yip1997: made $5k last year daytrading (in 2 months). So far this year I've made around $22k. Which statistical tools are you referring to? my7tvette: you make very good points. HolyGrail: I do not work for InterDigital. But would I sell if I did? Depends if it was just me or a mass layoff.
Not a bad result. At least it was positive. Depending on your trading method, you use different statistical measure to analyse your result. Of course, the mean return is one of the most important measure. Some also use standard deviation of your portfolio return, sharpe ratio, win loss ratio, max drawdown etc. Since you have made $22K this year (with 40K cash for day trading?!), why would you ask the original question and mentioned only 2 days result?
Well the majority of my daytrading profits have come from shorting stocks right before they suffered severe plunges (CFC, ETFC, WM, SLM). So I thought those profits were kinda lucky. In fact when I started out daytrading, my profit jumped to 18k pretty quickly because CFC plunged 25% one day, and then over the next few weeks my daytrading wasn't good and the profit shrunk to 2k. I asked about Thursday because it was a typical bad day for me getting whipsawed a lot, although I wonder if the trading was unusual given the Ben speech and then later the CFC buyout rumor. Friday was the best daytrading day of my life in terms of just sticking to my plan, which I've been trying to refine, and I just wonder if I've finally got it down.
Why is portfolio theory garbage? Personally I find a lot of its findings useful and profitable. For example - diversification, rebalancing, the link between risk and long-term returns for investment assets etc.
Basic mathematics says 90% is too much to have in one stock. Let's compare a 90%/10% portfolio, to a 50%/50% portfolio, in both the big winner and big loser scenarios: 90/10 big winner: you make a huge profit e.g. 1.8 mill. 50/50 big winner: you still make a huge profit, it's just that it's only a bit more than 1/2 what the 90/10 would make e.g. 1 mill instead of 1.8 mill 90/10 big loser: you lose 90%, leaving you with a mere 10% of your life savings. He has 30k left instead of 300k. 5/55 big loser: you lose 50%, leaving you with 50% of your life savings. He has 150k left instead of 300k. In the winning scenario, he only makes a bit less than twice as much by taking on 90% risk. In the losing scenario, he ends up with FIVE TIMES as much capital by taking the 50% risk instead of the 90% risk. Heads you do less than twice as well, tails you lose five times as bad. That's why >50% bets suck.
Here is another way that may help some people better what you just wrote. What if we asked what it would take them to go from the worst case you showed the positive case for each allocation? In one they would need to multiple the account by 1M/300K (around 3.3 times) , in the other the would need to multiply it by 1.8/30K which is around 60 time! 3.3 is way smaller than 60. The portfolios may have looked "close" when viewed in another scale, but in the real scale they are light years ahead of one another. Conclusion: they should change the scale, and they would understand better.
A looooong time ago I used to do this concentration thing and it NEVER ended well. The opportunity cost is a "cost" also. Even if IDCC just sat there and did nothing potential profit has been lost that could be realized elsewhere. Plus tech stocks like this are one report away from anything.