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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

#161

Post by njloof »

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…

One trick insiders use is when they know a stock will go down, they invest in competitors within the sector. They don’t have the same reporting requirements for those shares and are much less likely to get caught.

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

#162

Post by PeterStuer »

neilharbinger wrote: post #112
speedplane wrote: post #85

Earlier quoted context omitted.

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.…

"Today, it's extremely difficult to get information 5 minutes sooner than everyone else without insider trading." You'd think so. It turns out that there is plenty of news out there at the right time. Thing is, no-one has the time to continuously check the top 50 or so online news sources to see if their individual interests are being mentioned.

This is why text analysis software is used. Humans are far too slow at reading and reacting.

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

#163

Post by laurentl »

VBprogrammer wrote: post #151
speedplane wrote: post #83

Earlier quoted context omitted.

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…

I find the market for knowledge which others do not have but which aren't actually illegal to be quite fascinating. There is a company who will break down a brand new car into its component parts and by knowledge of materials and production processes can tell to a very narrow margin what the cost of producing that car is - and therefore the profit potential of each sale. The information about the number of cars sold…

> There are other companies who will buy a bunch of iPhones for example and by carefully analysing the serial numbers can deduce to within a reasonable margin exactly how many have been sold.

AKA the German Tank Problem (https://en.wikipedia.org/wiki/German_tank_problem). Fascinating application of statistics.

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

#164

Post by sparsely »

tsycho wrote: post #115

To play Devil’s Advocate: How is this different from being a market maker? I am presuming that if the customer actually made money, these guys would pay them from their own pocket. Or alternately, assuming zero or low enough transaction costs, if these guys just took the opposite position of their customers for each trade (also known as hedging) in the market, then wouldn't the net positions be exactly the same? Basi…

You're exactly right. In fact, retail brokerages are able to offer lower spreads than big professional investors get because their trading flow is so uninformed that there is reduced risk. A lot of the consumer facing trading companies get paid by larger institutions to send them their order flow.

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

#165

Post by bitxbit »

anonu wrote: post #25

I was a trader at a big bank for many years. The tools and access I had there put me in a different class of trader that very few other firms or individuals can attain. There is such information and technology asymmetry in this business - its not worth trying to day trade as an individual. Buy and hold forever... only way to invest.

This is a joke right? You were a flow trader for a dealer. How is that even remotely the same as buyside regardless of size? The tech at bulge doesn't even compare to what some of the sophisticated buysides have in place.

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

#166

Post by learnstats2 »

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…

It's unclear to me why you are not hitting the same problems as a mutual fund would - are you and your thousands of parallel traders not creating the same problem of scale?

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

#167

Post by tonyedgecombe »

paganel wrote: post #131
closeparen wrote: post #110

Earlier quoted context omitted.

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.

There was a severe bubble leading up to that, characterized by corruption and negligence. I'm not sure it's a good example.

If something like the Russian revolution comes along then all bets are off, it pretty much doesn't matter what you did with your money as long as you didn't flaunt it.

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

#168

Post by bigmanwalter »

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 would you say is the smallest amount of capital you would need to use in order to run a profitable strategy such as yours?

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

#169

Post by matwood »

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…

"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."

These obvious moments do happen sometimes. Not always, but they can give an edge to knowledgable people paying attention (most HNers know tech better than the average stock analyst/trader). I remember the night Trump won, the futures market reacted like the world ended. While the world might end at some point in the future, it certainly was not going to end the next day.

With that said, these moments do not happen frequently enough and turn out correctly for the investor to consistently make money.

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

#170

Post by mirimir »

Hey, if they made sure to credit clients with any gains, does it really matter where the losses went?

Edit: It could be in the ToS. "How can we offer such huge margins? Simple. If our algorithms indicate that you're a loser, we just don't place your trades. But whatever happens, your account will always be credited for gains that you would have earned.".

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