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Day Trading for a Living?

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Re: Day Trading for a Living?

#301

Post by nickles »

mattkrause wrote: post #289
nickles wrote: post #262

Earlier quoted context omitted.

> 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.

My understanding of your comments is influenced strongly by this statement:

> Thus, any analysis that averages across market participants' P&L will conclude that futures trading is unprofitable[0], except for the market makers. This is true regardless of the savvy of market participants.

By virtue of offering various services to market participants, savvy market operators can consistently generate profit. In the context of this article, I took your statement to mean that any given participant cannot consistently do so.

At the same time, the end users entering into these transactions understand they will be paying these fees, just as a firm expects to pay a fee to borrow money from a bank. If we describe this process as a zero-sum game, it gives the impression that trading is a speculative casino, reallocating money to participants at random (the misconception). If we describe it instead as negative-sum, where participants are paying/paid for services, it better reflects the economic value of the transactions.

> ignoring/averaging across trades with non-daytraders

I didn't see this bit for some reason when originally responding to your comment. Had I, my comment would have been stated differently.

Re: Day Trading for a Living?

#302

Post by ivalm »

esmi wrote: post #278
ivalm wrote: post #249

Earlier quoted context omitted.

Madoff was a ponzi scheme that relied on new investment (since it was simple pyramid). Medallion fund limits outside investment (so there is no outside source of money) and has operated for many decades (ie more money was withdrawn from it than put in).

I know nothing of Medallion, but I'm curious if only private insiders can invest, how do you know they're not just lying about how much they return?

It allows family and former employees, so it is actually A LOT of people. Kind of hard to keep a conspiracy with 100+ people for 30+ years. Why would all these people lie?

Re: Day Trading for a Living?

#303

Post by sebastianconcpt »

We show that it is virtually impossible for an individual to day trade for a living, contrary to what course providers claim. We observe all individuals who began to day trade between 2013 and 2015 in the Brazilian equity futures market, the third in terms of volume in the world, and persisted for at least 300 days: 97% of them lost money, only 0.4% earned more than a bank teller (US$54 per day), and the top individual earned only US$310 per day with great risk (a standard deviation of US$2,560). Additionally, we find no evidence of learning by day trading.

Re: Day Trading for a Living?

#304

Post by [deleted] »

smdz wrote: post #148

That is so misleading! I have been day trading profitably for the last 6+ years. It is more than enough to cover my living expenses for a family of 4. But I also work (freelance dev), because it cannot cover my home EMIs. My returns are not too high, but much better than bank interest rates and probably much below professional traders. The only thing stopping me from earning my EMIs or more income is the allocated ca…

[deleted]

Re: Day Trading for a Living?

#305

Post by agumonkey »

waylandsmithers wrote: post #265
agumonkey wrote: post #246

Earlier quoted context omitted.

I just left a 4am part time delivery job. The constant interruption and sitting then walking then sitting was hurting me more than daily half marathon or power tools injuries + full time car repair work. And it's slightly below minimum wage. So your health is torn, and you're not even able to plan long term because you earn so few. I can quit (it was a planned interim thing) but my colleagues can not. And they have t…

Right, but the point was, day trading isn't a "job" -- a day on the tough job you described would never end with you needing to write a check to your employer.

Isn't it just a matter of discipline to avoid too large losses ?

Re: Day Trading for a Living?

#306

Post by NovemberWhiskey »

hash872 wrote: post #279
pembrook wrote: post #274

Earlier quoted context omitted.

They don't. After the Volcker rule the big banks had to close their prop trading groups: https://en.wikipedia.org/wiki/Proprietary_trading The idea that investment banks are filled with human "traders" is Hollywood nonsense. Most trading activity (and even filling of retail order flow) is now done by quant-driven funds.

According to LinkedIn there are 573 people with the job title 'trader' at Goldman Sachs. I'm scanning through the list now- titles like Fixed Income Trader, Mortgage Trader, Rates Trader, Oil Trader, Equity Sales Trader, FX Trader, Emerging Markets Trader, Base Metals Trader, Interest Rates Trader, Investment Grade Bond Trader, Equity Derivatives Trader, Commodity Trader.... I found all of these on the first page of…

There are not a lot of equity cash traders left in Wall Street firms; but it's not like equity cash is the only thing to trade.

Re: Day Trading for a Living?

#307

Post by HenryBemis »

samfisher83 wrote: post #300
HenryBemis wrote: post #299

FX trader here. I do trade daily for the last 18 months, mostly algo, and it IS possible to make profit every single day. Just aim for 0.1% per day and you are set for life. You aim for the 0.1% of your capital, so when the market goes against you, you got enough margin to keep the account alive. Anton Kreil has a good video (I will add it later - walking now) that tells the tale how the markets are set up to rip you…

If you could make .1% every on the stock market that would be a return of 29% a year. I am not sure how many hedge funds could get you that kind of return. FX is different and I guess there are differences in terms of trading days, but returning .1% every day would be very hard.

I'd say even more than 20% per year, because you aim for 0.1%, but when the market goes against you, you may end up having a max floating -20% but that will close with a 2% profit that day.

The Broker will only cheat a little just to push you over the edge. As long as stay far-far away from the edge, you are safe. If you aim for 0.1%, even if they (broker, markets, price action) do their worse, they won't get you past 10% (that's x100 the 0.1% risk:reward you aim for).

Re: Day Trading for a Living?

#308

Post by HenryBemis »

taesu wrote: post #72

With big enough equity and proper risk management, one can do so. Problem lies with low equity & high expectation which often leads to improper risk management and a sudden margin call. i.e. it's really easy to make $1 with $1 billion account size with risk nearing zero, but trying to make $1 with $100 is exponentially hard & risky. These so called day traders opt in for later b/c they are trained by the course & soc…

Every retail trader I've talked to, wants to start with $1000 or less and make $300-$400 per day. Literally everyone. After they lose their 50th $1k, they still aim for the same. It's like an addiction to gambling.

Re: Day Trading for a Living?

#309

Post by tcbawo »

esmi wrote: post #278
ivalm wrote: post #249

Earlier quoted context omitted.

Madoff was a ponzi scheme that relied on new investment (since it was simple pyramid). Medallion fund limits outside investment (so there is no outside source of money) and has operated for many decades (ie more money was withdrawn from it than put in).

I know nothing of Medallion, but I'm curious if only private insiders can invest, how do you know they're not just lying about how much they return?

Such returns would not be possible if they grew to a certain size. By closing the fund, they can keep it small enough to limit scaling issues.

Re: Day Trading for a Living?

#310

Post by eximius »

cheez wrote: post #260
tim333 wrote: post #207

Earlier quoted context omitted.

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.

A linear model on a heretofore unknown predictor is basically how all hedge funds make money.

Coming up with the predictor is often the hard part. For example, take the tweets of a (sane) president and run sentiment analysis on it. If it is positively correlated with mentioning an equity, the sentiment of the tweet might be a good linear predictor of the stock price.

The math is simple once the feature is well defined.

Feature development is the current frontier, as I understand it.

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