Study:
• 1992-2006, >75% of all day-traders quit w/i 2 years
• Negative Aggregate performance of all traders over 15-years.
• Only 1 out of 100 day traders earned profits over time
Are ya feeling lucky?
bit.ly/3gquFDX
What's so pernicious from a trader's perspective is: YOU CAN MAKE MONEY DAY-TRADING!!! but the odds are you will give it back plus most of your starting capital. Greed only sees the all-caps teaser while ignoring the lower-case reality.
See this US example:
Individual investors pay a tremendous performance penalty for active trading. From 1991 to 1996, of 66,465 household with discount brokerage trading accounts, those trading the most earned 11.4%/year vs 17.9% for the market's returns
faculty.haas.berkeley.edu/odean/papers%2…
"When Day Traders Do Well, It’s Probably Just Luck"
There are exceptions, most notably, Jim Simons + the Medallion Fund, whose returns since 1987 are 2,091,747%
wsj.com/articles/when-…
Here is the thing:
You Are Not Jim Simons (Neither am I)
ritholtz.com/2020/04/you-ar…
Nope, you are not Bill Ackman either. Or Howard Marks, Ray Dalio, Stevie Cohen, or Ken Griffin.
Maybe you are a good or even a great trader, but before you try to find that out, you should at least know how much the odds are stacked against you.
Criticisms of trading as all luck are off base; It is very hard to consistently make money
I believe the odds of becoming a high schooler becoming a professional athlete are similar to that of a day trader becoming a successful professional trader.
ritholtz.com/2011/07/how-ha…
"Free" trades are not free.
There are myriad costs built in. Just because you don't see the $7 cost for trade execution does not mean it's not built-in.
Think about wider spreads, paying up to the ask or selling to the bid.
Free is expensive
You can pay a premium + get privacy, elegance + a premium solution
Or you can get the product for free & they figure out a way to monetize you as a user
via @profgalloway
"There is a basic, fundamental foundation upon which all economics is built: everything has a cost. There is no free lunch. Everything has a cost, at times, it can be hidden from view."
ritholtz.com/2018/10/cheap-…
Trading firms earn money generating trades (duh). But of all of these, the one I would least call a "passive trading outfit" is Robinhood . . .
nypost.com/2021/06/12/how…
Note: many of the ideas here have been detailed by lots of people who have thought long and hard about this.
See e.g., @safalniveshak (I linked to this in my daily reads last week); he pointed me to that research paper referenced up top.
safalniveshak.com/is-day-trading…
My colleague @dollarsanddata addressed the topic as well -- his thoughtful approach to using data to tell a story is ever-present.
ofdollarsanddata.com/is-there-a-bet…
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