Difference Between Poker and the Stock Market

[Mr. Now]

In poker, you see the faces.

In markets, you don't.

In markets, all traders make a market, but only a few prosper.

Ditto for poker.

[RarocASP]

[ QUOTE ]

Poker players require a fixed amount of capital and above that can cash out safely

[/ QUOTE ]

Ever use Neteller?

[pig4bill]

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.

[stephenNUTS]

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

[DcifrThs]

[ QUOTE ]
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

[/ QUOTE ]

how do DEshaw & renaissance make such a killing doing thousands of (equity) trades per day?

Barron

[Mark1808]

[ QUOTE ]
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.

[/ QUOTE ]

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:

http://en.wikipedia.org/wiki/The_Intelligent_Investor

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.

[stephenNUTS]

[ QUOTE ]
[ QUOTE ]
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

[/ QUOTE ]

how do DEshaw & renaissance make such a killing doing thousands of (equity) trades per day?

Barron

[/ QUOTE ]

C'mon man....these are TWO giants in the game,with DEEP pockets....I am talking/giving advice to the average Joe Blow daytrading?

[DcifrThs]

[ QUOTE ]
[ QUOTE ]
[ QUOTE ]
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

[/ QUOTE ]

how do DEshaw & renaissance make such a killing doing thousands of (equity) trades per day?

Barron

[/ QUOTE ]

C'mon man....these are TWO giants in the game,with DEEP pockets....I am talking/giving advice to the average Joe Blow daytrading?

[/ QUOTE ]

right but you made very specific claims, namely that the commissions will eat you alive if you do a lot of trades every day.

so i asked a question to try to learn. shaw & williams do thousands of trades a day with who knows how much money behind every trade...is it then that the commissions they pay become smaller and smaller % of the total capital as the amount they allocate to each trade increases?

thats 1 issue.

other issues are the spread and the running of the market.

the spreads being quoted by their prime brokers are minimized i'm sure by the randomization of orders accross many brokers so no 1 broker gets the whole trade. that spreading out means more trades and more commissions. do firms like that get a price break? or are the commissions as a % of the capital they trade that small?

another issue is the cost of trading so big and the running of the market. i don't have experience actually quoting prices or trading in the traditional sense but i think the size of a trade being ordered does affect the spread as well since it is harder to find a counterparty and more risk is taken by the exchange (or specialist or whoever).

further, despite being broken up, a big trade may still need to be broken up further by the prime broker which then may make it seceptible to being front run OR having the market move up as the trade is executed.

i'm just trying to get an idea of all the issues here and try to completely understand the impact of these things on shaw and williams. i know they have entire divisions devoted to minimizing these costs so obviously it doesn't directly relate to individuals.

thanks for your input.

Barron

[stephenNUTS]

Hello Barron,

The FIRST thing I want to say is compared to the other forums I frequent(mostly HSNL & Tournamnet Circuit)...I have been taken back by 95% of the intelligent,courteous,and mature replies/posts...compared to the majority of 15yr school kid/idiot responses over there

BRAVO!

Now back to the question..

What I did mean was that SW and Ren type firms... are GOLIATHS with extremely complex trading algorythms..that are tried...tested re-tried ..tested...fixed...and so on.There sheer success,is in there size.It might sound ambiguous then that why can they tarde 1000's of times a day...and show consistant profits,and a small DT'er cant?

As a former B/D OWNER I made a fortune capitalizing on commissions from individual DT'ers,using high-end software for indiviuals(e.g RealTickPro),it is like running in sand trying to overcome these costs.I was pointing this out to the new smaller guys,with no experience.As I said before 95% went broke ,and the ones that did werent very impressive,after the 2000 NASDAQ debacle and lost everything.Small daytraders for the most part play the momantum game looking to "ride the backs" of the big guys
Money Mangagement/Stop Loss is VITAL...that most never understood.

Another fiasco for DT'ers was when we changed to decimals from fractions.When I started trading making 1/4 pt positive trade was....meh....which was .25 cents,and that was usually a bid/ask break.

Now the spreads are in literal PENNIES...which makes it even harder to make a +trade.When that change occured...the traders lost a HUGE edge.Throw in the new shorting rules,forced liquidation on 4x buying-power down to overnight2x holds,a MINIMUM $25k account balance,pre-market trading ....which is the biggest scam out there with the giant spreads,and virtually ZERO liquidity on non-news realted stocks...are all hurdles the little guys faces

SW,Ren,and a few others are NOT considered daytraders in the true sense of the word IMO for a few reasons:

1.The costs they incur to intra-day trade are MINISCULE due to the sheer volumn vs. the trade spread/strategies gain expectations that are virtually pennies....BUT alot of PENNIES...LOL.

2.Firms like this usually self-clear,eliminating clearing house costs.That is no different than GS,Bear,Lehman,etc

2.They certainly DO break trades (as you said)to their prime/sub brokers to not only disguise their side(short or long),but MOST of these complex trades that are done intra-day are done by CU programs,looking for ANY descrepancy in bids to asks,amonst others,crossed market trades(where the program picks up stock where the ASK,is bigger than the BID),,and instantly sold...are privy to the bigger more powerful programs that can scan THOUSANDS of scenerios a second.

3.The size of these firms can ACTUALLY MOVE a particular stock/market in seconds (esp. in the most illiquid securities forcing a short squeeze for instance))thus amplfying/exaggerating the moves to whatever they desire

I can go on and on....but these type firms ...along with BIG BOYS ,and even some of the giant hedge funds out there,are playing with HUGE money

My point,and I am once again sorry if I mis-led anyone.......was that an individual daytrader churning his or a small house PROP account with little/or max leverage has a slim chance of being profitable over the long run

I am giving my professional opinion to the new guys,and young poker palyers that equate the two

Keep up the GREAT POSTS guys!

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

[DcifrThs]

first off stephen,

thanks for the kind words about BFI. i'd say the same as well. there seem to be far more well thought out posts here per capita than any other forum here.

now, onto your post.

[ QUOTE ]
2.Firms like this usually self-clear,eliminating clearing house costs.That is no different than GS,Bear,Lehman,etc


[/ QUOTE ]

are you saying they do self clear? because i'd bet they don't.

i worked for one of the top hedge funds in the world and they don't self clear. they definitely do thousands of trades a day but aren't even high frequency traders (just a long term fundamental strategy that has to meet tons of client account restrictions and adjust the portfolio to the signal generated 3 times a day in over 250 markets). there is no self clearing there. they spread the orders out among many prime brokers.

similarly, i'd bet shaw & williams' firms do the same. i doubt they self clear.

anyways, i'll reread to digest your post and post any other thoughts i have.

thanks,
Barron