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Article: "Day Traders: Dumber Than Ever"
- Thread starter zanek
- Start date
i hope so. if there's more dumb day traders, there's a better chance of them being on the other side of my trade...
but the author's article can really be dumbed down to two things:
1) academic types don't know how to do it, and i don't know how anyone can be doing it successfully, so it can't be possible, waaaaaaaaaaaaah!
2) random walk down wall street is gospel.
there are certain setups which are SIGNIFICANTLY high probability intraday setups with favorable risk / reward. i just got out of one 5 minutes ago. no, i'm not stating what they are specifically (though i've posted the generalities many times), but they're out there.
you have to invest time and effort, and not expect it to be handed to you in some kind of study.
but the author's article can really be dumbed down to two things:
1) academic types don't know how to do it, and i don't know how anyone can be doing it successfully, so it can't be possible, waaaaaaaaaaaaah!
2) random walk down wall street is gospel.
there are certain setups which are SIGNIFICANTLY high probability intraday setups with favorable risk / reward. i just got out of one 5 minutes ago. no, i'm not stating what they are specifically (though i've posted the generalities many times), but they're out there.
you have to invest time and effort, and not expect it to be handed to you in some kind of study.
Those motley idiots said that CSCO would go up for years even after John Bogle said that for the Motely Idiots to be right CSCO would have to worth more than all of Japan.
By the way I was a daytrader / lawyer. At my peak I traded over 2 million shares a month and averaged at least 40 trades a day and I made a great living for about 5 years. I do it again if I could make was I was making. Daytrading was great because of the volatility and volume.
By the way I was a daytrader / lawyer. At my peak I traded over 2 million shares a month and averaged at least 40 trades a day and I made a great living for about 5 years. I do it again if I could make was I was making. Daytrading was great because of the volatility and volume.
The article makes some bad arguments.
1) According to the article the data shows that 1% of day traders are predictably profitable. They conclude from this that you'd be better of playing roulette. Yet 0% of roulette players are predictably profitable since it's a game of chance where the odds favour the house. This difference is meaningful as it shows that consistent profitability from day trading is possible, materially differs from a game of chance in a casino and is able to overcome commissions and other fees.
2) The author claims that short term movements in stocks are random. This claim is simply untrue. Short term movements are the result of order flow imbalances and there's an industry that profits from this called market makers. Furthermore trends can be shown to exist on shorter time frames as well as long time frames as market structure somewhat resembles the structure of fractals.
3) It's implied that short term movements can't be predicted but long term movements can. I'd say this goes against the nature of prediction which has it that predictions become less reliable as the number of variables increases. A longer time frame always increases the number of variables.
4) Investors should buy stocks of companies with strong and sustainable economic moats. While doing so is obviously not wrong the author does display a strong case of survivorship bias. Two of the companies the author names as lacking in this regard are Fannie Mae and Freddie Mac. Yet as recent as 2007 these two companies were considered to have just such a moat as both companies had a strong history of earnings growth and being GSE's they were essentially backed by the US government. In fact the article's disclaimer reads: "Rich owns shares of (...) Freddie Mac, and Fannie Mae (the latter two bought when he thought they had long-term competitive advantages)" Nice going there pal, I really hope that you'll be able to use the tax writedown to your "long term advantage".
1) According to the article the data shows that 1% of day traders are predictably profitable. They conclude from this that you'd be better of playing roulette. Yet 0% of roulette players are predictably profitable since it's a game of chance where the odds favour the house. This difference is meaningful as it shows that consistent profitability from day trading is possible, materially differs from a game of chance in a casino and is able to overcome commissions and other fees.
2) The author claims that short term movements in stocks are random. This claim is simply untrue. Short term movements are the result of order flow imbalances and there's an industry that profits from this called market makers. Furthermore trends can be shown to exist on shorter time frames as well as long time frames as market structure somewhat resembles the structure of fractals.
3) It's implied that short term movements can't be predicted but long term movements can. I'd say this goes against the nature of prediction which has it that predictions become less reliable as the number of variables increases. A longer time frame always increases the number of variables.
4) Investors should buy stocks of companies with strong and sustainable economic moats. While doing so is obviously not wrong the author does display a strong case of survivorship bias. Two of the companies the author names as lacking in this regard are Fannie Mae and Freddie Mac. Yet as recent as 2007 these two companies were considered to have just such a moat as both companies had a strong history of earnings growth and being GSE's they were essentially backed by the US government. In fact the article's disclaimer reads: "Rich owns shares of (...) Freddie Mac, and Fannie Mae (the latter two bought when he thought they had long-term competitive advantages)" Nice going there pal, I really hope that you'll be able to use the tax writedown to your "long term advantage".
"Long-term investors concentrate on companies with strong and sustainable economic moats that are likely to be bigger and better in five years. That's the strategy famously employed by Warren Buffett, and I'd say it's worked pretty well for him so far"
Now that's some winning logic! Only 1% of day traders make money. How many Warren Buffetts are there ???
Now that's some winning logic! Only 1% of day traders make money. How many Warren Buffetts are there ???
Long-term investors don't waste their time speculating on the intraday movements of companies that might not even exist in five years, like Freddie Mac (NYSE: FRE) and Fannie Mae (NYSE: FNM). These failed financials are hemorrhaging money at an astonishing rate. Even if they manage to survive, there's a good chance that common shareholders will be massively diluted.
Similarly, long-term investors avoid companies with busted competitive strategies. At one point in time, Blockbuster (NYSE: BBI) and Borders Group (NYSE: BGP) enjoyed a barrier to entry against would-be rivals, thanks to their widespread store bases. However, nimble, capital-light, Internet-based businesses have turned those bricks-and-mortar stores into a strategic liability.
Long-term investors concentrate on companies with strong and sustainable economic moats that are likely to be bigger and better in five years. That's the strategy famously employed by Warren Buffett, and I'd say it's worked pretty well for him so far.
Isn't hindisght great???
IDIOTS !
Similarly, long-term investors avoid companies with busted competitive strategies. At one point in time, Blockbuster (NYSE: BBI) and Borders Group (NYSE: BGP) enjoyed a barrier to entry against would-be rivals, thanks to their widespread store bases. However, nimble, capital-light, Internet-based businesses have turned those bricks-and-mortar stores into a strategic liability.
Long-term investors concentrate on companies with strong and sustainable economic moats that are likely to be bigger and better in five years. That's the strategy famously employed by Warren Buffett, and I'd say it's worked pretty well for him so far.
Isn't hindisght great???
IDIOTS !
Quote from QuikrRetirement:
Assuming an average of 29 trades per day at $10 a pop, the typical day trader would have to make $72,500 per year just to break even!
I almost spit out my coffee reading this statement. No mention of direct access. I agree that $10 per trade could be insurmountable in some cases.
The worst part of this article is that it ends in a sales pitch for their stock advisor service.
At least their website is aptly named "Fool"
Is Fool associated or owned by Morningstar at all? The term economic moat is something they use quite a bit at Morningstar.
There is no such thing as an economic moat for a company. The business environment can change at any time and their competitive advantage gone.
There is no such thing as an economic moat for a company. The business environment can change at any time and their competitive advantage gone.