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Day Trading for a Living?

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Re: Day Trading for a Living?

#61

Post by melling »

flatline wrote: post #47
kevin_nisbet wrote: post #30

Earlier quoted context omitted.

The abstract of the paper seems to suggest otherwise: We observe all individuals who began to day trade between 2013 and 2015 in the Brazilian equity futures market, the third in terms of volume in the world, and persisted for at least 300 days: 97% of them lost money, only 0.4% earned more than a bank teller (US$54 per day), and the top individual earned only US$310 per day with great risk (a standard deviation of U…

I know people who made millions day trading commodities, for no one in that cohort to have made any real money over two years is surprising to the point of disbelief. This may be something particular to the Brazilian exchange.

I’ve noticed a lot of successful traders trade commodities versus equities.

What makes commodities easier to trade?

Ed Seykota has been doing it for decades:

https://en.m.wikipedia.org/wiki/Ed_Seykota

Re: Day Trading for a Living?

#62

Post by vonmoltke »

firethief wrote: post #48
vonmoltke wrote: post #33

Earlier quoted context omitted.

Correct, and the statement "it is impossible to become rich by playing the lottery" is absurd. It's part of an annoying tendency to conflate "extremely low probability of success" with "impossible".

Is that the original goalpost? Because I'd say it is impossible to make a living playing the lottery. To make a living doing something, it needs to provide enough positive cash flow.

It's the goalpost of the post I was responding to. I may have misunderstood the point, though.

Re: Day Trading for a Living?

#63

Post by [deleted] »

mrandish wrote: post #43
vonmoltke wrote: post #33

Earlier quoted context omitted.

Correct, and the statement "it is impossible to become rich by playing the lottery" is absurd. It's part of an annoying tendency to conflate "extremely low probability of success" with "impossible".

Yes, the title should have been something like "impossible for an individual to day trade stocks for a consistently reliable living".

[deleted]

Re: Day Trading for a Living?

#64

Post by vonmoltke »

tobr wrote: post #55
vonmoltke wrote: post #33

Earlier quoted context omitted.

Correct, and the statement "it is impossible to become rich by playing the lottery" is absurd. It's part of an annoying tendency to conflate "extremely low probability of success" with "impossible".

Ignore the link text here. They’re saying it’s “ virtually impossible”, which would be true of the lottery as well.

I'm on the fence about whether adding the weasel word "virtually" is any better.

Re: Day Trading for a Living?

#65

Post by mumblemumble »

outime wrote: post #32

Putting aside the potential quality issues of the study, the headline here in HN isn't accurate and made a lot of people comment about how wrong it is. The study doesn't literally say "impossible" but "virtually impossible" and they do say that a very small percentage was able to make about $310 a day which is about ~110k a year.

0.0051% of the study group, to be precise.

The more interesting trend, which isn't covered in the abstract, is that profitability is inversely correlated with how long you stay at it. It was 30% of people who day traded for one day and gave up on it, and steadily dropped down to 3% for people who kept at it for more than 300 days.

As a stats person, that struck me as a very evocative distribution. The paper put it nicely: "This peculiar pattern is similar to what we would fi􏰄nd, for instance, in the casino roulette."

The next thing I would want to know is, if you model the stock market as a machine that simply gives random payouts drawn from some distribution, what is the probability that a set of 1,551 groups of 300 random draws from that distribution would contain at least one set that averages more than $310? If the paper ran such a model, I didn't see it.

Re: Day Trading for a Living?

#66

Post by peteey »

ineedasername wrote: post #46
soneca wrote: post #39

Earlier quoted context omitted.

Why weird?

Because it would represent an extremely narrow slice of traders. It's possible traders of these equities find it quite hard to make a living but a larger number of other day traders do just fine. Also it says "impossible" but the article actually shows it's difficult and rare.

The paper's claim is "virtually impossible".

The post's title is click bait.

Re: Day Trading for a Living?

#67

Post by PopeDotNinja »

Kranar wrote: post #15

I mean you may as well say: Study shows it is impossible for an individual to build a tech start up as a living. Just because something is hard doesn't mean it's impossible. Day trading, like many other risky ventures, is something that is very hard and unlikely but for the few who succeed ends up being very profitable.

The problem with day trading, and stock trading in general, is that you can't predict the future. No one can. You can diversify your risk by buying the market (e.g. S&P 500 index fund) & hope the trend of going up N% per year continues, but even that isn't guaranteed. Essentially if you try to time/guess/predict the market, you're going gambling & the fees you pay on trading on the rake taken by the broker. Some gamblers do well. Most don't.

Re: Day Trading for a Living?

#68

Post by arghwhat »

Kranar wrote: post #15

I mean you may as well say: Study shows it is impossible for an individual to build a tech start up as a living. Just because something is hard doesn't mean it's impossible. Day trading, like many other risky ventures, is something that is very hard and unlikely but for the few who succeed ends up being very profitable.

This is not correct.

If we consider a tech startup a single gamble, then living off trading is a continuous stream of independent gambles.

While individual gambles may turn out better than the average (even many in a row), repeated gambling will always see the total outcome return to the normal.

This is why the house always wins.

Re: Day Trading for a Living?

#69

Post by mattkrause »

PaulRobinson wrote: post #37
mattkrause wrote: post #7

Earlier quoted context omitted.

And the article even moreso: > "We follow all individuals who day traded mini-Ibovespa futures contracts for their first time from 2013 to 2015, a total of 19,646 individuals." I know nothing about the Brazilian equities market, but it seems like it might be harder to for individuals to reliably make a profit on something heavily traded and fungible (Ibovespa is an index), where you're competing with much bigger play…

I don't know much about the Brazilian equities market per se, but I do know about trading in other markets. Liquidity is a very important aspect of any market. If you are the largest player in a small market (i.e. it has low liquidity), you are market making, and the problem with that is information asymmetry comes into play: you're trading against people who know stuff you don't know, and they will only trade agains…

Exactly. The odds that any random person (or worse, those with <2 years of day trading experience), has a meaningful edge on an index covering 80% of the Brazilian stock market are....not great.
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