are you in the 1%?

Discussion in 'Professional Trading' started by njrookie1, Aug 9, 2012.

  1. The academic type is finally recognizing the existence of successful traders. Traders/Day Trading Skill 110523.pdf


    We document that only the 1,000 most profitable day traders (less than 1 percent of the total population of day traders) from the prior year go on to earn reliably positive abnormal returns net of trading costs in the subsequent year. But, the stock picking ability of these investors is remarkable. Top day traders (based on prior year ranking) earn gross (net) abnormal returns of 49.5 (28.1) bps per day on their day trading portfolio, while the tens of thousands of day traders with a history of losses in the prior year go on to earn gross abnormal returns of -17.5 (-34.2) bps per day.
  2. gmst


    Odean is only one of the few worth listening to!

    Thanks for the link.
  3. ocean5


    Less then 1% are using market orders,turns out.
  4. the top 500 (out of 360,000) traders are probably taking lots of breakout trade.

    it is also interesting that the commission is about 1/3 of the gross return. it tells how careful one needs to be for risk management and how small the edge is. at almost 0.3% per day after costs, it is very good if one belongs to that top group.

  5. vinc


    that's why swing traders and long term traders are perceived as likely to be more profitable than day traders which probably is only a matter of 'focus' - give them enough ' frequency' and the statistics will look the same..
    yeah, whatever.. good thing is we all win here and that's what really counts! a buck here, two bucks there - who gives a f. ?? ;)
    one thing seems important though - the number of trades , countless number of trades /in case of profitability/ - and only then one can arrive at some conclusions..
  6. vinc


    one more thing - this 1 % .. would that be a proof that markets are not random??
  7. vinc,

    If market is purely random, nobody can out-perform market consistently. So yes this is proof that market is not 100% efficient (an efficient market demonstrates random returns) and some traders can predict a certain component of market movement.

    No long term trader can beat the consistency of successful short term trader - the one-percenter - however the capacity is a problem. In other words, short-term trade is going to have higher sharpe ratio and higher daily return. But short-term trader's return cannot compound.

  8. gmst


    ofcourse it is!

    Odean demonstrated top 1000 traders persist in their behavior year after year. This is clearly a proof that with skill you can make abnormal returns in the market. This in tun proves efficient market hypothesis wrong!

    I agree with your swing trading comment however I would like to add that day trading allows many more trades thus much higher compounding. No swing trader exists who can make his capital 5x-10x in a year (probably Paulson is an exception but then he used options), but there are plenty of day traders who have been able to go 5x-10x in one year. Ofcourse next year their performance could be just 2x but in any case I am just pointing out one big advantage of day trading over swing. Other advantage is your nights are much better!
  9. gmst


    You are so wrong. Just 'focus' doesn't make you consistently profitable day trader, you also need an edge.

    You are underestimating how much money you can make being a day trader. Lescor made 800k or so in 2010 when he had his journal here. Bob Bright made 12 million day +swing trading ES. All the HFT firms of the world are day traders :) I am sure you have heard about the 'flipper'. So, the point is if you are good, you can make millions every year day trading. If you are super good 10s of millions. Of course with swing trading, you can make millions/billions. But its not fair to say with day trading that you make a buck here, two bucks there - it can add upto serious cash.
  10. gmst


    Agreed with 1st line completely. On second line, if you are day trading multiple futures, 10s of millions of dollars per year is the capacity. Yes if you are trading just 1 or 2 illiquid futures then yes capacity is an issue - e.g. lumber or orange juice.
    #10     Aug 9, 2012