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Day Trading for a Living?

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Re: Day Trading for a Living?

#111

Post by nradov »

elephant_7 wrote: post #91
davidu wrote: post #8

I don't doubt the headline, but "We observe all individuals who began to day trade between 2013 and 2015 in the Brazilian equity futures market" seems like a weird way to come to that conclusion.

Swing trading with baskets as opposed to daytrading seems to be a better way to go according to historical performance, for example https://www.elastic.co/blog/generating-and-visualizing-alpha...

Anything that worked consistently yesterday will no longer work tomorrow as the HFT's arbitrage that market inefficiency away. That's one of the reasons why even extensive back testing isn't a reliable indicator that a trading strategy will be successful.

Re: Day Trading for a Living?

#113

Post by melling »

Kranar wrote: post #102
melling wrote: post #81

For anyone interested in a great story about a world class mathematician who built a company that has used algorithms to beat the market for the last few decades, James Simons has an impressive record: https://www.ted.com/talks/jim_simons_a_rare_interview_with_t... https://m.youtube.com/watch?v=QNznD9hMEh0 https://en.m.wikipedia.org/wiki/Jim_Simons_(mathematician) One other thing, the Simons Foundation funds Quanta M…

Renaissance Technologies did not use algorithms to beat the market... they used tax schemes to do so: https://www.bloomberg.com/news/articles/2019-04-10/renaissan... When you factor in the money they saved from dodging taxes and how they managed to compound the growth on that money, their returns end up being no more impressive than any other hedge fund. Even if it turns out that what they did wasn't illegal, the bul…

The article says that this scheme occurred during specific years.

During the 1990’s they also beat the market.

“Medallion, which is open only to current and former Renaissance employees, has generated returns of about 40 percent after fees for decades by using computers to spot market patterns. It’s distinct from the funds Renaissance makes available to outsiders, such as the Institutional Equities Fund.

Medallion earns most of its money through short-term trading of securities and other assets. Such earnings typically get taxed at the same marginal rate as salary. The tax code rewards longer-term investments with a preferential, lower rate.

The dispute centers on transactions the firm carried out with Barclays Plc and Deutsche Bank AG between 2000 and 2015 that had the effect of transforming short-term trading gains into long-term returns. Rather than own securities directly, Renaissance instructed the banks to buy and sell them within a portfolio of assets. It then bought an option from the banks tied to the portfolio’s performance”

Re: Day Trading for a Living?

#114

Post by gnopgnip »

flatline wrote: post #47
kevin_nisbet wrote: post #30

Earlier quoted context omitted.

The abstract of the paper seems to suggest otherwise: We observe all individuals who began to day trade between 2013 and 2015 in the Brazilian equity futures market, the third in terms of volume in the world, and persisted for at least 300 days: 97% of them lost money, only 0.4% earned more than a bank teller (US$54 per day), and the top individual earned only US$310 per day with great risk (a standard deviation of U…

I know people who made millions day trading commodities, for no one in that cohort to have made any real money over two years is surprising to the point of disbelief. This may be something particular to the Brazilian exchange.

Many who make millions are risky and lose it all, or more. How many of them are net positive over more than a year?

Re: Day Trading for a Living?

#115

Post by hn_throwaway_99 »

mumblemumble wrote: post #65
outime wrote: post #32

Putting aside the potential quality issues of the study, the headline here in HN isn't accurate and made a lot of people comment about how wrong it is. The study doesn't literally say "impossible" but "virtually impossible" and they do say that a very small percentage was able to make about $310 a day which is about ~110k a year.

0.0051% of the study group, to be precise. The more interesting trend, which isn't covered in the abstract, is that profitability is inversely correlated with how long you stay at it. It was 30% of people who day traded for one day and gave up on it, and steadily dropped down to 3% for people who kept at it for more than 300 days. As a stats person, that struck me as a very evocative distribution. The paper put it ni…

Yes, it certainly looks like what would be dictated by statistics with random chance that eventually reverts to a slightly negative mean.

In the short term it's not that unusual to flip a coin and get 5 heads in a row, but the more you throw the closer to a 50-50 split you'll see.

Re: Day Trading for a Living?

#116

Post by Kranar »

seiferteric wrote: post #97
Kranar wrote: post #54

Earlier quoted context omitted.

But what should we compare those odds, how are we supposed to interpret this? Imagine we tracked a group of 1000 randomly picked individuals who wanted to be a brain surgeon. I don't know for sure but I wouldn't be surprised if of 1000 randomly chosen people, only 3 people managed to succeed at it after 4 years. But no one would ever say "Study shows it's impossible for an individual to become a brain surgeon." or im…

Isn't it possible that there is simple not enough information in the system to successfully day trade (at least in this particular market). Considering that the daily movements of stocks are like a random walk, I don't find it hard to believe.

It's often difficult for me to discuss this since I do automated trading. I've been doing this for over 10 years now, have grown a company out of it that has 30 employees, and I maybe lose money 2 or 3 days out of the entire year and often times due to technical reasons...

Either daily movements of stocks are not at all like a random walk, or I am just one heck of an astronomically lucky guy. Now I do consider myself fortunate and privileged, for sure... but the amount of luck it would take to repeatedly make money on the market day after day that can fund a decently sized team of high paying engineers, data center costs/hardware costs, so on so forth... it's unthinkable.

The stock market, at least to the degree that I am involved in it, very short term market microstructure, doesn't behave anything like what economists say it does.

Re: Day Trading for a Living?

#117

Post by dav1app »

They have a reason to make that article: there is a lot of companies fooling the Brazilian people over this.

I'm a Brazilian software developer for the financial market. I also made some financial courses on the same university that the authors.

Brazilian stock exchange market has exploded in the last years and most of my friends decided to 'work' as traders. None of them with prior knowledge or experience in the market. All of the posts on Instagram every time they earn some money.

The cause for this fever was the marketing around 3 or 4 companies who sell the dream of financial independence through high-risk financial market lessons. Normally they offered courses to famous people for free and use their image to convince the rest of us.

One interesting thing: they normally sell the course with a private platform to trade the stocks included. I believe that they use that platform to collect data and operate against the traders that use that platform. They know the strategy that they are going to use (because they teach them), so it is easy to operate against.

Re: Day Trading for a Living?

#118

Post by teawrecks »

georgespencer wrote: post #84
DSingularity wrote: post #51

Earlier quoted context omitted.

Because that is not a representative sampling of the day trader population. Assuming the techniques of the study were sound, at best we can conclude whether or not day trading Brazilian futures is a sustainably profitable undertaking.

Wouldn't you need a basis for believing that day trading Brazilian futures has unique properties not present in other markets to assert this? E.g. the volatility or spread is significantly larger than European futures or the information flow is more tightly de/regulated etc. Is there a basis for believing this?

Making an assumption about the population based on a small non-random sample is usually the belief that needs to be justified by evidence.

Re: Day Trading for a Living?

#119

Post by osrec »

codeplea wrote: post #100
osrec wrote: post #83

I've done ok trading stocks and FX, probably enough to live off. There is a caveat however; you need to have a sizeable portfolio to begin with. Otherwise, the risks you'll need to take are simply too large. If you think you're going to turn £5k into £500k in a year, forget it! But turning £5k into £5.3k is certainly doable. Scale that initial portfolio to £5m, and you can take home £300k with relative ease in a good…

5k into 5.3k is 6%. You can get much more than that in the long run by just putting it in an index fund. Why bother day trading?

Property is not a great option in the UK currently due to rather high stamp duty (i.e. property tax, payable by the buyer) - if stamp duty were lower, I would probably put my money in more property. Equities were a reasonable second choice - my portfolio is fairly diversified now, so I am not making trades on a daily basis but I do keep an eye on it all the time. I probably re-balance my holding about once a week.

Index funds can take quite a hit in a bad market. I am very careful to avoid big slumps in my portfolio value, even if it means not being invested for a month or two.

Re: Day Trading for a Living?

#120

Post by 4ntonius8lock »

melling wrote: post #81

For anyone interested in a great story about a world class mathematician who built a company that has used algorithms to beat the market for the last few decades, James Simons has an impressive record: https://www.ted.com/talks/jim_simons_a_rare_interview_with_t... https://m.youtube.com/watch?v=QNznD9hMEh0 https://en.m.wikipedia.org/wiki/Jim_Simons_(mathematician) One other thing, the Simons Foundation funds Quanta M…

Also, the people I've known who call themselves day traders, were inevitably people who weren't too bright and were unemployed with independent income (mostly trust fund babies, but some others who had supplemental income) - From my own personal experience, these people don't even know what EBITDA adjusted earnings are.

If a world class mathematician says he will do something, I see the probability of success wildly higher.

It's like when you go to a writing class, and someone inevitably is admonished for doing run on sentences, and then they say "well Charles Dickens did it". Why yes, he did. But you probably aren't going to have Charles Dickens levels of talent.

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