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Almost 80% of Private Day Traders Lose Money

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Re: Almost 80% of Private Day Traders Lose Money

#91

Post by 3chelon »

pliny wrote: post #11
igf wrote: post #2

Restricted to the publically-available data from one particular and rather odd site, but probably not crazy. At first it seems counterintuitive, shouldn't it be roughly 50% gaining and 50% losing? But I guess that people typically put in a modest amount of play money, and then tend to trade until either they run out or get discouraged from losses.

>shouldn't it be roughly 50% gaining and 50% losing 1) They aren't trading against each other (they're trading against professional investors) 2) When you trade randomly you should expect to lose money (paying fees, paying spread, getting 'good' executions rarely and getting 'bad' executions often, etc.)

50% losing and 50% gaining, without any spreads or commissions, would eventually destroy all your wealth. It's the classic "random walk" or Brownian motion study in finance, and it destroys your wealth because every time you lose 50% you have to gain 100% to get back to where you started.

Re: Almost 80% of Private Day Traders Lose Money

#92

Post by emodendroket »

goodcanadian wrote: post #57
mistermann wrote: post #46

Earlier quoted context omitted.

It isn't, there's fanous people like Warren Buffet of course, but I personally know of 3 individuals in investing forums who post all their trades and handily beat indexes over long periods.

Warren Buffett is not a day trader. To paraphrase, "My favourite holding period is forever." He is a good data point to demonstrate that long term investors can beat the indices. Most don't, however, and it is my understanding that day trading is even worse. Just as there are professional poker players that can consistently make money, I'm sure there are some day traders that do very well, but it is not a skill that…

He is also typically actively involved in companies he invests in, which sets him apart from somebody sitting around on e-Trade in a pretty big way.

Re: Almost 80% of Private Day Traders Lose Money

#93

Post by grondilu »

Isn't day trading a zero-sum game? If so, it's not very surprising that the majority of day traders lose money. Every dollar you make comes from someone who lost it. So unless you have a competitive advantage, such as lower brokerage fees, you should stay away.

Me, I believe in https://en.wikipedia.org/wiki/Buy_and_hold. The money you'll make will come from the actual profits of the companies.

Re: Almost 80% of Private Day Traders Lose Money

#94

Post by bvanslyke »

nicholas73 wrote: post #59

This blog post did not answer it's own question because it's conditions were not day trading (over 3 trades in 12 months). That condition selects for people choosing individual stocks hoping for a moonshot, for which people tend to choose riskier stocks rather than stocks actually likely to make them money. So no wonder 80% lost money. On the other hand, notice that the 20% who do make money have a large power distri…

I'm curious - If you don't mind sharing, how long have you been day trading and what has your percentage return been?

Re: Almost 80% of Private Day Traders Lose Money

#95

Post by jfoster »

nicholas73 wrote: post #59

This blog post did not answer it's own question because it's conditions were not day trading (over 3 trades in 12 months). That condition selects for people choosing individual stocks hoping for a moonshot, for which people tend to choose riskier stocks rather than stocks actually likely to make them money. So no wonder 80% lost money. On the other hand, notice that the 20% who do make money have a large power distri…

If you ask me, daytrading seems riskier because you're essentially trading within noise. A company could rise or fall a few (and more rarely, a lot of) percentage points within a day. Is it fluctuating based on anything other than the feedback loop and noise? Usually not, I think.

It seems far more unpredictable and lacking in reasoning than something like "Amazon's strategy for the next couple of years involves X, Y, and Z, so I think they will be successful/fail."

Re: Almost 80% of Private Day Traders Lose Money

#96

Post by HashThis »

idohft wrote: post #80
HashThis wrote: post #72

I'd love people's opinion on this. From my understanding, HFT (High frequency trading) firms are front running stock orders. NYSE sells them data on stock orders. They buy data center space in order to front run stock orders. That is how the HFT guys make a profit when Day Traders can't make the same kind of profit. Is that true?

I'm in HFT (as per my handle). Exchanges like NYSE, NASDAQ, etc. sell stock data to firms but not before they get processed . The only way you get front run is if the broker that you submit through (ETrade, Schwab, etc.) notes your order, knows that it's big enough to move the market, and then prioritizes their own action over yours (which I'm reasonably sure they do not). Buying data center space (colocation) means…

Thanks for the details

Re: Almost 80% of Private Day Traders Lose Money

#97

Post by stevenmays »

nstj wrote: post #88

Ironically, it seems the HFT's have started eating their own lunch too [0] > Overall, HFT firms’ revenues in the US have slumped from about USD 7.2 bn in 2009 to USD 1.3 bn in 2014 (see chart 3) [0]: https://www.dbresearch.com/PROD/DBR_INTERNET_EN-PROD/PROD000...

Yeah it's a race to the bottom. All HFTs are competing with each other now for yield so profit declines.

Re: Almost 80% of Private Day Traders Lose Money

#98

Post by dllthomas »

jfoster wrote: post #95
nicholas73 wrote: post #59

This blog post did not answer it's own question because it's conditions were not day trading (over 3 trades in 12 months). That condition selects for people choosing individual stocks hoping for a moonshot, for which people tend to choose riskier stocks rather than stocks actually likely to make them money. So no wonder 80% lost money. On the other hand, notice that the 20% who do make money have a large power distri…

If you ask me, daytrading seems riskier because you're essentially trading within noise. A company could rise or fall a few (and more rarely, a lot of) percentage points within a day. Is it fluctuating based on anything other than the feedback loop and noise? Usually not, I think. It seems far more unpredictable and lacking in reasoning than something like "Amazon's strategy for the next couple of years involves X, Y…

> "Amazon's strategy for the next couple of years involves X, Y, and Z, so I think they will be successful/fail."

That's not really the right question. If Amazon's strategy is hugely successful, but everyone else already thought Amazon's strategy was going to be even more hugely successful and had priced that in, then you could be 100% correct about your question and lose money.

Re: Almost 80% of Private Day Traders Lose Money

#99

Post by cortesoft »

grondilu wrote: post #93

Isn't day trading a zero-sum game? If so, it's not very surprising that the majority of day traders lose money. Every dollar you make comes from someone who lost it. So unless you have a competitive advantage, such as lower brokerage fees, you should stay away. Me, I believe in https://en.wikipedia.org/wiki/Buy_and_hold . The money you'll make will come from the actual profits of the companies.

It isn't zero sum.... the stock market has, at least so far, gone up over time; so on average, the sum of all money made on the stock market each day is positive. This means it is possible for everyone to 'win' and gain money.

Fighting over that 'gain' for each day, however, is zero sum.

Re: Almost 80% of Private Day Traders Lose Money

#100

Post by leakybit »

Someone1234 wrote: post #56
brongondwana wrote: post #4

It's just slot machines with a more respectable coat of paint.

If we assume day trading is gambling, I wonder what the house odds look like contrasted against other forms of gambling (e.g. blackjack, poker, slots, horses, etc)? I guess what I am asking is, if we take it for granted that it is gambling (and I am happy to do so) is it gambling with the best odds around?

I would say the stock market more represents a poker game with hundreds of thousands of participants. There is no house, it's a free for all, and day traders simply don't have the capital or manpower to survive.
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