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

#231

Post by froindt » Fri, Sep 07, 2018, 4:07 PM UTC

Y_Y wrote: post #220

froindt wrote: post #188

Earlier quoted context omitted.

The gist I've read in the past is that basically as long as it's not obtained illegally (e.g. breaking in and stealing) and there's no benefit to the person providing the information, it's not insider trading. Matt Levine writes on the topic pretty regularly. Here's an example with a number of interesting situations. www.businesslive.co.za/amp/rdm/business/2018-02-01-matt-levine-the-fine-line-between-insider-trading-…

That would be a good way to donate to charity. Just feed info about your corporate overlord to a philanthropic trader.

I've never thought about that before, but it would certainly make for an interesting news story!

"Meals on Wheels is accused of receiving insider information about big market movements from dozens of investment bankers. The Meals on Wheels endowment has seen 10x growth in the past 18 months. It looks like the group they provide for will be fed forever, even if we went through another Great Depression-level financial catastrophe. Should they be allowed to keep these funds? It certainly looks bad for the government to fine them hundreds of millions of dollars with the recent cuts in government-provided social programs."

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

#232

Post by toast0 » Fri, Sep 07, 2018, 4:09 PM UTC

bunderbunder wrote: post #201

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 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.

Brokerage fees are getting lower and lower. I understand Interactive Brokers will pass through exchange rebates for setting orders that add liquidity. Negative fees add up too.

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

#233

Post by mamon » Fri, Sep 07, 2018, 4:12 PM UTC

laurentl wrote: post #163

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…

> 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.

Except it only works when serial numbers are sequential, I believe the common practice today is to have serial numbers to be random alphanumeric strings.

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

#234

Post by dzdt » Fri, Sep 07, 2018, 4:17 PM UTC

lbotos wrote: post #222

Retric wrote: post #213

Earlier quoted context omitted.

The alternative is to simply look at longer time horizons. In the 1990 you could have beaten the market by simply realizing that the PC was going to explode into an everyday item and simply focused on buying and holding the sector vs any one stock. That's not going to see huge daily gains, but on the backs of huge successes like Dell it could easily have turned ~100k into retirement money in a decade.

So, by that logic, where is the market going now? Isn't this just hindsight bias? What's your decade strategy now?

Some thoughts for a decade strategy:

(1) the US will move to single payer health care. Besides the growing popular support for this, there is a coming crisis of corporate, municipal, and state pension funds which are unfunded to pay for their growing health care commitments. Single payer will be used to bail out those pension liabilities.

(2) Climate change. Consider effects on real estate of the placement of storm barriers, the increases of flood tides, etc.

(3) Self-driving cars. Lots of unexplored knock-on implications of the cultural changes. Dropoff without parking may reinvigorate walkable downtowns. Driving without attention required will enable longer commutes and combined work+commute with mobile offices. Cheaper last-mile delivery may push more retail shopping online. Introduction of drive-thru services targetting unoccupied vehicles -- dispatch a car to fetch something. The now high-end service of going shopping and asking for items to be sent back to your home could become commonplace.

(4) demographics. You can predict China's growth will soon slow looking at how the age distribution is projected to change.

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

#235

Post by noir_lord » Fri, Sep 07, 2018, 4:24 PM UTC

mamon wrote: post #233

laurentl wrote: post #163

Earlier quoted context omitted.

> 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.

Except it only works when serial numbers are sequential, I believe the common practice today is to have serial numbers to be random alphanumeric strings.

Bought 3 identical Sony cameras recently 1 a month ago and a pair this week, serial numbers are numerical and the most recent pair are two digits apart.

So not everyone randomises.

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

#236

Post by talltimtom » Fri, Sep 07, 2018, 4:35 PM UTC

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…

> I am presuming that if the customer actually made money, these guys would pay them from their own pocket.

Set up a company, sell “shares” in Apple or whatever, and don’t actually buy the shares for your costumers. If Apple falls you make bank, and if Apple rises you declare bankruptcy. Either way the costumers loose.

That is the difference to market makers who actually buy the asserts, so the customers at worst just have a bunch of less valuable stocks not empty hands.

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

#237

Post by [deleted] » Fri, Sep 07, 2018, 4:45 PM UTC

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…

[deleted]

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

#238

Post by xefer » Fri, Sep 07, 2018, 5:11 PM UTC

ajay-d wrote: post #175

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…

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...

In the movie "Wall Street" (1987) Gordon Gecko has his lackey Bud Fox follow a rival around to try and figure out what he's going to invest in, so they can undercut him.

He follows him to a private jet and finds out it's flying to mid-sized city that happens to be the corporate headquarters of a particular company. In the movie it's sort of implied that this activity is illegal.

I wonder if it actually was, and if so, why that would be different than what those hedge fund guys you reference were doing?

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

#239

Post by gesman » Fri, Sep 07, 2018, 5:12 PM UTC

qaq wrote: post #211

gesman wrote: post #71

Trading is essentially an activity of showing numbers on a screen between funds deposits and funds withdrawal. Traders are playing with numbers. No one actually expects the paper shares to be mailed after stock purchase. Brokerage guarantees successful withdrawal event - and if not - then it's a present and clear fraud. So if brokerage does not actually do anything, but properly updates the numbers on the screen acco…

In this case brokerage exposes a client to counter-party risk that client has no idea about.

Well, if customer prone to lose anyways - "brokerage" is in good shape to collect commissions.

They'd be in trouble if customer suddenly strikes high margin gold and want to withdraw.

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

#240

Post by davidmr » Fri, Sep 07, 2018, 5:13 PM UTC

bjl wrote: post #227

PurpleBoxDragon wrote: post #189

Earlier quoted context omitted.

I wonder if the contract with the firm is setup so that the information they gather is public, if anyone can find the application in the back of the drawer in the basement if you show up in person and request the form from the admin who is only there 2 hours a week.

For something to be insider trading, one of the people involved has to have breached their fiduciary responsibilities. Low-level employees typically don't have any fiduciary responsibilities to their company, so the firm that collects information from them is under no obligation to make it public.

I'm not a lawyer, but this definition can't possibly be correct, can it? If you're a janitor and you come across a piece of paper or a conversation between bigwigs discussing a merger and sell it to a trader, the trader and the janitor can surely both be sent up the river for insider trading, right?