131–140 of 278 posts
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?
If someone is consistently good at losing money 60% of the time. Why not just do the exact opposite of whatever their initial hunch is. Then they should make money. Based on loss of 36% from the article that is more than just transaction and trade fees which are 1 to 2%of trade therefore if they just do the opposite of what they are doing they should make money.
What is the opposite of buying a specific stock? Buying every single other stock?
If someone is consistently good at losing money 60% of the time. Why not just do the exact opposite of whatever their initial hunch is. Then they should make money. Based on loss of 36% from the article that is more than just transaction and trade fees which are 1 to 2%of trade therefore if they just do the opposite of what they are doing they should make money.
If you went long, and lost money, going short instead doesn't mean you would make money, it means you could lose on the interest payments, you could lose on being forced to close, could lose on the different risk profile of having unlimited loss potential
Even more so with derivatives.
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…
I would also add another rule:
6) Think of your job as a trader is not to make money - it is to manage risk. If you have an edge, the money will come. But if you fail to manage risk, you will fail.
This blog post did not answer it's own question because it's conditions were not day trading (over 3 trades in 12 months). That condition selects for people choosing individual stocks hoping for a moonshot, for which people tend to choose riskier stocks rather than stocks actually likely to make them money. So no wonder 80% lost money. On the other hand, notice that the 20% who do make money have a large power distri…
There are some event-driven fast trades still done by humans, like after news or responding to economic releases, but hedge funds have highly-educated people modeling the effects of an interest rate change or earnings release as their full-time job. This area is also becoming dominated by bots doing sentiment analysis.
I think the retail trader could have an edge in a few ways. One would be an illegal edge like inside information or market manipulation. Another would be finding illiquid stocks that proprietary traders and hedge funds won't bother with and trading using similar techniques. You could also look for extreme situations that model-based traders can't understand well due to lack of data, like a merger target breaking away. Those trades would be very risky though.
FWIW I'm a professional trader and never day trade my own account or pick individual stocks. My company allows it, but I don't believe I have any edge in doing so. I just buy and hold a portfolio of ETFs.
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?
You can certainly get brokers that'll accept a lower commission than that per trade, and if you're not hugely overleveraged the variance of your expected returns is going to be lower[1]. As with poker, the difficulty isn't so much the house edge as the fact there will be people or bots who are much better at it than you and/or have much bigger bankrolls to force you out of the market even if your suspicion they're holding a weak hand is justified
[1]Your expected returns are also on average positive in the long term if you buy and hold rather than trading
Earlier quoted context omitted.
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…
Problem is, those patterns do exist, but they are chaotic behaviors, and transition probabilities are already priced in. So that, for a non-causal analyst looking at past data they look very reliable, but for somebody with no forward knowledge, they are useless.
Earlier quoted context omitted.
I would say the stock market more represents a poker game with hundreds of thousands of participants. There is no house, it's a free for all, and day traders simply don't have the capital or manpower to survive.
In poker there is a dealer: you are expected to tip the dealer if you win. In the stock market you pay the dealer win or lose.
Earlier quoted context omitted.
What is the opposite of buying a specific stock? Buying every single other stock?
In investing, my understanding is the opposite of a long is a short.
When you are long your loss is 100%. With a short it is theoretically unlimited.
This blog post did not answer it's own question because it's conditions were not day trading (over 3 trades in 12 months). That condition selects for people choosing individual stocks hoping for a moonshot, for which people tend to choose riskier stocks rather than stocks actually likely to make them money. So no wonder 80% lost money. On the other hand, notice that the 20% who do make money have a large power distri…
Don't forget taxes!