6 ms·

I mean you may as well say: Study shows it is impossible for an individual to build a tech start up as a living. Just because something is hard doesn't mean it

by Kranar 7y ago

I mean you may as well say: Study shows it is impossible for an individual to build a tech start up as a living. Just because something is hard doesn't mean it's impossible. Day trading, like many other risky ventures, is something that is very hard and unlikely but for the few who succeed ends up being very profitable.

smt88 7y ago
A better way to put it is that day-trading is like gambling. You always lose money in the long run, even if you have spurts of success.
cptaj 7y ago
Playing the lottery is also very profitable for those who succeed.
- vonmoltke 7y ago
  Correct, and the statement "it is impossible to become rich by playing the lottery" is absurd. It's part of an annoying tendency to conflate "extremely low probability of success" with "impossible".
  - mrandish 7y ago
    Yes, the title should have been something like "impossible for an individual to day trade stocks for a consistently reliable living".
    - deleted 7y ago
      [deleted]
  - firethief 7y ago
    Is that the original goalpost? Because I'd say it is impossible to make a living playing the lottery. To make a living doing something, it needs to provide enough positive cash flow.
    - vonmoltke 7y ago
      It's the goalpost of the post I was responding to. I may have misunderstood the point, though.
  - tobr 7y ago
    Ignore the link text here. They’re saying it’s “virtually impossible”, which would be true of the lottery as well.
    - vonmoltke 7y ago
      I'm on the fence about whether adding the weasel word "virtually" is any better.
      - ajscanlan 7y ago
        I think the term "for a living" is more important. How would you interpret the phrase "It's impossible for an individual to play the lottery for a living"? Technically we both know it IS possible, technically. But in the real world? I don't know, but I wouldn't be suggesting anyone out there try make a living playing the lotto.
      - tobr 7y ago
        It’s not a weasel word. A weasel word is used to mask a lack of sources or data, that’s not the case here.
- wasdfff 7y ago
  If you loose the lottery you end up with a piece of reciept paper, but if you buy a stock you have it for as long as you want. The market always goes up. Even if right after this comment, if the sp500 tumbles and we enter a recession, your share of vix doesn’t go anywhere. Youd just wait for the market to recover and hit the price you bought it for. However, day trading isn’t really viable unless you have a lot of money to take advantage of every dip and hill and get around day trading restrictions.
tylerhou 7y ago
> Day trading, like many other risky ventures, is something that is very hard and unlikely but for the few who succeed ends up being very profitable. > the top individual earned only US$310 per day with great risk (a standard deviation of US$2,560). The very best day trader made around the same as an entry-level SWE, which does not scream immense profit to me.
- lm28469 7y ago
  > an entry-level SWE In a major tech hotspot, working 8 hours a day
- soneca 7y ago
  I agree with your point totally. But just to put in perspective that U$310/day in Brazil would be the equivalent of the top 10% software engineer salaries in Brazil.
  - deleted 7y ago
    [deleted]
kevin_nisbet 7y ago
The abstract of the paper seems to suggest otherwise: We observe all individuals who began to day trade between 2013 and 2015 in the Brazilian equity futures market, the third in terms of volume in the world, and persisted for at least 300 days: 97% of them lost money, only 0.4% earned more than a bank teller (US$54 per day), and the top individual earned only US$310 per day with great risk (a standard deviation of US$2,560). My interpretation of this, is that those they tracked in this study, it's not even all that profitable for the few that beat the odds while being exposed to significant risk.
- flatline 7y ago
  I know people who made millions day trading commodities, for no one in that cohort to have made any real money over two years is surprising to the point of disbelief. This may be something particular to the Brazilian exchange.
  - melling 7y ago
    I’ve noticed a lot of successful traders trade commodities versus equities. What makes commodities easier to trade? Ed Seykota has been doing it for decades: https://en.m.wikipedia.org/wiki/Ed_Seykota https://en.m.wikipedia.org/wiki/Ed_Seykota
    - Kranar 7y ago
      Commodities are generally harder to trade compared to equities. The reason successful traders do it is because you get access to much greater leverage compared to equities.
    - reverend_gonzo 7y ago
      Leverage. You’ll quickly get big or go home.
    - JackFr 7y ago
      No inside information on commodities. (However trading on embargoed government press releases is illegal. Though rather than kidnapping Clarence Beeks on the train, you can just interview the Florida farmers yourself.)
adrianmonk 7y ago
Or you could say: it's impossible to win the world championship at anything. It would be easy to find data to show that 99.99% of people aren't the best tennis player or fastest runner or best Scrabble player in the world; therefore, nobody can be the best at it. According to this reasoning, at least.
- kritiko 7y ago
  The point of the article is to dissuade people from pursuing careers in day trading based on marketing that it's an easy way to earn money (from people whose business is selling instructional materials... not day trading). If there were lots of people selling courses on "Become a WTA Tour Player, make millions winning tennis tournaments!" the same type of paper might be warranted for tennis playing.
  - adrianmonk 7y ago
    On a high level I agree. The way I see it, "impossible" is the wrong label. What you must do, though, is have a rational basis to believe you're in (making up a number) the top 0.01% of people skilled in that area. If that's true, then it might be a reasonable plan. For the other 99.99%, it's a bad plan. And when I say rational basis, that's its own challenge. There is a huge potential for emotional thinking disguised as rational and for self-delusion. Everyone wants to believe they are the top 0.01%, and most of them are wrong.
- ClumsyPilot 7y ago
  That would be a perfectly accurate statement. If none except world champions got paid, it would be an atrocious career choice
PopeDotNinja 7y ago
The problem with day trading, and stock trading in general, is that you can't predict the future. No one can. You can diversify your risk by buying the market (e.g. S&P 500 index fund) & hope the trend of going up N% per year continues, but even that isn't guaranteed. Essentially if you try to time/guess/predict the market, you're going gambling & the fees you pay on trading on the rake taken by the broker. Some gamblers do well. Most don't.
arghwhat 7y ago
This is not correct. If we consider a tech startup a single gamble, then living off trading is a continuous stream of independent gambles. While individual gambles may turn out better than the average (even many in a row), repeated gambling will always see the total outcome return to the normal. This is why the house always wins.

by Kranar 7y ago

smt88 7y ago

A better way to put it is that day-trading is like gambling. You always lose money in the long run, even if you have spurts of success.

cptaj 7y ago

Playing the lottery is also very profitable for those who succeed.

vonmoltke 7y ago
Correct, and the statement "it is impossible to become rich by playing the lottery" is absurd. It's part of an annoying tendency to conflate "extremely low probability of success" with "impossible".
- mrandish 7y ago
  Yes, the title should have been something like "impossible for an individual to day trade stocks for a consistently reliable living".
  - deleted 7y ago
    [deleted]
- firethief 7y ago
  Is that the original goalpost? Because I'd say it is impossible to make a living playing the lottery. To make a living doing something, it needs to provide enough positive cash flow.
  - vonmoltke 7y ago
    It's the goalpost of the post I was responding to. I may have misunderstood the point, though.
- tobr 7y ago
  Ignore the link text here. They’re saying it’s “virtually impossible”, which would be true of the lottery as well.
  - vonmoltke 7y ago
    I'm on the fence about whether adding the weasel word "virtually" is any better.
    - ajscanlan 7y ago
      I think the term "for a living" is more important. How would you interpret the phrase "It's impossible for an individual to play the lottery for a living"? Technically we both know it IS possible, technically. But in the real world? I don't know, but I wouldn't be suggesting anyone out there try make a living playing the lotto.
    - tobr 7y ago
      It’s not a weasel word. A weasel word is used to mask a lack of sources or data, that’s not the case here.
wasdfff 7y ago
If you loose the lottery you end up with a piece of reciept paper, but if you buy a stock you have it for as long as you want. The market always goes up. Even if right after this comment, if the sp500 tumbles and we enter a recession, your share of vix doesn’t go anywhere. Youd just wait for the market to recover and hit the price you bought it for. However, day trading isn’t really viable unless you have a lot of money to take advantage of every dip and hill and get around day trading restrictions.

tylerhou 7y ago

> Day trading, like many other risky ventures, is something that is very hard and unlikely but for the few who succeed ends up being very profitable. > the top individual earned only US$310 per day with great risk (a standard deviation of US$2,560). The very best day trader made around the same as an entry-level SWE, which does not scream immense profit to me.

lm28469 7y ago
> an entry-level SWE In a major tech hotspot, working 8 hours a day
soneca 7y ago
I agree with your point totally. But just to put in perspective that U$310/day in Brazil would be the equivalent of the top 10% software engineer salaries in Brazil.
- deleted 7y ago
  [deleted]

kevin_nisbet 7y ago

The abstract of the paper seems to suggest otherwise: We observe all individuals who began to day trade between 2013 and 2015 in the Brazilian equity futures market, the third in terms of volume in the world, and persisted for at least 300 days: 97% of them lost money, only 0.4% earned more than a bank teller (US$54 per day), and the top individual earned only US$310 per day with great risk (a standard deviation of US$2,560). My interpretation of this, is that those they tracked in this study, it's not even all that profitable for the few that beat the odds while being exposed to significant risk.

flatline 7y ago
I know people who made millions day trading commodities, for no one in that cohort to have made any real money over two years is surprising to the point of disbelief. This may be something particular to the Brazilian exchange.
- melling 7y ago
  I’ve noticed a lot of successful traders trade commodities versus equities. What makes commodities easier to trade? Ed Seykota has been doing it for decades: https://en.m.wikipedia.org/wiki/Ed_Seykota https://en.m.wikipedia.org/wiki/Ed_Seykota
  - Kranar 7y ago
    Commodities are generally harder to trade compared to equities. The reason successful traders do it is because you get access to much greater leverage compared to equities.
  - reverend_gonzo 7y ago
    Leverage. You’ll quickly get big or go home.
  - JackFr 7y ago
    No inside information on commodities. (However trading on embargoed government press releases is illegal. Though rather than kidnapping Clarence Beeks on the train, you can just interview the Florida farmers yourself.)

adrianmonk 7y ago

Or you could say: it's impossible to win the world championship at anything. It would be easy to find data to show that 99.99% of people aren't the best tennis player or fastest runner or best Scrabble player in the world; therefore, nobody can be the best at it. According to this reasoning, at least.

kritiko 7y ago
The point of the article is to dissuade people from pursuing careers in day trading based on marketing that it's an easy way to earn money (from people whose business is selling instructional materials... not day trading). If there were lots of people selling courses on "Become a WTA Tour Player, make millions winning tennis tournaments!" the same type of paper might be warranted for tennis playing.
- adrianmonk 7y ago
  On a high level I agree. The way I see it, "impossible" is the wrong label. What you must do, though, is have a rational basis to believe you're in (making up a number) the top 0.01% of people skilled in that area. If that's true, then it might be a reasonable plan. For the other 99.99%, it's a bad plan. And when I say rational basis, that's its own challenge. There is a huge potential for emotional thinking disguised as rational and for self-delusion. Everyone wants to believe they are the top 0.01%, and most of them are wrong.
ClumsyPilot 7y ago
That would be a perfectly accurate statement. If none except world champions got paid, it would be an atrocious career choice

PopeDotNinja 7y ago

The problem with day trading, and stock trading in general, is that you can't predict the future. No one can. You can diversify your risk by buying the market (e.g. S&P 500 index fund) & hope the trend of going up N% per year continues, but even that isn't guaranteed. Essentially if you try to time/guess/predict the market, you're going gambling & the fees you pay on trading on the rake taken by the broker. Some gamblers do well. Most don't.

arghwhat 7y ago

This is not correct. If we consider a tech startup a single gamble, then living off trading is a continuous stream of independent gambles. While individual gambles may turn out better than the average (even many in a row), repeated gambling will always see the total outcome return to the normal. This is why the house always wins.