Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

wsj.com

Post reply on HN
Print view View original

61–70 of 107 posts

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#61

Post by TheRealDunkirk »

yieldcrv wrote: post #51
ModernMech wrote: post #38

Earlier quoted context omitted.

This is the trap of modern society. Think about what you're doing: instead of anything productive, you thought a good use of your time was sitting there staring at numbers, hoping to find a pattern to make money off of people; who in their own right are using insider information to game a system; which itself is set up to capitalize off the fact that the larger economy has failed, and now all that's left is to just m…

Finance has always been the largest sector on the planet through every economic environment you have been alive for, I don't really understand why there is a current of this community that acts so divorced from its perpetual and all encompassing existence their whole lives Despite you being an individual, you reflect an aberration of sentiment here that makes no sense For example, the larger economy hasn't failed, an…

> the larger economy hasn't failed

It's only a matter of time until Social Security starts to fail, right after we've paid all the boomers their full benefits (and just in time for me to be eligible), and then they'll have to implement "austerity measures." After that, groceries, gas, housing, health "care," and higher education will have fully broken the middle class (it's already broken me, and I have a good job and a paid-off house), and the economy (sans imaginary AI investment bullshit) will be exposed as failing. AI (such as it is) will hammer entry level jobs, and tax revenues will be impacted by this. At the same time, we're going to have to start some sort of menial UBI, but with what money, I have no idea. Service on the national debt just surpassed military spending last year. When the shit hits the fan in another 10 years, the country will have to either go to war to reset the accounting ledgers, or actually put themselves on a budget. Which do you think will happen?

Given the numbers and rates we can see at present, all economic activity right now is a process of moving deck chairs on the Titanic. Sure, it hasn't failed, but it is an absolute certainly that it WILL. It's just a question of WHEN, and it's relatively soon. We have no adults in Washington. It's clear they're ALL just trying "get theirs" before it all comes crashing down.

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#62

Post by screamingninja »

rmb177 wrote: post #57

I realize I'm an N of 1, but I've participated in prediction markets since 2019 and am just above 5 figures in profit. Not life-changing money, but it certainly doesn't hurt. I'm pretty conservative in my predictions and just think there is a lot of free money on these sites. Maybe that just supports the sentiments of this article and most of the negative comments on this post. There are certainly cases where I got r…

Have you heard of the Sucker Effect? Your gains come solely from the those who made the wrong bet. There is no inherent value generation in the prediction markets unlike the stock markets. Yes, there is money to be made, but at a net loss to the society, so many would not consider these bets "opportunities" but rather "gambling".

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#63

Post by benced »

rmb177 wrote: post #57

I realize I'm an N of 1, but I've participated in prediction markets since 2019 and am just above 5 figures in profit. Not life-changing money, but it certainly doesn't hurt. I'm pretty conservative in my predictions and just think there is a lot of free money on these sites. Maybe that just supports the sentiments of this article and most of the negative comments on this post. There are certainly cases where I got r…

I understand the hostility to them getting into sports betting since that seems to trigger a particular unhealthy impulse in young men but your anger should be first directed at the companies that are 100% sports betting (DraftKings and their ilk). I don't think the normal things prediction markets do subject young men to the same temptations.

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#64

Post by benced »

screamingninja wrote: post #62
rmb177 wrote: post #57

I realize I'm an N of 1, but I've participated in prediction markets since 2019 and am just above 5 figures in profit. Not life-changing money, but it certainly doesn't hurt. I'm pretty conservative in my predictions and just think there is a lot of free money on these sites. Maybe that just supports the sentiments of this article and most of the negative comments on this post. There are certainly cases where I got r…

Have you heard of the Sucker Effect? Your gains come solely from the those who made the wrong bet. There is no inherent value generation in the prediction markets unlike the stock markets. Yes, there is money to be made, but at a net loss to the society, so many would not consider these bets "opportunities" but rather "gambling".

The value generation is for passive observers: it is theoretically more informative to be told that there is a y% chance of x from someone with a financial incentive to be right.

(also, we allow plenty of zero and negative sum interactions in society. I don't know why this is special.)

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#65

Post by pessimizer »

jldugger wrote: post #54
hx8 wrote: post #24

Earlier quoted context omitted.

I am unfamiliar with working with such signal-to-noise ratios. * I only had the example trades in the news as 100% confirmed positive trades. * There are hundreds of millions of dollars in trades a day in Polymarket. * In Polymarket you can just spin up a new account. If an account spins up, makes a $50k bet and wins, and then has no other activity, was that an insider trader or just someone with a behavioral pattern…

> In Polymarket you can just spin up a new account. If an account spins up, makes a $50k bet and wins You'd probably want to use some form of bayesian ranking, like say add 1k of total bets and 500 in total winnings to the raw scores. But your bigger problem is just that people spinning up new accounts may be doing it to avoid your tracking. The kind of person with lots of evidence that they're good should be smart e…

> The kind of person with lots of evidence that they're good

But what evidence is there that anyone is "good"? The fact that I am an insider to one event does not make me an insider to all events. If I were an insider to many events, I would probably have better ways to profit off of them. Placing a big bet is something I would do if I knew one thing.

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#66

Post by yieldcrv »

TheRealDunkirk wrote: post #61
yieldcrv wrote: post #51

Earlier quoted context omitted.

Finance has always been the largest sector on the planet through every economic environment you have been alive for, I don't really understand why there is a current of this community that acts so divorced from its perpetual and all encompassing existence their whole lives Despite you being an individual, you reflect an aberration of sentiment here that makes no sense For example, the larger economy hasn't failed, an…

> the larger economy hasn't failed It's only a matter of time until Social Security starts to fail, right after we've paid all the boomers their full benefits (and just in time for me to be eligible), and then they'll have to implement "austerity measures." After that, groceries, gas, housing, health "care," and higher education will have fully broken the middle class (it's already broken me, and I have a good job an…

Everything you described is future liquidity and who has it, but whether that’s the economy or enough of it to make a statement is unclear to me

And you wrote this all as a reaction to people trading on prediction markets? Markets that show velocity of transactions in a new, novel and growing way, which is the goal of our economies - to discourage hoarding in favor of transactions

Being a permabear doomer has nothing to do with the existence of prediction markets and other people’s participation in them

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#67

Post by pants2 »

mathgradthrow wrote: post #43

Everytime someone loses money on a bad bet in a prediction market, it's an opportunity for them to learn something about ~~counter-party risk~~ adverse selection. You could easily make the argument that the more people are losing in prediction markets, the more learning is happening.

Counterparty risk would be more like the betting site going belly-up and not getting money out despite having a profitable trade. This is just regular risk.

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#68

Post by dist-epoch »

JumpCrisscross wrote: post #10
dist-epoch wrote: post #5

> On Kalshi, too, losers vastly outnumber winners. Spokeswoman Elisabeth Diana said there are 2.9 unprofitable users for each profitable one based on data from the past month So 25% of users are profitable? That's vastly more than on financial sites - stocks/futures/forex/options trading where only 5% of bettors are profitable.

> vastly more than on financial sites - stocks/futures/forex/options trading where only 5% of bettors are profitable Source? I'm not doubting that there are products and forums where 95% of traders lose money. But that's far from representative for most financial-market participants.

10 year old paper on forex trading. 85% of losers here.

> The average trader is in the dataset for almost exactly six months (181 days). This is the amount of time between a trader’s first and last trade. About 25% of traders leave the sample within the first 46 days, while 50% of traders exit the sample within 155 days. Of the 181 days on average between open and close, traders are actively trading on an average of 50 of those days. The average trader has an equal-weighted return per trade of -0.035%, and very few traders quit while ahead. That traders have such small average returns per trade is not surprising given that the median trade is open for only 16 minutes, as can be seen from Panel B. Only 16.2% of traders are profitable upon exiting the sample.

https://www.nber.org/system/files/working_papers/w22146/w221...

It's well known in the industry that about 90% of traders drop before 1 year.

> But that's far from representative for most financial-market participants.

I specifically mentioned "bettors" - day traders/speculators, not long time investors. Two different segments.

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#69

Post by aworks »

PaulHoule wrote: post #14
hx8 wrote: post #12

I had a thesis two months ago that you could detect predictors with insider knowledge and ride their coat tails and spent some amount of time staring at the data and running some ML algos to detect them. I learned some things about the market during this time, but did not succeed in my detection algorithm. * Polymarket is a bit more transparent with who placed what bet, so it's a good place to go to study winners. *…

I used to play penny stocks for fun and it was a blast to be doing $3000 trades and be responsible for 30% of the volume for the day. You can learn a lot about how markets work if you adopt a penny stock, particularly the kind that trades in a wide range where you can buy in at 0.03 and figure "I'll sell when it hits 0.12" and sooner or later it does... then falls back down to 0.02.

This is interesting to me. I never had any enjoyment from traditional gambling when I dabbled in it. But I like the idea of being an expert on a little-known company and experiencng the response of my actions. Of course, it would be "for entertainment purposes only."

I was never interested in market timing, though.

Re: Why Almost Everyone Loses–Except a Few Sharks–On Prediction Markets

#70

Post by JumpCrisscross »

dist-epoch wrote: post #68
JumpCrisscross wrote: post #10

Earlier quoted context omitted.

> vastly more than on financial sites - stocks/futures/forex/options trading where only 5% of bettors are profitable Source? I'm not doubting that there are products and forums where 95% of traders lose money. But that's far from representative for most financial-market participants.

10 year old paper on forex trading. 85% of losers here. > The average trader is in the dataset for almost exactly six months (181 days). This is the amount of time between a trader’s first and last trade. About 25% of traders leave the sample within the first 46 days, while 50% of traders exit the sample within 155 days. Of the 181 days on average between open and close, traders are actively trading on an average of…

> specifically mentioned "bettors" - day traders/speculators, not long time investors

Forex is zero sum before fees and negative sum after. It’s distinct from capital markets. I wouldn’t extrapolate losses from FX.

Post reply on HN