3 ms·

If you buy/sell a lot then there are also fees, both to brokers and I guess implied fees to market makers. So there are more than 2 parties involved (buyer and

If you buy/sell a lot then there are also fees, both to brokers and I guess implied fees to market makers. So there are more than 2 parties involved (buyer and seller), and so more than 50% can lose.

AnthonyMouse 3y ago
There are plenty of no-fee brokerages and market makers arguably narrow the spread. But it doesn't really matter if the percent who lose on net is 50% or 51% if you're at the 75th percentile. And a large plurality of people are. You don't have to be in the top 0.1% to come out ahead. The reason for the usual advice is that 50% of people are below average. And then they get mad when the market proves it to them, so the advice that keeps them satisfied is to buy an index fund.
- quickthrower2 3y ago
  The statistics would be interesting. While 50% of trades are below average, that might translate to a different percentage of trading entities. (like 5 drunk idiots and one sober professional playing poker in a casino)
  - AnthonyMouse 3y ago
    A fool and his money are soon parted. There may be people who show up to the casino drunk, and that can enrich quite a number of other patrons, but then they go home bankrupt and have nothing to play with tomorrow. The steady-state number of drunk idiots is bound to be small because they're self-eliminating.
    - quickthrower2 3y ago
      Ok that os where the analogy breaks down I guess. In the stock market the “idiots” don’t lose their money, they just get below average returns. The average of 1,1,1,1,1,37 is 7. If these are % yoy gains of traders who try to beat the market.
      - AnthonyMouse 3y ago
        Some of the people who try to beat the market do actually lose their money. You can go play games with options trading or short selling or high volatility stocks and not just get 1% instead of 7%, you can lose the majority of your principle. Or all of it. Or even end up in debt. The average of 37, 8, 8, 8, 8, -27 is also 7.
      - FooBarBizBazz 3y ago
        1.01^5 * 1.37 = 1.43988 1.43988^(1/6) = 1.06264 So, really 6.26% CAGR. Not a huge difference here. But it is lower. The difference really shows up when you start seeing losses. The extreme case of one year with 100% loss demonstrates things.

If you buy/sell a lot then there are also fees, both to brokers and I guess implied fees to market makers. So there are more than 2 parties involved (buyer and seller), and so more than 50% can lose.

AnthonyMouse 3y ago

There are plenty of no-fee brokerages and market makers arguably narrow the spread. But it doesn't really matter if the percent who lose on net is 50% or 51% if you're at the 75th percentile. And a large plurality of people are. You don't have to be in the top 0.1% to come out ahead. The reason for the usual advice is that 50% of people are below average. And then they get mad when the market proves it to them, so the advice that keeps them satisfied is to buy an index fund.

quickthrower2 3y ago
The statistics would be interesting. While 50% of trades are below average, that might translate to a different percentage of trading entities. (like 5 drunk idiots and one sober professional playing poker in a casino)
- AnthonyMouse 3y ago
  A fool and his money are soon parted. There may be people who show up to the casino drunk, and that can enrich quite a number of other patrons, but then they go home bankrupt and have nothing to play with tomorrow. The steady-state number of drunk idiots is bound to be small because they're self-eliminating.
  - quickthrower2 3y ago
    Ok that os where the analogy breaks down I guess. In the stock market the “idiots” don’t lose their money, they just get below average returns. The average of 1,1,1,1,1,37 is 7. If these are % yoy gains of traders who try to beat the market.
    - AnthonyMouse 3y ago
      Some of the people who try to beat the market do actually lose their money. You can go play games with options trading or short selling or high volatility stocks and not just get 1% instead of 7%, you can lose the majority of your principle. Or all of it. Or even end up in debt. The average of 37, 8, 8, 8, 8, -27 is also 7.
    - FooBarBizBazz 3y ago
      1.01^5 * 1.37 = 1.43988 1.43988^(1/6) = 1.06264 So, really 6.26% CAGR. Not a huge difference here. But it is lower. The difference really shows up when you start seeing losses. The extreme case of one year with 100% loss demonstrates things.