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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 id
by 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 agoA 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 agoOk 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 agoSome 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 ago1.01^5 * 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.