Was all in into Barclays shares the day before it was going bust in 2008 but got out before 5pm fearing the night and the wiping out. Instead, Gordon Brown bailed them before the market reopened the next morning ("too big to fail") and I missed my once-in-a-lifetime opportunity to make the big money as an indie trader. Done.
Almost 80% of Private Day Traders Lose Money
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Re: Almost 80% of Private Day Traders Lose Money
#62The Financial Times often refers to spread betting companies as 'debt collection agencies with a side interest in trading'. Emptying the accounts of users and then collecting the additional money owed is what these companies do. Then they use some of the profits to advertise for new customers to continue the cycle...
I'm an avid FT reader and like that description, but have never seen it before. Any chance you can provide a reference?
Re: Almost 80% of Private Day Traders Lose Money
#63Was all in into Barclays shares the day before it was going bust in 2008 but got out before 5pm fearing the night and the wiping out. Instead, Gordon Brown bailed them before the market reopened the next morning ("too big to fail") and I missed my once-in-a-lifetime opportunity to make the big money as an indie trader. Done.
I thought Barclays were one of the few banks who managed to raise extra capital without government help?
Re: Almost 80% of Private Day Traders Lose Money
#64The way the math works out with that distribution: only 80% of them lose money over one year, but as time continues over multiple years, the percent losing money approaches 100%.
This is not how the math works, and it shows a common statistical fallacy. We cannot assume that the chance that a person loses money one year is uncorrelated with the chance that the same person loses money the next. Here is a simple model a mathematician might realistically use to model this. Given N traders, let P_1..P_N be iid Beta(α, β), and let the chance that trader n loses money during a year be Bernoulli(P_n…
Okay, okay. To be strictly correct, I should have said something like "with that distribution and any reasonable assumption about correlation".
Re: Almost 80% of Private Day Traders Lose Money
#65Earlier quoted context omitted.
Isn't it the case that essentially no traders beat the performance of index funds long-term?
It isn't, there's fanous people like Warren Buffet of course, but I personally know of 3 individuals in investing forums who post all their trades and handily beat indexes over long periods.
People actually misstate the argument regularly. It is of course possible to beat the index over long periods, but there is little evidence that there is any skill that allows you to do it. That is, could those 3 individuals write down a prescriptive algorithm that allows someone to replicate their results ahead of time?
Another way to describe the problem is, given the same number of bots, randomly picking tades, as members of a trading forum, how many would beat the index? Is the number more than 3?
Re: Almost 80% of Private Day Traders Lose Money
#66Earlier quoted context omitted.
@chollida1 , you should write a book; help drive Michael Lewis' point home. In my last project for a brokerage system, I developed features for day traders. What was most surprising to me how much money the brokerage system generated for the bank regardless of the outcomes for the day traders.
With commissions per trade, brokerages love day traders. The more activity, the more money they make. They hate people that buy a stock with 3% dividend yield and don't touch it for 10 years.
Its not just the trades that generate fees; the application enables you to borrow money with a click of button ( kind of like how they place ATMs near slot machines). The trader pays a borrowing fees plus interest.
Re: Almost 80% of Private Day Traders Lose Money
#67I suspect this is a relatively new development- I think 5 years ago I would have been pretty comfortable with my chances against AI trading bots. But in 2016, not so much.
Based on my own anecdotal evidence, I think the large corps building HFT systems with AI have gone a long way towards eating the lunch of "lone wolf" day traders in the last few years.
Re: Almost 80% of Private Day Traders Lose Money
#68Well, how else someone would earn huge amount of money in this negative sum game?
The stock market isn't a zero sum game (or a negative sum game for that matter). If you think it is, you are over simplifying. At the very least you need to account for traders' differing time spans on their trades.
Re: Almost 80% of Private Day Traders Lose Money
#69I re-read Michael Lewis' Liar's Poker once every few years. In new reprints he's added a prologue where he says something along the lines of "I tried to write a book about the horrors of wall street and instead it became a recruiting tool for wall street" In a similar vein whenever something like this comes up I write something that says don't try and do this and inevitable I get 10+ emails from people saying "Ok I u…
@chollida1 , you should write a book; help drive Michael Lewis' point home. In my last project for a brokerage system, I developed features for day traders. What was most surprising to me how much money the brokerage system generated for the bank regardless of the outcomes for the day traders.
"Be the farm, not the livestock."
Re: Almost 80% of Private Day Traders Lose Money
#70It would be interesting to know whether the gains were concentrated among a small group of same individuals over time, or equally across the large group (ie everyone getting lucky once)