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Almost 80% of Private Day Traders Lose Money

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Re: Almost 80% of Private Day Traders Lose Money

#71

Post by icebraining »

emodendroket wrote: post #53
mistermann wrote: post #46

Earlier quoted context omitted.

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.

Since you mentioned him: http://finance.yahoo.com/news/buffett-most-mportant-investme... > Nearly a decade ago, Warren Buffett made a million-dollar bet: that by investing in a completely unmanaged, broad-market low-fee index fund, he could beat the gains earned by a high-powered hedge fund with a team of managers at the helm. His opponent was Protege Partners, LLC, a New York City hedge fund with $3.5 billion in ass…

By the way, the bet is online at http://longbets.org/362/

Re: Almost 80% of Private Day Traders Lose Money

#72

Post by HashThis »

I'd love people's opinion on this. From my understanding, HFT (High frequency trading) firms are front running stock orders. NYSE sells them data on stock orders. They buy data center space in order to front run stock orders. That is how the HFT guys make a profit when Day Traders can't make the same kind of profit. Is that true?

Re: Almost 80% of Private Day Traders Lose Money

#73

Post by vonmoltke »

kasey_junk wrote: post #65
mistermann wrote: post #46

Earlier quoted context omitted.

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…

I think you also have to define "the index". There are dozens of indexes on the NYSE alone, and many come with legitimate questions about how well they actually represent the market. In that sense, I think it is possible to choose (and not luck into) a better basket of stocks than what goes into the indexes. Of course, it isn't easy.

Re: Almost 80% of Private Day Traders Lose Money

#74

Post by TheCowboy »

inputcoffee wrote: post #35

Isn't is possible that the sample is biased because you only looked at the subset of traders who were not sophisticated enough to turn off the feature that allows others to observe their trades?

This is a good point. And we shouldn't assume this means that the number of successful traders is automatically higher due to their greater understanding. There could be a large number of people hiding their trades due to a losing record, or an unlucky streak inducing paranoia.

Re: Almost 80% of Private Day Traders Lose Money

#76

Post by DrNuke »

dan1234 wrote: post #63
DrNuke wrote: post #61

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.

I thought Barclays were one of the few banks who managed to raise extra capital without government help?

Yes they then raised from Qatar but the unfolding was dramatic http://news.bbc.co.uk/2/hi/business/7658277.stm and Robert Peston was having the days of his professional life eheh. Got it the link! http://monevator.com/how-fear-is-driving-bank-share-prices/

Re: Almost 80% of Private Day Traders Lose Money

#77

Post by gedrap »

I think the analysis could be improved by excluding people who made a couple of trades worth of a few dollars just as an experiment, etc. This way, leaving only the people who took it somewhat seriously. Even then, the data would be heavily biased - it includes only traders who decided to use eToro AND keep the history public. This is far from a random sample and very biased.

However, I would not be surprised if the actual results (across all brokerages, etc) are close to that, or even more extreme.

Re: Almost 80% of Private Day Traders Lose Money

#78

Post by forgetsusername »

Someone1234 wrote: post #56
brongondwana wrote: post #4

It's just slot machines with a more respectable coat of paint.

If we assume day trading is gambling, I wonder what the house odds look like contrasted against other forms of gambling (e.g. blackjack, poker, slots, horses, etc)? I guess what I am asking is, if we take it for granted that it is gambling (and I am happy to do so) is it gambling with the best odds around?

>is it gambling with the best odds around?

You can expect, on average, to perform as well as the market, less your trading fees (which for most of us small-timers are ~$10 per round trip).

The problem is not knowing the odds (and hence expected earnings) ex-ante. That said, horse racing would probably be the best analogy.

Re: Almost 80% of Private Day Traders Lose Money

#79

Post by mkaziz »

icantdrive55 wrote: post #51
chollida1 wrote: post #29

I 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…

If you get to 5, make sure you are judgement proof, and any loaned money is unsecured credit card money. I honestly couldn't care less about credit card money losses, but I've seen too many people with assets(home, profitable website, really good job, nice cars) get reamed in bankruptcy court. Or, they lie about assets. Lie about assets, but make sure they never show up anywhere. And just because you lied about your…

Do you have any literature you can recommend for when one gets into financial troubles. I don't think I would ever feel comfortable using leverage, but would like to know what I'm up against if I get to medical bankruptcy, for example.

Re: Almost 80% of Private Day Traders Lose Money

#80

Post by idohft »

HashThis wrote: post #72

I'd love people's opinion on this. From my understanding, HFT (High frequency trading) firms are front running stock orders. NYSE sells them data on stock orders. They buy data center space in order to front run stock orders. That is how the HFT guys make a profit when Day Traders can't make the same kind of profit. Is that true?

I'm in HFT (as per my handle). Exchanges like NYSE, NASDAQ, etc. sell stock data to firms but not before they get processed. The only way you get front run is if the broker that you submit through (ETrade, Schwab, etc.) notes your order, knows that it's big enough to move the market, and then prioritizes their own action over yours (which I'm reasonably sure they do not). Buying data center space (colocation) means they can react to activity quickly, but only after said activity has happened.
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