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Robinhood and How to Lose Money

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Re: Robinhood and How to Lose Money

#191

Post by renewiltord »

jesterson wrote: post #60
renewiltord wrote: post #30

Earlier quoted context omitted.

This doesn't jibe with what Matt Levine describes as RH's operating model. Unless you're actually informed, this just sounds like Internet urban myth. You actually can get better results because as a retail trader participating with other retail traders you have uncorrelated order flow.

> You actually can get better results because as a retail trader participating with other retail traders you have uncorrelated order flow. Hedge funds will get even better results knowing what's robinhooders are betting upon with much better precision.

RHer buying VOOG beats hedge funds all the time. It's the safest thing to do over large periods of time. Guy using eTrade buying VOOG does not do much better than RHer buying VOOG. Guy using Ameritrade buying VOOG does not do much better than RHer buying VOOG.

That's because the magic is VOOG, not your platform. And if RH gets you to buy VOOG instead of storing excess dollars in your savings account, then RH is the number one option.

All the returns are in the activation energy of getting to stock one of VOOG. Whether you buy it at 198.86 today or 198.85 will not change your outcome to any significance. What it will do is put you ahead of many hedge funds ten years from now, even if they spend 200 on their portfolio where you spent 198.85.

Re: Robinhood and How to Lose Money

#192

Post by MR4D »

hftrader998 wrote: post #34

I work in the industry and these kind of articles are always full of bad information about order routing. * Robinhood order flow is informed and toxic like all other brokerages. Taking the opposing side of all Robinhood trades would cause a broker-dealer to lose all of their capital very quickly. * The "bad prices" the "novices" are trading at, are in fact, the same market price that all participants trade at (at or…

I’d take the opposite side of the trade on several things. Hertz being one of them.

Also, I think you mistook the meaning of “overtrading at bad prices.” Buying Hertz at any price in June was overtrading it, and at a bad price to boot.

Re: Robinhood and How to Lose Money

#193

Post by toastal »

JumpCrisscross wrote: post #120
toastal wrote: post #101

Earlier quoted context omitted.

I know a couple of people that did just that. With the lowered barrier to entry (free), people have been able to buy say a single share per paycheck instead of having to hold on for months to get a cost effective amount of cash to make it worth the trade. Not only this, but you can effectively dollar cost average your way into the market to minimize losing to bad timing. The trade fees were always absolute and not a…

> people have been able to buy say a single share per paycheck instead of having to hold on for months to get a cost effective amount of cash to make it worth the trade This is the problem solved by ETFs. Small amounts of money buying lots of diversification.

Not when it's $5 to trade 2 shares of SCHB because that's all the extra you can afford per paycheck.

Re: Robinhood and How to Lose Money

#194

Post by tinus_hn »

WalterBright wrote: post #40
rydre wrote: post #31

Earlier quoted context omitted.

The quality of life increase fore mere 8% return is not as much. You'd need much higher returns for many people to make them not use the money now. Losing 1K every month for 5 years for a person who make 200k a year is not much Given the chance to make 100million - billion even if is very little. Think of it as being a indie VC. Most investment will lose, the ones that gain might make you a lot.

Your odds are still likely better than lottery tickets.

Storing money in a sock has better odds than lottery tickets.

Re: Robinhood and How to Lose Money

#195

Post by seanhunter »

AstralStorm wrote: post #142
seanhunter wrote: post #87

Earlier quoted context omitted.

If you're a broker/dealer, you spend a lot of your time facilitating other people's trades. By "facilitating" here, we mean that you don't only put their trade on the market for them, you often trade with them "on risk" by taking the other side of their trades and then unwinding them. So if you want to sell 1000 tesla I might (as a broker/dealer) just buy them off you and look to sell them myself later either at mark…

The "large enough" argument does not work if you explicitly or implicitly filter or stratify the input to your sampling function. Just like law of large numbers does not work for heavy tailed distributions directly. In which case your client do not represent the market, either by volume, or by number. If you can actually know in which ways your sample is different, you can play it then against the market. Robinhood w…

I'm not talking from the perspective of RobinHood, I'm talking about the broker/dealers who provide execution services to RobinHood. RobinHood is nowhere near large enough to have a client base which represents the market. JPM, GS, MS etc are.

Re: Robinhood and How to Lose Money

#196

Post by QuesnayJr »

BoorishBears wrote: post #155
QuesnayJr wrote: post #65

Earlier quoted context omitted.

options with asinine strike/expiries for people who don't get options I've never used Robinhood, so I was curious what you meant by an "asinine" strike. (I know all about options, FWIW.)

Stuff that's just so insanely out of the money, and so close to expiry, that even by "YOLO" standards, it's stupid. You usually get burned right off the bat because the bid/ask spread is huge, so to even get the order filled, you need a limit order with a really unfavorable price

Thanks. That makes sense.

Re: Robinhood and How to Lose Money

#197

Post by abduhl »

WalterBright wrote: post #185
orojackson wrote: post #175

Earlier quoted context omitted.

Or taking a different view that concurs with yours: investing in index funds or broad ETFs lets me match or beat most long-term investors with nearly zero effort. There's no need for me to waste my time reading "financial news" or developing super fancy HFT algorithms like some posters here have done. I just need to buy those index funds at my desired asset allocation and I'm good to go. Repeat until retirement. Very…

I never really understood the "rebalancing" thing. It requires selling your winners. One thing about winners - they tend to keep winning! Some people call it "locking in your gains". I call it "minimizing your returns".

That’s weird - I call it “letting it ride” and “never leaving a hot table.”

Gambling is a word used to describe anything beyond your own acceptable risk tolerance.

Re: Robinhood and How to Lose Money

#198

Post by zigzaggy »

zigzaggy wrote: post #188
kjksf wrote: post #45

Earlier quoted context omitted.

Here's the appeal: I made 4x return in last 3 years "gambling" on stocks. That's far in excess of 8% return from "just passively investing for the long term". BTW: I gambled on IBKR, not RobinHood (I have RH account but don't use it). I just don't get why RobinHood is so vilified for the crime of making a fast, usable app. I use IBKR but their website is just bad. A security theater that makes logging in slow. Someti…

I’ve had a good experience with RH too. I started out small, learned about stocks first. I gradually started into options and learned some strategies there. Then I started learning about volatility and other derivatives. And of course I’ve learned all about ETFs etc. My first year was hard; and it was emotional. I was too excitable and got hooked a little. But I steered my way through it with a very small loss. I con…

P.S. It’s not “luck” for a small time swing trader to make a little money. Its something you do every day, using math, psychology, and timing on companies carefully selected for their fundamentals. The market is a large, slow moving entity that constantly shows its hand. A small timer can make money. Will it scale? I don’t know. I’ve been steadily increasing my account so ask again in 5 years.

Admittedly, there are days where it’s hard to see where things are going - especially high vol days. But when vol comes down and the market slowly heaves one way or the other, there are tickers that pretty much always go with the flow. Buy low, hold for the swing. Or short a bump and sell lower... it’s really not rocket science. Just don’t get greedy... hit your target a get out.

The real question is: is it worth my time in terms of ROI? Frankly, no not yet. I am streamlining the work, semi automating thru alerts, triggers, and buy/sell presets. But my paycheck and my side hustle still pay better. However I’m on a slow trajectory right now and I’m curious where it’s going. Will I plateau? Yes probably. But I’m enjoying the ride.

Re: Robinhood and How to Lose Money

#199

Post by dbancajas »

mam2 wrote: post #126
Cthulhu_ wrote: post #89

Earlier quoted context omitted.

You got lucky; your post is why people pick Robinhood and day trading over the long-term one. It's survivorship bias. For every success story like yours, there's at least one - probably more - that lost three-quarters of what they put in. If you're thinking of investing, apply the "strong beliefs weakly held" practice; you think you may get high returns, so look for examples to the contrary to challenge your own beli…

It's not luck if you make consistent returns over 4 years. "gambling" is the term people use because they don't understand the stock market

you can measure how risky it was using something like Sharpe Ratio. Then you can assess how likely you are able to repeat it again. Also, kelly criterion allows you to measure risk of ruin for every bet. "making consistent returns in 4 years" does not really mean anything without additional information.

Re: Robinhood and How to Lose Money

#200

Post by dbancajas »

zigzaggy wrote: post #198
zigzaggy wrote: post #188

Earlier quoted context omitted.

I’ve had a good experience with RH too. I started out small, learned about stocks first. I gradually started into options and learned some strategies there. Then I started learning about volatility and other derivatives. And of course I’ve learned all about ETFs etc. My first year was hard; and it was emotional. I was too excitable and got hooked a little. But I steered my way through it with a very small loss. I con…

P.S. It’s not “luck” for a small time swing trader to make a little money. Its something you do every day, using math, psychology, and timing on companies carefully selected for their fundamentals. The market is a large, slow moving entity that constantly shows its hand. A small timer can make money. Will it scale? I don’t know. I’ve been steadily increasing my account so ask again in 5 years. Admittedly, there are d…

Are you doing things like bankroll management? measuring your risk of ruin? Sharpe ratio? if you are not tracking how legit your upswing/downswing is then I think are doing a disservice to yourself.
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