3 ms·

Why would they lose the more they trade? I mean yeah they’ll lose some on the spread but not very much. You would expect their returns on average to match the m

• perl4ever 7y ago
  People often imagine they'll make huge amounts of money by making a tiny amount on each trade, very frequently and consistently. The arithmetic on the percentages makes it appear possible. It just works just as well (or better/worse) in reverse. I'm not sure what's typical these days, but let's say the spread on a large cap liquid stock is 0.02% and the spread on a small cap illiquid stock is 0.40%. If you trade once a year, the cost is comparable to the management fees on an index fund. Not much, but already you're paying more than someone who is fully diversified. If you trade everything once a month, and average -0.40% each time, you are down 20% after five years! If you trade more frequently, say 200 times a year (not every day, but most days) and stick to the liquid stocks so that it only costs 0.02%, then you are also down roughly 20% after five years, before the actual returns.
  • m3kw9 7y ago
    Also you tend to lose when playing the short game, short game is more easily predicted by algorithms. So you are not only going against pros, you are going against machines that has speed and world class math phds