90% of traders lose money, but anyone DCA an index would be making money...

wrbtrader · Jun 30, 2020

Do both...stop debating about it.

Put the bulk of your money towards investing and put a little of your money towards day trading or no day trading (e.g. get an expensive hobby).

The few (I really mean a few) that day trade successfully for a living...I guarantee you that they have investments on the side for their retirement and they are not filthy rich unless they inherited their money from family.

That money you set aside for day trading...now go to a forum about day trading and talk about day trading.

wrbtrader

HolyGrailSeeker · Jun 30, 2020

smallfil said:
What is that a painting? Absurd example. Like the filthy rich do not have enough monies to throw around? Not the same as buying into a position, losing monies, then, averaging down as you lose more monies? Most people will bail out to save what is left of their monies. It is just common sense. Ever hear of cut your losses and let your winners run? They did not tell you to average down because it is dumb.
More...

Institutions also buy when it's low..

To me trading is like a game of rock paper scissors

smallfil said:
Still depends on the index. If your index has been trending down, does not matter. You would be averaging down on a losing position which is dumb really. Add to that, the emotion part of it. People do not know how emotional they are until, they lose a lot of monies in the stockmarket in a very short period of time. Those people are going to panic and sell out after such huge losses. Even if an index has been trending up, then, sells off deeply. How many will continue to hang on, how many will bailout and take their monies with their huge losses?
More...

You can buy more when an index has fallen sharply.

Sometimes you play trend following, sometimes contrarian, other times you do nothing. Trading is like a game of rock paper scissors.

deaddog · Jun 30, 2020

HolyGrailSeeker said:
Sometimes you play trend following, sometimes contrarian, other times you do nothing. Trading is like a game of rock paper scissors.
More...

DCA an index is a trend following strategy with risk controlled by diversification and market cap.

I changed to a market timing strategy because I didn't like the volatility.

Snuskpelle · Jun 30, 2020

DCA (and by extension B&H) are great if you live long enough and start early enough. Otherwise, it's a bit of a lottery that you will be sitting through a high stock returns macro period. DCA is still a very reasonable way to deal with investment in face of uncertainty, especially since it takes minimal time so you can do something more useful with your life.

I see people all around me becoming advocates of passive investment and DCA now since they're looking at the post 2008 market...

ironchef · Jun 30, 2020

Sekiyo said:
You guys are irrational.
More...

Of course we are. Aren't you or you won't be here.

smallfil · Jun 30, 2020

HolyGrailSeeker said:
Institutions also buy when it's low..

To me trading is like a game of rock paper scissors

You can buy more when an index has fallen sharply.

Sometimes you play trend following, sometimes contrarian, other times you do nothing. Trading is like a game of rock paper scissors.
More...

The institutions use trend following. Who do you think sets the trends? It is not the retail traders. Even if you take all our monies, it would not be enough to move most stocks in the stockmarket. Maybe, the penny stocks that are thinly, traded? Why do you think so called gurus want low float stocks to day trade? You need a lot of monies to move most stocks with hundreds of millions of shares. Trading stock is easy, some aspects of trading though, are neglected and more important like risk management, trading psychology. That is what makes it hard for any trader to succeed.

ironchef · Jun 30, 2020

Arnie said:
DAY TRADING
WHERE ARE THE DAY TRADER’S YACHTS?
DECEMBER 31, 2018 ADMIN

Google Search “examples of consistently profitable day traders.”

You won’t find a single name. You will find a lot of articles explaining why day trading is not profitable.

The most compelling articles discuss how high frequency trading (HFT) by financially and intellectually well backed Wall Street firms mashes short-term profits out of existence. Other articles explain why day-trading profit was never there in the first plane.

The Main Street day trader underestimates the tendency of extreme randomness in short-term stock prices.

Watch Below Deck: Premature Corkulation on Bravo

See: Bravo TV. 2014. Premature Corkulation

Overwhelming academic evidence shows that the stock market is beaten over weeks, months and years rather than in minutes and seconds.

How do I know this?

I am well connected as a finance professor at a major state university. And I have never heard of a day trader dying rich.

Business Insider concludes that folks who attempt to day-trade stocks “would be far better off working at Burger King.”

Read: Blodget, Henry. 2010. Here’s What Day Traders Don’t Understand. Business Insider.

Why You Should Think Twice About Day Trading Stocks

I am a collector of prominent investor biographies.

In all of my readings I have yet to find a wealthy estate made through day trading. Think about this statement.

I am contracted by the university system to read all existing writings in the field of finance. My particular focus is on the nature of investment returns.

And in my decades of extensive readings I have yet to find a terminally rich day trader.

The Curse of Frequent Small Bets

Eugene F. Fama and Robert J. Shiller shared the 2013 Nobel Prize in Economic Sciences for research on market efficiency. Fama was instrumental in developing the empirical models built on testing efficiency in markets.

The Capital Asset Pricing Model (CAPM) became a precise tool for auditing claims of high returns on Wall Street.

Studies of short-term trading have concluded that gaining a mathematical edge over movements happening during a single trading session is like playing a rigged circus ring toss sinking in quicksand.

Shiller won the prize in large part for pointing out the impossibility of arbitrage in the long run. Limits to arbitrage allow the market to diverge dramatically from equilibrium.

This is why the big money is in enduring price movements.

The unpredictability of short term pricing is such that trading profits are elusive when buying and selling within the day session.

Four out of five people who day-trade lose money. Just 1% are “predictably profitable.”

This is confirmed by recent research by Terrance Odean of the UC Berkeley Haas School of Business. The study concluded that even the predictably profitable day-traders would make more money on balance flipping hamburgers.

Read: Barber, Brad, Yi-Tsung Leeb, Yu-Jane Liuc, and Terrance Odean. 2013. The cross-section of speculator skill: Evidence from day trading. Journal of Financial Markets 18. 1.24.

The Big Money is in Long Term Infrequent Big Bets!

Google Search: “examples of consistently profitable stock value investors” and you will find a lot of wealthy family fortunes. You will also find a lot of articles explaining why value investing is profitable.

Ditto for momentum investing.

The really big money in the stock market is made in tax sheltered stock investing accounts. Profitable long term trend tracking futures and currency traders must operate within a tax scrubbing corporate business structure.

Even so the big money is made by investors who can muster the iron willed conviction to stay large on a rising stock over weeks, months and years. Profit depends on how long the move lasts.

The best stock investors ride along like surfers. They work waves over which they know they have no control. The best of the best take profits with hard stops placed at entry.

These are adjusted upward over time.

High yield long run stock investing should be done within an individual 401(k) and a Roth IRA. Futures and Forex should be traded within a company you create.

Start with an LLC. But don’t open one until you make at least $17,500 in profit in the market.

Why? You can strip the taxes on the $17,500 of trading profits in an individual 401(k) plan straight off of your W2.

And remember that you will have to work very hard to trade stocks, futures or Forex for a living. The odds are 900 to 1 against your success according to the study above.

It is much easier to make money in a day job. Then you can manage your retirement savings in a Roth and 401(k) plans on long run plays on value and momentum stock.

Indexing two thirds gives you training wheels at the start. This takes very little time per week and your odds of success are far higher.

Make sure you open an individual 401(k) to garner the supreme value of freedom in self-direction. The contribution directly reduces your W2 taxable income.

You can add a C corporation later if profits merit. The C-corporation allows you to create a family health plan and expense it off of your tax bill.

The C-corporation also allows you to create a profit sharing plan that offers further deduction.

If you make so much money that you can’t avoid taxes you are left with one alternative. Move your trading business to Puerto Rico under an Act 20 and 22 decree.

-Dr. Scott Brown
More...

Now I don't feel so bad I failed day trading and moved on to swing trade options for a living.

Thank you for your post Dr. Brown. You gave me a few good ideas on how to set up my trading accounts.

Another question for you: I took Finance courses from Coursera to gain some knowledge on finance and investment, do you have any recommendation on courses pertinent to trading options and CAPM?

Regards,

ironchef · Jun 30, 2020

Arnie said:
DAY TRADING
WHERE ARE THE DAY TRADER’S YACHTS?
DECEMBER 31, 2018 ADMIN

Google Search “examples of consistently profitable day traders.”

You won’t find a single name. You will find a lot of articles explaining why day trading is not profitable.

The most compelling articles discuss how high frequency trading (HFT) by financially and intellectually well backed Wall Street firms mashes short-term profits out of existence. Other articles explain why day-trading profit was never there in the first plane.

The Main Street day trader underestimates the tendency of extreme randomness in short-term stock prices.

Watch Below Deck: Premature Corkulation on Bravo

See: Bravo TV. 2014. Premature Corkulation

Overwhelming academic evidence shows that the stock market is beaten over weeks, months and years rather than in minutes and seconds.

How do I know this?

I am well connected as a finance professor at a major state university. And I have never heard of a day trader dying rich.

Business Insider concludes that folks who attempt to day-trade stocks “would be far better off working at Burger King.”

Read: Blodget, Henry. 2010. Here’s What Day Traders Don’t Understand. Business Insider.

Why You Should Think Twice About Day Trading Stocks

I am a collector of prominent investor biographies.

In all of my readings I have yet to find a wealthy estate made through day trading. Think about this statement.

I am contracted by the university system to read all existing writings in the field of finance. My particular focus is on the nature of investment returns.

And in my decades of extensive readings I have yet to find a terminally rich day trader.

The Curse of Frequent Small Bets

Eugene F. Fama and Robert J. Shiller shared the 2013 Nobel Prize in Economic Sciences for research on market efficiency. Fama was instrumental in developing the empirical models built on testing efficiency in markets.

The Capital Asset Pricing Model (CAPM) became a precise tool for auditing claims of high returns on Wall Street.

Studies of short-term trading have concluded that gaining a mathematical edge over movements happening during a single trading session is like playing a rigged circus ring toss sinking in quicksand.

Shiller won the prize in large part for pointing out the impossibility of arbitrage in the long run. Limits to arbitrage allow the market to diverge dramatically from equilibrium.

This is why the big money is in enduring price movements.

The unpredictability of short term pricing is such that trading profits are elusive when buying and selling within the day session.

Four out of five people who day-trade lose money. Just 1% are “predictably profitable.”

This is confirmed by recent research by Terrance Odean of the UC Berkeley Haas School of Business. The study concluded that even the predictably profitable day-traders would make more money on balance flipping hamburgers.

Read: Barber, Brad, Yi-Tsung Leeb, Yu-Jane Liuc, and Terrance Odean. 2013. The cross-section of speculator skill: Evidence from day trading. Journal of Financial Markets 18. 1.24.

The Big Money is in Long Term Infrequent Big Bets!

Google Search: “examples of consistently profitable stock value investors” and you will find a lot of wealthy family fortunes. You will also find a lot of articles explaining why value investing is profitable.

Ditto for momentum investing.

The really big money in the stock market is made in tax sheltered stock investing accounts. Profitable long term trend tracking futures and currency traders must operate within a tax scrubbing corporate business structure.

Even so the big money is made by investors who can muster the iron willed conviction to stay large on a rising stock over weeks, months and years. Profit depends on how long the move lasts.

The best stock investors ride along like surfers. They work waves over which they know they have no control. The best of the best take profits with hard stops placed at entry.

These are adjusted upward over time.

High yield long run stock investing should be done within an individual 401(k) and a Roth IRA. Futures and Forex should be traded within a company you create.

Start with an LLC. But don’t open one until you make at least $17,500 in profit in the market.

Why? You can strip the taxes on the $17,500 of trading profits in an individual 401(k) plan straight off of your W2.

And remember that you will have to work very hard to trade stocks, futures or Forex for a living. The odds are 900 to 1 against your success according to the study above.

It is much easier to make money in a day job. Then you can manage your retirement savings in a Roth and 401(k) plans on long run plays on value and momentum stock.

Indexing two thirds gives you training wheels at the start. This takes very little time per week and your odds of success are far higher.

Make sure you open an individual 401(k) to garner the supreme value of freedom in self-direction. The contribution directly reduces your W2 taxable income.

You can add a C corporation later if profits merit. The C-corporation allows you to create a family health plan and expense it off of your tax bill.

The C-corporation also allows you to create a profit sharing plan that offers further deduction.

If you make so much money that you can’t avoid taxes you are left with one alternative. Move your trading business to Puerto Rico under an Act 20 and 22 decree.

-Dr. Scott Brown
More...

By the way, did you read Schwager's Market Wizard books, there were a few day traders among the wizards.

Arnie · Jun 30, 2020

I don't think any qualify as true daytraders....opening and closing all postitions in same session.

volpri · Jun 30, 2020

DCA = long-term averaging down. Tudor says only loser average down losers. ROFLMAO