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Day Trading for a Living?

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Re: Day Trading for a Living?

#251

Post by atourgates »

gwbas1c wrote: post #71

I always thought the problem with day trading is an absence of information: How does a single individual know enough about about all the various entities they are trading to really know when one is going up or down? Seems like an institution with dedicated employees performing due diligence will know much more than an individual day trader, and thus will be able to make better decision about when to buy and sell? Any…

All effective trading is, essentially, insider trading. Not in the legal definition, but in the sense that to beat the market, you have to know something that "the market" doesn't.

Or, just get lucky.

The only personal example I have is from buying NFLX stock about a decade ago. I saw a news (Slashdot I think) story that Netflix's servers were having an hours-long outage. I can't remember if it was mentioned in the story that their stocks took a dip, or I just happened to look. Either way, I noticed that their stocks were down about 30% on that news, which seemed silly to me. The market was treating this like it was some kind of disaster for the company, whereas I was pretty confident it was a temporary blip.

I bought the stock, just a few hundred worth since I was in my first barely-over-minimum wage job at the time. Netflix got their servers running again, and the stock recovered the next day. I decided to hold on to the stock because, why not? Today, it's worth about 20x what I bought at.

If only I'd bought more.

My point is, I knew that the market was wrong, and an hours-long server outage wasn't a reason for Netflix to suddenly be worth 30% less than it was the day before.

To successfully pick stocks, you have to have some kind of expertise or insider knowledge to know when the market's wrong, and you're right. Most of us, in most situations, don't have that kind of expertise or insider knowledge.

Re: Day Trading for a Living?

#252

Post by pembrook »

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

Goldman Sachs isn't profitable because of prop trading. They charge fees for services. It's that simple.

Re: Day Trading for a Living?

#253

Post by WalterBright »

ummonk wrote: post #239
Carpetsmoker wrote: post #196

Earlier quoted context omitted.

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.

There's a classic one where one places a classified ad that says: "How to make money at home! Send XXX $10 for information."

Send them $10, and you get a letter that says: "Place a classified ad that says: How to make money at home! Send XXX $10 for information."

Re: Day Trading for a Living?

#254

Post by Macross8299 »

mruts wrote: post #210
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…

Okay, let’s do the math buddy. Let’s assume the null hypothesis (the market) has a mean return of 10% and vol of 10%. RenTec’s Medallion Fund has made 80% annualized return before fees in the last 20 years. Assuming the market is a random walk (it’s not), the chance of RenTec making >50% (I don’t think they’ve ever made less than that in 20 years) every year for 20 years is... 3.486 x 10^(-91) The actual probability…

>Why do people keep posting this tired argument over and over?

Sour grapes. Easier to pretend _nobody_ beats the market than honestly admit you're not willing to put in the effort to constantly discover new alpha. And it's fine to not be willing to do that -- it takes a lot of effort and skill to discover alpha and most people will be better off improving their skills in their day job and just tracking indexes.

Doesn't mean it's impossible to beat the market, especially as a small investor where you have some advantages over larger players (your orders aren't large enough to move markets and reveal valuable information)

Re: Day Trading for a Living?

#255

Post by WalterBright »

ChuckMcM wrote: post #213
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…

Welcome to 1999 :-) Or China 2010 or so. It almost feels like there are people who look at these events, figure out who made the money, and then work to recreate them in a new environment where they can be in the position to make all the money. My experience from the dot com day trading frenzy was that there were three kinds of investors; Those that had no clue and just followed a bunch of investment "tip" sources an…

Haha, I invested in the "shovel" companies that were making real profits (such as Cisco). They got caught in the secondary die-off, when the dot-bust companies stopped buying shovels.

Re: Day Trading for a Living?

#256

Post by outworlder »

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?

Exactly. This goes double for when we are talking about investments.

If the proposed strategy really really works, then you would get investors and offer them a share of the pie. "Teaching" them accomplishes nothing and reduces your profits.

Re: Day Trading for a Living?

#257

Post by opportune »

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…

What you believe the platforms are doing seems similar, if not the same, to “front running”, which is not allowed in the US

Re: Day Trading for a Living?

#258

Post by voldacar »

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…

>If, indeed, the client is trading based on no information whatsoever, then the broker wins and the client loses.

If this were the case, wouldnt both sides just make 0$ on average over a long period of time? (or whatever the avg growth of the market was during this period)

I guess the broker would earn fees, but that still doesn't exactly sound lucrative

Re: Day Trading for a Living?

#259

Post by bowcoy »

inerte wrote: post #195
kolbe wrote: post #187

Earlier quoted context omitted.

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.

This is a contradiction. You first assume complete market efficiency (assets are priced in) to support that the market is random and unpredictable. Then you say that a hedge funds' payroll is no better than random guessing (something you could scale up without hiring anyone). This means that quants are grossly overpaid (assets don't reflect their true price) and that the trader's market is highly inefficient... That's having your cake and eating it too: a rational irrational market.

And it is a hypothesis that can't be disproven or proven, since, in a round-about way, it concerns non-computable concepts like Kolmogorov Complexity/Randomness (The efficient market hypothesis basically states that the stock market is an optimally compressed computer program, there are no discernible patterns left to reduce the "file" size).

There are numerous tried and tested ways to beat the market, including:

- Have more information than other players - Have better models than other players - Make faster decisions than other players - Have enough energy to perturb the system and predict the outcome (this is the big one that is out of reach of most individuals and non-Physics PhD's).

Survivor bias is of course a very real phenomenon, but like other incomplete information games that can be won, or even solved, algorithmically: Poker, international diplomacy, ..., we would not conflate pure luck with the real skills required to play those games consistently well.

Re: Day Trading for a Living?

#260

Post by cheez »

tim333 wrote: post #207
blunte wrote: post #154

Earlier quoted context omitted.

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 unle…

There was a video interview with the founder where he explained pretty much how they do it. The employ a lot of bright PhD maths/physics types, get them to come up with all the algorithmic strategies they can think of, run tests with historic data and live trading to see which ones work and then scale up those. There isn't one smart guy or one great strategy - there are dozens of smart guys and loads of strategies an…

They could lie about that too and just use linear regression.
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