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Don't Steal Money from Day Traders Before They Lose It

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Re: Don't Steal Money from Day Traders Before They Lose It

#131

Post by paganel »

closeparen wrote: post #110
luckman212 wrote: post #106

Earlier quoted context omitted.

That "strategy" only works when markets are behaving irrationally, such as they have been for the last 10 years, where basically everything just goes up. If you tried that in 2000 (like I did) or 2008, you'd be quickly destroyed.

The business cycle is a thing. Passive investing means expecting that, and not selling at the bottom. (For short-term liquidity needs, you shouldn't be in the stock market at all).

If the cycle is long enough, like in Tokyo, where the Nikkei is only at about 60% compared to its 1989 value, then it is of no use at all, unless we think of the “in the long run we are all going to end up dead” as a good investment strategy.

There are also Black Swan-like events of stock exchanges and entire markets disappearing completely, like it happened in Russia after 1917 and in China after WW2.

Re: Don't Steal Money from Day Traders Before They Lose It

#132

Post by jcfrei »

speedplane wrote: post #83
qwtel wrote: post #32

Earlier quoted context omitted.

I find it hard to believe there’s any day trader using any kind of information making a consistent profit. Isn’t everybody just dabbling around hoping to be in the 50% that outperform by chance? i’ve read about ed thorp pioneering statistical arbitrage in the 80s (?) which would fit the bill of “consistent returns”, but I doubt that there is any of that left close to 50 years later. I’m wondering what all these quant…

The only way you can consistently make money is by knowing things others do not (e.g., insider trading) or by taking advantage of structural problems or inefficiencies in the trading platform (e.g., high frequency trading). I do believe that insider trading is rampant. I've seen many occasions where a large corporate announcement sends a stock up or down, but hours before, you can see the price of the stock slowly sl…

Your two ways fall a bit short. The goal of markets is to integrate any kind of information into an assets price which is relevant for its value (so called price discovery). So the ideal way to make money would be to discover some new source of information, like for example the data from social media (which was pretty new some years ago). Another example: Some decades ago quant funds started using weather data for trading commodity futures, etc.

Re: Don't Steal Money from Day Traders Before They Lose It

#133

Post by kgwgk »

speedplane wrote: post #96
mikestew wrote: post #88

Earlier quoted context omitted.

Today, it's extremely difficult to get information 5 minutes sooner than everyone else without insider trading. You're assuming parent is trading on news, information, or fundamentals. A technical trader wouldn't care about anything you've mentioned.

> You're assuming parent is trading on news, information, or fundamentals. A technical trader wouldn't care about anything you've mentioned. I don't believe it's possible to consistently make money ignoring "news, information, or fundamentals". Otherwise you're just fitting curves to noisy data. If it could work consistently, then you would be able to read the future.

The data may be noisy but as long as it’s not just noise it may be possible to find a signal that can be exploited.

By the way, people read the future all the time: it will rain today and it will snow in four months.

Re: Don't Steal Money from Day Traders Before They Lose It

#134

Post by dmichulke »

anonu wrote: post #24
akanet wrote: post #8

This is so interesting - one wonders if this is strictly immoral. I propose this thought experiment: What if there was a version of this fraudulent brokerage that conducted this behavior in the open? Let's say their policy is something like, "You trade for real under favorable commissions and margins. If we decide via internal algorithms that you are liable to lose money, we will instead pocket your trade and credit…

Its just wrong. For starters, you're advertising a service that you're not providing. Secondly, you're basically running a twist on a Ponzi scheme. Eventually it will get out of hand.... if your customers have an incredible streak of good luck but no real trades to back them - how do you pay them?

The Ponzi scheme part applies in reverse to customers trading with leverage.

EDIT: Oh, that part also applies to banks with fractional reserve (i.e. all banks) but no discussion about the merits of that here please :)

Re: Don't Steal Money from Day Traders Before They Lose It

#135

Post by bboreham »

topmonk wrote: post #129
speedplane wrote: post #77

Earlier quoted context omitted.

> I would happily make money for n-years and lose for one, provided the amount lost was a fraction of what I earned. Your caveat there often swallows the rule. Many bet on the market and make big bucks only to lose multiples of it later.

If you set up a stop loss you could make it impossible to lose a huge enough amount on a single trade to wipe put the profit on your prior ones.

“Stop-loss” orders don’t work perfectly. If the entire market has gone South, you can lose a lot more than your stop-loss says.

Re: Don't Steal Money from Day Traders Before They Lose It

#136

Post by sinstein »

speedplane wrote: post #85
saosebastiao wrote: post #69

Earlier quoted context omitted.

I trade futures and currencies. Short positions happen about as frequently as long positions. My average trade lasts less than 5 minutes. Macro trends don't really affect my strategy outside of the fact that I tend to watch Fed and ECB news announcements as a way of predicting short term volatility.

If your average trade lasts less than 5 minutes, then you can conceivably make money only if you can read 5 minutes into the future (not currently possible), or have tools that allow you get news/information faster than everyone else, analyze that information, and act on it, 5 minutes before everyone else. Today, it's extremely difficult to get information 5 minutes sooner than everyone else without insider trading.…

I am not a trader but in this scenario won't he have to read (news, signal, trigger, etc.) just 5 minutes before everyone reads it?

The larger corporations might be on top of things but there will be plenty of individual investors reacting to the news. You just need to react before they do.

Re: Don't Steal Money from Day Traders Before They Lose It

#137

Post by _fizz_buzz_ »

darksaints wrote: post #42
qwtel wrote: post #32

Earlier quoted context omitted.

I find it hard to believe there’s any day trader using any kind of information making a consistent profit. Isn’t everybody just dabbling around hoping to be in the 50% that outperform by chance? i’ve read about ed thorp pioneering statistical arbitrage in the 80s (?) which would fit the bill of “consistent returns”, but I doubt that there is any of that left close to 50 years later. I’m wondering what all these quant…

FWIW, I'm day trading and I'm making consistent returns, well above the rates of most mutual funds and hedge funds. The caveat is what most fund managers would call capacity. My trading strategy can't scale without severe cuts in those returns. It's extremely easy to buy 10 contracts and hold for 5 ticks. I've never experienced slippage at all. Operating at mutual fund sizes, I would be trading at volumes that would…

How much did you outperform the market e.g. S&P 500 over the past 3 years or so?

Re: Don't Steal Money from Day Traders Before They Lose It

#138

Post by kgwgk »

speedplane wrote: post #86

I don't day trade, I mostly keep my money in ETFs and other dumb securities. But every now and again, I see the market move in such a completely unreasonable way, most often hammering a stock on some bad, but not awful news. In these cases, I've made small gambles and bought the stock when it's low to see it recover every time. My sample size is small and I'm too conservative to bet the bank, but I haven't been wrong…

So you were able to successfully read the future yourself? Can you predict coin flips as well? ;-)

Re: Don't Steal Money from Day Traders Before They Lose It

#139

Post by ddebernardy »

thaumasiotes wrote: post #11
mewse wrote: post #9

Earlier quoted context omitted.

That's basically taking a short position on whatever the customer thinks they're buying, right? Whenever the customer wants to sell their position, you'd have to pay them whatever the value was at that time, whether the position had gone up or down. Big risk, unless you're confident that the customers are going to reliably make terrible trades, on balance. It might still be fraud maybe if you claimed to be performing…

There are laws against naked shorting, even when you've personally determined that the stock will tank as evidenced by the fact that an idiot is buying it. There are arguments that naked shorting should be allowed, but it isn't allowed right now.

I've read sensible arguments about why shorting is ok. I've yet to read any sensible argument about why naked short selling is ok. Mind elaborating or giving a few references?

Re: Don't Steal Money from Day Traders Before They Lose It

#140

Post by macspoofing »

paulie_a wrote: post #90
selectodude wrote: post #84

Earlier quoted context omitted.

>for instance buying American airlines the day they went bankrupt allowed me to pay off a medical bill for a surprise medical emergency. Good job, you got into the same short-squeeze opportunity everybody else did that morning.

Be sarcastic, but quite a few pros claimed it was a terrible investment. Same thing has been happening with amd. It's incredibly low hanging fruit. I just wasn't able to or decided not to reinvent the profits. My original point stands, the pros are terrible at their job. If you can't beat the rate of inflation in a multi billion dollar fund get a new job, despite all the fancy pointless tech.

>My original point stands, the pros are terrible at their job.

They are. Because no one can be good at that job. I think that's the part you're missing. You're deluding yourself that you've figured out a strategy for making money in a way that you beat the relevant market index consistently.

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