<story><title>Almost 80% of Private Day Traders Lose Money</title><url>http://www.curiousgnu.com/day-trading</url></story><parent_chain><item><author>nicholas73</author><text>This blog post did not answer it&amp;#x27;s own question because it&amp;#x27;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 distribution curve.&lt;p&gt;A better way would have been to compare performance versus frequency of trading (I don&amp;#x27;t expect this to prove one way or another though).  The fact is, there are many strategies one could take, and it&amp;#x27;s how well you execute them that counts.&lt;p&gt;Personally, I don&amp;#x27;t find daytrading riskier than holding stocks.  By far my biggest losses come from holding the wrong stocks for a long period.  It just seems riskier because you have to confront yourself with the possibility of loss each day, rather than hold &amp;quot;long term&amp;quot; and deny that you are wrong.&lt;p&gt;I now take the Doyle Brunson approach.  The poker champion loved to pick up small pots and felt it was critical to do by aggressively playing small hands.  That way, these little wins pay for the risk of playing bigger hands over time.  I&amp;#x27;ve had the same experience - my daytrading tends to be small money but it stems from work done for holding long term stocks.  So why not put it to use?&lt;p&gt;But, to actually make good money daytrading is still really difficult.  Commissions alone can make you have to be 55&amp;#x2F;45 correct, but there is also the steamroller affect where people tend to hold on to losses and double down further.  So it&amp;#x27;s also about mastering yourself in addition to your market.  Otherwise, there is not reason why you can&amp;#x27;t be better: you are putting in more work than others to make good decisions, and that&amp;#x27;s how you profit.  Trouble is, when are you still outgunned informationally?</text></item></parent_chain><comment><author>mrchicity</author><text>I think the individual retail trader is almost always outgunned informationally when it comes to intraday trades. Most short-term price action is driven by order flow and cross-asset correlations, which machines are very good at trading. They are often net trading cost earners due to rebates and capturing bid-offer spreads. That means their win rate doesn&amp;#x27;t need to be as high, so they can pull the trigger on a trade before you can, just by having lower fees and superior execution. In addition to that, they&amp;#x27;re faster, more scalable, have more access to liquidity, and are more disciplined than humans could ever be. For the ones who trade off statistical correlations, they have the best data and armies of PhDs working on signals.&lt;p&gt;There are some event-driven fast trades still done by humans, like after news or responding to economic releases, but hedge funds have highly-educated people modeling the effects of an interest rate change or earnings release as their full-time job. This area is also becoming dominated by bots doing sentiment analysis.&lt;p&gt;I think the retail trader could have an edge in a few ways. One would be an illegal edge like inside information or market manipulation. Another would be finding illiquid stocks that proprietary traders and hedge funds won&amp;#x27;t bother with and trading using similar techniques. You could also look for extreme situations that model-based traders can&amp;#x27;t understand well due to lack of data, like a merger target breaking away. Those trades would be very risky though.&lt;p&gt;FWIW I&amp;#x27;m a professional trader and never day trade my own account or pick individual stocks. My company allows it, but I don&amp;#x27;t believe I have any edge in doing so. I just buy and hold a portfolio of ETFs.</text></comment>
<story><title>Almost 80% of Private Day Traders Lose Money</title><url>http://www.curiousgnu.com/day-trading</url></story><parent_chain><item><author>nicholas73</author><text>This blog post did not answer it&amp;#x27;s own question because it&amp;#x27;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 distribution curve.&lt;p&gt;A better way would have been to compare performance versus frequency of trading (I don&amp;#x27;t expect this to prove one way or another though).  The fact is, there are many strategies one could take, and it&amp;#x27;s how well you execute them that counts.&lt;p&gt;Personally, I don&amp;#x27;t find daytrading riskier than holding stocks.  By far my biggest losses come from holding the wrong stocks for a long period.  It just seems riskier because you have to confront yourself with the possibility of loss each day, rather than hold &amp;quot;long term&amp;quot; and deny that you are wrong.&lt;p&gt;I now take the Doyle Brunson approach.  The poker champion loved to pick up small pots and felt it was critical to do by aggressively playing small hands.  That way, these little wins pay for the risk of playing bigger hands over time.  I&amp;#x27;ve had the same experience - my daytrading tends to be small money but it stems from work done for holding long term stocks.  So why not put it to use?&lt;p&gt;But, to actually make good money daytrading is still really difficult.  Commissions alone can make you have to be 55&amp;#x2F;45 correct, but there is also the steamroller affect where people tend to hold on to losses and double down further.  So it&amp;#x27;s also about mastering yourself in addition to your market.  Otherwise, there is not reason why you can&amp;#x27;t be better: you are putting in more work than others to make good decisions, and that&amp;#x27;s how you profit.  Trouble is, when are you still outgunned informationally?</text></item></parent_chain><comment><author>jfoster</author><text>If you ask me, daytrading seems riskier because you&amp;#x27;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.&lt;p&gt;It seems far more unpredictable and lacking in reasoning than something like &amp;quot;Amazon&amp;#x27;s strategy for the next couple of years involves X, Y, and Z, so I think they will be successful&amp;#x2F;fail.&amp;quot;</text></comment>