Trading by myself - how feasible is it to make a living at it?

Dale Dough · #1 09-14-2007, 05:44 AM

Sorry if this is a dumb question, but I really don't want to google it because, well, vested interest that doesn't align with mine, and all.

I would have to start pretty much from scratch. I majored in business and wrote my bachelor thesis on a finance subject, but that's it. I currently do not own any stocks, although I do plan to buy some index funds as an investment. I have read threads here and have some recommended books coming to me from Amazon.

I always had some kind of Ponzi-scheme attitude towards professional daytraders - some get lucky, but most people fail, and the big ones make their money on commission, and are not necessarily more +EV than the market. Then I realized that I would probably think the same about card players if I was a layman. And I managed to do that - so why not trading?

Would an approach similar to poker work? Ie. start out with a little bit and go from there, picking up skills along the way? Or do I need to be backed by algorithms developed by theoretical physicists to have a chance?

What would be my best source of information - is there like a 2+2 of day traders? I mean I'm sure there are lots of forums, but I probably couldn't tell the difference between 2+2 and FCP if I knew nothing about poker.

gull · #2 09-14-2007, 06:08 AM

The difference between trading and poker is that you can't select easy games. You're competing against the pros, teams with hundreds of phd analysts and modelers.

SunOfBeach · #3 09-14-2007, 07:18 AM

The only forum that's *really* any good for this kind of stuff is this one:

http://www.nuclearphynance.com/

If you can't follow what the better/top people are saying on there, don't even bother trying to trade for a living.

And your chances are virtually nil if you want to trade your own account. You'll need OPM to make a living.

Sammich · #4 09-14-2007, 06:34 PM

Who is OPM?

BradleyT · #5 09-14-2007, 06:58 PM

Other Peoples Money.

Korch · #6 09-14-2007, 07:55 PM

say you could beat that market and make 10% annually. do you have enough cash to make that excess returns (like 3%) more than the sallary you could earn in a real job?

Mark1808 · #7 09-14-2007, 11:10 PM

This from a recent LA Times interview with Jim Cramer:

But you agree that very few people can make a lot of money actively trading?

It's a sucker's game.

http://www.latimes.com/business/la-fi-cramer7sep07,1,6811123.story

When you trade you pay commissions, spreads and ordinary income on gains and you compete against the collective wisdom of the best minds on Wall Street. Furthermore a large percentage of the market gains come in a small percentage of days, if you are out of the market on those days you miss the lions share of market gains for the year.

When the market is hot everyone gets the idea that they can make money trading in and out of stocks for small profits. If money can be made so easily why do most professional money managers underperform the market?

T50_Omaha8 · #8 09-14-2007, 11:15 PM

Unless you have six figure savings (and I mean high six figures) you are going to be fighting a major uphill battle. Even then, the 3% excess return you make (borrowing from the last post) would be less than $30,000. Before taxes.

I think the stock market suffers from the opposite misconceptiong poker does:

People seem to think making money playing poker is impossible, when it's actually pretty easy.

People also seem to think making money in the stockmarket is pretty easy, when in fact their dartboard or a RNG would probably have about the same expected return they would.

Like poker, a huge portion of the people who really profit off of it are the ones who stand on the sidelines: brokers, option writers, broadcasters, etc.

Lee Nickel · #9 09-14-2007, 11:21 PM

[ QUOTE ]
Sorry if this is a dumb question, but I really don't want to google it because, well, vested interest that doesn't align with mine, and all.

I would have to start pretty much from scratch. I majored in business and wrote my bachelor thesis on a finance subject, but that's it. I currently do not own any stocks, although I do plan to buy some index funds as an investment. I have read threads here and have some recommended books coming to me from Amazon.

I always had some kind of Ponzi-scheme attitude towards professional daytraders - some get lucky, but most people fail, and the big ones make their money on commission, and are not necessarily more +EV than the market. Then I realized that I would probably think the same about card players if I was a layman. And I managed to do that - so why not trading?

Would an approach similar to poker work? Ie. start out with a little bit and go from there, picking up skills along the way? Or do I need to be backed by algorithms developed by theoretical physicists to have a chance?

What would be my best source of information - is there like a 2+2 of day traders? I mean I'm sure there are lots of forums, but I probably couldn't tell the difference between 2+2 and FCP if I knew nothing about poker.

[/ QUOTE ]

I never opened up a hardware store before, but I turned out to be good at it.

Dale Dough · #10 09-15-2007, 06:04 AM

Points well made. Nice gimmick btw, I loved that show.

SO, market+ returns is hard to impossible? In the [censored] thread, a.o. ahnuld and pig4bill laughed at the notion that markets are efficient, and were 'tilted' by the idea that some finance prof seems to believe in random walk and all. Where did that come from?

But just to be clear, it's pretty much not possible to eventually achieve an hourly over time that's in the ballpark of decent-but-not-great 10/20 NL? Half or even less would probably still be OK - most traders work full days I understand and most poker pros don't, so the put in the time component has to be easier.

I guess for that to be possible, there would have to be opportunities out there that aren't interesting to the pros because the volume is too low, and with more capital they're better off focusing their effort on other trades. I was thinking something with arbitrage, i.e. not dependent on market direction. Although admittedly I have to read up on that, which I will.

Wishful thinking?

Edited to add: I obv understand that this isn't an hourly rate type of deal - my assumption is that eventually profits would start to max out because I can't make trades in areas that the pros cover. Or do the pros cover pretty much all trade?