> This is because on average, you will gain $1 with every coinflip. For those interested in the maths, you have a 50% chance of winning $2, and a 50% chance of losing $1, 50% * (+2) + 50% * (-1) = +$0.50.
Interesting
Are You Trading or Gambling?
71–80 of 419 posts
Re: Are You Trading or Gambling?
#72Earlier quoted context omitted.
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…
Day trading is difficult and requires a lot of practice, knowledge, and patience, but saying you’ll lose every time isn’t always true. There are many many profitable retail day traders. HFT don’t really compete too much because they look to scalp differently.
A three to five percent success rate applied to a large population will produce "many many" winners. This is true.
Re: Are You Trading or Gambling?
#73This 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…
I think that for the serious cases of unexpected misfortunes, an insurance is a compressor where all population events are the whole signal and individuals make the peaks (well sometimes many a person are in the same event):
For the subset of people that would need an insurance without knowledge that could prevent that, the consequences should be distributed among all people. (Sure, there are exceptions if taking too big a risk.)
And personally I feel most medical issues and school should be paid by the state as it would be too unfortunate if an individual should face alone the consequences -- and possibly couldn't afford for an insurance, or is likely not to buy it because has other monetary issues.
Re: Are You Trading or Gambling?
#74Around 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…
HF traders DO NOT lose money. They see the trading world a few milliseconds into the future. The whole game is rigged in a way where they cannot lose. They only lose if someone screws up, human error, all that.
Re: Are You Trading or Gambling?
#75Around 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…
I 100% agree with that breakdown. But I disagree that the game perspective "matches the market".
The beauty of the marketplace is that there are all types of people in the sandbox: fundamentals, macro, hedgers, short-sellers, punters, high-frequency traders, mean-reverters, money managers, pension plan managers. And all of these people have slightly different time horizons ranging from microseconds to years.
The market concept is this beautiful thing that supports all these people: aided by strong regulation, strong oversight, and better technology.
Re: Are You Trading or Gambling?
#76Around 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…
I think the problem with this is it works great in a bull market but when the recession man comes the stock values get pared down to what the companies are really worth.
Re: Are You Trading or Gambling?
#77Gambling is a zero sum game, your win is anothers loss. Investing is not. When it works there is literally more stuff, goods and services, for everyone! With investing you can win without others losing! That is how we all have so much more stuff than a century ago without anyone losing, we didn't liberate it from the aristocrats we invested and created it.
Re: Are You Trading or Gambling?
#78Earlier quoted context omitted.
That makes a lot of sense. I think the GME debacle is a good demonstration of that. Shorting stocks is a part of the game. Some people exploited it, others found a counter move. I don’t believe GME is worth what the market currently values it at. But I also don’t see that fundamental value ever matching the market value anytime soon because the market has fully embraced its non-rationality regarding this stock. We ar…
> 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…
> The way I understand L3, there's no such thing as "fundamental value". There's only market value
I think control theory works better at describing these factors, as L1-L2-L3 suggest some derivative relations that its's not really there.
you have your set point, which is the hard company value. you have n proportional forces, each proportional to the distance from the company current value and that of every put and call on the market. you have a damping effect in the form of HFT, and you have an integrative term, which acts weird because it's applied inversely proportional to the short positions, and it's the lending cost on the short positions.
Re: Are You Trading or Gambling?
#79Doesn’t matter, as long as you are making money.
Re: Are You Trading or Gambling?
#80Gambling is a zero sum game, your win is anothers loss. Investing is not. When it works there is literally more stuff, goods and services, for everyone! With investing you can win without others losing! That is how we all have so much more stuff than a century ago without anyone losing, we didn't liberate it from the aristocrats we invested and created it.
But there is a buyer and seller in the transaction regardless of whether one person is gambling or investing.