5 ms·

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 m

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.)
    - Macross8299 7y ago
      There is definitely inside information on commodities, it's just rare that insider trading on commodities is prosecuted. You would definitely have an advantage in trading oil/gas futures if you had access to ExxonMobil's seismic exploration reports, for example.
      - boulos 7y ago
        Indeed! I found Matt Levine's post last Fall [1], particularly useful, as he believed you couldn't be prosecuted for insider trading of commodities (only securities). Then he received a nastygram from the CFTC :). [1] https://www.bloomberg.com/amp/opinion/articles/2018-10-24/it-s-hard-to-be-an-insider-in-oil https://www.bloomberg.com/amp/opinion/articles/2018-10-24/it...
      - JackFr 7y ago
        Wow. But if Matt Levine can get it wrong too I don’t feel so bad. But the insider trading you suggest above, is predicated on having material non public information of ExxonMobil’s.
- gnopgnip 7y ago
  Many who make millions are risky and lose it all, or more. How many of them are net positive over more than a year?
  - hn_throwaway_99 7y ago
    While I don't necessarily agree with Kranar's conclusions, I think his point is that the same can be said for many highly risky endeavors, like building a startup. IMO the main difference is that, while in both cases you'll see a small number of successes and a huge number of failures, in startup land the net expected value is positive while in day trader land it is negative.
Kranar 7y ago
But what should we compare those odds, how are we supposed to interpret this? Imagine we tracked a group of 1000 randomly picked individuals who wanted to be a brain surgeon. I don't know for sure but I wouldn't be surprised if of 1000 randomly chosen people, only 3 people managed to succeed at it after 4 years. But no one would ever say "Study shows it's impossible for an individual to become a brain surgeon." or imply that it's just random luck to be a brain surgeon. Instead we conclude that being a brain surgeon must be very hard and require a great deal of dedication and commitment. The reason day trading is singled out whereas brain surgeons are not is that the barrier to entry to become a day trader is very low, anyone can try to become a day trader and many people think they can succeed at it. The proper conclusion to take from this is isn't that the stock market is pure luck or just a form of gambling... it's that one shouldn't be deceived by the low barrier to entry into thinking that they can succeed at it. It's really hard, soul crushing work to be a successful day trader in much the same way it's really hard work to do anything in life that pays well.
- kritiko 7y ago
  What would you say the difference is between trying to make money on short term investments and trying to make money betting on sports? Also your final paragraph seems to imply a causal relationship between how hard you work and remuneration. Hard work doesn't hurt, but luck is very important.
- ofibrvev 7y ago
  One major flaw in this reasoning.. Some group of people are guaranteed to become brain surgeons.. the demand is there, the training is there, so it is a near certainty. In fact in the US at least, you can know very closely how many brain surgeons there can be per year. Who will fill those slots isn’t too kind to all takers. It is dedication, hard work, and luck (ie ovarian lottery). Also the majority of those that “fail” at obtaining a neurosurgery training. If they were on the path to medical training will end up falling back to any number of high paying jobs in medicine or surgery. This study found no one did terribly well at day trading. Random chance implies there will be some outlying outcomes, but that is a fundamentally different objective than having too many people for few slots.
- 7y ago

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.)
  - Macross8299 7y ago
    There is definitely inside information on commodities, it's just rare that insider trading on commodities is prosecuted. You would definitely have an advantage in trading oil/gas futures if you had access to ExxonMobil's seismic exploration reports, for example.
    - boulos 7y ago
      Indeed! I found Matt Levine's post last Fall [1], particularly useful, as he believed you couldn't be prosecuted for insider trading of commodities (only securities). Then he received a nastygram from the CFTC :). [1] https://www.bloomberg.com/amp/opinion/articles/2018-10-24/it-s-hard-to-be-an-insider-in-oil https://www.bloomberg.com/amp/opinion/articles/2018-10-24/it...
    - JackFr 7y ago
      Wow. But if Matt Levine can get it wrong too I don’t feel so bad. But the insider trading you suggest above, is predicated on having material non public information of ExxonMobil’s.
gnopgnip 7y ago
Many who make millions are risky and lose it all, or more. How many of them are net positive over more than a year?
- hn_throwaway_99 7y ago
  While I don't necessarily agree with Kranar's conclusions, I think his point is that the same can be said for many highly risky endeavors, like building a startup. IMO the main difference is that, while in both cases you'll see a small number of successes and a huge number of failures, in startup land the net expected value is positive while in day trader land it is negative.

Kranar 7y ago

But what should we compare those odds, how are we supposed to interpret this? Imagine we tracked a group of 1000 randomly picked individuals who wanted to be a brain surgeon. I don't know for sure but I wouldn't be surprised if of 1000 randomly chosen people, only 3 people managed to succeed at it after 4 years. But no one would ever say "Study shows it's impossible for an individual to become a brain surgeon." or imply that it's just random luck to be a brain surgeon. Instead we conclude that being a brain surgeon must be very hard and require a great deal of dedication and commitment. The reason day trading is singled out whereas brain surgeons are not is that the barrier to entry to become a day trader is very low, anyone can try to become a day trader and many people think they can succeed at it. The proper conclusion to take from this is isn't that the stock market is pure luck or just a form of gambling... it's that one shouldn't be deceived by the low barrier to entry into thinking that they can succeed at it. It's really hard, soul crushing work to be a successful day trader in much the same way it's really hard work to do anything in life that pays well.

kritiko 7y ago
What would you say the difference is between trying to make money on short term investments and trying to make money betting on sports? Also your final paragraph seems to imply a causal relationship between how hard you work and remuneration. Hard work doesn't hurt, but luck is very important.
ofibrvev 7y ago
One major flaw in this reasoning.. Some group of people are guaranteed to become brain surgeons.. the demand is there, the training is there, so it is a near certainty. In fact in the US at least, you can know very closely how many brain surgeons there can be per year. Who will fill those slots isn’t too kind to all takers. It is dedication, hard work, and luck (ie ovarian lottery). Also the majority of those that “fail” at obtaining a neurosurgery training. If they were on the path to medical training will end up falling back to any number of high paying jobs in medicine or surgery. This study found no one did terribly well at day trading. Random chance implies there will be some outlying outcomes, but that is a fundamentally different objective than having too many people for few slots.
7y ago