Difference Between Poker and the Stock Market

[stephenNUTS]

Barron,

I am not positive but you appear to be knowledgable enough to probably know Ren. for example works with a "secret club society" mentality.
I am sure if they dont self clear...there clearing costs due to huge volumn ,is probably negligible,and many of the smaller tiered clearing houses such as a Penson Financial(located in Texas),which specialized in DT'ing clearing would give them deal to beat the band...believe me ...thats something I KNOW,just based on volumn alone!

Thanks again,
Stephen

[pig4bill]

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I posted this a few days back to someone new to investing:
As a former B/D owner,I have ONE word of advice for anyone new to investing in the market.

I became fairly wealthy retiring after 20 yrs from the commisions from daytraders alone

DO NOT DAYTRADE..the Big Boys will eat you up,as intra-day trading can run up HUGE costs,from commisions,ECN costs from ARCA/Island,monthly sofware costs(a premium daytrading platform like RealTickPro costs almost $300 a month),etc

If you are DT'ing from one of their remote locations(we had 20+),it will cost even more as they(the B/D) will encourage 40 or more trades a day.If you are trading from home,you are an isolated target lacking live news feeds as Bloomberg-Reuters,cable connection vs. T-1 or better yet T-3 lines,home distractions,etc.You are gonna' go broke fast just watching CNBC or Cramer(what a joke/FOOOL)from home

This is WAAY too much to over come.Sure a B/D will give you a muliple monitor set-up,free lunch,BS you with all kinda CANT MISS formulas,etc...but it is ALL about the # and volumn of each trade.

You are only a commodity while trading with them....until your last one.Then ,,,,,NEXT!

Of the THOUSANDS of DT'ers I that came and went 99% went BUST!
I am just trying to warn anyone that thinks DT'ing is easy or anywhere near in comparison to standard investing in the stock market.The commisions over time,cannot be overcome when doing 30+ intraday trades per day

~stephen

If you have any questions,feel free to ask

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Eh... this is wrong.

You are stuck in the 20th century. Things have changed. A lot.

[pig4bill]

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Another huge difference - luck is a major factor in poker and has very little effect in stocks.

You can play poker well all night and triple or quadruple up on your buy-in, and get all-in with a 5 to 1 edge and lose it all on one hand. You can say that over time you should win most of those hands, but there's nothing that says you will. In the stock market, if you've done your work, luck plays a very small role.

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The market has a high level of variance (luck factor). Part of the skill of poker and the market is to understand this variance and know how to react to it. Benjamin Graham felt how you handled variance had a great effect on your results:

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If you put in your work, luck has very little to do with your results.

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Just because you buy a stock that you believe has great value, it doesn't mean the market will recognize that value right after you buy it.

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That's why I don't trade that way.

[stephenNUTS]

I might be stuck in 20th century thinking...but I RETIRED in the 21st century from that same thinking.... from individual DAYTRADERS alone!

Are you familiar with DT'ing game?
If so..Discuss Plz
[img]/images/graemlins/smile.gif[/img]

[tippy]

Interesting thread. I got to side with stephenNuts here though. I've been daytrading since 1996 and the game has gotten to the point where it is unbeatable in certain markets, specifically stocks.

The primary similarity between Poker/Stocks in that the longer the game has gone on, the more skilled the players have become and therefore the HARDER it has become to make money. From 1997-2001 it was possible to make a killing daytrading. From 2001-2004 it was possible to make a killing playing poker. Now there is so much parity between the participants, money is harder to accumulate.

The second factor that killed the market was the move from fractions to decimals, with commissions remaining equal. Taking an easy .25 on 10,000 shares was sweet, making 5 cents on 10,000 shares is just a losing proposition. For daytrading to work, you must have volatility. There is no real volatility anymore due to information dissemination and electronic trading platforms.

Basically in the stock market, you cannot hypertrade and make money anymore, however if you cut your hand selection down to premium trades, you can still make money.

While making money in daytrading stocks is much harder now, FOREX does offer a way to trade shorter term and make some money, although once this market gets saturated, it will suffer the same fate as stocks/poker. FOREX trades with no commissions, only spreads and the software is free. It is also a more trending market, which allows a little more risk containment, although it does have high risks. You can also get into this type of trading with very little money. Still, you better know your intermarket play between rates, equities, commodities, etc. A good bit of skill in currency trading, probably more than simple stock trading.

[stephenNUTS]

[ QUOTE ]
Interesting thread. I got to side with stephenNuts here though. I've been daytrading since 1996 and the game has gotten to the point where it is unbeatable in certain markets, specifically stocks.

The primary similarity between Poker/Stocks in that the longer the game has gone on, the more skilled the players have become and therefore the HARDER it has become to make money. From 1997-2001 it was possible to make a killing daytrading. From 2001-2004 it was possible to make a killing playing poker. Now there is so much parity between the participants, money is harder to accumulate.

The second factor that killed the market was the move from fractions to decimals, with commissions remaining equal. Taking an easy .25 on 10,000 shares was sweet, making 5 cents on 10,000 shares is just a losing proposition. For daytrading to work, you must have volatility. There is no real volatility anymore due to information dissemination and electronic trading platforms.

Basically in the stock market, you cannot hypertrade and make money anymore, however if you cut your hand selection down to premium trades, you can still make money.

While making money in daytrading stocks is much harder now, FOREX does offer a way to trade shorter term and make some money, although once this market gets saturated, it will suffer the same fate as stocks/poker. FOREX trades with no commissions, only spreads and the software is free. It is also a more trending market, which allows a little more risk containment, although it does have high risks. You can also get into this type of trading with very little money. Still, you better know your intermarket play between rates, equities, commodities, etc. A good bit of skill in currency trading, probably more than simple stock trading.

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Nice post Tippy(and not just because you agree with me)

You hit the nail on the head on all the relevent points,esp. the timelines you listed.
The volatility issue which I think I neglected is another MUST in order to profit intra-day

Stephen [img]/images/graemlins/smile.gif[/img]

[Foghatlive]

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While making money in daytrading stocks is much harder now, FOREX does offer a way to trade shorter term and make some money, although once this market gets saturated, it will suffer the same fate as stocks/poker. FOREX trades with no commissions, only spreads and the software is free. It is also a more trending market, which allows a little more risk containment, although it does have high risks.

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I checked out FOREX a few years ago. It seemed like a sucker bet for a small investor.

You have to set stop losses so that you can sleep at night. But, when you do set them, there's always a spike that sets them off. You can be 100% right about the direction of a currency and still lose.

[tippy]

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While making money in daytrading stocks is much harder now, FOREX does offer a way to trade shorter term and make some money, although once this market gets saturated, it will suffer the same fate as stocks/poker. FOREX trades with no commissions, only spreads and the software is free. It is also a more trending market, which allows a little more risk containment, although it does have high risks.

[/ QUOTE ]

I checked out FOREX a few years ago. It seemed like a sucker bet for a small investor.

You have to set stop losses so that you can sleep at night. But, when you do set them, there's always a spike that sets them off. You can be 100% right about the direction of a currency and still lose.

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If you can't sleep at night, then your position was too big to begin with.

Forex isn't really a good vehicle to buy and hold. If you like buy and hold, go equities. Also, you incur the rollover if you buy and hold currencies.

I was only really referring to FOREX for daytrading purposes, not overnights.

[Foghatlive]

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If you can't sleep at night, then your position was too big to begin with.



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While that's certainly true with the stock market, FOREX is a 24hr market. Even with a small position, you want to have some protection, so you don't wake up to a nasty surprise.

In addition, the nature of currency trading, with its relatively small price swings compared to stocks, requires the small investor to operate on a tremendous amount of margin so that you're not playing for nickles and dimes.

[tippy]

Playing for nickles and dimes isn't such a bad thing sometimes, lol. I hear your point though.

I don't think Forex is even worth playing if you have to leave your computer screen, either for sleep or other. Leaving a FOREX trade unattended is just gambling. With the given margin, you just can't gamble like that.