Trading vs. Poker

Discussion in 'Professional Trading' started by jk90029, Apr 21, 2015.

  1. Jakobsberg

    Jakobsberg

    That's the point about equity not being zero sum. The projects in the underlying businesses do create value over time which is shared with the owners. If the index rose 20%, someone who gained 15% with inflation at 3% and bonds paying 5% they are not a loser. They actually did quite well compared to the next best option they had.
     
    #11     Apr 22, 2015
  2. #12     Apr 22, 2015
  3. Meanwhile, if the index goes down 20% during one year, and if some trader lost ONLY 15% nominal for that period, then he actually won roughly 5%.

    Lost cash but won 5% more share (portion) in total market than 1 years ago.

    Any objection is welcomed.
     
    #13     Apr 22, 2015
  4. Jakobsberg

    Jakobsberg

    The stock market isn't an isolated pool. If he lost 15% he lost 15% so he should have put the money in the bank. Hes just not done as bad as everyone else if he lost 15% and they lost 20%. I dont get hung up about beating an index just making money.
     
    #14     Apr 22, 2015
  5. My point is how many percent we have outperformed, in the log time of periods.

    For example, as in http://www.berkshirehathaway.com/letters/2014ltr.pdf ,
    can you satisfy if your record has only annual 10% over annual 9% of index, like Buffet?
     
    #15     Apr 22, 2015
  6. Jakobsberg

    Jakobsberg

    Well Im not trying to be a billionaire like him and noone is going to sack me because i underperformed an index in a single year. Just trying to get enough money so that I then only need a small annual percent return to live off it comfortably is my goal but everyone has different goals so unless you know what they are its hard to rate people against them. For some the goal is safe consistent returns. It depends if your being paid to do it but if you cannot consistently beat whichever market your trading consistently by at least 5% then its probably not worth the effort for most small traders, unless they just get a kick out of trading.
     
    #16     Apr 22, 2015
  7. Most cannot be a millionaire. My point is that annual 20% compounded to 4000 times after 40 years.
     
    #17     Apr 22, 2015
  8. When you are trading you’re up against the pros, but at the same time you also have millions of amateurs whose money you can take.
     
    #18     Apr 23, 2015
  9. Jakobsberg

    Jakobsberg

    1.2^40=1470

    I get your point that over a long period 20% compounds up to a big number.
    But you need a long period. If your aiming for 1 M USD to save several years I would wait until a big opportunity and borrow money.
    If you have 125,000 you only need to double it twice (12 years at 20%)
    If you have 62,500 you need to double it three times. (16 years at 20%)
    ....etc etc

    So starting out with 1000 USD will take a long, long time (38 years) at 20% and is just not worth the effort to get 200 USD in the first year. The dollars per hour of effort is just not worth it.

    I went big and borrowed money to save time when the opportunity was there in 2008/9. Now trying to decide when to jump off the bull.
     
    #19     Apr 23, 2015
    SwingToWin likes this.
  10. that's a solid point, jakobsberg. you've been lucky in 2008/9, but markets could also have lost another 25% or even more after you went in. i don't know what I'd done then - especially with borrowed money.

    where did you borrow the money from? do you mean normal broker leverage? I haven't heard of anybody (banks,...) borrowing money for investment purposes, other than real estate.
     
    #20     Apr 23, 2015