Trading Is Hazardous to Your Wealth [pdf] (2000)

Post by lend000 » Thu, May 14, 2020, 8:52 PM UTC

grafs50 wrote: post #51

jaredtn wrote: post #31

Earlier quoted context omitted.

Two counterarguments: 1) Trading fees. If the house takes a cut of 0.1% on every transaction, then on average those who trade more lose more money. 2) Risk/reward tradeoff. If you buy deep out-of-the-money options, you might have a 5% chance of profitability, but expected return of $0 (neither positive nor negative). 95% of the time you lose $X, and 5% of the time you make $19X. If traders are pursuing riskier strate…

Also, the average at-home trader probably doesn't sell at a random point in time. They are probably more likely to sell after a loss.

Post by chrischattin » Thu, May 14, 2020, 9:05 PM UTC

nullandvoid wrote: post #72

chrischattin wrote: post #55

Earlier quoted context omitted.

This is absolutely right. I'm handily beating the market with an automated strategy I designed to the point I've all but shut down my startup/programming consulting business. What the system trades, and what I understand intellectually is the right thing to do, is often very hard to stomach emotionally.

Do you have a background in finance / any recommended reading? I've spent a lot of time on a automated trading side project of mine but haven't found the strategy yet. In retrospect time has been spent in completely the wrong areas ( setup a solid backrest platform first, duh )

Post by H8crilA » Thu, May 14, 2020, 9:11 PM UTC

alasdair_ wrote: post #64

H8crilA wrote: post #32

Earlier quoted context omitted.

This is not why the 90/50 contrast exists. It exist due to "absorption barriers", due to the ergodicity of the process - betting too big and hitting "uncle points". It's a bias present in most people, especially otherwise intelligent people: not understanding that there is a huge difference between expected value and ergodic properties. Between expected returns and risk. Just look up what VaR is, the concept is ridic…

>not understanding that there is a huge difference between expected value and ergodic properties Can you expand on this? Are you claiming that the stock market is ergodic, or that it is not?

Post by heavenlyblue » Thu, May 14, 2020, 9:14 PM UTC

leetcrew wrote: post #65

esotericn wrote: post #53

Can someone explain to me why people keep referring to average return as some sort of magical answer to the question? The median person makes the median income, that doesn't mean that trying to get a good job is pointless. By definition in order for you to make more than the market, someone else has to make less than the market. Assuming that knowledge has superlinear returns (I consider this to be obvious without pr…

a lot is stacked against you as a private investor. being very smart is not enough to beat the market consistently when your competition is other very smart people who themselves have a support staff of very smart people and they all spend 8+ hours a day analyzing the market and making trades. even if you quit your day job to trade full-time, they can collect information in ways that you can't (eg, satellite imagery)…

Post by chrischattin » Thu, May 14, 2020, 9:20 PM UTC

nullandvoid wrote: post #84

chrischattin wrote: post #83

Earlier quoted context omitted.

It was a big part of my degree but I never worked in finance professionally. Backtesting is great for validating ideas initially. Especially, to see if it holds up through abnormal markets like '08, or the volpocalypse, or the recent crash. Watch out for curve fitting, though.

Thanks for the reply. Yeah I needed to nail that down immediately! Do you apply ml techniques? I don't suppose you could point a little in a good direction to follow