The efficient-market hypothesis is a useful theoretical ideal that is never perfectly achieved in reality. Good trading drives the markets towards efficiency with the work of the traders being compensated by capturing a portion of the inefficiency that they remove. Traders who are above average at removing inefficiency will be compensated above average and the less capable traders will tend to drop out due to losses. This competition allows markets to converge towards efficiency over time. If the markets were perfectly efficient, there would be no trading firms as they would have no way to get compensation for providing their service. If there were no trading firms, then the markets would be less efficient because of the erratic appearance of buyers and sellers as well as the loss of many trading experts evaluating risk and value. So, you see, there is a nice negative feedback loop at the heart of the markets that drives them closer to efficiency over time as traders are motivated to improve and advancements in technology and theory allow better determination of pricing.
Investing in equity markets is very different from trading. Corporations pay you dividends and capital gains in return for the capital you provide them. That's why long term investments in passive index funds are typically the best bet for someone who is not a finance professional. Rather than trying to beat the professionals at pricing assets, you get to sit back and enjoy the compensation from a mix of companies working hard to increase the value of their stock and/or generate dividends. You just need to ensure you don't take on excessive risk. Stay away from margin at all costs.
Thanks for the response man. Not sure if you'll see this, but- is it actually proven that some % of traders are consistently, year over year profitable? Because that would seem to be another blow to the strong form of EMH. I could see a more EMH-friendly world where some traders are profitable some of the time, but it's not consistent who's who year over year (which is what is supposedly said about active fund managers, one good year has little correlation to having another good year)
I am unaware of much publicly available proof, but in my experience, there is definitely a class of trader that is consistently profitable every year or even much better than that. These are the traders who are meticulous about their risk management and have found a way to improve a market. For a public glimpse, you could have a look at Virtu Financial's S-1 filing from 2014 (https://www.sec.gov/Archives/edgar/data/1592386/000104746914...). In it, they disclose that over the previous five year period, they were profitable on every day except one.
Investing in equity markets is very different from trading. Corporations pay you dividends and capital gains in return for the capital you provide them. That's why long term investments in passive index funds are typically the best bet for someone who is not a finance professional. Rather than trying to beat the professionals at pricing assets, you get to sit back and enjoy the compensation from a mix of companies working hard to increase the value of their stock and/or generate dividends. You just need to ensure you don't take on excessive risk. Stay away from margin at all costs.