Don't Steal Money from Day Traders Before They Lose It • Hacker News Board

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

#191

Post by H1Supreme » Fri, Sep 07, 2018, 1:22 PM UTC

mabbo wrote: post #160

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 worked briefly[0] at a startup that helps get professional traders faster/easier access to reports, data, etc[1]. It was eye opening. Brokerage firms do huge amounts of research to help figure out where the market is going, then only give that information to the big fish who do millions/billions in trades. You and I are not competing in a fair game when we buy and sell stocks. I just keep my retirement savings in a…

> Hands off the wheel, don't think about it, don't mess with it

I'm the same way. I put money in, buy more shares of whatever ETF I deem worthy, and outside of the occasional sell to fund another ETF purchase, I don't touch it. It fluctuates, but ultimately goes up.

But, man oh man, do I fantasize about trading. When I look at the underlying stocks in an ETF that's doing good for me, and some of them have these massive YTD returns, I get the itch.

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

#192

Post by matwood » Fri, Sep 07, 2018, 1:22 PM UTC

qaq wrote: post #179

matwood wrote: post #169

Earlier quoted context omitted.

"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 :)

That's why I said they a) don't happen that frequently and b) do not always turn out positive. Black swan events do happen. I joke with my currency trading friends about 'picking up nickels in front of a steam roller'. It works great, until suddenly it doesn't and you're broke.

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

#193

Post by VBprogrammer » Fri, Sep 07, 2018, 1:29 PM UTC

froindt wrote: post #186

VBprogrammer wrote: post #151

Earlier quoted context omitted.

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…

>I wonder how far down this rabbit hole things go. Do they have people standing outside factories counting how many cars leave on the back of the truck? Do they have people standing outside factories counting how many cars leave on the back of the truck? Mostly as an exercise for myself, I've been curious to make a system that would do this. Cameras on all the entrances, license plate tracking, and maintaining an "in…

Funny enough, in the last couple of days I've been wondering whether you could use computer vision in combination with sports betting to generate more accurate odds given the current state of the game.

Of course the problem with that is getting up to the second video feeds (as apposed to delayed video feeds from SKY etc) from a fixed view point. I'm sure you could pay some money to get essentially a security camera feed at the game but that would be expensive.

Which made me wonder whether someone could turn up the night before a big game, park a drone on the roof broadcasting the video to a van with the computers processing the results while evading detection...

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

#194

Post by cheez » Fri, Sep 07, 2018, 1:34 PM UTC

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.

Retail day trading is guerrilla warfare. It's not about beating the big guys.

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

#195

Post by saosebastiao » Fri, Sep 07, 2018, 1:36 PM UTC

riskneutral wrote: post #171

sinstein wrote: post #136

Earlier quoted context omitted.

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…

> 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.

5 minutes is plenty of time, well shorter than most successful day traders who are trying to predict on 15 minute or hourly horizons, or swing traders trying to predict on daily horizons. There are plenty of trends that occur on the horizons of minutes, hours, days, even weeks.

> 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.

This comment reads like a science fiction fan's made up ideas about how NASA works. You've taken snippets of vague ideas about the truth and mishmashed them into a frankenmonster that would never exist in reality.

* Millions of trades every millisecond is an exaggeration several orders of magnitude off from the real world volumes of HFT firms.

* HFT algorithms don't use AI. They wouldn't be able to react fast enough if they did. HFT algorithms in practice are rarely more complicated than linear regression.

* Those who use AI in their algorithms are doing so with incredibly varied levels of success. They are typically trading on horizons much longer than HFT firms. They are trading volumes orders of magnitude lower than HFT firms, even if those volumes are orders of magnitude higher than individual investors. From what I can tell, outside of text analysis of the potential sentiment generated by news, the finance industry is pretty pessimistic about AI.

* There are plenty of traders operating successfully across several time horizons. It is not necessary to be faster than HFT firms to be successful. Most day traders like me actually depend on the liquidity provided by HFT firms in order to be profitable; we couldn't do it without the deep books that they provide.

* Likewise, a lot of the predictability of how the market moves comes from the market effects of large actors: when you trade $100M in a day in a single direction, you move the market with you, and that creates a trend pattern that smaller traders can pick up on and take for a ride.

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

#196

Post by oillio » Fri, Sep 07, 2018, 1:45 PM UTC

tonyedgecombe wrote: post #167

paganel wrote: post #131

Earlier quoted context omitted.

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.

Are you sure we are not currently in a “severe bubble characterized by corruption and negligence?”

I think I could argue both sides pretty convincingly. It is easy to see in hindsight, not so easy in the thick of it.

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

#197

Post by wruza » Fri, Sep 07, 2018, 1:46 PM UTC

phyalow wrote: post #159

wruza wrote: post #121

Earlier quoted context omitted.

That’s when it stops working, as far as I understood. You turn into next deterministic robot that you just exploited with your’s. The same holds for bet arbitrages; once you automate it, they find you and cut your leverage.

who is they? Is it your broker? why would they do that it? It's in their interest to have you trade as frequently as possible...

Idk why exactly, but smaller bookmakers seem to not like surebets much. (edit: ‘bet arbitrages’ part was not about a regular market.)

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

#198

Post by throwawaymath » Fri, Sep 07, 2018, 1:48 PM UTC

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…

> 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 slide in the direction.

I can tell you from professional experience that is most often not insider trading. You might be surprised at the amount of meaningful information that can be legally obtained through research.

I used to (very legally) find and analyze data that would lead to better conclusions than street analysts. The results of equity earnings are basically an open secret among institutional investors before they're announced.

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

#199

Post by saosebastiao » Fri, Sep 07, 2018, 1:48 PM UTC

vlasev wrote: post #105

saosebastiao wrote: post #66

Earlier quoted context omitted.

Formula 1 cars probably couldn't even beat a Vespa in a 3000 mile endurance race. Does that mean f1 cars are slow? Does that mean Vespas are fast? Comparing returns between income-oriented day traders and compounding-orieted mutual funds is like comparing top speed between f1 cars and endurance cars. You can certainly do it, but you're not doing anything worthwhile with your time by doing so. My strategy has high ret…

If you reduce the Formula 1 car's performance by as little as 25%, you would be able to get a much much higher mileage. Those things are so optimized that they break down much faster and easier.

That's exactly the point. If I were trying to beat the infinitely compoundable returns of the whole market over a long period of time, I would have to make monumental changes to how I operate, and those changes would drastically alter the level of returns that can be realistically achieved.

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

#200

Post by tim333 » Fri, Sep 07, 2018, 1:50 PM UTC

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?

The modern equivalent is spreadbetting. We have loads in the UK.