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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

#171

Post by riskneutral »

sinstein wrote: post #136
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.…

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.

Reacting before “individual investors” and trying to read the news 5 minutes faster than them is not a sufficient edge to consistently beat the market. You have to react faster than the market moves, which means you have to move faster than hedge funds, banks, prop shops, mutual funds, etc. The market moves very fast, and it is dominated by very large sophisticated participants.

First of all, 5 minutes is a very long period of time in the world of high frequency trading, where machines are executing millions of trades every millisecond. Secondly, the same machines are equipped with AI algorithms for reading real-time news feeds, earnings releases, etc, and reacting very quickly on the news. Thirdly, the amount of money that the machines (and their owners) are trading with dwarfs any impact that individual investors would have on market prices.

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

#172

Post by Erlich_Bachman »

bitxbit wrote: post #165
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.

He could have been on the buy side within the bank? Some investment banks still do this kind of business, even if within certain limits.

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

#173

Post by pjc50 »

arethuza wrote: post #150
cissou wrote: post #56

Earlier quoted context omitted.

I think a big difference here is that bucketeers knew they weren't actually buying the securities, and just waging against one another. The scheme in the article is like a combination of a bucket shop and a concealed ponzi scheme

Is running a bucket shop still illegal even if you are open with everyone that it is a bucket shop and people are just gambling?

That usually falls foul of gambling laws.

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

#174

Post by Erlich_Bachman »

qwtel wrote: post #32
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.

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…

Who do you expect to take effort to change your mind? It is much better to keep most people with skills and grit away by giving off impression that the task is impossible: it means there is more alpha for the ones who actually work with it and make a living. Because whatever alpha there is available, it is negatively correlated with the number of minds and amount of dollars trying to extract it. The markets can only get so efficient.

This industry is filled with secrecy on one side, and paradoxically, with a wealth of free information on the other side. It's just that information is so abundant and complex, a normal person has no chance of using it anyway. Especially if they think it's impossible.

The hoards of "get-rich-quick" dudes with no emotional control rushing into this thinking they can learn to day-trade in a month, loosing their life savings and then ranting on forums about how it is all just a big casino - they do not help the situation either. Well I guess in a way they do help real managers to keep their jobs.

So you keep wondering. Just stay away from the markets :)

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

#175

Post by ajay-d »

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…

How about tracking corporate jets to buy stock in companies before a merger / acquisition. That blew me away when I first read about it.

[0] https://www.bloomberg.com/news/articles/2017-01-27/hedge-fun...

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

#176

Post by Grangar »

xchaotic wrote: post #4

I'd always wondered if crypto exchanges actually bother to buy the crypto that you ask them to. For most people they wouldn't know the difference as eventually they'll withdraw in fiat money anyway

You don't trade against the exchange - you trade against counterparties that deposited as well.

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

#177

Post by lovich »

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…

A company I interviewed at was finding people who lived near power plants and paying them to set up cameras. The cameras would look at the smoke/steam coming out of the plant and based on that and the type and age of the plant they were estimating the power being generated. They'd then sell that data to energy traders.

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

#178

Post by tim333 »

qwtel wrote: post #32
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.

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…

Not sure about individuals but https://en.wikipedia.org/wiki/Renaissance_Technologies did ok. (Assets now$84bn, "from 1994 through mid-2014 it averaged a 71.8% annual return").

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

#179

Post by qaq »

matwood wrote: post #169
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.…

if they are 100% obvious trade options on margin and make a killing :)

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

#180

Post by parkaboy »

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…

>> Do they have people standing outside factories counting how many cars leave on the back of the truck?

Yes. They do. I took a car ride with someone a few years ago who claimed to work for a consulting firm that the big banks+others hire to gather on the ground intel from companies through things like factory tours and shooting the sh*t with employees at bars near the warehouses etc.

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