the avg number of trades daily and $10/trade seem somewhat arbitrarily chosen.
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Article: "Day Traders: Dumber Than Ever"
- Thread starter zanek
- Start date
the avg number of trades daily and $10/trade seem somewhat arbitrarily chosen.
What has fool.com's investment performance been, out of interest? I mean their actual portfolio, not their cherry-picked 20/20 hindsight examples they use to shill their marketing spiel.
Quote from bauschj:
I love it when guys make a fortune without any significant study on the subject. Fact is: The greatest return for risk time is 20 years. The worst is 10 years, and the SECOND best reward to risk ratio is 8 Minutes!! There's virtually no probability study done in Random Walk Down Wall Street. Just a bunch of cherry picked data to get the retailer sucked in.
That is a very interesting stat, and I don't doubt it. Can you provide a source though?
Quote from illinimatt81:
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.
Economic moat is not a morningstar creation. That's a basic of fundamental analysis that all fundy investors include in their analysis. If anyone coined the term, I believe it would have been Peter Lynch.
But Morningstar, fool, and zacks, are all based on fundamental analysis, which they've mixed up with trading, and that's where they go wrong. FA analysis is for investors, and for people buying companies. That's why all three of the above's portfolios were blown out during the big sell off.
Investors weren't hurt, but traders were killed. That's what you get when you try to mix the two together.
for your stats needs you need to go to Niederhoffer he knows what he is talking about. Just blew up 3 or 4 times already, sinking his clients' ships. But hey, thats 5-6 times less blowouts than the average day trader in here, LOL.
Quote from bauschj:
I love it when guys make a fortune without any significant study on the subject. Fact is: The greatest return for risk time is 20 years. The worst is 10 years, and the SECOND best reward to risk ratio is 8 Minutes!! There's virtually no probability study done in Random Walk Down Wall Street. Just a bunch of cherry picked data to get the retailer sucked in.
daytrader/ lawyer, LOL. This is why I am here on ET to read posts such as this. Buddy, the volatility is here you are blind or foS. Go back to your divorce trials and cheat more money out of unassuming clients.
Quote from jem:
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.
you could not be more wrong (does not mean I fully agree witht he article);
Short term movements are mostly random, every beginner should know that and if not there is plenty quantitative analysis to support this. But I know you are a hard worker and want to always prove things for yourself: Alright, lets do it: Start at a 1-min bar frequency, establish a long if the current price is higher than 10 bars ago. Look at the performance 10 bars later. Do the same for shorts. Run various tests by varying the lookback and performance look forward parameter. Now step out and decrease the frequency until you get to a daily or monthly time frame. Report back what you have observed.
Next, market makers bread and butter does not come from order flow imbalances. Quite the opposite. Market makers perform best when they have a buyer for each seller and vice versa, resulting in no forced warehoused positions or additional hedging cost.
Please show me proof that market structure resembles fractals and even if it does (at this point I dont even know what you mean with it but please educate us) whats your argument and how does it point to support your claim that there are as strong short term as long term trends?
Moving into longer time frames does not introduce any additional variables in itself. If you mean that now fundamental factors also impact prices in the longer term then you are right but the increased number of variables in that sense have a beneficial impact on your predictive power not the opposite.
GSEs never had strong earnings power, everybody treated them as god-like entities because a paper tiger backed them. This has nothing whatsoever to do with survivorship bias, quite the opposite. Those companies with strong earnings power, innovative management teams are those companies who are still in the seat and have the cash to buy other companies. Its the Enrons, Tycos, and Lehmans that everyone is forgetting about and who either had horrible earnings power when time came to shut shop or they cooked the books. So, if you remove that bias then earnings power actually moves up couple ranks as price impacting factor in your PCA. Just a hint, but please do your own work to verify.
Before you start getting all excited about this article you may wanna think a little deeper in your analysis...just my 2 cents
Short term movements are mostly random, every beginner should know that and if not there is plenty quantitative analysis to support this. But I know you are a hard worker and want to always prove things for yourself: Alright, lets do it: Start at a 1-min bar frequency, establish a long if the current price is higher than 10 bars ago. Look at the performance 10 bars later. Do the same for shorts. Run various tests by varying the lookback and performance look forward parameter. Now step out and decrease the frequency until you get to a daily or monthly time frame. Report back what you have observed.
Next, market makers bread and butter does not come from order flow imbalances. Quite the opposite. Market makers perform best when they have a buyer for each seller and vice versa, resulting in no forced warehoused positions or additional hedging cost.
Please show me proof that market structure resembles fractals and even if it does (at this point I dont even know what you mean with it but please educate us) whats your argument and how does it point to support your claim that there are as strong short term as long term trends?
Moving into longer time frames does not introduce any additional variables in itself. If you mean that now fundamental factors also impact prices in the longer term then you are right but the increased number of variables in that sense have a beneficial impact on your predictive power not the opposite.
GSEs never had strong earnings power, everybody treated them as god-like entities because a paper tiger backed them. This has nothing whatsoever to do with survivorship bias, quite the opposite. Those companies with strong earnings power, innovative management teams are those companies who are still in the seat and have the cash to buy other companies. Its the Enrons, Tycos, and Lehmans that everyone is forgetting about and who either had horrible earnings power when time came to shut shop or they cooked the books. So, if you remove that bias then earnings power actually moves up couple ranks as price impacting factor in your PCA. Just a hint, but please do your own work to verify.
Before you start getting all excited about this article you may wanna think a little deeper in your analysis...just my 2 cents
Quote from FerdinandAlx:
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".
thats not hindsight that is employing thoughts on the level of how children think. If you did not come to the same conclusion EARLY ON then you are the idiot here not anyone else.
In the same way isnt it crystal clear by now that RIMM will follow into the same exact footsteps than PALM? Wasnt it totally clear what would happen to Palm? Wasnt it also clear what happens to the brick and mortar video rentals? I mean, seriously, maybe you really think on a way too complex level. Here my hint for your next homework. Do you really think the ibanks are a cheap buy right now and that they are about to bottom out? Nothing that could cause an additional 10-20% drop in them? LOL
In the same way isnt it crystal clear by now that RIMM will follow into the same exact footsteps than PALM? Wasnt it totally clear what would happen to Palm? Wasnt it also clear what happens to the brick and mortar video rentals? I mean, seriously, maybe you really think on a way too complex level. Here my hint for your next homework. Do you really think the ibanks are a cheap buy right now and that they are about to bottom out? Nothing that could cause an additional 10-20% drop in them? LOL
Quote from spindr0:
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 !