Economics

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Less than 1% of day traders were able to beat the market… Adopt a dog, take up a sport, anything but stock trading. (web.archive.org)

submitted 5 months ago by [email protected] to c/[email protected]

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[–] [email protected] 9 points 5 months ago* (last edited 5 months ago) (2 children)

Probably because of lack of knowledge and so many youtubers/twitters promoting that shit. It's mind boggling how so many people can give financial advice on social media and not to go jail for it. They also always skew things, so that it seems that their advice was good when it really wasn't.

Edit: I meant "lack of knowledge" that technical analysis is based on probabilities. Even if you do everything right, there's still a significant chance that the market goes against you. Which is when a lot of traders end up getting their accounts blown out. Brokers also give noob traders tools like leverage and margin, which only makes it more likely for people to lose everything in one bad trade.

[–] [email protected] 7 points 5 months ago

It's not about knowledge. The stock market is fundamentally chaotic as it responds not only to external signals (like firm profitability) but also to itself. Following the market is essentially just the strategy of holding long enough and in enough stocks that you filter out the high frequency swings and focus on pure surplus extraction. If you try to follow the high frequency variations, you have to predict them in advance to take advantage. You can only do that if you have shit loads of data, a good algorithm and maybe a healthy heaping of insider knowledge. Most day traders don't have that.

[–] [email protected] 3 points 5 months ago

I think in this case it is more than just "lack of knowledge", at least concerning the basic investment idea. Less than 1% beating the market can't just be about knowledge, but in my opinion suggest something more fundamental preventing success. Otherwise there'd be more people finding success just acting randomly or consistently choosing the opposite of the consensus.

Imo at least concerning retail investors it is a disadvantage in speed and access to tools. And additionally fees from middlemen eating away potential profits at this smaller scale.

We don't really now what exactly they are doing, but I imagine that something like Renaissance technologies' medallion fund are arbitraging away any profits (after fees) to be had. They'll be faster with their way better infrastructure and will use financial instruments in such complex ways the average investor can't even imagine or access. I guess knowing where to look for these opportunities is a knowledge advantage, but not on an individual trade level, but a systematic one.