Debunking the “No Edge in Day Trading” Myth
How Top Traders Prove It Wrong
“Day trading has no edge”
“You can’t be consistent day trading”
I’ve heard this so many times over my 20+ years in this business.
Maybe you have too?
Let’s unpack that and see if it’s really true…
Intraday Hedge Funds
Firstly, there are literally dozens of hedge funds trading intraday:
- Medallion
- Two Sigma
- Citadel
To name a few.
And yes, these are quantitative firms and sure some of those are engaged in high-frequency trading.
But funds like Medallion are said to have had an average holding period of a few minutes to a few hours.
That’s an intraday edge, just executed by a machine.
Ok Mark, that doesn’t count… what about human click traders?
Alright…
Take Aatu Kokkila, remember him?
He runs a $30m hedge fund and since 2015 has not had a losing year.
Guess what his strategy is?
Day Trading Forex.
Who else?
Day Traders
Then there’s Toby Crabel, who launched his Crabel Multi-Product fund in 1998 with an average hold time of one day.
He was the pioneer of the opening range breakout strategy.
He wouldn’t still be in business if he was losing money!
- Top traders like Linda Raschke, who ran a profitable hedge fund for years. She’s predominately an intraday trader.
- Then there are all the day traders in the Market Wizard series, and the countless independent guys and girls quietly killing it with their own or other people’s money.
You get the point.
There is an edge intraday if you look carefully.
However…
Most day traders do lose money.
We know this – you see the stats everywhere.
But what sets the traders mentioned above apart from the crowd is the ability to wait for the edge to show…
That’s the ‘secret sauce’ ladies and gents.
The traders who win year after year after year aren’t sitting in front of the screen and taking a punt on EURUSD at lunchtime because they think it’s going up.
The real winners have discovered an edge and pressed that edge.
Take Aatu for example (a good example because his track record is there to see, and I have discussed his strategy with him on my podcast.)
He trades forex around news – specifically looking for mispricings.
Does he roll into the office, pull up a random chart, and take a stab at a trade?
No!
He spends hours and hours studying his edge, preparing for the next trade, and working out new ways to manage risk and add size.
As does any trader with edge, intraday or multiday.
That’s the difference.
And that’s why people who aren’t really in the thick of this business believe there’s no edge in day trading.
They just see the crowd from the outside.
And the crowd is a net loser.
Our job is to not be like everyone else.
Avoid falling into the same traps as the average day trader.
And to play the game differently, by our own rules…with our own edge.