No one on EliteTrader will beat the market… here is why

Quote from GTS:

You started with a simple premise: that the average trader would see gains equal to the average market returns.

When I pointed out that traders go short as well as long you changed from a your original mathematically based thesis to "Intuitively I feel".

Frankly I don't care how you feel. Your original premise was badly flawed but it was at least based on a real number - now you've switched to just guessing.
What you just wrote contradicts your original premise.

The only way traders would match the average market gains while being in and out of the market with both long and short trades would be if they have an edge (which you previously claimed they do not have in the short-term)

If they had no edge then there is no way they could match the average market gain unless they held a 100% long position in the market at all times - again, basic math.
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OK then, my intuition is wrong about the return of the short traders but my original premise that the average trader will receive an average return can still hold.

Let's imagine a trader who only trades from the short side in the stock market. You are correct that on average he should have negative returns (-10%) because he always takes the opposite side in an upward going market (in the long run). On the other side of that trader you must have a leveraged long trader (because someone must lend and buy the stock from the short trader). He will have a higher return than the market (+20%). The average return of both the long trader and the short trader (-10% + 20%) is still the market return of +10%.
 
Quote from neutrino:

OK then, my intuition is wrong about the return of the short traders but my original premise that the average trader will receive an average return can still hold.

Let's imagine a trader who only trades from the short side in the stock market. You are correct that on average he should have negative returns (-10%) because he always takes the opposite side in an upward going market (in the long run). On the other side of that trader you must have a leveraged long trader (because someone must lend and buy the stock from the short trader). He will have a higher return than the market (+20%). The average return of both the long trader and the short trader (-10% + 20%) is still the market return of +10%.
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No, the flaw in your argument is assuming that the other side of the short trader is a long trader. The other side of the short trader could be a long-term investor not another trader.

Also traders, by definition, aren't fully invested (long or short) in the market 100% of the time - those people are called investors, so traders would never have gains (or losses) equal to the average market return because they are only in the market some percentage of time.
 
Quote from neutrino:

I posted some of my thoughts on another thread on why you can’t make any money from speculation (above the normal long-term return for stocks), but I didn’t get challenged so I decided to post this in a separate thread.

I
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FALSE
 
Quote from GTS:

No, the flaw in your argument is assuming that the other side of the short trader is a long trader. The other side of the short trader could be a long-term investor not another trader.

Also traders, by definition, aren't fully invested (long or short) in the market 100% of the time - those people are called investors, so traders would never have gains (or losses) equal to the average market return because they are only in the market some percentage of time.
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The major flaw in my argument that markets are so competitive that it's not worth playing, I explained here: "A lot of people on EliteTrader will beat the market… here is why". I no longer hold the view that markets are efficient, I only believed in this for a week after five years of beating the market. It happens sometime for a person to question some of his basic beliefs and test the foundation of his knowledge. Of course I feel a little stupid that I engaged the ET community with my doubts but when I strongly believe in something I must try to falsify it, i.e. to test its credibility. In this case I could have done it on my own with some more thinking :p
 
Quote from neutrino:

The major flaw in my argument that markets are so competitive that it's not worth playing, I explained here: "A lot of people on EliteTrader will beat the market… here is why". I no longer hold the view that markets are efficient, I only believed in this for a week after five years of beating the market. It happens sometime for a person to question some of his basic beliefs and test the foundation of his knowledge.
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Yes, I saw your other thread, was not impressed with it either.
 
Quote from GTS:

No, the flaw in your argument is assuming that the other side of the short trader is a long trader.
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Quite correct. We only know what the exchange shows us.
To extrapolate that by virtue of assumption is immature at best or just plain silliness.

If our OP ever leaps into the market with real money, these silly threads will cease immediately to be replaced by an air of reality.
Then and only then does the mind open up and the learning begin.

regards
f9
 
Quote from eagle:

Nicolas Darvas had proved Livermore theory that once you found that "luck" combination, all you have to do is to adjust some variables and then your edge will resume working over and over again. Why? Because prices are driven by emotion and emotion is not random. You cannot switch between happy and angry in a very short time frame. When you're happy, you're happy for a while before switching to angry.
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Livermore and Darvas was right. That's why we have trends. But you need a strategy to win.
 
Here is a chart from yesterday of spy. I would ask the OP where should you have gotten short and why, and what should your stop and target be. You will never really KNOW if markets or life is random. Who cares really?
 
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