It's similar to the ice cream shop because you can do lots of things better than a lot of people. It's your ability to analyze the financial information, the overall strategy you are using, you can do due diligence on who is running the company, you can already have an expertise in the industry the company is in, you can choose to buy the stock at a relative low point and sell at a relative high point. You can look at very small companies that the big players won't bother with. You can find or strongly consider information that most ignore. You can wait until the economy is in the middle of a recession to start investing in individual stocks and hold them until the economy recovers and then sell them and invest it back in an index fund. There's like an unlimited amount of things you can do to beat the market.
JP Grunin: From $10,000 to $100,000 in 6 months.
- Thread starter mGrunin
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It's similar to the ice cream shop because you can do lots of things better than a lot of people. It's your ability to analyze the financial information, the overall strategy you are using, you can do due diligence on who is running the company, you can already have an expertise in the industry the company is in, you can choose to buy the stock at a relative low point and sell at a relative high point. You can look at very small companies that the big players won't bother with. You can find or strongly consider information that most ignore. You can wait until the economy is in the middle of a recession to start investing in individual stocks and hold them until the economy recovers and then sell them and invest it back in an index fund. There's like an unlimited amount of things you can do to beat the market.
Like these guys?
Knight Capital Swamped by Glitch Loss - WSJ.com
http://en.wikipedia.org/wiki/Knight_Capital_Group
You think some extremely smart and dedicated people can beat the market over the long term right? (I'm pretty sure that's what you believe from reading your posts). Many of these guys run hedge funds or for example with Warren Buffet you can just buy his stock. So if that's the case, then you could just beat the market by giving them all your money to manage.
Well said. Efficient markets is total horseshit, but even with that said I think its incredibly hard to beat indexing.
I know small hedge fund operators who buy up the float of not insignificant companies ($300m, NYSE listed) and then when they've sufficiently reduced the supply they start to "make a market" and trend it up. They'd never admit to it, but that's what they do - There are profits for the taking.
Here's another example of how markets can be predictable.
Here is a model of the stages stocks go through:
Stage 1. Basing pattern (sideways).
Stage 2. Rises above Moving Average line and stays above it for the duration of bull move.
Stage 3. The top, upwards movement slows and forms a sideways trend at the top of the movement.
Stage 4. Decline. Stock moves below Moving Average line and mostly stays beneath it.
Here is a few examples of this model playing out recently:
FEYE
SPLK
Of course there are inefficiencies in the market.
Take a look at a company like Renaissance Technologies. They are clearly taking advantage of market inefficiencies. However...
If there are market inefficiencies that are so easy to spot that mgrunin can write simple rules for buys and sells, those gaps would already be closed by bigger trading firms within milliseconds and the inefficiency would be gone.
I'm not saying there aren't market inefficiencies, but mgrunin certainly isn't taking advantage of them.
Take a look at a company like Renaissance Technologies. They are clearly taking advantage of market inefficiencies. However...
If there are market inefficiencies that are so easy to spot that mgrunin can write simple rules for buys and sells, those gaps would already be closed by bigger trading firms within milliseconds and the inefficiency would be gone.
I'm not saying there aren't market inefficiencies, but mgrunin certainly isn't taking advantage of them.
To fatalerror, tavin, and others who are unsure, MGrunin is not playing with his parents' money.
He made his first million advertising a frogger game on facebook back in 2010.
Made some more doing other AM stuff, then he started/learned options trading ~mid 2011. He made between 500k to 700k in the past 12 months, so he upgraded from the BMW to the R8, and also bought a house in Queens.
Source: I know someone who is very close to him.
Just wanted to clear that up. The 10k isnt much.
He made his first million advertising a frogger game on facebook back in 2010.
Made some more doing other AM stuff, then he started/learned options trading ~mid 2011. He made between 500k to 700k in the past 12 months, so he upgraded from the BMW to the R8, and also bought a house in Queens.
Source: I know someone who is very close to him.
Just wanted to clear that up. The 10k isnt much.
Yes, I think groups of very intelligent people can beat the market. They're not perfectly efficient by any means.
All I'm saying is that most people aren't qualified to spot market inefficiencies, especially when they're acting alone.
I'm not talking about full time traders at institutions here, or funds who have huge teams of people that develop algorithmic trading software.
I'm talking about the average reader of this thread, who says "oh, Apple is a good company, I think they're undervalued" and chucks 10% of their cash into the stock.
By doing that, you're saying "I know better than Goldman Sachs, Warren Buffet, thousands of algorithmic traders, yada yada". Because they're the guys with the money that price the stocks. Why are you in a better position to value that stock than they are? How can you possibly value it in a better way, faster?
Algorithmic/ultra high frequency trading is decimating the advantage most individual traders had (i.e. the "Goldman Sachs can't invest in ABC because if they put $1bn in it, it would change the price"), because they can trade in smaller numbers and still be profitable, due to the sheer volume of trades their automated software can make every second. You can be in and out of thousands of stocks making points here there and everywhere on $10k investments and make billions over a year.
i think hedge fund managers also succumb to individual investors emotions though.
even though they know better.
if your hf buys company a it returns 15% and they know its a good company still, they will trade it anyway because thats what they get paid for.
if they don't and just hold stock A B and C and they just keep going up by themselves people will wonder why they need hedge fund managers (because they wouldn't have found a, b and c)
I remember couple of years back I read somewhere people criticizing buffett too, more and more, because he had all that cash and made no trades at berkshire. right before the down in 2008.
I think he caved too and went in before the collapse with railroads but one should have to research that if I remember that right.
even though they know better.
if your hf buys company a it returns 15% and they know its a good company still, they will trade it anyway because thats what they get paid for.
if they don't and just hold stock A B and C and they just keep going up by themselves people will wonder why they need hedge fund managers (because they wouldn't have found a, b and c)
I remember couple of years back I read somewhere people criticizing buffett too, more and more, because he had all that cash and made no trades at berkshire. right before the down in 2008.
I think he caved too and went in before the collapse with railroads but one should have to research that if I remember that right.
I work with a guy who has supported his family for about 15 years trading on the Canadian markets and junior north american markets.
Pretty well all resource stuff
I will tell you how he does it: A huge number of contacts, the willingness to do research, and high emotional IQ.
For example, lots of trailing stops and a completely ruthless ability to shoot the dogs.
Now when I say "willingness to do research," I mean exactly that. How many of you guys have read evey damn paragraph of a 30 page company report?
Yeah, zero. I thought so.
It's not a super-high IQ that makes you money, but a fanatically high attention to detail and time and practice.
You guys drop $20k on a stock and you don't even know the earnings of the last quarter? And then when you lose money, you say the market is rigged?
Whatever.
Pretty well all resource stuff
I will tell you how he does it: A huge number of contacts, the willingness to do research, and high emotional IQ.
For example, lots of trailing stops and a completely ruthless ability to shoot the dogs.
Now when I say "willingness to do research," I mean exactly that. How many of you guys have read evey damn paragraph of a 30 page company report?
Yeah, zero. I thought so.
It's not a super-high IQ that makes you money, but a fanatically high attention to detail and time and practice.
You guys drop $20k on a stock and you don't even know the earnings of the last quarter? And then when you lose money, you say the market is rigged?
Whatever.