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Are You Trading or Gambling?

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Re: Are You Trading or Gambling?

#301

Post by Closi »

acover wrote: post #162
Closi wrote: post #155

Earlier quoted context omitted.

Technical analysis is definitely part of long-term investing (e.g. at the most basic, work out how much profit the company is making compared to the market cap and what dividends will be paid over the investment period)

Technical analysis refers to only looking at the price history of a stock. You are referring to fundamental analysis. https://en.m.wikipedia.org/wiki/Technical_analysis Fundamental analysis still requires you have an edge over other investors. Passive does not.

Doh.

Re: Are You Trading or Gambling?

#302

Post by rtx »

aphextron wrote: post #251
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…

I'd say this precisely mirrors my journey through day trading. You start out with the naive mindset, thinking you can make money by finding strong undervalued companies and investing in them with stocks/LEAPS. Then when you've lost enough money trying that, you move on to technical analysis, thinking you can time the momentum and price action of "predictable" securities. Still thinking it's the "market" you're trying…

There is an old saying, two kind of people enter the market in the morning, one with money and the other with experience. They switch postions by day end.

Re: Are You Trading or Gambling?

#303

Post by rtx »

imutemyteam wrote: post #96
dfgdghdf wrote: post #69

Earlier quoted context omitted.

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.

and not just that, it is literally an information game. You hear that the company's latest car model failed after seeing the quarterly figures. Obviously, the stock price will go down? Wrong, the market already knew that the car model failed, and the current price is already adjusted for that. Stock market trading is only worth it if you have an information advantage. And obviously it is the one with the most capital…

Billionaire dosent even need the AI. The CEO of any company will spill out everything.

Re: Are You Trading or Gambling?

#304

Post by toss1 »

mitchdoogle wrote: post #277
toss1 wrote: post #174

Earlier quoted context omitted.

Yup. And that key feature of "sending money over the internet" thing hasn't worked out very well so far I've been in it, found the entire system wanting, and got out. May get in again to enjoy gamble in speculative bubbles, but as a technology, it is still in the early and massively-sucking and increasingly-sucking days. Like railroads in the 18th century, they utterly changed society, but most investors lost their s…

I know I'm just a single point of data, but I routinely buy things on the Internet with Bitcoin that cost $200-300 USD. I always set the fee to just under a dollar and have never had any issues with the transaction being confirmed within 20-30 minutes, including in the last few weeks. Of course, paying with Bitcoin saves the seller about 3% of the final cost, and they need not worry about chargebacks, which saves the…

Interesting, I was several years ago seeing the transaction delays climb into the hours, but not the fees (ya, maybe I should have set my fees higher, just went for average). I wonder how much variance there is in the network and if you are just lucky, or somehow frequently get picked up in maybe a less busy part of the network, or if there's some attribute you unconsciously use that gives your transactions so much better than average performance? Either way, enjoy your advantage while it lasts!

Re: Are You Trading or Gambling?

#305

Post by solosoyokaze »

ac29 wrote: post #287
colordrops wrote: post #282

Earlier quoted context omitted.

Yes, 11 years after its debut and nearly a trillion in valuation, still ridiculously ignorant statements like "delivers no value". It delivers no value you care about. Many people care about money that can't be inflated, can't be stopped from being traded, and can't be controlled across international borders. Those are hugely valuable to some people, whether you find it valuable or not.

> money that can't be inflated The supply of Bitcoin has been inflated, on average, every 10 minutes for the past ~11 years.

It's known exactly how many Bitcoin will be produced and at what rate. There will never be more than 21 million BTC. This was known and agreed upon by all participants in the system.

How much USD will exist in 10 years?

Re: Are You Trading or Gambling?

#306

Post by rtx »

opportune wrote: post #274
imutemyteam wrote: post #96

Earlier quoted context omitted.

and not just that, it is literally an information game. You hear that the company's latest car model failed after seeing the quarterly figures. Obviously, the stock price will go down? Wrong, the market already knew that the car model failed, and the current price is already adjusted for that. Stock market trading is only worth it if you have an information advantage. And obviously it is the one with the most capital…

This is, IMO, the hardest part about the stock market to explain to new people. I work with a guy who otherwise seems smart but who just can't wrap his head around information being priced in. His ideas are things like buy retailers right before Christmas and sell soon after, or to buy stocks in cyclical industries because they have low P/Es (at the peak of their cycle). And he is quite confused when market movements…

It's even simpler, you need to invest in things which all of us agree too.

Re: Are You Trading or Gambling?

#307

Post by xenocyon »

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…

I agree that expected value (EV) is not necessarily a good metric for personal financial decisions. In fact, this applies both to EVs greater than and less than 1.

As you point out, insurance is a good example of a Another example: lottery tickets in the occasional case where the EV>1. This is supposed to, for instance, lead a rational economist to buy a lottery ticket (or many lottery tickets!) when the Powerball jackpot hits some particular threshold, say 500 million. However, money isn't linear in terms of value to individuals, and for most people the difference in life impact between winning a billion dollars vs 500 million is not anywhere close to 2x - indeed the two outcomes are more or less effectively identical.

tl;dr: because money is not linear in the value it adds, EV is not a good optimization metric for highly skewed outcomes.

Re: Are You Trading or Gambling?

#309

Post by orangeoxidation »

colordrops wrote: post #282
nikanj wrote: post #127

Earlier quoted context omitted.

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.

Yes, 11 years after its debut and nearly a trillion in valuation, still ridiculously ignorant statements like "delivers no value". It delivers no value you care about. Many people care about money that can't be inflated, can't be stopped from being traded, and can't be controlled across international borders. Those are hugely valuable to some people, whether you find it valuable or not.

> money

With built in and inevitable deflation. Bitcoin could never replace a national currency.

With transaction times in the tens of minutes and with a maximal global transaction rate of 5-10 per second. The Blockchain couldn't replace the banking system of single mid-sized town.

It's not money. It's at best "digital gold", but more realistically it's just a ponzi scheme.

Re: Are You Trading or Gambling?

#310

Post by jandrewrogers »

fakedang wrote: post #284
criticaljudge wrote: post #52

Earlier quoted context omitted.

I think you can still buy some stock with the intention of collecting the dividends or hoping for the stock's value to grow over time. There are simple calculations like Price/Earnings ratio that are usually published with every stock, that can help to see if it is a "gambling stock". You will of course hear all sorts of opinions about the stock market, including hardcore socialists who believe it is the root of all…

P/E has become a rubbish metric now, because there's so much money in the market thanks to QE. Most of the money in stocks now is money that would have gone into commodity trading and bonds, etc. The former's prices have stabilized or declined, leading to really poor opportunities, while zero interest rates and neg rates battered the market of the latter. Hence all that money has entered the stock market, which is wh…

It isn't so much that P/E is rubbish but that its utility as a proxy metric assumes approximately flat revenue growth. This assumption is no longer true for a significant percentage of the largest companies, many of which are demonstrating large non-zero revenue growth rates, both positive and negative. If you are looking at companies with high revenue growth, there are other metrics used to determine if they are "cheap" or "expensive". Amazon is a great example of a company that is "expensive" by value metrics like P/E but actually pretty cheap by metrics with more applicability to revenue growth companies.

The problem is that many investors apply metrics, like P/E or book value, blindly without understanding the assumptions that must be true for the metric to be a meaningful measure of value. It is even more complicated inasmuch as some companies fall into an ambiguous gray area when it comes to appropriate valuation metrics (I'd argue Apple is one such company).

Like with any analysis, there is some work to make sure the statistical model actually captures what you intend to measure.

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