5 ms·

Yep, that is a fairly common misunderstanding that the general public makes (and ends up with: if I just take the opposite decision then I will make money). Th

Yep, that is a fairly common misunderstanding that the general public makes (and ends up with: if I just take the opposite decision then I will make money). The main reason why 90% lose money is costs. That is it. Most people probably are optimised for losing money but the main issue is really costs/overtrading. But related to this, most people believe that edge on profitable trades is very large...but in most markets, institutional-grade costs will still be a big chunk of your edge i.e. costs matter hugely.

Bubbadoo 6y ago
Costs? as in commissions? I haven't paid a commission in two years. Many brokers are now commission-free.
- clairity 6y ago
  if it's commission free, it's likely because (1) fees are baked into the quoted price, or (2) firms are buffering trades with their own holdings and making money on traders' losses. you're paying somewhere for sure.
  - TuringNYC 6y ago
    Sort of. The fees are baked into quoted price ("the spread") but the execution cannot be worst than the NBBO (National Best Bid Offer). They are making money on the spread for sure, probably crossing some trades internally as well. They also make money on the margin rates.
    - rmrfstar 6y ago
      Yeah, but the NBBO moves. You don't think it's at all strange that 80% of share volume coming out of Robinhood is sold off to broker-dealers attached to large systematic hedge funds? I'm sure you could think of a thing or two to do with terabytes of retail trade logs and behavioral advertising data.
      - TuringNYC 6y ago
        >> Yeah, but the NBBO moves. The rule is that at the time of the execution, the execution cannot be worse than the NBBO. I'm dont work at a broker dealer anymore, i'm a retail investor. I think where we are is awesome. Ten years ago, these trades cost $7 to $20 ($1 for iB) + spread. Twenty years ago, they cost $10 to $50 + spread. Twenty five years ago they cost $35+ + spread. These numbers are not even inflation adjusted. In think where we are is awesome and a big win for customers.
        rmrfstar 6y ago
        I'm not saying things aren't better now than they were in 2000. I'm just saying that systematic hedge funds make directional bets and hold positions overnight. These activities move the midpoint. That is a hidden cost not visible in spreads or commissions. The SEC can't even measure that cost, only the intermediaries themselves can.

Bubbadoo 6y ago

Costs? as in commissions? I haven't paid a commission in two years. Many brokers are now commission-free.

clairity 6y ago
if it's commission free, it's likely because (1) fees are baked into the quoted price, or (2) firms are buffering trades with their own holdings and making money on traders' losses. you're paying somewhere for sure.
- TuringNYC 6y ago
  Sort of. The fees are baked into quoted price ("the spread") but the execution cannot be worst than the NBBO (National Best Bid Offer). They are making money on the spread for sure, probably crossing some trades internally as well. They also make money on the margin rates.
  - rmrfstar 6y ago
    Yeah, but the NBBO moves. You don't think it's at all strange that 80% of share volume coming out of Robinhood is sold off to broker-dealers attached to large systematic hedge funds? I'm sure you could think of a thing or two to do with terabytes of retail trade logs and behavioral advertising data.
    - TuringNYC 6y ago
      >> Yeah, but the NBBO moves. The rule is that at the time of the execution, the execution cannot be worse than the NBBO. I'm dont work at a broker dealer anymore, i'm a retail investor. I think where we are is awesome. Ten years ago, these trades cost $7 to $20 ($1 for iB) + spread. Twenty years ago, they cost $10 to $50 + spread. Twenty five years ago they cost $35+ + spread. These numbers are not even inflation adjusted. In think where we are is awesome and a big win for customers.
      - rmrfstar 6y ago
        I'm not saying things aren't better now than they were in 2000. I'm just saying that systematic hedge funds make directional bets and hold positions overnight. These activities move the midpoint. That is a hidden cost not visible in spreads or commissions. The SEC can't even measure that cost, only the intermediaries themselves can.