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Day Trading for a Living?

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Re: Day Trading for a Living?

#191

Post by [deleted] »

alexhutcheson wrote: post #161
amluto wrote: post #144

Earlier quoted context omitted.

> 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…

A business using this approach is called a Bucket Shop - it's both fairly well-known and explicitly illegal in most places: https://en.wikipedia.org/wiki/Bucket_shop_(stock_market)

[deleted]

Re: Day Trading for a Living?

#192

Post by tim333 »

alexhutcheson wrote: post #161
amluto wrote: post #144

Earlier quoted context omitted.

> 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…

A business using this approach is called a Bucket Shop - it's both fairly well-known and explicitly illegal in most places: https://en.wikipedia.org/wiki/Bucket_shop_(stock_market)

It's also very similar to 'spread betting', explicitly legal in the UK and a large industry.

Re: Day Trading for a Living?

#193

Post by neaden »

hash872 wrote: post #180

While I agree that day trading anything is an extremely poor idea- why is trading by banks/hedge funds/Goldman Sachs etc. consistently profitable? (Or if isn't profitable, why do they do it?) Is it just the massive informational advantage that they have? I'm not advocating for trading per se (I certainly don't do it!)- just curious about how large financial institutions presumably turn trading profits in light of EMH

A big part of it is that on average the stock market goes up, so even if you are randomly buying stocks you'll come out ahead over the long run as long as fees don't eat it up. Another significant portion is that they have access to a lot of information you don't, and are able to buy stocks and derivatives that you cannot. This comes as a benefit of their size.

Re: Day Trading for a Living?

#194

Post by [deleted] »

inerte wrote: post #173
melling wrote: post #81

For anyone interested in a great story about a world class mathematician who built a company that has used algorithms to beat the market for the last few decades, James Simons has an impressive record: https://www.ted.com/talks/jim_simons_a_rare_interview_with_t... https://m.youtube.com/watch?v=QNznD9hMEh0 https://en.m.wikipedia.org/wiki/Jim_Simons_(mathematician) One other thing, the Simons Foundation funds Quanta M…

Someone will always beat the market, because that's what we're looking for. I think it was on "Thinking Fast and Slow" that I read it's pointless to analyze the stock market winners, since it's a random process. Imagine there are 30 million entities that own stocks in the US - individual, companies, funds, etc... If on a given year half of them did better than average (with some rounding liberty): 1st year: 15M bette…

[deleted]

Re: Day Trading for a Living?

#195

Post by inerte »

kolbe wrote: post #187
inerte wrote: post #173

Earlier quoted context omitted.

Someone will always beat the market, because that's what we're looking for. I think it was on "Thinking Fast and Slow" that I read it's pointless to analyze the stock market winners, since it's a random process. Imagine there are 30 million entities that own stocks in the US - individual, companies, funds, etc... If on a given year half of them did better than average (with some rounding liberty): 1st year: 15M bette…

If you think everything is just random, you should educate yourself the impact of superior information sources or technology on producing returns. Are you telling me someone who runs the fastest market data feed between Chicago and New Jersey, doing arbitrages between S&P futures and S&P ETFs is just getting lucky over and over again, and it will eventually be revealed that they just won 30,000 coin tosses in a row?

Correct. There are numerous studies showing professional traders (individual or companies) are in fact no better than randomly picking stocks. Just the sheer number of players and variables will eventually produce winners, then we will justify why it happened in the first place.

Re: Day Trading for a Living?

#196

Post by Carpetsmoker »

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…

The best way to get rich in a gold rush is to sell shovels.

Every time someone comes up with a "get rich with this training/tool/etc." it's very unlikely to make you rich, because if it would work that great then why isn't the seller of the training/tool using it to get rich, instead of selling whatever they're selling?

Re: Day Trading for a Living?

#197

Post by downandout »

inerte wrote: post #173
melling wrote: post #81

For anyone interested in a great story about a world class mathematician who built a company that has used algorithms to beat the market for the last few decades, James Simons has an impressive record: https://www.ted.com/talks/jim_simons_a_rare_interview_with_t... https://m.youtube.com/watch?v=QNznD9hMEh0 https://en.m.wikipedia.org/wiki/Jim_Simons_(mathematician) One other thing, the Simons Foundation funds Quanta M…

Someone will always beat the market, because that's what we're looking for. I think it was on "Thinking Fast and Slow" that I read it's pointless to analyze the stock market winners, since it's a random process. Imagine there are 30 million entities that own stocks in the US - individual, companies, funds, etc... If on a given year half of them did better than average (with some rounding liberty): 1st year: 15M bette…

The math, at least when it comes to the Medallion Fund, says that you are wrong. The odds of being able to achieve 40%+ returns (net of very steep fees) over 20+ years are astronomically low. In fact, the odds of simply being in the top 25% of hedge funds for 20 straight years, through “randomly picking stocks” as you put it, are 1/(4^20), which is roughly 1.09 in 1 trillion. There have been less than 25,000 hedge funds in US history.

Yours is the kind of folksy explanation that appeals to the masses. It seems like the kind of thing Bernie Sanders would say in a speech. But in this case it leads to an astoundingly inaccurate conclusion.

Re: Day Trading for a Living?

#198

Post by neaden »

melling wrote: post #184
inerte wrote: post #173

Earlier quoted context omitted.

Someone will always beat the market, because that's what we're looking for. I think it was on "Thinking Fast and Slow" that I read it's pointless to analyze the stock market winners, since it's a random process. Imagine there are 30 million entities that own stocks in the US - individual, companies, funds, etc... If on a given year half of them did better than average (with some rounding liberty): 1st year: 15M bette…

Who said it’s a random process? Stock prices don’t go up randomly over the long term. Joel Greenblatt had 50% yearly returns for a decade. Renaissance Technologies uses algorithms. Also, I don’t think you would expect someone to beat the market every year, but over a ten year period, for example.

An important difference. You would expect someone to beat the market every year for ten years just by chance alone, you wouldn't expect it to be any specific person. I expect someone is going to win the lottery, I just don't expect that someone to be me.

Re: Day Trading for a Living?

#199

Post by mruts »

Kranar wrote: post #102
melling wrote: post #81

For anyone interested in a great story about a world class mathematician who built a company that has used algorithms to beat the market for the last few decades, James Simons has an impressive record: https://www.ted.com/talks/jim_simons_a_rare_interview_with_t... https://m.youtube.com/watch?v=QNznD9hMEh0 https://en.m.wikipedia.org/wiki/Jim_Simons_(mathematician) One other thing, the Simons Foundation funds Quanta M…

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…

You have absolutely no idea what you’re talking about. RenTec is the most profitable money making machine the world has ever seen (and likely will see). RenTec’s Medallion fund has an annualized return for over 30 years in excess of 35% net of fees. I’m not sure what their management fee is, but their performance fee is like 45%. This means they are making like 80% returns YoY before fees.

I suspect you don’t work in the industry, because what you’re saying is absolutely ludicrous. The S&P 500 lost like 40% in 2008. Meanwhile Medallion doubled up after fees. So a total return of 145%. What you’re saying is simply not possible with a tax loophole.

There’s not a single hedge fund analyst or PM on the Street who doesn’t think that RenTec is anything less than amazing. No one thinks they are as good as those guys, no one. If you want the real story about Simmons and RenTec, check out the MIT Sloan fireside chat with him on YouTube.

Re: Day Trading for a Living?

#200

Post by ryandrake »

melling wrote: post #184
inerte wrote: post #173

Earlier quoted context omitted.

Someone will always beat the market, because that's what we're looking for. I think it was on "Thinking Fast and Slow" that I read it's pointless to analyze the stock market winners, since it's a random process. Imagine there are 30 million entities that own stocks in the US - individual, companies, funds, etc... If on a given year half of them did better than average (with some rounding liberty): 1st year: 15M bette…

Who said it’s a random process? Stock prices don’t go up randomly over the long term. Joel Greenblatt had 50% yearly returns for a decade. Renaissance Technologies uses algorithms. Also, I don’t think you would expect someone to beat the market every year, but over a ten year period, for example.

I’ve got a roulette “system” too. Trust me, it even has algorithms and machine learning. I’ll sell you the book.

The discussion reminds me of a fun exercise we did in one of my B-school classes: everyone stands up and flips a coin. If you flip heads you sit down and stop the game. Everyone who flipped heads flips again, with the new tails flippers sitting down. At the end when there’s one person left, the prof interviews him, asking “how did you become so skilled at flipping heads?” and “what advice can others take to get as good as you!”

This is what we are doing when we admire stock pickers and try to figure out what their secret is.

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