1

When I learned about investing, I was told that the methods generally fall into two camps: fundamental analysis (annual reports, competitive advantage, intrinsic value, etc.) and technical analysis (trend, momentum, indicators, etc.). There's also quantitative analysis that involves a lot of math. However, I have recently noticed a method that was completely alien to me: day trading without fundamental or technical analysis. Apparently, all that's needed is Level 2, Time and Sales, and Direct Market Access (DMA) to several ECNs. No other information is needed, not even charts. This is essentially scalping stocks by only using the "ticker tape".

Is day trading by scalping stocks without using charts even viable nowadays? I find it hard to believe that such methods would work, with all the automated trading and HFT algorithms these days.

3
  • Could you elaborate on how you would actually use the 'ticker tape' to make trades? Sounds like just simplified TA [which you can debate the oft-disputed merits of]. Sep 21 '20 at 16:59
  • Flux, day trading is like sexual intercourse. Talk about it, books about it, and theories about it are: totally. utterly. completely. fully. hopelessly: worthless. I'd urge you to grab 10 grand ("better than wasting it on a muscle car") put it in an account and trade away. For the cost of 10 grand, you'll enter a different, uh, something.
    – Fattie
    Sep 21 '20 at 17:56
  • @Grade'Eh'Bacon Presumably by exploiting supply and demand imbalances or anomalies, and by exploiting ECN rebates.
    – Flux
    Sep 22 '20 at 4:26
2

This might degenerate into a very opinion based set of answers, but I think day trading is not a viable investment strategy with charts.

You may want to read some books by Jack Bogle the inventor of the low cost index fund. His research has shown that one is better off buying broad market, low cost index funds.

But for illustration lets say that it can be proven that an active trader can beat the performance of a passive investor (PI) who buys low cost broad market mutual funds. Some questions remain of the active trader:

  • Can they beat the PI enough to cover their cost of trading?
  • Can they beat the PI enough to cover their additional tax liability (mutual funds are very tax efficient)?
  • Can they beat the PI enough that their hourly rate beats minimum wage?
  • Would the active trader be better off concentrating on their career or building a business to increase their income so they have more to invest?

The answer for most people is most people should be passively investing. This is especially true for young people (as if they can increase their lifetime earnings it will have a dramatic effect), or those with small portfolios (less than $250K).

It sounds very old fashion, but sometimes this stuff works, I'd get a second job and put all the earnings from that job into investments.

2
  • Pete, I think this is a general "is day trading real" answer : it doesn't really address the specific (weird!) question asked ?
    – Fattie
    Sep 21 '20 at 17:50
  • So day trading is not viable with charts, but can it be viable without charts?
    – Flux
    Sep 22 '20 at 4:25
0

As an aside, I find it interesting that explanations on various bulletin boards of why trading can't work tend to come from non traders :->)

There are many ways to trade and some indeed do not involve fundamental or technical analysis.

In its simplest sense, what does an options market maker do? Charts? Fundamentals? No. He simply delta neutral trades based on the numbers. A trader can do this as well, though not as efficiently as a market maker.

I could (not will) show you a pairs trading system that has paid off handsomely in every decent correction in the past 13 years (2008, 2009, the China scare in 2018, the implementation of tariffs, the inverted yield curve fears, the pandemic drop). No charts, no fundamentals, just price. And no losing time periods either.

While it's not likely to be relevant today, one of the most famous ticker tape readers was Jesse Livermore who made and lost fortunes, notably once because the ticker tape didn't update in a timely fashion.

You mentioned automated trading and HFT algorithms. For years they made a bundle. Again, no charts, no fundamentals, just price.

I'd imagine that there are far more ways to trade without technicals or fundamentals. Anyone with such an edge would hardly advertise it.

0

Is day trading by scalping stocks without using charts even viable nowadays?

No, what I believe you are getting at (i.e., what I believe the mentioned author was getting at) is completely nonsensical.†

I find it hard to believe that such methods would work, with all the automated trading and HFT algorithms these days.

Regarding major well-known stocks, you've hit the nail on the head.

Regarding thin markets - the whole thing is meaningless. In a "sense" you could do what the author is hinting at, but, thin market trading is sort of meaningless and not really in the spirit of what you're asking.


† note that one of the few ways to make money trading is ... write books or newsletters about it

2
  • Could you explain what you mean by "thin market trading is sort of meaningless"? Thin market trading is definitely relevant to my question.
    – Flux
    Sep 22 '20 at 4:22
  • Sure, "no rules apply" and "all theories are meaningless" in thin market trading. If you have some theory on trading (whether charting, fundamentals, price points, analysis of fair values, arbitrage .... or whatever ... anything) it's all just meaningless in a very thin market. The particular system to which you allude, is totally out the window in thin markets, it's a non-starter.
    – Fattie
    Sep 22 '20 at 13:11

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.