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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

#201

Post by bunderbunder »

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…

> the 50% that outperform

Not even. After you take your brokerage's fee structure into account, you've got to nominally outperform the market by a fairly decent margin in order to stay ahead of the market. The amount by which you need to depends on the rate at which you incur those fees, so day traders are giving themselves the toughest row to hoe in this department.

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

#202

Post by mikestew »

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.

I don't believe it's possible to consistently make money ignoring "news, information, or fundamentals".

I’m not here to argue if it works, I’m arguing that there are people who trade stocks with no concern for anything that you mentioned. Argue the effectiveness all you like, people still do it.

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

#203

Post by throwawaymath »

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…

I've worked in a similar role. I broadly agree: individual investors don't really have the technical skills or the capital needed to acquire and analyze the dizzying amount of data you typically need find an edge.

That being said, an individual who specialized in that kind of data acquisition and analysis at a firm can do well on their own by targeting specific equities with only one or two streams of revenue. But it's still difficult and that individual would probably be trading in a manual capacity.

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

#204

Post by xivzgrev »

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…

I haven't seen this far, but one summer I joined a friend working for a commodity trading firm. We went into corn fields, ripped off a couple ears and made some counts to help them estimate yield. it was definitely trespassing, one time he got caught and got an "earful" from the farmer.

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

#205

Post by bunderbunder »

mattnewport wrote: post #157

This article is typical of the complete lack of ethics in the banking and finance industry. As he acknowledges, this is straight up fraud / theft and yet he is sympathetic to the perpetrators. It's the kind of amorality and lack of ethics that was so visible in the financial crisis. At least in this case there appears to have been some actual enforcement unlike in the financial crisis where essentially nobody in the…

Matt Levine is typically a voice for greater ethics in the industry. He just happens to also have a very ironic sense of humor.

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

#206

Post by Lavery »

gonehome wrote: post #99
speedplane wrote: post #95

Earlier quoted context omitted.

> when you play with big money, your emotions will immediate change and that is when you will make mistakes That's precisely why I don't play with big money, not that I have so much anyway. I wonder though, if I was playing with someone else's "big money", if you could keep those emotions in check.

That’s the real trick - convince others to give you a lot of money and when you win you get a big cut and when you lose it’s not your money and you just do something else. Seems to be the way all hedge funds operate, maybe can even charge membership fees too.

Part of the trick to convincing people to invest with you is having a significant amount of your own money in the fund. So that's one hurdle here. It's possible to raise enough that your management fee renders irrelevant whatever you might lose trading your own money, but at that point you're in big league hedge fund scale anyway and will be very tightly scrutinized.

Also, losing client money is just as emotionally difficult and stressful and guilt inducing--maybe more so--than losing your own for anyone with a half normal sense of responsibility and fiduciary duty.

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

#207

Post by tim333 »

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…

"Observing correctly that the market was frequently efficient, they went on to conclude incorrectly that it was always efficient. The difference between these propositions is night and day."

Buffett in 1988 prior to his net worth increasing a lot.

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

#208

Post by platz »

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…

The problem is when everyone is simply tracking an index, there are no more humans in the loop to avert disaster.

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

#209

Post by mabbo »

H1Supreme wrote: post #191
mabbo wrote: post #160

Earlier quoted context omitted.

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 massi…

I suspect I could do that successfully. What I do instead is give up 0.5% per year and let WealthSimple[0] do it for me. Automatic weekly payments from my bank account get invested in whatever way gets me closer to a balanced portfolio.

It's a big cut for doing something I could do manually but I'm super lazy and it's a percentage of not much money anyways.

[0] https://wealthsimple.com or https://wealthsimple.com/invite/FCU4AG if you want a referral link which gives you (and me) some extra discounts.

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

#210

Post by kgwgk »

toomanybeersies wrote: post #21
Danieru wrote: post #14

This is notable because in the United States the form of leverage common else where, a contract for difference, is banned. Outside America it is much easier to run these kinds of bucket shops. The key is offering leverage, Kelly's formula suggests that stocks should be traded with a rather narrow band of leverage, under two in most cases. Yet these shops always offer leverage ratios more similar to forex. You would b…

IG will offer me, here in Australia, 5% margin on shares (20x leverage), 0.5% margin on forex (200x leverage), 0.5% on indices, and form 0.7-4% on commodities [1]. I set up a demo account a while back, and it's pretty impressive the amount of money you can quickly make (and lose) with CFDs. It was possible on a $30,000 capital to make (or lose) over $1000 per day. I'm a pretty risk averse guy, and also can't be bothe…

> It was possible on a $30,000 capital to make (or lose) over $1000 per day.

Maybe there is a typo in your example? Making or losing 3.3% in one day does not seem that impresive...

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