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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

#271

Post by hellogoodbyeeee »

EvgeniyZh wrote: post #248
hellogoodbyeeee wrote: post #68

Earlier quoted context omitted.

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.

I'm not really game theory expert, but negative sum game is when the total gain is less than total losses, isn't it? That's exactly what happening - the only source of money are participants, and part of the money goes to brokers.

Say a day trader buys a stock for $9/share and then sells it to me at $10/share a week later. I then put the stock into my investment portfolio and hold on to it for forty years and sell it at $100/share. You could make a simplistic argument that the day trader "lost" the game because he missed out on the appreciation to $100/share but you are neglecting the different investing timespans. The day trader doesn't have a job if he is holding on to stocks for 40 years. He was happy to buy and sell quickly for a small profit. I'm happy because I held on to an appreciating asset. Bankers are happy because they made a few dollars in commissions. No one losses here.

Re: Almost 80% of Private Day Traders Lose Money

#272

Post by [deleted] »

EvgeniyZh wrote: post #248
hellogoodbyeeee wrote: post #68

Earlier quoted context omitted.

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.

I'm not really game theory expert, but negative sum game is when the total gain is less than total losses, isn't it? That's exactly what happening - the only source of money are participants, and part of the money goes to brokers.

[deleted]

Re: Almost 80% of Private Day Traders Lose Money

#273

Post by kgabis »

nibnib wrote: post #258
kgabis wrote: post #213

Earlier quoted context omitted.

It doesn't sound like winning a lottery but rather like making a series of good investing decisions.

Buying a winning lottery ticket always looks like a great investing decision in retrospect...

I don't think it's a valid comparison. Lottery results are unpredictable, stock market to some degree is.

Re: Almost 80% of Private Day Traders Lose Money

#274

Post by thedevil »

dietrichepp wrote: post #267
thedevil wrote: post #223

Earlier quoted context omitted.

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?

There are professional day traders who earn an income over the long run by day trading. This is a true fact. It seems like you are trying to contradict this fact… or do I misunderstand what you are saying? The model I gave was the simplest model I could think of that would let you test the theory that skill is a factor in day trading. It was an illustration of how someone with mathematical training might think about…

> There are professional day traders who earn an income over the long run by day trading. This is a true fact.

Got anything to back up this "fact"?

> The model I gave was the simplest model I could think of that would let you test the theory that skill is a factor in day trading.

You can't assume the existence of skill proves the existence of long-term profits.

Nor can you even assume that a good up/down ratio proves skill without considering the magnitude of the ups and downs or the impact of compounding.

Re: Almost 80% of Private Day Traders Lose Money

#275

Post by EvgeniyZh »

hellogoodbyeeee wrote: post #271
EvgeniyZh wrote: post #248

Earlier quoted context omitted.

I'm not really game theory expert, but negative sum game is when the total gain is less than total losses, isn't it? That's exactly what happening - the only source of money are participants, and part of the money goes to brokers.

Say a day trader buys a stock for $9/share and then sells it to me at $10/share a week later. I then put the stock into my investment portfolio and hold on to it for forty years and sell it at $100/share. You could make a simplistic argument that the day trader "lost" the game because he missed out on the appreciation to $100/share but you are neglecting the different investing timespans. The day trader doesn't have…

> No one losses here.

But you two are not the whole market. Someone sold a stock to a day trader and someone bought it from you. There are no other money in a stock market except those people bring (minus commission) so how everybody can win?

Re: Almost 80% of Private Day Traders Lose Money

#277

Post by stevenwiles »

kgabis wrote: post #273
nibnib wrote: post #258

Earlier quoted context omitted.

Buying a winning lottery ticket always looks like a great investing decision in retrospect...

I don't think it's a valid comparison. Lottery results are unpredictable, stock market to some degree is.

That is incorrect.

Re: Almost 80% of Private Day Traders Lose Money

#278

Post by nicholas73 »

eldavido wrote: post #220
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:)

Buffet wouldn't have gotten rich in today's environment. When he was growing up, the stock market was a plaything of the rich. Valuations were lower across the board, markets weren't nearly as efficient (in the technical sense) as they are now, volumes were much thinner, in general it was a lot less systematized. Nowadays, much like YC, he's a brand, so while he might be a very smart and capable investor, it's his de…

In my first year investing, I read The Intelligent Investor, then promptly found out that no stocks were trading below their value. Not even close; more often at multiples. The only time shares trade below book these days are either when book is seriously questionable, or when cash burn is expected to deplete the value.
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