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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

#81

Post by gedrap »

drcode wrote: post #67

I 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.

>>> HFT systems with AI

I highly doubt that it would affect you, tbh, and I suspect that it's a highly sentimental matter. Only if I did have money to buy Apple stock 10 years ago, that kind of :) no offense if I am totally wrong, it's just that you didn't provide any specific argument for your reasoning.

Aren't these folks with hundreds of millions in the trading accounts in a totally different league and they do not affect you, unless you want to play in their own game (e.g. high frequency)?

Re: Almost 80% of Private Day Traders Lose Money

#82

Post by [deleted] »

gedrap wrote: post #81
drcode wrote: post #67

I 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.

>>> HFT systems with AI I highly doubt that it would affect you, tbh, and I suspect that it's a highly sentimental matter. Only if I did have money to buy Apple stock 10 years ago, that kind of :) no offense if I am totally wrong, it's just that you didn't provide any specific argument for your reasoning. Aren't these folks with hundreds of millions in the trading accounts in a totally different league and they do no…

[deleted]

Re: Almost 80% of Private Day Traders Lose Money

#83

Post by 3chelon »

wehadfun wrote: post #75

80% are losing who the hell is winning and how? I fell like they are cheating or have some sort of advantage that is not easily available to private day traders and no I don't think that advantage is a PHD and fast data connection.

The spread betting companies are winning, of course. They are the market makers and they can manipulate the market as much as they like, even pushing the price up or down temporarily to hit stop loss orders and the like. And of course they adjust the spread to suit them, esp. in equities. I always thought the safest markets are forex because the huge liquidity tends to limit the spreads somewhat, but I have no idea if that is actually true.

Re: Almost 80% of Private Day Traders Lose Money

#84

Post by jokoon »

crucialfelix wrote: post #32
yomly wrote: post #17

Earlier quoted context omitted.

So if you went in with an "algorithm" which baked in your own rules for trading and left it for a year, would it have performed better? Does a greater proportion of non-HFT bots make money?

Developing that trading strategy is a continuous job; that's what successful traders do. They don't play stocks, they play strategies. There are going to be computers involved no matter what. Your indicators, your trading platform, what analysts you trust. So what is a bot ? A "bot" suggests to me something just trading in and out of some security at some average frequency: weeks, days, intraday, minutes, seconds and…

An online friend just got into currency trading and went into some tutorials about reading curves. Apparently there are recurring curve patterns, which allows one to predict where a rate is going. If you can code up some pattern recognition algorithm, there might be a way to make money.

Although I'm very skeptical about those patterns, because there could be someone trading back and forth to create those trends, and screw you when they want.

Anyway analyzing data and gaining money with it makes really no sense at all. Surely you can make money to live, but there is no point to it until you really are able to win big, and nobody does. Investing money where real business create economic activities that are in effective demand, maybe. But trading numbers, that's really an awful thing.

Re: Almost 80% of Private Day Traders Lose Money

#85

Post by glippiglop »

It's an interesting stat, but the chart doesn't speak as to the levels of experience of the traders. All beginners lose money, but it's entirely possible for an amateur to become a profitable day trader with time.

Speaking from experience, the real issue for me was that once I started to get good at it (after 2 years) I realised just how awfully boring it was. It's not intellectually demanding and for the investment of your time, stress and the risk involved, the rewards even if you reach profitability aren't worth it.

Now that I can reflect on it, I couldn't be happier that I stuck with software development instead.

Re: Almost 80% of Private Day Traders Lose Money

#86

Post by 3chelon »

sidlls wrote: post #30
criddell wrote: post #26

Earlier quoted context omitted.

One thing I've always wondered, if you take a day trader that was wiped out in some time span, and reversed all the trades (ie sell rather than buy and buy rather than sell), would they still be wiped out?

Possibly. Also, due to the nature of trading, they may have been wiped out in this hypothetical "reverse all trades" scenario before they were in reality. For example, they could have had one potent stochastic windfall early in their career that, had it gone the other way, would have wiped them out.

I agree. The nature of the spread acts like entropy.

Re: Almost 80% of Private Day Traders Lose Money

#87

Post by gedrap »

0xmohit wrote: post #12

And the primary reason is that one loses more in a single trade than what one probably earned in 5 or more trades. Humans are inherently risk-averse when it comes to protecting their profits and risk-taking otherwise. The possibility to make money increases if one acts more like a robot, i.e. acting strictly upon rules decided a priori.

>>> And the primary reason is that one loses more in a single trade than what one probably earned in 5 or more trades.

This is the key. Once in a while, on the internets, I see people who say that they developed a strategy that can profit 5% month on month, etc. Excluding the ludicrous claims of 30% and similar monthly profit. However, they are often totally wiped out by a highly unlikely outlier event that should happen once in a century, as they like to call it. Or something similar.

The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb is a good book on this subject.

Re: Almost 80% of Private Day Traders Lose Money

#90

Post by dharmon »

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…

This is a great list, and it should be higher up in this thread. Most of it applies to longer-term investing as well (the area I work in).

1) I always tell this to people. So much of investing / trading comes down to your emotional reaction, and paper trading does not invoke these emotions.

Contrary to your #3, I actually suggest starting with a small amount they can afford to lose. Better to work out the kinks and/or find out you're not cut out for it before you bet serious money. It doesn't have the full psychological effect, but it can be a big wakeup call for people.

2) Absolutely. Grind it out. Every day you try to get a little smarter and make better decisions. Learn to love the process and don't lie to yourself. I like to rub my nose in mistakes to make sure I don't repeat them, but I also take a moment to appreciate things I did well, like getting out of a situation when I realize I don't have a handle on it, even if it means taking a loss.

4) No textbooks can prepare you for the mental anguish of watching your portfolio sink. You feel like the biggest idiot in the world, even moreso if you are underperforming the market. Of course, when you're up, you feel like a genius. Its during those times I find it wise to reflect on the not-so-good months to remind myself that I'm not invincible.

5) As Buffett says about leverage, "If you're smart, you don't need it, and if you're dumb, you got no business using it."

To add my own:

6) If you don't know what your edge is, you probably don't have one. What advantage do you have over the other market participants?

7) "If you want a good gambling life, make positive expectation bets." - Ed Thorpe, in Mathematics of Gambling

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