majorleagueswag
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Intro: Why not to daytrade
Daytrading will not make you rich and it is not a viable option. First, if you're just trading stocks you are catching so much slippage and such small percentages at best you're going to grab a .3% gain from time to time. Just holding SPY, the literal market, the literal representation of the US economy that the president, congress, 401ks, foreign coutnries, and hedgefudns care about, for a year (on average) yields the best returns.
Okay so if SPY is the best how do you beat it? I know you've seen wallstreet bets people show off crazy wins. They're buying lottery tickets on options and getting lucky. Don't do that there's no strategy it's just gambling. I know it sounds fun to say but from the outside it looks pathetic. Full stop.
1. Leverage
If the S&P500 (SPY) is the closest thing we have to a guaranteed financial vehicle that outperforms inflation and all other savings, is there any way to take advantage of it?
Yes. Leverage.
2x and 3x ETFS exist (SSO and UPRO). On a good year, UPRO will return 100%. It's so leveraged that a bull run will get you better gains than you've ever seen.
From the lowest price during the Iran conflict, UPRO has returned 73% in the past 5 months compared to SPY at 23%. This is taking the lowest of the year through a rebound.
Instead of timing it, what if we just held during a healthy market long term? No day tarding, just hold through the dips. 2023 until now. Roughly 250%, that's more than tripling your investment in 3 years. SPY had about 80% since then, which is very very good, but still far away.
2. Why not just hold forever?
So this sounds great, but we've only shown growth periods. It's leveraged so it moves 3x up and moves 3x down. If a stock is at 100, and it moves 10% down, it's t 90. It requires about 11% to get back to 100. On 3x leverage, it would fall 30% to 70 and require 45% to get back to 100. However we only recovered 11% on the regular stock, so a 33% recovery, so we're not back at the starting price. For example, after the 2021 peak, leveraged ETFs like UPRO took longer to recover to pre 2022 correction price than the market did. So you're in for a longer downturn during bad markets. Even during a good market, you have to accept stomaching 30%+ drops of your investment and flash crashes. It's psychologically tough. S&P500 is far more stable day to day and slower during a crash.
3. Strategy
What if there was a way to only hold leverage during bull markets? Wouldn't this outperform the market? Yes. There is an actual whitepaper research that backtested this. When the price of SPY > its 200 day moving average, we are in a bull market. When the stock price is above its 200 day moving average that also means there is less volatility. Less volatility means less red days meaning less we have to recover from with leverage and more growth. Just hold leveraged funds during the bull markets and then exit and hold Tbills or high interest savings during bear markets.
This is the strongest long term investing plan you'll find. Not crypto pumps that ran out, actual companies that run our economy.
4. The mindset
This requires patience but a lot of daytrading is performative, something to do everyday. Setting goals everday. you don't actually need that. You just need to sit back and tarde less. Obviously, there is risk invovled. Seriously, don't just jump in on it. You need to develop your own backtest system.
Most importantly, you need a job and a source of income to fund this. Until you have a couple hundred thousand dollars (really need a million), stocks are not going to grow enough for you to see meaningful income from them. That's a fact. Still, this is much better advice than anyone telling you about signals or chart strategy - none of that is real. Statistics is real. Backtested statistics is real and can be pressure tested and simulated. Study financial papers, that's the best advice. If you're in hs, this isn't much for you yet. If you have a job and you're already putting money away each month, this is something you can read into and see if it makes more sense for you or not.
Let's say somehow you had $10k back during covid and you put in around $200 a month every month since, you'd be sitting at around $200k now. That's not even optimizing it for only holding during bull periods and sitting out during bears.
Daytrading will not make you rich and it is not a viable option. First, if you're just trading stocks you are catching so much slippage and such small percentages at best you're going to grab a .3% gain from time to time. Just holding SPY, the literal market, the literal representation of the US economy that the president, congress, 401ks, foreign coutnries, and hedgefudns care about, for a year (on average) yields the best returns.
Okay so if SPY is the best how do you beat it? I know you've seen wallstreet bets people show off crazy wins. They're buying lottery tickets on options and getting lucky. Don't do that there's no strategy it's just gambling. I know it sounds fun to say but from the outside it looks pathetic. Full stop.
1. Leverage
If the S&P500 (SPY) is the closest thing we have to a guaranteed financial vehicle that outperforms inflation and all other savings, is there any way to take advantage of it?
Yes. Leverage.
2x and 3x ETFS exist (SSO and UPRO). On a good year, UPRO will return 100%. It's so leveraged that a bull run will get you better gains than you've ever seen.
From the lowest price during the Iran conflict, UPRO has returned 73% in the past 5 months compared to SPY at 23%. This is taking the lowest of the year through a rebound.
Instead of timing it, what if we just held during a healthy market long term? No day tarding, just hold through the dips. 2023 until now. Roughly 250%, that's more than tripling your investment in 3 years. SPY had about 80% since then, which is very very good, but still far away.
2. Why not just hold forever?
So this sounds great, but we've only shown growth periods. It's leveraged so it moves 3x up and moves 3x down. If a stock is at 100, and it moves 10% down, it's t 90. It requires about 11% to get back to 100. On 3x leverage, it would fall 30% to 70 and require 45% to get back to 100. However we only recovered 11% on the regular stock, so a 33% recovery, so we're not back at the starting price. For example, after the 2021 peak, leveraged ETFs like UPRO took longer to recover to pre 2022 correction price than the market did. So you're in for a longer downturn during bad markets. Even during a good market, you have to accept stomaching 30%+ drops of your investment and flash crashes. It's psychologically tough. S&P500 is far more stable day to day and slower during a crash.
3. Strategy
What if there was a way to only hold leverage during bull markets? Wouldn't this outperform the market? Yes. There is an actual whitepaper research that backtested this. When the price of SPY > its 200 day moving average, we are in a bull market. When the stock price is above its 200 day moving average that also means there is less volatility. Less volatility means less red days meaning less we have to recover from with leverage and more growth. Just hold leveraged funds during the bull markets and then exit and hold Tbills or high interest savings during bear markets.
Actual paper to read: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2741701
This is the strongest long term investing plan you'll find. Not crypto pumps that ran out, actual companies that run our economy.
4. The mindset
This requires patience but a lot of daytrading is performative, something to do everyday. Setting goals everday. you don't actually need that. You just need to sit back and tarde less. Obviously, there is risk invovled. Seriously, don't just jump in on it. You need to develop your own backtest system.
Most importantly, you need a job and a source of income to fund this. Until you have a couple hundred thousand dollars (really need a million), stocks are not going to grow enough for you to see meaningful income from them. That's a fact. Still, this is much better advice than anyone telling you about signals or chart strategy - none of that is real. Statistics is real. Backtested statistics is real and can be pressure tested and simulated. Study financial papers, that's the best advice. If you're in hs, this isn't much for you yet. If you have a job and you're already putting money away each month, this is something you can read into and see if it makes more sense for you or not.
Let's say somehow you had $10k back during covid and you put in around $200 a month every month since, you'd be sitting at around $200k now. That's not even optimizing it for only holding during bull periods and sitting out during bears.
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