bear, that's a great analogy.
cards TRULY are random.
yet, given a random distribution of cards, a skilled player, given sufficient "n" makes money. and that money necessarily comes from losing players.
the stock market is not zero sum, like a poker game, but the futures market is, so it's a good analogy. otoh, if you are a short term trader, the stock market is ESSENTiALLY close enough to zero sum to also have merit in this analogy.
look at johnny chan. he won TWICE in a row (granted, the WSOP had far fewer players back then), but that is still INCREDIBLE. the chances of that happening by chance, are astronomically small
similarly, there are many players who consistenty win and place in the money in WSOP and circuit events at very high rates, and there is NO way that skill does not play a part.
to quote an old stats professor "at some point, a million points of data becomes compelling"
this has nothing to do with reality. it has to do with what people WANT to believe to soothe their egos
losing traders who don't want to admit they weren't a good enough trader to make it, cannot accept that it was THEIR fault. so, if the market is random and perfectly efficient, they can blame the market
there is NO way that gus hansen, negreano (sp?), etc. could achieve their results purely through luck
simlarly, it is (as close to ) impossible (as one could imagine) that somebody who makes THOUSANDS of trades a year could be profitable in an efficient market. the more trades you make, the more you pay (relatively) in slippage and commission
in an efficent market, anybody (many people) could get lucky and make money position/swing trading with a few dozen trades in a year
when you get into the THOUSANDS of trades, it is not statisitically possible
also note that i am generally a scalper (i also trade longterm accounts, but i am referring to my dow minis trading), and a scalper has a greater burden to overcome because his targets are smaller thus commission is a greater %age of his trading expenses and a much higher burden to overcome (must have, ceteris paribus, a greater edge to be profitable)
most of my primary trade targets are about 6 points (depends on the setup), so i am going to pay 4/5 a point in commission, and that is close to 1/6 of my trading profits would get eaten up by commission. that is MASSIVE because my edge has be well beyond 1 pt a trade to be profitable to any extent, especially also considering slippage in fast moving markets.
cards TRULY are random.
yet, given a random distribution of cards, a skilled player, given sufficient "n" makes money. and that money necessarily comes from losing players.
the stock market is not zero sum, like a poker game, but the futures market is, so it's a good analogy. otoh, if you are a short term trader, the stock market is ESSENTiALLY close enough to zero sum to also have merit in this analogy.
look at johnny chan. he won TWICE in a row (granted, the WSOP had far fewer players back then), but that is still INCREDIBLE. the chances of that happening by chance, are astronomically small
similarly, there are many players who consistenty win and place in the money in WSOP and circuit events at very high rates, and there is NO way that skill does not play a part.
to quote an old stats professor "at some point, a million points of data becomes compelling"
this has nothing to do with reality. it has to do with what people WANT to believe to soothe their egos
losing traders who don't want to admit they weren't a good enough trader to make it, cannot accept that it was THEIR fault. so, if the market is random and perfectly efficient, they can blame the market
there is NO way that gus hansen, negreano (sp?), etc. could achieve their results purely through luck
simlarly, it is (as close to ) impossible (as one could imagine) that somebody who makes THOUSANDS of trades a year could be profitable in an efficient market. the more trades you make, the more you pay (relatively) in slippage and commission
in an efficent market, anybody (many people) could get lucky and make money position/swing trading with a few dozen trades in a year
when you get into the THOUSANDS of trades, it is not statisitically possible
also note that i am generally a scalper (i also trade longterm accounts, but i am referring to my dow minis trading), and a scalper has a greater burden to overcome because his targets are smaller thus commission is a greater %age of his trading expenses and a much higher burden to overcome (must have, ceteris paribus, a greater edge to be profitable)
most of my primary trade targets are about 6 points (depends on the setup), so i am going to pay 4/5 a point in commission, and that is close to 1/6 of my trading profits would get eaten up by commission. that is MASSIVE because my edge has be well beyond 1 pt a trade to be profitable to any extent, especially also considering slippage in fast moving markets.