Trading is a Giant Scam!

Discussion in 'Trading' started by Bullz n Bearz, May 29, 2007.

  1. Reading this, I can see that you don't want it enough and that there is a high probability that you still won't be making any money in 10 years. You have the patience, but I am afraid you don't want it enough for you to survive. You expect someone to give it to you on a silver platter and I am sure that you are in it for the "easy" money.
     
    #71     Jun 1, 2007
  2. mercorex

    mercorex

    What you have discovered is that it is difficult to make money but that doesn't mean it is a scam or impossible. As with everything else it takes time, knowledge, practice, money etc.... If it was impossible Renaissance would not have been able to generate the returns they have over the last 15+ years using purely quantitative analysis.

    It is true that markets are relatively efficient in most cases extremely so. It is true that you can't predict the future with 100% certainty. However, temporary price discrepancies between assets do occur as do discrepancies between risk and price. What you can do is identify if the price of your prediction compares favourably with its probability of happening. Any differentials create opportunity such that infinite iterations of a certain strategy will give a probability of success or failure very close to something absolute. This is ultimately about risk management and is no different to the way actuarial science works in the insurance business.
    Of course the winners win at the expense of the losers. The additional risk in stocks is priced over the long run versus bonds and cash etc... Everything carries its own risk which is usually but not always priced efficiently.
    The big players close pricing opportunities very quickly so it is tough as an independent to find inefficiencies that can be exploited quickly enough and profitably enough to make it worthwhile. However, certain markets still have more significant inefficiencies that can be exploited especially if you have knowledge of that market or the sector it represents.
    Ultimately you need to be able to calculate your alpha and understand the risk profile of your trades in order to make money. Remember, if it was easy everyone would be doing it and at the same time noone would be doing it because the inefficiencies would be closed before anyone could trade them!
     
    #72     Jun 2, 2007