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Are You Trading or Gambling?

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Re: Are You Trading or Gambling?

#61

Post by NOTaCODERR »

DSingularity wrote: post #50
sandworm101 wrote: post #42

Earlier quoted context omitted.

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.

It’s really interesting seeing how HN can be so uninformed when the topic changes to their area of expertise, this thread is insightful and I’ll use the search button to get an understanding of how many morons are on this forum, this is great for me as I’m not a coder and thought this crowd was ‘smart’.

Re: Are You Trading or Gambling?

#62

Post by waynesonfire »

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…

Another way that I like to think about this is that if you think of a stock price as following brownian motion (e.g. follows a random, well defined process), then it follows that the stock price has a scaling-invariance property. In other words, the stock prices follows the same process regardless of the time window.. e.g. a day for day traders, milliseconds for HF, or years for long term value holders.

Now, brownian motion is just a model for a stock price so YMMV, but still an interesting idea. An investor can pick whatever time horizon interests them and that they're most suitable to take advantage of; e.g. HF traders take advantage of low latencies, technical analysis for day traders, and macro / micro economic analysis for value.

As the OP said, there are these three ways to look at this and at the end of the day, all are gambling with different time-horizons and this is possible because of this scale-invariance property.

Re: Are You Trading or Gambling?

#63

Post by AbrahamParangi »

TeMPOraL wrote: post #38
agumonkey wrote: post #29

Earlier quoted context omitted.

And I believe they orbit around the set of self fulfilling prophecies described in books. Fibonacci or similar simple arithmetic range estimates, deviation from the mean, etc.

Isn't this the reverse of a self-fulfilling prophecy? A self-fulfilling prophecy attracts reality to the state it describes. The stock market, being anti-inductive, attracts reality away from whatever predictions being made - that is, for example, if I found a pattern that proves $GME reaches the Moon on Tuesday, enough other people would find that pattern too and start buying early, and $GME would reach the Moon on…

That’s an artifact of including a specific time in your prediction. If you made that same statement time-invariant “GME will moon” it becomes a self-fulfilling prophecy.

Re: Are You Trading or Gambling?

#64

Post by j4yav »

criticaljudge wrote: post #53
TeMPOraL wrote: post #36

Earlier quoted context omitted.

> But I also don’t see that fundamental value ever matching the market value(...). We aren’t trading shares in a specific company here. We are trading Melvin’a profits and/or losses. I think you're still doing L1/L2 thinking. The way I understand L3, there's no such thing as "fundamental value". There's only market value, that's determined by what people think the market value is. The extent to which it's correlated…

But it is obviously bullshit, as the real companies behind some stocks have a real value. Like for example they might own a building that is worth one billion dollars (simple example). If you take away all the stock market shenanigans, you still own part of that building via your stocks. As for the usefulness question: providing liquidity is useful. If an investor considers investing in some project, it helps his dec…

As a shareholder how do you access that value without stock market shenanigans coming into play? The only two that come to mind are companies about to go bankrupt, or a careful focus on dividend value (but dividends may not pay out the value of their static assets without having to sell them.)

Re: Are You Trading or Gambling?

#65

Post by nemo44x »

midasuni wrote: post #28
IgorPartola wrote: post #14

Earlier quoted context omitted.

I tend to agree. Trading stocks is essentially gambling but almost worse. The odds are rigged but you don’t know by whom abs how much. It’s a game of skill, except not entirely. The house always wins except there are multiple houses and you can lose to all of them. I think investing is a different beast: that is going long on a company, industry, or the market in general. You reasonably know that the market will over…

Stick a 1% tax on all share buys and use to reduce income tax for working people, or just issue it as a cheque at the end of the year that people can invest. That doesn’t harm investing

The Net Investment Tax is a better way and already exists. It taxes actual gains over a threshold so “the little guy” is unlikely to pay.

Re: Are You Trading or Gambling?

#66

Post by ramblerman »

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…

Interesting, given he is such a prominent Economist I'm a little surprised by the simplicity of the analogy though.

It seems strange that he has reduced it to one where there is no objective value at all. As an equity at the first level is still about how the company will perform in the future, no? And thus has an objective value.

Re: Are You Trading or Gambling?

#67

Post by agumonkey »

TeMPOraL wrote: post #38
agumonkey wrote: post #29

Earlier quoted context omitted.

And I believe they orbit around the set of self fulfilling prophecies described in books. Fibonacci or similar simple arithmetic range estimates, deviation from the mean, etc.

Isn't this the reverse of a self-fulfilling prophecy? A self-fulfilling prophecy attracts reality to the state it describes. The stock market, being anti-inductive, attracts reality away from whatever predictions being made - that is, for example, if I found a pattern that proves $GME reaches the Moon on Tuesday, enough other people would find that pattern too and start buying early, and $GME would reach the Moon on…

I think it does both but oscillates. At first people think it's an edge so it emerges as truth, then agents realize it's know and tweak around it.. but it's still the basis of their action.

All in all, I had the idea that pure chaos cannot be used so there will always have weak superstitious held as reference points for a game to emerge. The one who can play it right (or have enough resources to endure errors) or not when it shouldn't will benefit from the others.

Re: Are You Trading or Gambling?

#68

Post by Udik »

AbrahamParangi wrote: post #63
TeMPOraL wrote: post #38

Earlier quoted context omitted.

Isn't this the reverse of a self-fulfilling prophecy? A self-fulfilling prophecy attracts reality to the state it describes. The stock market, being anti-inductive, attracts reality away from whatever predictions being made - that is, for example, if I found a pattern that proves $GME reaches the Moon on Tuesday, enough other people would find that pattern too and start buying early, and $GME would reach the Moon on…

That’s an artifact of including a specific time in your prediction. If you made that same statement time-invariant “GME will moon” it becomes a self-fulfilling prophecy.

It's true, but making the statement time-invariant is also an oversimplification. Time does not end with the fulfillment of the prophecy and everybody knows that. Where does $GME go after reaching the moon? It can only stay there or go down, and in both cases people would start selling it.

Re: Are You Trading or Gambling?

#69

Post by dfgdghdf »

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…

Another way of describing the "game perspective" is simply: "a stock is worth what someone else will pay for it". This sounds obvious, but the implication is that the stock price has no direct connection to how a company performs.

Re: Are You Trading or Gambling?

#70

Post by machiaweliczny »

ramblerman wrote: post #66
YokoZar wrote: post #26

Earlier quoted context omitted.

> 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…

Interesting, given he is such a prominent Economist I'm a little surprised by the simplicity of the analogy though. It seems strange that he has reduced it to one where there is no objective value at all. As an equity at the first level is still about how the company will perform in the future, no? And thus has an objective value.

Beauty has objective value as defined as such but I leave it to you to figure out.
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