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Day Trading for a Living?

papers.ssrn.com

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Re: Day Trading for a Living?

#311

Post by mattkrause »

nickles wrote: post #301
mattkrause wrote: post #289

Earlier quoted context omitted.

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 cont…

That's not what zero-sum means. The definition of a zero sum "game" is simply one where the participants' payoffs (here, profits) sum to zero.

Nothing in the definition prevents some participants from being better players than others. As you noted above, some entities might also prefer to "buy" stability for their main operation instead of trying to minimize their spending on some of its inputs. Nevertheless, for every dollar made on futures, someone has lost (at least) that much. Except for the market-maker, the entire thing is a closed system. Thus, you'd expect the average return, across everyone trading the contract, to be zero, which is exactly what this paper shows.

The paper does show 47 people who turned a profit. Their analysis can't distinguish between rubes who haven't (yet) reverted to the mean and savvy traders with some kind of effective edge. It would be interesting to see what the loss distribution looks like.

Re: Day Trading for a Living?

#314

Post by cheez »

eximius wrote: post #310
cheez wrote: post #260

Earlier quoted context omitted.

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 define…

That's my point. They hire the smart people so they can really abuse the simple stuff.

Re: Day Trading for a Living?

#315

Post by hogFeast »

What do you think traders who work at banks are doing? Last I checked, they made more than bank tellers.

(Being facetious, looking at one instrument in one market is awful...it deserves a stupid response).

Re: Day Trading for a Living?

#317

Post by PorterDuff »

I've always wanted to design a slot machine that traded a few NASDAQ stocks.

You go into a bar, run your credit card and stick some money in the machine, buy/sell some shares (with leverage?), machine owner skims off fees, cash out when done.

I never thought day trading worked very well and given the number of non-human brains on the other side (plus the overhead), the odds are good that the odds are bad.

Re: Day Trading for a Living?

#318

Post by tialaramex »

amluto wrote: post #295
tialaramex wrote: post #266

Earlier quoted context omitted.

The nominal dealing on a future's market will be on some paper that entitles the holder to the commodity delivery at a future date. When you buy oil futures, you are NOT buying oil since the oil doesn't exist (well I guess it exists underground somewhere, maybe), you are buying a contract to deliver crude oil and that needs to really exist. If the contracts don't exist that's a Bucket Shop. It matters when things go…

You may be confusing the exchange with a broker. With a serious commodities broker, you’re using the services of the broker to trade on an exchange, e.g. the CME. The broker does not particularly care whether you make or lose money, so long as you don’t actually go negative. In the US, securities brokers are very heavily regulated — see “regulation NMS”.

I don't think so (I am not an expert though so it's possible), my point was that even if the exchange, not just your broker, blows up, the thing you were buying and selling is a real thing anyway, unlike in a Bucket Shop.

Re: Day Trading for a Living?

#319

Post by PorterDuff »

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…

That sounds too much like this:

https://www.amazon.com/When-Genius-Failed-Long-Term-Manageme...

As I remember, beaucoup back testing, hilarity ensues anyway.

Re: Day Trading for a Living?

#320

Post by jdurham »

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…

When I worked in Forex (~1999-2003) this was common practice, at least where I worked. Bring in customers, teach them the bare minimum, and let them trade with 100:1 (and sometimes 200:1 leverage). Even better, because 99% of customers lose, we would "assume the risk" of most trades, accepting their trades but not offloading them to larger banks (ABN, Deutsche, etc), so their loss was all profit. If someone demonstrated they were a decent trader (very, very rare), we would set a special bit on their account and, from then on, offload their trades to major banks at better spreads than we offered to the customer, making 5-10 pips per transaction. Most of the "decent" traders traded in huge lots (10-100 millions), so making 5-10 pips per transaction was substantial. Long story short, you make money on the crappy traders and on the good traders, and the good traders were even better because they would keep coming back.
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