
Response to HackerNews comments on my trading - peterkto
http://ptotrading.blogspot.com/2014/11/a-message-to-all-non-daytraders-and.html
======
falsestprophet

      Needless to say, a lot of people, based off one story that I haven't yet finished, 
      now think I'm just another halfwit gamble-my-savings-away day trader.
    

The closest thing to a thesis of this post is that he is not a halfwit gambler
as critics on Hacker News (including practicing market makers and quantitative
traders) believe him to be.

    
    
      On some days, I feel the same way about myself [that he is in fact a 
      halfwit gambler].
    

_Not looking good._

    
    
      You have no idea how much I've read up on financial history, probability, and
      behavioral finance. You have no idea the number of profitable 
      traders (whose track records I get to see or witness in real time) I've spoken
      to whom use a variety or combination of different methodologies.
    

Because you don't know what he knows, you can't be certain that he doesn't
know anything. True. But, he doesn't record any specific knowledge here, so we
still don't know whether he knows anything.

 _Looking worse now._

He then sets up several straw man arguments against him. But, amazingly, does
not refute them.

 _Okay, I give up._

------
comboy
You seem like a nice and rational guy, but it looks to me as if your post
ended just after the introduction. Apart from the info that there are many
profitable trades which success that cannot be explained by luck, I'd love to
see counterarguments to other things.

For example, if you are a successful trader, it seems a kind of activity that
scales very nicely. If you can be sure you are profitable in say a month (or a
year), you are multiplying money, so using leverage or loans you should be
able to basically have any amount of money you want (and what about trades in
that case?). At least that is my understanding as a non-trader. I'd love to
read some explanations for this, especially that I like your writing style.

~~~
opendais
> If you can be sure you are profitable in say a month (or a year), you are
> multiplying money, so using leverage or loans you should be able to
> basically have any amount of money you want (and what about trades in that
> case?).

Its not that simple, sadly.

You can't buy $InfinteMoney$ worth of stock X in a single transaction, you end
up moving the stock price as you buy/sell. This allows others to respond to
your activity. At small scales, a system that appears to work will break down
at large scales.

~~~
comboy
> You can't buy $InfinteMoney$ worth of stock X in a single transaction, you
> end up moving the stock price as you buy/sell. This allows others to respond
> to your activity. At small scales, a system that appears to work will break
> down at large scales.

OK, true it doesn't work up to infinity, but given how much money there is on
the Wall Street, I would imagine that when your activities are big enough to
move the market, you are way past the point of wondering what you can and what
you cannot afford (say $1B+ not to be too vague). Especially given how many
instruments there are out there.

~~~
opendais
He is trading penny stocks with a market cap is less than $50 million,
generally.

[http://www.investopedia.com/terms/n/nanocap.asp](http://www.investopedia.com/terms/n/nanocap.asp)

The amount of money needed to move the needle on these is very small, its why
they are often used in pump & dumps.

He doesn't have anything to do with "Wall Street" which works with stocks that
follow SEC rules, commodities, etc. in the way you mean.

~~~
namecast
Deleted my response when I saw this better one. I'll only add these links as
they're good for background:

[http://en.wikipedia.org/wiki/Slippage_(finance)](http://en.wikipedia.org/wiki/Slippage_\(finance\))
[http://en.wikipedia.org/wiki/Market_impact](http://en.wikipedia.org/wiki/Market_impact)

------
debacle
Refuting crappy internet comments about your blog isn't really a recipe for
success, unless your criteria for success is more pageviews. There were tens
of people in that thread who were spouting off armchair economics like they
were financial experts. That type of ignorant rambling should really be
reserved for /r/economics or, better, /r/bitcoin.

It doesn't really deserve to be responded to, much less refuted.

~~~
opendais
Yes, but he is talking about trading penny stocks/pink sheets. He is on par
with the people the "armchair economists" unless he is super wealthy and can
prove it.

You sure you want to act like he is a financial guru?

"If you've been following penny stock trading circles on twitter for awhile,
you'll know certain tales of legend were born on that day. One particular
trader profited $1.2 million in a day. When that many traders produce their
largest gains on one particular trade, you know it doesn't require some crazy
genius, It's the stock that does all the work and makes life easy.

My day was just peanuts in comparison but it was still my personal best, as I
made $33,000 (with no profit split! which felt amazing). The trader across
from me, who I will affectionately nickname El Chango, had seen enough. El
Chango was branch B's head trader. It killed him to see easy money slip away
due to inaccessibility. He pulled CCG's principle owner aside and pleaded for
him to enable access to the OTC."

His method?

"Simple. Look for the extreme volatile moves on massive volume. If the
direction was down, find the first held bid. Buy. If the direction was up,
find the first major seller. Short."

If it was really how that worked in the real world, it'd have been eaten up by
HFT.

~~~
fleitz
HFT on fucking pink sheets? LULZ.

What about the HFT risk from getting goods for free on CL and reselling them
back to CL?

~~~
opendais
Like I said, if it really was how it worked someone would find a way to
automate it. :P

I suppose I could have been more verbose. I tend to use acronyms sometimes and
not think through that it could be read differently than I intended.

~~~
fleitz
Yeah, I was once considering building an OTCBB trader that would trade all the
pennystock promo bullshit and see which (if any) lists actually worked and
just trade the spam. The amount of degenerate gamblers in that industry is
insane.

Almost built a claim jumping / claim expiry bot for mineral titles. Claim
expires tomorrow? Grab it at 9 AM? Claims made today? Stake the blocks around
them.

I think anyone with half a brain would clean up on OTCBB with a little
automation.

~~~
buckbova
You'd think so but the problem is volume. When it's time to buy you can't get
enough shares at the price you want and when it's time to sell, there's no
buyers.

I used to trade pennies for fun, because maybe I was one of those degenerate
gamblers. Options trading can be just as much fun.

------
eastbayjake
I think the big complaint was that your post was titled "How I lost a shit-ton
of money in one day" but the content was "How I started making some money on
OTC trades and got on a leaderboard at work" \-- felt click-baited.

~~~
poopsintub
Full of himself, b.s. trader can't even make a blog title correctly. No wonder
he lost thousands of dollars by accident, then couldn't even finish the last
3/4 of his story. Not to mention leaving out the most interesting part.

------
jMyles
Am I the only one who sees this entire story as decidedly "un-hackerly?"

On one hand, OP chides commenters for describing trades as "coin flips" (this
is apparently some sort of composite as he quotes no individual commenter in
saying this). Then expresses the following transparent cognitive dissonance:

> Trades are not binary outcomes like coinflips. If you think someone with a
> consistent 70% win rate...

Well, if trades are not binary, what is a "win rate?"

OP makes no mention of the 'hack' here - namely, the underlying systemic
outcome of this conduct. Are the companies whose stock is at issue ethically
sound? Are they promoting open source and free thought? If they aren't, and if
their value is the metric, how can any gains be regarded as a "win?"

Perhaps in a self-enriching sense, but self-enrichment isn't per se a 'hack.'

------
howeyc
Do TA proponents ever talk about the suggestions that the reason TA works is
because of a feedback cycle?

That is, if you get enough people with enough influence (cash) all believing
they can read tea leaves, and make similar movements based on that, it kinda
works.

~~~
comboy
> kinda works

I think it does influence the market, but it cannot make them all profitable.
Unless you think that group of TA believers act as a big pump and dump scheme
(but I guess most markets are too big for that?)

~~~
opendais
Penny stocks [as the OP trades] wouldn't be.

He tries to obscure it a little with things like "pink sheets" and acronyms
but I don't think that is intentional. I'm guessing people just don't read the
original article he is defending.

~~~
comboy
I read it, but wasn't aware of the difference. Thanks for the link and
explanation in another comment.

------
Chirael
I'm glad this was posted; I thought it was well-written and humble (both the
original and follow-up), and interesting to me personally anyway.

My impression from the limited research I've done into technical trading is
that - just like a lot of things in life - it's a lot of work. People who go
into it hoping to make it big on one lucky score seem to get slaughtered.

A lot of technical analysis indicators seem to be not about the companies
themselves (which is fundamental analysis) but about determining the trend of
what _other people_ think about those companies/stocks (the "Kenesian beauty
contest"
[http://en.wikipedia.org/wiki/Keynesian_beauty_contest](http://en.wikipedia.org/wiki/Keynesian_beauty_contest))

So I think it's a little more than sheer chance/luck, but it also definitely
seems to require a lot of work and staying glued to the
market/indicators/news.

It's appealing intellectually because of the "game" aspect, but I think the
reality is that like anything else it requires a ton of work to succeed at it,
especially in the beginning when you're still cutting your teeth and learning
hard lessons. I appreciate that the author wrote candidly about his
experiences learning the game/trade.

------
fiatmoney
There is a pretty solid hypothesis that when traders talk about "reading a
chart", they are not in fact using easily explainable patterns, but rather
more hardcore estimations of market psychology, derived via the brain's rather
robust pattern-finding machinery. The chart patterns are more of a mnemonic
than a decision rule in and of themselves.

~~~
saalweachter
Pattern matching has its own risks.

My favorite story is a study that involved trying to predict the outcome of a
1:2 random distribution. Pull a random card from an infinite deck, 1/3rd of
the time it's black, 2/3rds of the time it's red. The optimum strategy is to
guess red all of the time; you will be right 2/3rds of the time. Humans have a
tendency to try to match the random number generator, guessing red 2/3rds of
the time and black 1/3rd of the time, which is sub-optimal, and you're only
correct 5/9ths of the time.

We're powerful pattern matchers, yes: we can observe a 1:2 random distribution
and mimic it pretty accurately. But we're also a little stupid: we think it's
a good idea to do so.

~~~
yzzxy
Maybe traders have learned on an intuitive level to "fix" this pattern
matching - clearly the processing circuitry / power / ability is there, so a
trained difference in outlook could allow us to harness it properly.

------
encoderer
Here's something I've witnessed: Those that understand trading do it. Those
that don't, swear that nobody else is making money doing it either. They are
_convinced_ of that and will argue their point endlessly.

I find it strange.

(Caveat: of course I don't mean absolutely everyone, but it's a phenomena you
can witness whenever it gets discussed here.)

~~~
letstryagain
[http://longbets.org/362/](http://longbets.org/362/)

[http://fortune.com/2014/02/05/buffett-widens-lead-
in-1-milli...](http://fortune.com/2014/02/05/buffett-widens-lead-in-1-million-
hedge-fund-bet/)

------
dyeje
I don't usually bookmark blogs, but you've got me hooked.

