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Good for this guy for making this app. However, this makes me worried for him... > There’s a 50% chance that I can lose $50.00 in a few days, but there’s also

Good for this guy for making this app. However, this makes me worried for him... > There’s a 50% chance that I can lose $50.00 in a few days, but there’s also a 50% chance that I can make $100.00 or more in a few days. Why 50% chance? This number will be different for every person depending on his profit & loss history. Ummm..... This doesn't seem true to me. What if the stock just stays flat? That's more often than not the default for many stocks. if you make the dubious assumption that all three outcomes are equally valid then you loose 2/3s of the time. If the stock stays flat then you lose as you have to pay commissions to enter into the trade and to exit the trade. Lots of people model algorithms, very few model them accurately, sometimes myself included unfortunately:) > But swing traders need to win at least 50% of the time in order to be profitable. If you don't pay any commissions or have any overhead, sure. But I'm guessing you pay commission and I'm guessing you have overhead. I would read up on the Kelly Criterion to imporove your capital allocation. http://en.wikipedia.org/wiki/Kelly_criterion http://en.wikipedia.org/wiki/Kelly_criterion > You should stay away from stocks priced below $5.00 because these are Penny Stocks and involve a higher risk. You might consider stocks between $5.00 and $10.00, but again, they involve higher risk and even worse, they might go into Penny Stock territory. This is just plain false. Being under $5 is one of 3 criteria that make up a penny stock, its a necessary but not sufficent condition. There are plenty of good companies with stock prices under $5. The price of a stock isn't a good indicator of its risk. > The reality is that it’s easier said than done! It’s actually very hard to make money in the stock market! You will win but you will also lose a lot! To put it into perspective Full points to the author for realizing this! I'm still amazed at the number of people who think they can slap together some machine learning, nlp or deep learning and make money. People literally spend all their time doing this, if there was free money to be made someone would be making it:)

jeffreyrogers 12y ago
> People literally spend all their time doing this, if there was free money to be made someone would be making it:) I agree with everything you said above, including this. I want to add though, that there is effectively free money in the stock market. For example, just by buying a low-fee index fund (e.g. something from Vanguard), you're almost guaranteed to do better than most investors and probably better than nearly all speculators. (And there are other investment strategies that typically outperform the indices as well). I guess the reason people do poorly in the stock market is similar to why people start dumb startups that don't really have any hope of being profitable: The idea of rapidly creating an enormous amount of money for very little effort in a very short amount of time is much more appealing than making 12+% per year indefinitely, even though this strategy is much more likely to net you a higher return in the long-run... plus you actually have to save money if you want to invest this way :) Edit: It's also interesting to learn about how some of the big quant trading firms started. D.E. Shaw, for example, originally had some bond trading algorithms they used. It was very profitable and the hours were short compared to the rest of the Wall Street/Finance world. Then they got greedy and tried some more aggressive strategies, blew up, and nearly lost the fund. Fortunately for them they seem to be doing much better now, though I'm not sure what their current strategy is.
- mistrQ 12y ago
  > People literally spend all their time doing this, if there was free money to be made someone would be making it:) I used to think this, then I worked on a trading system in an investment bank. Don't underestimate how quickly and easily you can learn and exceed people who should know what they're doing, given sufficient motivation.
  - falsestprophet 12y ago
    There are thousands of buy side firms all over the world stocked with stone cold geniuses who do this all day every day after having trained in maths and science all their lives. The fact that you saw some people you perceived to be clowns once, does not demonstrate the market is anyone's for the taking.
    - lnanek2 12y ago
      Those people are usually managing a lot of money, though. Warren Buffet has said he has to trade completely differently nowadays due to size. So those people are not working the same opportunities most people here are going for.
      - falsestprophet 12y ago
        Sure, even small hedge funds and propriety trading firms are generally working with millions of dollars. I agree there must be some niches are that are amenable to exploitation by small independent traders (perhaps anything to do with nanocap stocks). I have not had success finding niches where I thought I would be successful, but I could very well be insufficiently clever. But trading highly liquid equities on a multi-day timescale (the strategy proposed here) is certainly not prohibitively hostile territory for large, sophisticated buy side operations.
      - jonknee 12y ago
        A lot of HFT shops (if not most), don't "manage" any money in the conventional sense. They close the books at night and don't hold any positions when there isn't active trading. What Buffet does and what HFT do are completely different. The reason why Buffet has to change how he trades is because of HFT. If Buffet puts in an order for 100,000 shares of Coke (KO) while it's at $40 a share, he would not stand a chance. HFT bots would swarm in and scoop every last share of KO that's available and then sell it back for incrementally more. All within a fraction of fraction of a fraction of a second.
cliftonk 12y ago
Very helpful post. I'd like to add that "Fooled by Randomness" [1] by Taleb should be required reading for investors and speculators alike. A couple other good quotes to remember by one of my favorite investors, Ray Dalio. "Just because something hasn't happened recently doesn't mean it's implausible." "Always ensure that the improbable outcome is still acceptable." [1] http://www.amazon.com/Fooled-Randomness-Hidden-Markets-Incerto/dp/0812975219 http://www.amazon.com/Fooled-Randomness-Hidden-Markets-Incer...

jeffreyrogers 12y ago

> People literally spend all their time doing this, if there was free money to be made someone would be making it:) I agree with everything you said above, including this. I want to add though, that there is effectively free money in the stock market. For example, just by buying a low-fee index fund (e.g. something from Vanguard), you're almost guaranteed to do better than most investors and probably better than nearly all speculators. (And there are other investment strategies that typically outperform the indices as well). I guess the reason people do poorly in the stock market is similar to why people start dumb startups that don't really have any hope of being profitable: The idea of rapidly creating an enormous amount of money for very little effort in a very short amount of time is much more appealing than making 12+% per year indefinitely, even though this strategy is much more likely to net you a higher return in the long-run... plus you actually have to save money if you want to invest this way :) Edit: It's also interesting to learn about how some of the big quant trading firms started. D.E. Shaw, for example, originally had some bond trading algorithms they used. It was very profitable and the hours were short compared to the rest of the Wall Street/Finance world. Then they got greedy and tried some more aggressive strategies, blew up, and nearly lost the fund. Fortunately for them they seem to be doing much better now, though I'm not sure what their current strategy is.

mistrQ 12y ago
> People literally spend all their time doing this, if there was free money to be made someone would be making it:) I used to think this, then I worked on a trading system in an investment bank. Don't underestimate how quickly and easily you can learn and exceed people who should know what they're doing, given sufficient motivation.
- falsestprophet 12y ago
  There are thousands of buy side firms all over the world stocked with stone cold geniuses who do this all day every day after having trained in maths and science all their lives. The fact that you saw some people you perceived to be clowns once, does not demonstrate the market is anyone's for the taking.
  - lnanek2 12y ago
    Those people are usually managing a lot of money, though. Warren Buffet has said he has to trade completely differently nowadays due to size. So those people are not working the same opportunities most people here are going for.
    - falsestprophet 12y ago
      Sure, even small hedge funds and propriety trading firms are generally working with millions of dollars. I agree there must be some niches are that are amenable to exploitation by small independent traders (perhaps anything to do with nanocap stocks). I have not had success finding niches where I thought I would be successful, but I could very well be insufficiently clever. But trading highly liquid equities on a multi-day timescale (the strategy proposed here) is certainly not prohibitively hostile territory for large, sophisticated buy side operations.
    - jonknee 12y ago
      A lot of HFT shops (if not most), don't "manage" any money in the conventional sense. They close the books at night and don't hold any positions when there isn't active trading. What Buffet does and what HFT do are completely different. The reason why Buffet has to change how he trades is because of HFT. If Buffet puts in an order for 100,000 shares of Coke (KO) while it's at $40 a share, he would not stand a chance. HFT bots would swarm in and scoop every last share of KO that's available and then sell it back for incrementally more. All within a fraction of fraction of a fraction of a second.

cliftonk 12y ago

Very helpful post. I'd like to add that "Fooled by Randomness" [1] by Taleb should be required reading for investors and speculators alike. A couple other good quotes to remember by one of my favorite investors, Ray Dalio. "Just because something hasn't happened recently doesn't mean it's implausible." "Always ensure that the improbable outcome is still acceptable." [1] http://www.amazon.com/Fooled-Randomness-Hidden-Markets-Incerto/dp/0812975219 http://www.amazon.com/Fooled-Randomness-Hidden-Markets-Incer...