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Day Trading for a Living?

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Re: Day Trading for a Living?

#151

Post by ajscanlan »

vonmoltke wrote: post #64
tobr wrote: post #55

Earlier quoted context omitted.

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.

I think the term "for a living" is more important.

How would you interpret the phrase "It's impossible for an individual to play the lottery for a living"?

Technically we both know it IS possible, technically. But in the real world? I don't know, but I wouldn't be suggesting anyone out there try make a living playing the lotto.

Re: Day Trading for a Living?

#152

Post by faet »

xivzgrev wrote: post #2

It’s not impossible, there are many people who make decent money from day trading. It might be more accurate to say “study shows it is difficult to earn a living trading stocks”

"Making decent money" doesn't mean crap it's about risk, expected value, and opportunity cost.

If you've got a million dollars and put it into an index fund you'll make ~$100k/year. If you day trade and make "Decent money" of say $70k/year you're still at a loss vs if you took the less 'risky' approach. Even if you made $150k (50% over the index) it's still a loss due to lost opportunity cost. As the $100k index + a job at McDonalds making $30k/year still puts you ahead due to long term vs short term capital taxes. And if you've got the knowledge to day trade and earn more than 50% over an index you can probably command a better job than fast food.

If you don't have a million in capital it becomes harder and harder the less money you have.

Your friends would need to consistently beat the market by a percentage of their capital for it to be considered a 'win' imo.

Re: Day Trading for a Living?

#153

Post by mumblemumble »

hn_throwaway_99 wrote: post #115
mumblemumble wrote: post #65

Earlier quoted context omitted.

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 ni…

Yes, it certainly looks like what would be dictated by statistics with random chance that eventually reverts to a slightly negative mean. In the short term it's not that unusual to flip a coin and get 5 heads in a row, but the more you throw the closer to a 50-50 split you'll see.

I'd also be very interested to see what would happened, hypothetically, if everyone just stopped trading after some fixed number of hours, held that position until the point when they decided to give up trading, and then liquidated it.

My hypothesis is that their average returns would end up being much higher than the returns they realized by day trading that whole time, due to less money being lost to fees.

Re: Day Trading for a Living?

#154

Post by blunte »

nickles wrote: post #124
Kranar wrote: post #102

Earlier quoted context omitted.

Renaissance Technologies did not use algorithms to beat the market... they used tax schemes to do so: https://www.bloomberg.com/news/articles/2019-04-10/renaissan... When you factor in the money they saved from dodging taxes and how they managed to compound the growth on that money, their returns end up being no more impressive than any other hedge fund. Even if it turns out that what they did wasn't illegal, the bul…

> Renaissance Technologies did not use algorithms to beat the market... This is false. RenTec generated outsized returns for a decade prior to entering into the derivatives with Barclays and DB beginning in 2000. > the bulk of their profits beyond what would have been made just investing in an index fund This is also false. For example, RenTec generated 99% return in 2000 net of fees, while the S&P 500 lost ~8%.

From what has been published, secrecy within Renaissance is so extreme that perhaps only 2-3 people actually know what is going on. So for an outsider, I say it's pure speculation.

And I speculate that their outsized gains are due to market manipulation, front running, or other insider activities (as in, illegal/unfair).

No one is smart enough; no algorithm or model is future-proof; nobody gets returns like this unless they define the scenarios themselves.

Re: Day Trading for a Living?

#155

Post by munherty »

Sorry this doesnt fly.

I think at best we can conclude that the trading methods used by the sample are ineffective for day trading in Brazil. Now if their methods are similar to that of the population, one may be able to conclude that common day trade methods are unsustainable within the brazilian market

Re: Day Trading for a Living?

#156

Post by bradshaw1965 »

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.

Glancing at the abstract it looks like 97% lose money, what larger number in a more suitable sample size would make a difference?

I've heard low single digits of traders and investors deliver Alpha. Impossible? no. Highly efficent? Yes

Re: Day Trading for a Living?

#157

Post by bencollier49 »

amluto wrote: post #144
dav1app wrote: post #117

They have a reason to make that article: there is a lot of companies fooling the Brazilian people over this. I'm a Brazilian software developer for the financial market. I also made some financial courses on the same university that the authors. Brazilian stock exchange market has exploded in the last years and most of my friends decided to 'work' as traders. None of them with prior knowledge or experience in the mar…

> One interesting thing: they normally sell the course with a private platform to trade the stocks included. I believe that they use that platform to collect data and operate against the traders that use that platform. They know the strategy that they are going to use (because they teach them), so it is easy to operate against. You’re assuming a complex strategy is needed when a simple one can easily suffice: simply…

Presumably this strategy would land the operators in jail if enough of their traders successfully predicted a large enough market move.

Re: Day Trading for a Living?

#158

Post by duxup »

iliketosleep wrote: post #134

This is akin to saying "it is impossible to gamble at the casino for a living", which for the overwhelming majority of people is true. Having said that, it's not impossible. People have beaten casinos before, and they have beaten markets, by finding an edge over the house (or market) - but it's never the typical Joe type. In day-trading, the typical Joe uses so-called "technical analysis", the same stuff you'll find…

I think the "for a living" is really about beating it longer term and the income comes in a sustainable fashion.

Even someone beating a casino I would think would get some big payouts to live on long term... but that casnio is gonna notice and shut down that "living" or just ban you. In that sense you're not doing it "for a living" as much as hoping to make enough money in a short span to maybe last longer term.

Now maybe they find new ways to beat the casino but to do it sustainability is questionable.

So beating the casino seems different than "for a living" IMO.

Re: Day Trading for a Living?

#159

Post by eloff »

LargeWu wrote: post #136
eloff wrote: post #108

Earlier quoted context omitted.

Not likely. But there are some strategies that amount to exploiting casino promotions and perks. There used to be some tricks around slot machines - like those near the door had a payout ratio above 1.0. There are probably still tricks along those lines, but if they become well known the casino's change them. You'd be much better of sticking to games of skill.

Fair enough. I've heard of craps players teaming up to play huge on both sides of the pass/don't pass, which would still have a negative EV. But they racked up comps pretty quickly which supposedly gave them a slight overall return when factoring that in. This might be good for a while to accumulate free rooms and whatnot, but not sure how one would actually make a living doing this.

Yeah, seems like a bad bet, but still better than day trading judging by the study results.
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