141–150 of 419 posts
Gamblers like the thrill of win-it-all or lose-it-all.
Investors minimize risk while accepting some risk as a cost for higher return.
Trading can be gambling or investing, or a combination of both.
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…
Big institutional traders are limited by risk, the fact that they are market makers for stocks in many cases, and the returns required need to be high, since their salaries are pretty ridiculous. Because of this, the fact that you're generally worse than them isn't a dealbreaker, just find a mid volume niche and learn it really well, then trade around general market volatility.
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The correct perspective, aka reality, is that market value gravitates towards the intrinsic value in the long-term. And if you're a very long-term investor, you can ignore the market price and just collect the dividends. By intrinsic value I mean the sum of all expected future cash-flows where each cash flow is adjusted for time and variance (risk).
That’s fundamentally true because all stock values tend to go to zero over a long enough period of time. Not a lot of companies survive 100 years for example
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> 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…
And thus, bitcoin. A stock that's guaranteed to provide no dividends, do no buy-backs, or deliver any value - aside from the ability to sell it to the next fool for an even greater value.
"Gambling occurs when you have a poor understanding of risk, resulting in either (1) negative expected value bets, or (2) poor bet sizing that leads to ruin." Not so. Top poker players are still gambling, but have an excellent understanding of the risks. Their skill doesn't turn them into investors. Gambling is taking a high risk bet. Whether the expected pay off is high enough to justify the risk and whether you can…
I (and I think a lot of poker players) would disagree. Everything in life involves some sort of risk, but doesn't mean it's gambling. Gambling is defined exactly by those two properties. You could die driving to the store, but the odds are tiny and the benefits are huge. Driving to the store isn't gambling. Are casinos gambling when they let you play blackjack? No, the bets are +EV, even those they are only a few % d…
If we're investors, and not gamblers, why do we get an explanation about negative value bets with only gambling examples? It feels like negative value bets don't exist in investment. You can't say a bet is negative value when you don't know the odds, and the whole reason people are making so much money market making is that no one actually knows the odds, so no one knows the "real" value of any instrument. If you're…
This is basically the same way professional sports betting works. People involved collect information about the teams and try to understand how this information affects the outcome of the match. Once they have established their own view on the probabilities, they check the odds bookmaker if offering and calculate the expected outcome, i.e. how much money will this bet give me. If your calculations are right, then repeating this over and over again will lead to profitable betting in long term.
In a sense the gambling/investing distinction is just in your own head. Maybe you are so bad at evaluation the companies that a coin toss would be better predictor for success than your Excel sheets.
Working out EV is easy for casino table games, relatively easy for poker and extremely difficult for stocks trading.
Yes...bet sizing is something I worry about a lot, but it isn't clear to me how to apply the kelly criterion to a game where the risk/reward is mostly unknown and only based on a hunch.
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> 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…
And thus, bitcoin. A stock that's guaranteed to provide no dividends, do no buy-backs, or deliver any value - aside from the ability to sell it to the next fool for an even greater value.
As it turns out "sending money over the internet" is kind of an important utility for the modern world, and nothing does it as well as Bitcoin. This is why it's now a trillion dollar global economy.
That's great for you that you're in a position where you never need to send money over the internet, and you have people who you trust that can manage all your money for you without robbing you, but that's a privilege not everyone in this world has.
Please stop denigrating shit that you don't understand. Bring proud of ignorance is not a good look, and it really is embarrassing that a community that's supposed to be somewhat technologically sophisticated has bought in so hard to this ignorant-ass take.
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I'd argue that the reason why HFTs don't do day trading strategies, is because it's not profitable in the long run (ie, negative expected value). Which backs GPs point.
Hedge funds engage in day trading, and there's many successful hedge funds. So the expected value can be positive if you're sufficiently skilled.
But occasion matters! Life isn't a nice continuous stream, it's lumpy. Circumstantial performance makes a difference - and that's why Greece could win the Euros despite probably not being a good football team.
Day trading is probably quite a hard discipline to follow, but that doesn't mean that everyone who does it is destined to fail.
Anecdotally 50% of marriages end in divorce but that apparently doesn't stop most people getting married...
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And thus, bitcoin. A stock that's guaranteed to provide no dividends, do no buy-backs, or deliver any value - aside from the ability to sell it to the next fool for an even greater value.
You forgot no share dilution in this offtopic tangent. Every stock out there can double their issuance if they want to.