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Day Trading for a Living?

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Re: Day Trading for a Living?

#331

Post by fouc »

Kevin_S wrote: post #297
smdz wrote: post #148

That is so misleading! I have been day trading profitably for the last 6+ years. It is more than enough to cover my living expenses for a family of 4. But I also work (freelance dev), because it cannot cover my home EMIs. My returns are not too high, but much better than bank interest rates and probably much below professional traders. The only thing stopping me from earning my EMIs or more income is the allocated ca…

Ok but the last 6 years the market has generally only gone up. If you are doing technical analysis, you would expect to actually be profitable in an expansionary period. The problem is if you trade the same way in a deflationary period you will lose all of your gains.

It'd be interesting if the trading interface could silently flip the chart & swap the puts & shorts during a deflationary period, so that you could keep trading the same way, while taking into account a bear market.

Re: Day Trading for a Living?

#332

Post by marketgod »

Havoc wrote: post #223
dragthor wrote: post #143

Earlier quoted context omitted.

With risk-defined option trading, you decide the size of the steam roller.

The pennies stay small though

Look up the Wheel Strategy. Good way to start trading and it's fairly profitable because it's long term investing with a boost to your cash flow.

Re: Day Trading for a Living?

#333

Post by marketgod »

glitchc wrote: post #327
docker_up wrote: post #288

Earlier quoted context omitted.

They are lying because you've never made money daytrading? As per my other comment, this is absurd. Being a profitable daytrader is very hard, and it's not probable, but definitely possible.

It's not a question of possibility, but a question of probability. Lots of things are possible with very tiny probabilities. That's why we do research, to estimate the probability of a phenomenon being true, in this case making money daytrading. The research in the paper suggests that the probability that your friends are making more than a teller is 0.4%, therefore the probability that they are making less than a te…

Look at the 10-k filings of companies. Lot's of people beat the market and hedge funds in particular. The thing is it's a hard skill to attain. Day trading is probably not the best, but the study should have focused on Full-Time trading. If you trade reversal/swing it's definitely possible to beat the market.

Just this year, I am at 35% returns, however, September is not in my calculation and this month was probably the most profitable so I should be around 50% at the end of the month if not higher (and this is a bad year.) Also the market has been choppy lately, the last few months so harder to lock in gains.

Re: Day Trading for a Living?

#334

Post by simtel20 »

PorterDuff wrote: post #319
tim333 wrote: post #207

Earlier quoted context omitted.

There was a video interview with the founder where he explained pretty much how they do it. The employ a lot of bright PhD maths/physics types, get them to come up with all the algorithmic strategies they can think of, run tests with historic data and live trading to see which ones work and then scale up those. There isn't one smart guy or one great strategy - there are dozens of smart guys and loads of strategies an…

That sounds too much like this: https://www.amazon.com/When-Genius-Failed-Long-Term-Manageme... As I remember, beaucoup back testing, hilarity ensues anyway.

The issue with LTCM wasn't just that they didn't test sufficiently - the problem is that traders could take positions without supervision and any accountability. My understanding is that any firms that survived that period (and I believe they were all pulling the same shenanigans as LTCM, just maybe to a lesser degree) now have risk management because unlike Lehman/Bear they can't just foist that risk off onto the public market. No one at the head of a multi-billion dollar hedge fund wants to stop being there if all they have to do to endure is pay for risk management.

*edit: I'm not a serious student of this aspect, but I recall that none of the top independent hedge funds took a bath in the 2007+ collapse (that is, those that weren't in-house funds from a major wall st. company). They all had their risk management in order and all did pretty well in buying distressed assets. Some like Bridgewater really managed to grow non-stop right through that.

Re: Day Trading for a Living?

#335

Post by PorterDuff »

simtel20 wrote: post #334
PorterDuff wrote: post #319

Earlier quoted context omitted.

That sounds too much like this: https://www.amazon.com/When-Genius-Failed-Long-Term-Manageme... As I remember, beaucoup back testing, hilarity ensues anyway.

The issue with LTCM wasn't just that they didn't test sufficiently - the problem is that traders could take positions without supervision and any accountability. My understanding is that any firms that survived that period (and I believe they were all pulling the same shenanigans as LTCM, just maybe to a lesser degree) now have risk management because unlike Lehman/Bear they can't just foist that risk off onto the pu…

As I remember the book, they back tested quite a lot. It's just that whenever they went live with trading reality changed on 'em. Go figure.

Re: Day Trading for a Living?

#336

Post by simtel20 »

Scoundreller wrote: post #150
melling wrote: post #113

Earlier quoted context omitted.

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 ea…

I’m confused. Doesn’t the recipient pay these taxes, so it wouldn’t show up when comparing fund returns?

I'm not a finance guy, but I think the idea is this:

Ren says "we bought an option and held it for a year". The option's counterparty was a bank, I guess, so they just form a company to hold the bag, and the company that is created reports to the IRS that they don't have any assets, just a basket of assets to offset the option they're responsible for.

At the end of the contract (and there can be more than one of these going on at the same time) the assets can be sold, and would be sold, in order to pay for the option contract which was now held for a year. Some money would go to the broker for executing the trades over time, etc. but much less than the taxes that would otherwise be paid.

So, the part that has the tax man scratching his head is that if Ren was directing the buying and selling of the assets in the basket constantly, is that really holding on to an asset, or is it just a lie? They say they got a tax lawyer to sign off on it, so it goes to court to see if it's a defensible position. If not, they'll probably pay a slap on the wrist and won't get to do it again.

It's not done in isolation IIRC. This sounds a lot like how I understand swaps are done, so it may be that this is only slightly unusual.

Re: Day Trading for a Living?

#337

Post by pembrook »

hash872 wrote: post #279
pembrook wrote: post #274

Earlier quoted context omitted.

They don't. After the Volcker rule the big banks had to close their prop trading groups: https://en.wikipedia.org/wiki/Proprietary_trading The idea that investment banks are filled with human "traders" is Hollywood nonsense. Most trading activity (and even filling of retail order flow) is now done by quant-driven funds.

According to LinkedIn there are 573 people with the job title 'trader' at Goldman Sachs. I'm scanning through the list now- titles like Fixed Income Trader, Mortgage Trader, Rates Trader, Oil Trader, Equity Sales Trader, FX Trader, Emerging Markets Trader, Base Metals Trader, Interest Rates Trader, Investment Grade Bond Trader, Equity Derivatives Trader, Commodity Trader.... I found all of these on the first page of…

By contrast, about 37,000 people work at Goldman. Those people with the name “trader” in their title are simply executing client trades as a service for fees—-not speculating with the banks own money.

I stand by my point, the idea that Goldman is full of traders in the Hollywood sense is nonsense.

Re: Day Trading for a Living?

#338

Post by no_one_ever »

torben-friis wrote: post #106
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…

But that's like 6% interest rate. The S&P 500's average anual return is 10%... So unless I've got something wrong, you'd be earning far more if you just let your 5m chill there and go watch Netflix for the whole year.

The S&P 500's expected annual return is 10% except when it isn't.

S&P (and the rest of the market, really) can depreciate over a year and you'd just be losing your money.

Re: Day Trading for a Living?

#339

Post by simtel20 »

actually_trades wrote: post #217
downandout wrote: post #197

Earlier quoted context omitted.

The math, at least when it comes to the Medallion Fund, says that you are wrong. The odds of being able to achieve 40%+ returns (net of very steep fees) over 20+ years are astronomically low. In fact, the odds of simply being in the top 25% of hedge funds for 20 straight years, through “randomly picking stocks” as you put it, are 1/(4^20), which is roughly 1.09 in 1 trillion. There have been less than 25,000 hedge fu…

This is the correct response. For whatever reason, people seem to think "50/50 chance of beating the market" = 50% chance of generating 40% return on any given year. Try randomly picking stocks over the last 20 years, and run 1 billion simulations and see if you get anywhere near that (even letting you have survivorship bias for free)

> people seem to think "50/50 chance of beating the market" = 50% chance of generating 40% return on any given year

Yeah, quants like to coyly say they're figuring out where pennies might drop, and then they bring in leverage. Without the leverage, they'd be beating the market by less than a percent in so many cases.

Re: Day Trading for a Living?

#340

Post by brentis »

Carpetsmoker wrote: post #196
dav1app wrote: post #117

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 mar…

The best way to get rich in a gold rush is to sell shovels. Every time someone comes up with a "get rich with this training/tool/etc." it's very unlikely to make you rich, because if it would work that great then why isn't the seller of the training/tool using it to get rich, instead of selling whatever they're selling?

Thats what i did.
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