It is impossible

[protodigm]

Quote from nonlinear5:

(5) The markets facilitate redistribution of wealth from one group of people to another group of people. If the total amount of money in the pool is the same (which it is, more or less), then whenever someone makes money, it means that someone lost money. In the process of money transfer, everyone pays commission, which is a rake. By definition, if you trade as well as the "average" trader, you lose money because of the constant drain in the form of commissions and other transaction costs. That's all there is to it.

The stock market isn't a zero-sum game because stocks aren't simply ONLY investments traded from one person to another.

Businesses inject money in via dividends/buybacks so wealth is constantly being created and so value is added overtime.

If you subtract all the injections by businesses then yes it can be considered zero-sum.


The context of the 95% statistic is too vague since it is unclear what exactly the pool of people is the 95% representing. Also, is the 5% meaning people who are consistently profitable trading or professional? Or merely people who don't lose it all? Or people who beat the market?

I think what is correct is... 5% of people who set out to try to consistently make money in the stock market actually succeed in becoming professional.

Regardless I'm sure the 5% is made up on the spot anyways. What matters is that its a very small percentage.

 

[stock_trad3r]

Quote from intradaybill:

Last year I made some money, not very much to become wealthy form trading (intraday and swing) but I did make enough to buy a not too expensive new car. This year, after being down about 5% I have just recovered my losses.


Bill

hmm...I didn't know they still made Pacers

 

[intradaybill]

Quote from protodigm:

The stock market isn't a zero-sum game because stocks aren't simply ONLY investments traded from one person to another.

Please, do not convert this thread into another zero-sum debate.

I posed specific questions that have nothing to do directly with the zero-sum game or not.

I appreciate your attention.

Bill

 

[ProfitTakgFool]

Someone posted a ways back -- I forget who it was or I'd give them credit -- a CPA firm reported that 36% of traders win (based on the returns they did) but less than 5% of them made enough money to do it for a living.

Quote from intradaybill:

Last year I made some money, not very much to become wealthy form trading (intraday and swing) but I did make enough to buy a not too expensive new car. This year, after being down about 5% I have just recovered my losses.

My point: I have determined it only takes common sense, risk management and good use of software tools not to lose money. Why is it then that I keep hearing that 90% or even 95% of traders lose money. It is impossible for all those traders to be so stupid. Then, the following possibilities exist:

(1)The 95% estimate is flat wrong. It is way less than that if the law of large numbers applies as there is a great number of individual traders in the markets, so the actual figure is near 50%.

(2) The 95% figure is correct because there are not that many active individual traders in the market for the law of large numbers to apply.

(3) There are many traders in the market but the law of large numbers does not apply because the probabilities are biased in favor of professionals, for some known or unknown reasons.

(4): (2) above + the probabilities are biased in favor of professionals, for some known or unknown reasons.

What do you think?

Bill

 

[heypa]

Someone stated that there was an upward bias to the equity markets.This is a very commonly stated falsehood.All the commonly published charts are not adjusted for the fake gummint published inflation let alone a real inflation rate. I know you can argue that short term it doesn't matter. I think it does matter since I agree we trade in short term but live in the long term hopefully.Why else bother with any of this.
If any one believes this is a zero sum game minus costs then he should know as any real gambler ( Excuse me. It's called gaming now a days) knows there is no way to win long term. If you are lucky enough to get substantially ahead. Take your gains and run.
PROFITS ARE LUCK. SMALL LOSES ARE SKILL. A motto to live by. It takes your ego out of the game.

 

[intradaybill]

Quote from ProfitTakgFool:

Someone posted a ways back -- I forget who it was or I'd give them credit -- a CPA firm reported that 36% of traders win (based on the returns they did) but less than 5% of them made enough money to do it for a living.

The numbers sound very reasonable to me since most trade noise and end up either slightly up or down.

But I constantly hear about this 95% losers and if it is true then something must befundamentally wrong or incomprehensible.

Bill

 

[TraderZones]

Quote from intradaybill:

The numbers sound very reasonable to me since most trade noise and end up either slightly up or down.

But I constantly hear about this 95% losers and if it is true then something must befundamentally wrong or incomprehensible.

Bill

Since you disagree, then your logic must be incontrovertible...

 

[monti1a]

Quote from heypa:

............PROFITS ARE LUCK. SMALL LOSES ARE SKILL. A motto to live by. It takes your ego out of the game.

I amend this...PROFITS ARE PROBABILITY-BASED LUCK. SMALL LOSSES RELATIVE TO THE SIZE OF YOUR WINS IS A SKILL.

 

[intradaybill]

Quote from TraderZones:

Since you disagree, then your logic must be incontrovertible...

Where did you see my dissagreement? Are you having a bad day or something? Do you have anything of value to contribute?

Bill

 

[supertuber]

Quote from intradaybill:

Last year I made some money, not very much to become wealthy form trading (intraday and swing) but I did make enough to buy a not too expensive new car. This year, after being down about 5% I have just recovered my losses.

My point: I have determined it only takes common sense, risk management and good use of software tools not to lose money. Why is it then that I keep hearing that 90% or even 95% of traders lose money. It is impossible for all those traders to be so stupid. Then, the following possibilities exist:

(1)The 95% estimate is flat wrong. It is way less than that if the law of large numbers applies as there is a great number of individual traders in the markets, so the actual figure is near 50%.

(2) The 95% figure is correct because there are not that many active individual traders in the market for the law of large numbers to apply.

(3) There are many traders in the market but the law of large numbers does not apply because the probabilities are biased in favor of professionals, for some known or unknown reasons.

(4): (2) above + the probabilities are biased in favor of professionals, for some known or unknown reasons.

What do you think?

Bill

Hey Bill,

I would certainly like to think that more than 95% of traders are making gains on the balance.

However, I think that if someone is serious about making trading their living they need the right software, hardware, time, money and emotional balance to succeed which basically eliminates a vast proportion of potential traders.

I think that its also important to remember that most people who wish to start a 'business' usually do so with insufficient funds to cover losses, learn from mistakes and have live with delusions of grandeur both of which will kill any business and certainly finish a trader quickly.

Successful individual traders are certainly not huge in numbers which is great, but i hope for all our sakes that a living can be made from this extraordinary business.

Dave

"Real knowledge is to know the extent of one's ignorance" ~Confucius