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Day Trading for a Living?

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Re: Day Trading for a Living?

#281

Post by pembrook »

docker_up wrote: post #11

Impossible? Lol I have a handful of friends that do this. It's hard work but they make 5 to 6 figures consistently per year. It's very very hard, and not everyone can do it. I tried and lost a lot of money. But it's definitely not impossible, that is simply a lie.

Sigh. Here's the truth, everybody knows a guy at work who claims they make money "day trading."

If you know more than 1 person who beats the market consistently by trading, you should open a fund-of-funds and start investing institutional money, ASAP. The Harvard endowment would love to speak with you.

Re: Day Trading for a Living?

#282

Post by dbsights »

pembrook wrote: post #248
Macross8299 wrote: post #209

Earlier quoted context omitted.

"Random Walk Down Wall Street" is somewhat outdated and a lot of the evidence from behavioural finance doesn't really support its central thesis. It's more dogma than anything.

The central thesis of short term market movements (say day to day or week to week or month to month) being a random walk is about 99.7% correct. This is a statistical reality, you can literally crunch the numbers! Behavioral finance has nothing to do with it.

about 99.7%?

I've always hated the argument of this book: yes the markets are chaotic and short term movements appear random, but the appearance of being random is not equivalent to being caused by a random process. The book makes a big deal about how technical analysts saw patterns in random data so it must be bunk, but this doesn't really say anything about the predictive power of technical analysis when the data is generated by the aggregate actions of thousands of traders instead of a coin toss.

Price action is not the result of investors literally buying or selling at random. Each action is undertaken in response to external conditions and it is far from absurd to believe that patterns can exist in the price.

Re: Day Trading for a Living?

#284

Post by gbronner »

superfrank wrote: post #243
ummonk wrote: post #236

Earlier quoted context omitted.

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?

I'm not sure if it's the only difference, but according to the wikipedia definition, in a bucket shop there is "no transfer or delivery of the stock or commodities nominally dealt in", which would be one difference from the option market.

The bucket shops described in https://en.wikipedia.org/wiki/Reminiscences_of_a_Stock_Opera... operated by offering incredible leverage and using actual ticker tape quotes, which, at the time, were delayed slightly.

They offered the 'service' of being able to trade large nominal amounts at the last market price, without market impact, but had incredible levels of margin -- 50-1+ or something like that.

This meant that customers often hit margin limits, incurring additional 'commissions' to close out their positions.

Operationally, the bucket shop netted long and short positions, and either actually traded the residual or, occasionally, would use market orders (e.g. aggressive sells) to push the punters into margin calls, which they would then execute. They would then buy low and cover their earlier positions.

Jesse Livermore managed to beat them through astute technical analysis and through the installation of a direct telegraph line from the exchange, thus beating his 'brokers', who promptly kicked him out.

Re: Day Trading for a Living?

#286

Post by docker_up »

pembrook wrote: post #281
docker_up wrote: post #11

Impossible? Lol I have a handful of friends that do this. It's hard work but they make 5 to 6 figures consistently per year. It's very very hard, and not everyone can do it. I tried and lost a lot of money. But it's definitely not impossible, that is simply a lie.

Sigh. Here's the truth, everybody knows a guy at work who claims they make money "day trading." If you know more than 1 person who beats the market consistently by trading, you should open a fund-of-funds and start investing institutional money, ASAP. The Harvard endowment would love to speak with you.

This is absurd. You don't know my friends, and you say they are lying?

Daytrading for a single account and managing a multi-billion dollar fund are completely different strategies and need completely different skillsets. You should educate yourself before talking authoritatively on subjects you don't know very much about.

Re: Day Trading for a Living?

#287

Post by gbronner »

georgespencer wrote: post #84
DSingularity wrote: post #51

Earlier quoted context omitted.

Because that is not a representative sampling of the day trader population. Assuming the techniques of the study were sound, at best we can conclude whether or not day trading Brazilian futures is a sustainably profitable undertaking.

Wouldn't you need a basis for believing that day trading Brazilian futures has unique properties not present in other markets to assert this? E.g. the volatility or spread is significantly larger than European futures or the information flow is more tightly de/regulated etc. Is there a basis for believing this?

Yes. Brazil is a relatively high-friction market, and you'd need to know the actual trading costs. The studies I've seen in the US are that most 'active' traders lose money, but 10-30% do well. There is an entire industry of day-trading hedge funds, so many people believe this.

Re: Day Trading for a Living?

#288

Post by docker_up »

glitchc wrote: post #22
docker_up wrote: post #11

Impossible? Lol I have a handful of friends that do this. It's hard work but they make 5 to 6 figures consistently per year. It's very very hard, and not everyone can do it. I tried and lost a lot of money. But it's definitely not impossible, that is simply a lie.

Your friends are probably lying to you or themselves (or both) about the making money part. It's typical for gamblers to overstate their winnings and understate their losses in the long-haul to somehow convince themselves they're ahead when they're actually behind.

They are lying because you've never made money daytrading? As per my other comment, this is absurd. Being a profitable daytrader is very hard, and it's not probable, but definitely possible.

Re: Day Trading for a Living?

#289

Post by mattkrause »

nickles wrote: post #262
mattkrause wrote: post #245

Earlier quoted context omitted.

Isn't that example nearly zero-sum (ignoring the spread)? If the spot price for milk goes down later, Starbucks loses a bit of money. If it goes up, the farmer has effectively "paid" for an advance. My point is that futures are by construction zero-sum (ignoring spreads) or negative sum (including them). Thus, any analysis that averages across market participants' P&L will conclude that futures trading is unprofitabl…

> Isn't that example nearly zero-sum (ignoring the spread)? But ignoring the spread is incorrect, and nearly zero sum is not the same as zero-sum. The spread is the fee that market makers earn for a service they provide. You're also not considering other participants. The price changes you're talking about could be driven entirely by end users, or they could be driven by speculators, arbitrageurs, and others who are…

Are you saying that the "misconception" is that it's actually slightly negative-sum, rather than exactly-zero sum? If so, great, I agree. It doesn't change my point at all; if anything it makes it stronger.

I am not excluding anyone; I'm trying to explain why I think the result here is not particularly enlightening.

Re: Day Trading for a Living?

#290

Post by gbronner »

mruts wrote: post #214
ryandrake wrote: post #200

Earlier quoted context omitted.

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 inter…

Well Claude Shannon and Ed Thorpe did figure out how to beat roullette. And BlackJack. And then Thorpe figured out Black Scholes and made a killing in the markets trading warrents. See my above comment about how statistics does not bear out your fooled by randomness theory.

See also the Eudaemonic Pie
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