YouTube video (Adrian Reid) addressing the misconception that day trading (closing positions daily) is inherently safer than holding positions overnight. Reid argues that overnight risk is manageable with sensible position sizing and that a substantial portion of S&P 500 long-term gains occur outside regular trading hours, so holding overnight can provide a natural edge compared with intraday-only strategies.
I think there's one other misconception which I really think is important. And this comes up almost every time I tell someone I'm a trader. If I say, they say, what do you do? I trade stocks. Oh, you're a day trader is what they say. I said, I'm a trader, not a day trader. Now the difference is lost on most people, but it's important. Most traders who are new to the markets assume that in order to be a trader and be successful, you have to trade very short term because you don't want to take up too much risk. So you look at very short term charts and because on a short term chart you've got no overnight risk, right? So therefore it must be less risky because you're looking, you're just trading in the day and then you go flat at the end of the day, you don't hold overnight and then you start trading the next day and you're buying, selling, buy and selling. That must be less risky. It's absolutely not. That's a very common misconception. Overnight risk is not a big deal as long as your position size is okay. If you've got huge positions and you're massively leveraged, then yes, it's a problem. But if you trade sensibly, it's not. And in fact, if you look at the S&P 500 and you zoom out over the entire history of the S&P 500 and you looked at the proportion of the growth in the S&P 500 that happens during trading hours between the open and the close.
And then you compare that to the proportion of the overall growth that happens outside of trading hours from the close to the open the next day. A lot of the positive drift in the market is outside of normal trading hours. So by taking overnight risk sensibly and trading slightly longer term, you actually have much a much bigger natural edge because the market drifts up and it's the overnight edge that gives you a big chunk of that, not all of it, but a big chunk of it. And if you're just trading a five minute chart and going to cash at the end of the day, A, you're super stressed, B, you've probably made a ton of mistakes. See, you probably don't have a profitable strategy because there's not many very profitable day traders. And D, you're missing out on the overnight edge.
It.
