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Are You Trading or Gambling?

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Re: Are You Trading or Gambling?

#41

Post by vasco »

elygre wrote: post #13

Around 20 years ago, I had the opportunity to listen to a member of Nasdaq top management talk about the stock market. It's all a _tiny_ bit blurry, being a long time ago, but I remember how he talked about three different perspectives for investing in stock: First, the "company perspective". An investor would buy stock in a company they believed in. Maybe they had good products, or good management, or something else…

Piggy backing on OP, if you're new to these topics and are interested in a more in-depth explanation about these stages as well as a number of other really interesting history check out https://en.wikipedia.org/wiki/How_Markets_Fail

Re: Are You Trading or Gambling?

#42

Post by sandworm101 »

elygre wrote: post #13

Around 20 years ago, I had the opportunity to listen to a member of Nasdaq top management talk about the stock market. It's all a _tiny_ bit blurry, being a long time ago, but I remember how he talked about three different perspectives for investing in stock: First, the "company perspective". An investor would buy stock in a company they believed in. Maybe they had good products, or good management, or something else…

Following that model, the variety of crypto currencies is the next evolution. The game can now be played as a pure game, without the economic uncertainties that come with underlying companies. All that matters are the actions of the other gamers. The gamestop fiasco would be an incidence of that crypto market mentality bkeeding back into a market not designed to handle such games.

Re: Are You Trading or Gambling?

#43

Post by vasco »

lordnacho wrote: post #31

This is only scratching the surface of the question. For interest, there's a very common negative expected value bet that almost everyone is required to make: insurance. We don't consider that gambling, in fact we often tell our parents to buy some when they fly on holiday. Why? The answer touches on the lottery. We care about not just the average case, we care about what might happen. Regarding Kelly criterion, ther…

Moreover, insurance is a bet against yourself. When assessing insurance I always go through this exercise. For example, optional auto insurance when renting a car is routinely extremely overpriced. A good way to reason about it is "Would I bet $20/day that I'm going to have an accident in this car for the next 3 days?"

Re: Are You Trading or Gambling?

#44

Post by curiousgal »

choonway wrote: post #16

trading is gambling. the only difference is the risk and insider info.

It's always funny to read such generalizations. You will (almost) never find a trading desk at a bank that takes a directional position on an asset, i.e. gamble. The entire foundation of quantitative finance rests on hedging and replication. If I sell an option contract for $x then I must use that $x to build a portfolio that would compensate my potential loss on the option that I sold you.

Re: Are You Trading or Gambling?

#46

Post by [deleted] »

YokoZar wrote: post #26
elygre wrote: post #13

Around 20 years ago, I had the opportunity to listen to a member of Nasdaq top management talk about the stock market. It's all a _tiny_ bit blurry, being a long time ago, but I remember how he talked about three different perspectives for investing in stock: First, the "company perspective". An investor would buy stock in a company they believed in. Maybe they had good products, or good management, or something else…

> An investor would not really care about the stock, but only about the behavior of other investors. This sounds like the idea of a Keynesian Beauty Contest ( https://en.wikipedia.org/wiki/Keynesian_beauty_contest ) "It is not a case of choosing those [faces] that, to the best of one's judgment, are really the prettiest, nor even those that average opinion genuinely thinks the prettiest. We have reached the third deg…

[deleted]

Re: Are You Trading or Gambling?

#47

Post by rootsofallevil »

vasco wrote: post #43
lordnacho wrote: post #31

This is only scratching the surface of the question. For interest, there's a very common negative expected value bet that almost everyone is required to make: insurance. We don't consider that gambling, in fact we often tell our parents to buy some when they fly on holiday. Why? The answer touches on the lottery. We care about not just the average case, we care about what might happen. Regarding Kelly criterion, ther…

Moreover, insurance is a bet against yourself. When assessing insurance I always go through this exercise. For example, optional auto insurance when renting a car is routinely extremely overpriced. A good way to reason about it is "Would I bet $20/day that I'm going to have an accident in this car for the next 3 days?"

it would be more accurate to say:

Would I bet $20/day that something will happen to this car that would make the rental car company want to be reimbursed for?

Depending on rental car company the limits of scratches, dents etc .. can be very low.

Re: Are You Trading or Gambling?

#48

Post by DSingularity »

hef19898 wrote: post #33
elygre wrote: post #13

Around 20 years ago, I had the opportunity to listen to a member of Nasdaq top management talk about the stock market. It's all a _tiny_ bit blurry, being a long time ago, but I remember how he talked about three different perspectives for investing in stock: First, the "company perspective". An investor would buy stock in a company they believed in. Maybe they had good products, or good management, or something else…

The reason I will never touch day trading is, that it is basically the same thing HF traders do. Only 1000 times slower. So I will loose against these guys every single time. And even HF traders loose money. The only single stock investments I have came from employment, either through RSUs or employer sponsored stock buying programs. RSUs are just coming to you, and why would I not take stock at 50% discount? The onl…

You are wrong. HF traders front run to profit off individual trades by beating them to better prices. Day traders try to get an edge and exploit it to profit intraday by simply selling higher than they bought.

Re: Are You Trading or Gambling?

#49

Post by wruza »

For those not familiar with stock market 101, this article is pretty equivalent to «you can greet the world via echo "Hello, World!" in bash». Not that it’s not worth sharing, but

Teaching everything I learnt about investing and decision making on Wall Street.

Oh, god. Wall Street’s not what it used to be, apparently. Sorry for a bitter tone, but really?

Re: Are You Trading or Gambling?

#50

Post by DSingularity »

sandworm101 wrote: post #42
elygre wrote: post #13

Around 20 years ago, I had the opportunity to listen to a member of Nasdaq top management talk about the stock market. It's all a _tiny_ bit blurry, being a long time ago, but I remember how he talked about three different perspectives for investing in stock: First, the "company perspective". An investor would buy stock in a company they believed in. Maybe they had good products, or good management, or something else…

Following that model, the variety of crypto currencies is the next evolution. The game can now be played as a pure game, without the economic uncertainties that come with underlying companies. All that matters are the actions of the other gamers. The gamestop fiasco would be an incidence of that crypto market mentality bkeeding back into a market not designed to handle such games.

GameStop price spiked because of a short squeeze. Short squeeze happened because hedgefunds over extended in their short positions.

Do you think GameStop was shorted more than float because of games learned by cryptocurrency traders? That’s a stretch.

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