was a few months back, now valuations are starting to get ridiculous again. I’m a big fan of Apple, but I don’t think it was Worth 1T before let alone 2T today. And Tesla’s over 2k/ share... we’ve gone from irrational to insane.
Well Apple at $2 trillion is already worth more than the entire Canadian economy. I'm sure some people think that $3 trillion is just around the corner.
 

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Discussion Starter #14
Do any of you, perhaps @Topo or @Rusty O'Toole have experience making intraday trades that are closed by the end of the day?

These vehicles like TQQQ can move pretty significantly so I think one might be able to 'harvest' volatility or ride momentum over short timespans.

If you look at last Tuesday Aug 25 for example, even if you joined the well-established rally in the afternoon, briefly perhaps 1400-1500, that's +0.72% which is pretty significant.
 

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Do any of you, perhaps @Topo or @Rusty O'Toole have experience making intraday trades that are closed by the end of the day?

These vehicles like TQQQ can move pretty significantly so I think one might be able to 'harvest' volatility or ride momentum over short timespans.

If you look at last Tuesday Aug 25 for example, even if you joined the well-established rally in the afternoon, briefly perhaps 1400-1500, that's +0.72% which is pretty significant.
I don't have any experience day trading. I am often working during the day, so the continuous access that is needed for day trading is not feasible for me. I have heard of traders scalping futures, but I don't know if that is successful in the long run.

I occasionally do swing trades that span from a few days to a few months, but since this is with a small portion of my portfolio, it does not materially affect my annual returns. It does, however, provide for a good dopamine boost.
 

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Discussion Starter #16
I don't have any experience day trading. I am often working during the day, so the continuous access that is needed for day trading is not feasible for me. I have heard of traders scalping futures, but I don't know if that is successful in the long run.
Yeah, this is the main part that concerns me -- the need to continuously monitor. It's the same problem I ran into with my AUD trading, even though it was giving great results.
 

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Yeah, this is the main part that concerns me -- the need to continuously monitor. It's the same problem I ran into with my AUD trading, even though it was giving great results.
One way around that is to open a position, then set a limit order to sell above (for long positions) and a stop-loss to sell below (if desired). That way one could go about work and then make adjustments or open a new position later on.
 

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Discussion Starter #18
One way around that is to open a position, then set a limit order to sell above (for long positions) and a stop-loss to sell below (if desired). That way one could go about work and then make adjustments or open a new position later on.
Can you recommend any paper trading / simulation platform which is good for trying out trades?

I used RBC DI's practice account before but was not impressed. Doesn't give you bid/ask spreads and the interface is awful when quick decisions have to be made.

The only good one I'm aware of is IB simulation account. I'm not too concerned about the specific platform at the moment, but definitely want real-time quotes and bid/ask spreads. I want to try things out without any real money in play. Any suggestions?
 

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Can you recommend any paper trading / simulation platform which is good for trying out trades?

I used RBC DI's practice account before but was not impressed. Doesn't give you bid/ask spreads and the interface is awful when quick decisions have to be made.

The only good one I'm aware of is IB simulation account. I'm not too concerned about the specific platform at the moment, but definitely want real-time quotes and bid/ask spreads. I want to try things out without any real money in play. Any suggestions?
I don't know of any, since I have not tried to use them. My guess is that the bid/ask spread for most liquid ETFs would be in the penny range, so it may not matter a whole lot, unless you are doing many trades a day. It may be more important to have access to a free ETF trading account, because even 2 trades per day would add up to 5000 dollars per year. On the other hand, even a 5 cent spread only amounts to 25 dollars in the same time period.
 

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Discussion Starter #20 (Edited)
I don't know of any, since I have not tried to use them. My guess is that the bid/ask spread for most liquid ETFs would be in the penny range, so it may not matter a whole lot, unless you are doing many trades a day. It may be more important to have access to a free ETF trading account, because even 2 trades per day would add up to 5000 dollars per year. On the other hand, even a 5 cent spread only amounts to 25 dollars in the same time period.
I might be getting ahead of myself thinking of fees, but just wanted to point out the potential problem with the "free" trades.

The ''free trades" accounts, as far as I know, all sell their order flow. That's the Robinhood idea, and IB now has a Lite version that does the same. Having your order flow go to these specific market makers will, I'm pretty certain, deprive you of price improvement and may even deprive you of limit fills.

For example the full IB account uses their smart order router, which I remember from the past, is actually very good at selecting the best marketplace and giving best fills. Their "lite" account has no-commission trades, but then the order flow is sent to specific market makers instead of the smart router. This is guaranteed to give worse fills, which amounts to hidden fees and possibly even worse, poor execution under market stress / volatility.

There is an argument to be made that good quality execution (say the IB smart router) and paying fees, is better than going through an inferior market maker intermediary and risking having orders not fill. Especially in fast moving markets where a fill is even more important... do you really want to pay "no fees" and endanger those trades?

Scotia iTrade may be a good compromise actually. $4.99 per trade for frequent traders, Big 5 bank safety, and (I presume) good order routing, though it's really hard to get a read of how good their order routing and execution is.
 
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