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Day Trading for a Living?

papers.ssrn.com

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Re: Day Trading for a Living?

#231

Post by golover721 »

jacquesc wrote: post #87

I have a couple friends that do day trading on "technical analysis". As in, they only trade on the chart movements. Both claim to make money consistently. I generally believe them, but it seems like black magic to me. Especially when they explain what they're doing in detail. Not sure I understand this study tho, and whether or not it relates.

I also have a few friends who do well day trading (which is usually done by mostly or only technical analysis). They have done well for themselves as they actually treat it like a job. Constantly trying to educate themselves, being at their computers paying attention to the market for the entire trading day.

Most folks who feel the allure of day trading don't realize that to make it work it has to be your full time job. You can't just make some trades, go off and do something else, and expect to make any money.

Re: Day Trading for a Living?

#232

Post by bmarquez »

newshorts wrote: post #80

I find it interesting that all the comments on here seems to corroborate this evidence. It doesn’t seem like a large percentage of comments are saying “this is false, because I make a living day trading!” Instead most of the comments say something like “this story is untrue because I know someone who makes a living day trading” Knowing someone != being someone

Many people who are actually successful with day trading (as opposed to selling pitchforks to miners) don't like to brag or talk openly, or post flashy pictures on social media.

Why? Because they don't need the attention. They don't need people begging to mentor them for free, or share the strategy they've worked for months or years, or ask for free stuff since they didn't really "work" for it like lottery winners, or criticize their livelihood saying it can't be done. There's just no point.

Re: Day Trading for a Living?

#233

Post by adrianmonk »

kritiko wrote: post #125
adrianmonk wrote: post #34

Earlier quoted context omitted.

Or you could say: it's impossible to win the world championship at anything. It would be easy to find data to show that 99.99% of people aren't the best tennis player or fastest runner or best Scrabble player in the world; therefore, nobody can be the best at it. According to this reasoning, at least.

The point of the article is to dissuade people from pursuing careers in day trading based on marketing that it's an easy way to earn money (from people whose business is selling instructional materials... not day trading). If there were lots of people selling courses on "Become a WTA Tour Player, make millions winning tennis tournaments!" the same type of paper might be warranted for tennis playing.

On a high level I agree. The way I see it, "impossible" is the wrong label. What you must do, though, is have a rational basis to believe you're in (making up a number) the top 0.01% of people skilled in that area. If that's true, then it might be a reasonable plan. For the other 99.99%, it's a bad plan.

And when I say rational basis, that's its own challenge. There is a huge potential for emotional thinking disguised as rational and for self-delusion. Everyone wants to believe they are the top 0.01%, and most of them are wrong.

Re: Day Trading for a Living?

#234

Post by nickles »

mattkrause wrote: post #228
nickles wrote: post #99

Earlier quoted context omitted.

This is a common misconception. Futures contracts are very often used for nonspeculative purposes (e.g. Starbucks locking in prices for buying milk or farmers locking in prices to sell wheat). This is a form of insurance. While the end users are ultimately may net with each other, the intermediaries who take risk matching these parties charge a fee (the spread) for doing so. Why can't the end users trade with each ot…

I get that the insurance has a value of its own, but what about the trading of futures specifically? Suppose I buy a biotech stock at $10/share. They make a breakthrough, and the stock shoots up to $110/share. I make +$100/share, but no one has lost the corresponding $100. Suppose I agree to buy an ounce of silver from you for $20 in January. If silver is $21 then, you effectively lose a dollar , since you need to ch…

Suppose a farmer wants to lock in the price of milk produced the farmer's dairy. The farmer wants to sell futures and sees a market of 18.30 / 18.50. These prices are probably being shown by a market maker. The farmer sells the futures to the market maker at 18.30. A few minutes later, Starbucks would like to buy the same contracts, to lock in its costs for the next month. Starbucks buys at 18.50.

These two participants have paid the market maker, in total, 0.20 in spread. Here, the spread is the fee the market maker charges for facilitating liquidity. At this point, the net sum between the three participants is still 0. However, we also need to factor in the fees charged by the exchange, any taxes that may be charged on the transaction (for example the SEC fee in equities), clearing fees, and funding costs.

On the whole, the transaction between the three participants was negative sum. However, the market maker is running a business by reflecting those costs, and the risk premium, in the spread. Even though this transaction is negative sum, it, presumably, still provides economic value to the farmer and Starbucks.

Re: Day Trading for a Living?

#235

Post by vasco »

jacquesc wrote: post #87

I have a couple friends that do day trading on "technical analysis". As in, they only trade on the chart movements. Both claim to make money consistently. I generally believe them, but it seems like black magic to me. Especially when they explain what they're doing in detail. Not sure I understand this study tho, and whether or not it relates.

Technical analysis works the same way the weekly paper works to say that Virgo or Capricorn will have a good week at work.

Re: Day Trading for a Living?

#236

Post by ummonk »

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)

I have a hard time telling the difference between the “bucket shop” described in the lede there and a modern options trading market.

I guess the difference is that in a market third parties eat the spread by market making whereas in a bucket shop the market itself profits off the spread?

Re: Day Trading for a Living?

#237

Post by mlevental »

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've been rightfully skewered by other people but I just want to point that this is what happens when someone reads one article about a controversial thing they don't otherwise know anything about and then goes around presenting that finding as if they're some kind of expert.

Re: Day Trading for a Living?

#238

Post by bob1029 »

aj7 wrote: post #211

Two axioms for small investors: 1. You can’t make money by day trading. 2. Technical analysis is bunk.

I would like to expand on this point because while it is true as stated above, there is more to the picture from my perspective. Day trading and technical analysis are certainly bunk, but the problem I see is people equating day trading with making intelligent stock picks which were NOT driven solely by technical analysis nonsense.

For instance, predicting that a certain company's product will steal market share from a competitor based upon personal experience in the same industry and then purchasing stocks based upon this is an extremely viable strategy. Especially, if your intentions are to hold for the long term (beyond 12 months). You just need to get comfortable with the boundaries of your own understanding and make rational decisions based on this. I always see this black and white discussion (put everything into a broad market EFT vs day trade on technical analysis) without much discussion of intermediate strategies that are based on actual concrete research and understanding of the relevant markets.

Re: Day Trading for a Living?

#239

Post by ummonk »

Carpetsmoker wrote: post #196
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?

Well, I’ve seen a few people blogging about how they make money by blogging about how to make money.
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