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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

#221

Post by nicholas73 »

bvanslyke wrote: post #94
nicholas73 wrote: post #59

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…

I'm curious - If you don't mind sharing, how long have you been day trading and what has your percentage return been?

I started actively trading around 5 years ago, and only picked longs another 5 years before that. It's difficult to give an exact % because I'm not a day trader per se. I trade around a position I know well, but do day trades when I spot an opportunity. Sometimes you know something will happen, but only on a short time frame.

For example, I went into oil stocks earlier this year, and I knew that the market was panicking over the low oil price. So some days the market would bounce back right when the oil pits close at 2:30 (since the oil correlation can't get much worse then). Take a chance to ride the way back up, why not? But you can't do this all the time, which is why I gave you this esoteric example.

Well, if you still want a percentage, I'd say 10-20% might be a reasonable achievement.

Re: Almost 80% of Private Day Traders Lose Money

#222

Post by nicholas73 »

naveen99 wrote: post #114
nicholas73 wrote: post #59

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…

If your minimum bet is $1000, commissions are less than 1%. As long as you don't over leverage, the expected return should be positive relative to s&p if you sell options. But you got to hold them to collect some premium.

This was about daytrading, where you would be lucky to find a stock that moves 10% intraday.

Re: Almost 80% of Private Day Traders Lose Money

#223

Post by thedevil »

dietrichepp wrote: post #200
thedevil wrote: post #64

Earlier quoted context omitted.

Okay, okay. To be strictly correct, I should have said something like "with that distribution and any reasonable assumption about correlation".

Are you saying that it's unreasonable to suppose that some people can make money day trading in the long run? I was just illustrating a simple model you might use to test that theory.

I'm saying it's not reasonable to think that a private individual can make a long-term profit day-trading, skilled or not. It's quite reasonable to suppose lots of impossible things.

How does your model account for magnitude?

Re: Almost 80% of Private Day Traders Lose Money

#224

Post by nicholas73 »

jfoster wrote: post #95
nicholas73 wrote: post #59

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…

If you ask me, daytrading seems riskier because you're essentially trading within noise. A company could rise or fall a few (and more rarely, a lot of) percentage points within a day. Is it fluctuating based on anything other than the feedback loop and noise? Usually not, I think. It seems far more unpredictable and lacking in reasoning than something like "Amazon's strategy for the next couple of years involves X, Y…

I think the opposite of every you said. Short term factors are far more predictable, with less noise, but this is only true if you trade defined situations and have good understanding of counterparties. Noise really isn't much of an issue except for illiquid stocks. The rest have highly correlated movements and random noise averages out anyways.

Re: Almost 80% of Private Day Traders Lose Money

#225

Post by KeytarHero »

enraged_camel wrote: post #115
KeytarHero wrote: post #113

Earlier quoted context omitted.

> Why not just do the exact opposite of whatever their initial hunch is. If your initial hunch is to buy a stock you don't own yet, you can't sell it instead.

You buy stocks for two reasons. Either you think they will go up (long) or you think they will go down (called "shorting"). You can think of them as opposites.

Buying short isn't the opposite of buying long - it's the reciprocal. Which is an important distinction: if you buy a diversified portfolio of 10 stocks and one goes bust, if you bought long you've lost 10%. If you bought short, you're completely broke.

Re: Almost 80% of Private Day Traders Lose Money

#226

Post by seagreen »

streblo wrote: post #216
seagreen wrote: post #215

Earlier quoted context omitted.

It seems that many people that we all know do become quite rich as investors, and the secret to their good fortune is not apparent. Studies promising us "they'll all lose in the long run!" makes us feel good about our decision not to participate in the game. This would be a way stronger argument if the king of the buy-index-fund team wasn't Warren Buffett:)

Buffett isn't exactly buying index funds for BRK

The parent comment said criticisms of private day traders were motivated by jealousy, and I said that's certainly not the case for the most notable of the critics. Buffett could have made his success as a rodeo clown for all it matters to my point.

Re: Almost 80% of Private Day Traders Lose Money

#227

Post by unabst »

habosa wrote: post #211

Excuse my meta-comment, but I notice that HN seems to have an obsession with proving that active trading is bad and that we should all buy low-cost indexes. And before anyone jumps on me, I 100% agree with that investment strategy and use it myself. I'd just like to comment on the intersection of that belief and tech enthusiasts. It seems to generally come from a place of binary/analytical thinking which we're all so…

> wanting to justify risk aversion

I don't think this is it. In fact, I think it's the exact opposite. I think risk aversion is what's justified by default. You don't need to defend being steadily employed or your lack of interest in stocks. It's the reasons people give to take risks that most of us are challenging.

Stock trading is gambling. It just is. So to deny it's gambling is already a red flag. To say you have more information than other people is another. And to say you're smarter so you're okay, well, maybe you are, but no one is smart enough to compete with those who cheat. And if you're cheating, none of these comments apply to you.

So for those who insist day trading is profitable, the empirically backed scientifically proven answer is simply, no it's not. And that's why it's so easy to knock on those who disagree with this claim. Yes, people make money, but so does every single person who continues to gamble. If you never won, you wouldn't keep gambling.

But to be fair, for entrepreneurs, it's the decision to not have a steady job that needs defending and that is analogous to the irrationality of the day trader. They may claim it's a great idea, but the empirically backed scientifically proven answer is, no it's not.

But I think a key difference in values is that entrepreneurs feel like they're actually building something. They value their work. And that's where you just have to agree to disagree. Passion is not an opinion.

Re: Almost 80% of Private Day Traders Lose Money

#228

Post by nicholas73 »

jomamaxx wrote: post #186
qznc wrote: post #175

Earlier quoted context omitted.

I believe there sometimes are opportunities you can take, because a "Hacker" knows more about some parts of the world than most traders. My prime example: When Apple released the iPad it quickly became a great hit. For me it was obvious that a lot of cheap copycats would spawn soon. What would you use for a cheap iPad knockoff? An ARM processor for sure. Strategy: Buy ARM and hold for years. First iPad was released A…

"My prime example: When Apple released the iPad it quickly became a great hit. For me it was obvious that a lot of cheap copycats would spawn soon. What would you use for a cheap iPad knockoff? An ARM processor for sure. Strategy: Buy ARM and hold for years. F" Do you think that Wall Street hasn't figured that out? Apple is one of the most watched stocks in the world. To the original commenters point: the banks have…

"Do you think that Wall Street hasn't figured that out?"

"Wall Street", whoever that is on Wall Street, may have figured it out, but the stock doesn't instantaneously move to the correct value afterwards. There is a time lag where traders who are paying attention can still get in at a good price.

Re: Almost 80% of Private Day Traders Lose Money

#229

Post by nicholas73 »

mrchicity wrote: post #135
nicholas73 wrote: post #59

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…

I think the individual retail trader is almost always outgunned informationally when it comes to intraday trades. Most short-term price action is driven by order flow and cross-asset correlations, which machines are very good at trading. They are often net trading cost earners due to rebates and capturing bid-offer spreads. That means their win rate doesn't need to be as high, so they can pull the trigger on a trade…

I agree with what you say, and I actually have grown to appreciate what the bots are doing. They basically do the supply/demand discovery for you and you can trade off of this information. Especially for stocks you follow that haven't moved yet.

Example: back in February crude prices crashed, and the weekly EIA reports were very bearish. But the bots bought the initial drop on report release and crude strongly rallied after each bearish report. Maybe that's the time to buy oil stocks :)

Re: Almost 80% of Private Day Traders Lose Money

#230

Post by nicholas73 »

songzme wrote: post #202

Here's a story of my mom's journey as a day trader: My mom got laid off in 2008. The job market was brutal and she had a hard time looking for a new job. She had to find ways to make money to support my sister and I through school so she turned to the only other place where she could earn some money - the stock market. She started with around 100k, read up about stock options, and decided that shorting calls and puts…

I might have taken this at face value if the houses weren't in LA and Oakland (well, maybe you mean condos, or cash for down payment only). To make that much money (>million?) with 100k means selling massive amounts of naked options. Theoretically it could all work out - but what broker let her take out so much risk?
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