4 ms·

That's not a profitable strategy. The opposite of noise is noise.

zitterbewegung 5y ago
Also, when you trade you expect the value of a security to go up in the future. When it is in the news you have an observation of an event of t-1 due to the fact that people have already written about it and others have taken actions already.
- dheera 5y ago
  Legalize insider trading and make large trades go through very slowly while small trades go through in milliseconds. This would allow common people with a few thousand dollars to act on news and make meaningful amounts of money, while hedgehog funds have to wait for their transaction to painfully slowly go through. Let real people make money for once.
  - edgyquant 5y ago
    How would this work? Most institutions buy and sell through a bunch of small trades they don’t buy a million shares at once
    - dheera 5y ago
      Base it on the size of your position before or after (whichever is higher), not the size of your trade.
  - okwubodu 5y ago
    (Very) Large trades already go through slowly unless you’re buying/selling a high volume stock at market. Also when they say insiders already heard the news it’s more like days ahead, not hours.
    - dheera 5y ago
      I meant to delay it by more than that. If you own 100000 shares of AMZN, it should take an entire quarter for your trade to go through. You will lose money if there is bad news. If you own 1 share of AMZN, it should take 1 ms. If you are a super well-networked intern and figured out the bad news, bravo, you just made a bunch of money.
      - deleted 5y ago
        [deleted]
        deleted 5y ago
        [deleted]
      - mahkeiro 5y ago
        100000 is 3-5% of daily volume… your trade will go during the day with limited effect (except if you create a at market order for 100000)
      - ipaddr 5y ago
        That would cause an fake increase of stock price temporary keeping it artificially higher. Meaning anyone buying would be paying more than the actual value. The next thought would be wouldn't the market correct for this? It doesn't know if I'm going to sell 100,000 at once or 1,000 shares daily for 100 days.
        dheera 5y ago
        I was thinking that if you possess a lot of shares, your orders are all forced to go through with a several-day (even -month) delay, regardless of the size of your trade.
  - jb775 5y ago
    Would need to get rid of dark pools, or at least completely open up their visibility. (should be more transparent anyways) And would need a way to backwards-track trades to make sure a single entity isn't placing millions of small trades...which would also require individual verifiable identities being linked to each trade.
  - fighterpilot 5y ago
    Why would you want 100 people doing the job of 1? You'd be purposefully eliminating economies of scale and making the market less efficient.
    - JanisL 5y ago
      Why would you want 100 people to have wealth instead of just one? I feel there's some related questions about utility being non-linear that matter here
      - fighterpilot 5y ago
        No, because you can make the same argument against any improvement in efficiency and productivity. It's like arguing against division of labor or automation in a factory because less people will be employed by the factory. It's anti-prosperity.
      - eru 5y ago
        Eh, let the market place organize in a matter that promotes efficiency, and if you really want to re-distribute, use the tax system. That way you get a bigger pie to share around.
  - eru 5y ago
    You joke, but there are serious economists suggesting that we _should_ in fact legalize insider trading. (Though your employment contract might still forbid you.) In any case, your suggestion wouldn't really work: the insider who would benefit would mostly be high up managers, not anymore 'real people' than the (relative) corporate outsiders who run the hedge funds and vulture funds etc. Second, who would the retail traders trade with on those news? Market makers would go on to quote huge spreads, or not trade at all. Those institutional investors you want to hobble ain't so stupid. (And those that are, wouldn't last long.)
    - dheera 5y ago
      I actually am not joking; I don't think access to information should be discriminated upon. If you have better access to information, because of a leak, you are better fit, better networked, and should be rewarded for it. At the same time, those high up managers would probably be trading millions of dollars worth of shares -- their trades should go through slowly, and that is a mechanism that would prevent them from benefitting from it. The person who benefits the most, percentage-wise, will be the dude who sweeps the floors at Amazon and sniffed the bad news based on, say, the times that people were coming in and out of work. Or the intern who found a huge security vulnerability and shorted the stock before disclosing it. These people should be rewarded. These people will get a few months' worth of rent while the millionaire just gets an additional Michelin one-star dinner, at best. And the billionaire CEO who owns a shitton of shares will lose money because he has enough shares that his trades will be delayed by an entire quarter.
      - eru 5y ago
        OK, those economists are also not joking. Though they have different reasons to allow insider trading. Mostly to make markets more efficient by making them incorporate more information. In the end, that's good for productivity. In any case: you can remove the laws that make insider trading various shades of illegal in various countries around the globe. However, companies would very likely still insert clauses in their employment contracts that forbid insider trading. (And have you eg forfeit any profits you make to the company plus a hefty extra penalty on top.) If you wanted to get to the situation you describe, you'd have to make a law that makes these kinds of clauses unenforceable. That's probably pretty hard to get right, if you still want companies to be able to protect trade secrets with contracts. How are you planning to make big trades go slow? I mean, mechanically? And, as I asked earlier, who do you think would be the willing counterparties for those retail trades when you make the life of market makers harder? (Btw, I didn't downvote you.)
- eru 5y ago
  > Also, when you trade you expect the value of a security to go up in the future. Not necessarily. You can also trade on securities going down in value (via shorting). Or you can even just bet on eg volatility going up or down or staying the same. (Eg via some derivatives and options.) Or you can bet on relative price movements of some security vs another. You are right about financial prices being forward looking, and news being backwards looking. And: by the time you have heard of something in the news, the professionals and their computers will have already traded on it a million times over. This mostly applies to deeply liquid markets. If you are trading rare Lego sets or Magic the Gathering cards, you might still benefit from news.
- jsemrau 5y ago
  One of the main drivers of a stock price is the assumption of earnings. New product ? Slash cost? Higher taxes / interest? If it's a surprise, then the reaction can be quick. If it's quick its much more profitable or disastrous (depending on which side you are on).

Also, when you trade you expect the value of a security to go up in the future. When it is in the news you have an observation of an event of t-1 due to the fact that people have already written about it and others have taken actions already.

dheera 5y ago
Legalize insider trading and make large trades go through very slowly while small trades go through in milliseconds. This would allow common people with a few thousand dollars to act on news and make meaningful amounts of money, while hedgehog funds have to wait for their transaction to painfully slowly go through. Let real people make money for once.
- edgyquant 5y ago
  How would this work? Most institutions buy and sell through a bunch of small trades they don’t buy a million shares at once
  - dheera 5y ago
    Base it on the size of your position before or after (whichever is higher), not the size of your trade.
- okwubodu 5y ago
  (Very) Large trades already go through slowly unless you’re buying/selling a high volume stock at market. Also when they say insiders already heard the news it’s more like days ahead, not hours.
  - dheera 5y ago
    I meant to delay it by more than that. If you own 100000 shares of AMZN, it should take an entire quarter for your trade to go through. You will lose money if there is bad news. If you own 1 share of AMZN, it should take 1 ms. If you are a super well-networked intern and figured out the bad news, bravo, you just made a bunch of money.
    - deleted 5y ago
      [deleted]
      - deleted 5y ago
        [deleted]
    - mahkeiro 5y ago
      100000 is 3-5% of daily volume… your trade will go during the day with limited effect (except if you create a at market order for 100000)
    - ipaddr 5y ago
      That would cause an fake increase of stock price temporary keeping it artificially higher. Meaning anyone buying would be paying more than the actual value. The next thought would be wouldn't the market correct for this? It doesn't know if I'm going to sell 100,000 at once or 1,000 shares daily for 100 days.
      - dheera 5y ago
        I was thinking that if you possess a lot of shares, your orders are all forced to go through with a several-day (even -month) delay, regardless of the size of your trade.
- jb775 5y ago
  Would need to get rid of dark pools, or at least completely open up their visibility. (should be more transparent anyways) And would need a way to backwards-track trades to make sure a single entity isn't placing millions of small trades...which would also require individual verifiable identities being linked to each trade.
- fighterpilot 5y ago
  Why would you want 100 people doing the job of 1? You'd be purposefully eliminating economies of scale and making the market less efficient.
  - JanisL 5y ago
    Why would you want 100 people to have wealth instead of just one? I feel there's some related questions about utility being non-linear that matter here
    - fighterpilot 5y ago
      No, because you can make the same argument against any improvement in efficiency and productivity. It's like arguing against division of labor or automation in a factory because less people will be employed by the factory. It's anti-prosperity.
    - eru 5y ago
      Eh, let the market place organize in a matter that promotes efficiency, and if you really want to re-distribute, use the tax system. That way you get a bigger pie to share around.
- eru 5y ago
  You joke, but there are serious economists suggesting that we _should_ in fact legalize insider trading. (Though your employment contract might still forbid you.) In any case, your suggestion wouldn't really work: the insider who would benefit would mostly be high up managers, not anymore 'real people' than the (relative) corporate outsiders who run the hedge funds and vulture funds etc. Second, who would the retail traders trade with on those news? Market makers would go on to quote huge spreads, or not trade at all. Those institutional investors you want to hobble ain't so stupid. (And those that are, wouldn't last long.)
  - dheera 5y ago
    I actually am not joking; I don't think access to information should be discriminated upon. If you have better access to information, because of a leak, you are better fit, better networked, and should be rewarded for it. At the same time, those high up managers would probably be trading millions of dollars worth of shares -- their trades should go through slowly, and that is a mechanism that would prevent them from benefitting from it. The person who benefits the most, percentage-wise, will be the dude who sweeps the floors at Amazon and sniffed the bad news based on, say, the times that people were coming in and out of work. Or the intern who found a huge security vulnerability and shorted the stock before disclosing it. These people should be rewarded. These people will get a few months' worth of rent while the millionaire just gets an additional Michelin one-star dinner, at best. And the billionaire CEO who owns a shitton of shares will lose money because he has enough shares that his trades will be delayed by an entire quarter.
    - eru 5y ago
      OK, those economists are also not joking. Though they have different reasons to allow insider trading. Mostly to make markets more efficient by making them incorporate more information. In the end, that's good for productivity. In any case: you can remove the laws that make insider trading various shades of illegal in various countries around the globe. However, companies would very likely still insert clauses in their employment contracts that forbid insider trading. (And have you eg forfeit any profits you make to the company plus a hefty extra penalty on top.) If you wanted to get to the situation you describe, you'd have to make a law that makes these kinds of clauses unenforceable. That's probably pretty hard to get right, if you still want companies to be able to protect trade secrets with contracts. How are you planning to make big trades go slow? I mean, mechanically? And, as I asked earlier, who do you think would be the willing counterparties for those retail trades when you make the life of market makers harder? (Btw, I didn't downvote you.)
eru 5y ago
> Also, when you trade you expect the value of a security to go up in the future. Not necessarily. You can also trade on securities going down in value (via shorting). Or you can even just bet on eg volatility going up or down or staying the same. (Eg via some derivatives and options.) Or you can bet on relative price movements of some security vs another. You are right about financial prices being forward looking, and news being backwards looking. And: by the time you have heard of something in the news, the professionals and their computers will have already traded on it a million times over. This mostly applies to deeply liquid markets. If you are trading rare Lego sets or Magic the Gathering cards, you might still benefit from news.
jsemrau 5y ago
One of the main drivers of a stock price is the assumption of earnings. New product ? Slash cost? Higher taxes / interest? If it's a surprise, then the reaction can be quick. If it's quick its much more profitable or disastrous (depending on which side you are on).