LogFAQs > #938431262

Moonroof, daytrading is basically like gambling. Some days it goes up, some days it goes down. You can win on most trades by following a strategy of selling quickly when you have a profit and holding or doubling down when you are down, but this is NOT in itself a winning strategy because the losses, when they do come, will be bigger than the winnings. That is to say, if you are actually able to predict the day to day variations, timing them is great, but if you don't have any more predictive power on them than random, the "money management" of strategy of cashing out small wins does not really help.

Once the casinos are open again, you can fairly easily win on 90%+ of days by playing blackjack or roulette. You use the same strategy - bring a lot of money, leave if you are up a little, camp out and play until you break even if you are losing. You'll leave with a small gain on most days but when you do hit a big losing day, you'll give it all back and more. And that's because you won't have any really big winning days, since you always left when you were up a little.

The difference between the stock market and the casino is that the casino offers actually negative expectation games, while the stock market is positive expectation. So if you use this strategy on the markets, you should make money in the long run - but that's not because of the strategy, it's because the market is positive expectation. And I think you'll probably make less money than with a buy and hold strategy because your money is spending more time not invested.

It's really deceptive, because we like to attribute results to things we can see, like our strategy, and not to nebulous ideas like "the stock market goes up in the long run" or "all the games at the casino favor the house."

---

September 1, 2003; November 4, 2007; September 2, 2013
Congratulations to DP Oblivion in the Guru Contest!