Picking Stocks and Poker

[Lucky]

The consensus here seems to be that one's stock portfolio should consist of mutual funds, or top stocks picked with the idea of not touching them. Basically, the implication is that one can't win by daytrading/week trading/buying and selling often.

Interestingly, this is the same thing I hear from people who don't play poker, or don't play well.

My questions:

1. Are 2+2ers behaving like the unsklanskified masses on the possibility of success in an arena they don't understand.

2. What percent of active traders make decent money (is it more than the 5-10 percent that do it in poker)?

3. If it is possible, what is the time investment required?

4. What is the bankroll/investment money needed to begin with low ROR?

5. Are Sklansky/Zee/other brilliant minds on this board deftly navigating the stock market the way they tear thru poker fields? If not, why not?

[Dan Mezick]

Question 5 is especially interesting since it's the same game. Mathlogic, and the tilt factor. The tilt factor is best managed by keeping bets small.

All traders must develop a personalized system. Of course, you have to go practically through psychotherapy to do this successfully since knowing "jack" about yourself is a recipe for certain disaster in trading. Since most people are not honest with themselves, most people can't trade or invest to save their lives. (This concept carries directly into no-limit poker and sometimes limit poker.) Investing in mutual funds turns out to be a great idea for most people for these very reasons.

Here's a couple of interesting links. The book is an especially great read.

http://www.traderscalm.com/ (http://www.traderscalm.com)

Reminiscences of a Stock Operator (http://www.amazon.com/exec/obidos/tg/detail/-/0471059706/qid=1094515077/sr=8-3/ref=pd_ka_3/104-0094442-2573565?v=glance&s=books&n=507846)

This guy might be on to something:

www.getfolio.com (http://www.getfolio.com)

[midas]

Lucky:

Your post is very amusing-comparing winning poker techniques(with all do respect to our moderators) to the stock market.

1. Poker is a closed environment with a defined set of variables influencing outcomes. The stock market is open and unpredictable with many variables (known and possibly unknown) that can effect stock price direction.

2. Information is the key to stock trading. Although easier than 5 years ago - getting affordable access to this information is difficult.

3. I would bet, that the amount of money that firms spend in one month researching or predicting stock direction - exceeds the combined total money wagered in poker over the last ten years.

4. Trading is now 24 hours a days - you need to work 24/7 if you have open positions. News over the weekend will effect Monday's opening price.

5. Unless you have over $100,000 - you're really not in the game.

[moondogg]

IMHO:

[ QUOTE ]
The consensus here seems to be that one's stock portfolio should consist of mutual funds, or top stocks picked with the idea of not touching them. Basically, the implication is that one can't win by daytrading/week trading/buying and selling often.


[/ QUOTE ]
I agree completely with this, and I believe history has shown it to be true.

[ QUOTE ]

Interestingly, this is the same thing I hear from people who don't play poker, or don't play well.


[/ QUOTE ]
You hear a lot of things from a lot of people. But how many actually follow it? Also, the "buy-and-hold" concept is everywhere. Many people have been told that this is the the way to invest responsibly. Most poeple have not been exposed to good poker strategy.

[ QUOTE ]

My questions:

1. Are 2+2ers behaving like the unsklanskified masses on the possibility of success in an arena they don't understand.


[/ QUOTE ]
If the masses are investing responsibly, then yes.

[ QUOTE ]

2. What percent of active traders make decent money (is it more than the 5-10 percent that do it in poker)?


[/ QUOTE ]
In a small time period (less than 10 years), I wouldn't be suprised if it was 5-10 percent. Over a long time period (20 years or more), I would be absolutely amazed if 1 in a thousand actually showed a profit.

BTW, the successful active traders have almost nothing to do with successful poker players. Showing a profit after a year or two of active trading is like showing a profit after an hour or two in a poker game. Over such a short time period, there is very little connection between results and "playing well".
[ QUOTE ]

3. If it is possible, what is the time investment required?


[/ QUOTE ]
IMHO, it is virtually impossible for a single person invest the time needed to process the information necessary in order to be a successful active trader. It requires a team of very skilled people, a lot of expesive software, and at least a little bit of luck.

[ QUOTE ]

4. What is the bankroll/investment money needed to begin with low ROR?


[/ QUOTE ]

See #4. Because it is a losing proposition, no bankroll is big enough, and your ROR is almost 100%.

[ QUOTE ]

5. Are Sklansky/Zee/other brilliant minds on this board deftly navigating the stock market the way they tear thru poker fields? If not, why not?

[/ QUOTE ]
I don't know what their results are. Based on some of Zee's posts regarding investment strategies, I imagine he's a buy-and-hold guy. Based on some Sklansky's recent posts, I got the impression that he likes to pick specific stocks, but I only skimmed his posts a few minutes ago.

What is your definition of brilliant? Many consider brilliant to be the smartest 5% or 10% of people. Personally, I consider brilliant to be the smartest 5 or 10 people in the world.

Again, I don't consider it reasonably possible for a single person to "deftly navigate" the stock market (if you mean this as active trading) for any extended period of time. Sure, some have done it, but your probably better off trying to win the lottery.

[Paluka]

I agree with most of what moondogg says. I'm a derivatives trader, so although the focus of my job is not stock trading I know a fair amount about it. I think that just about every single person who thinks they can make money "daytrading" or whatever it is they think they are doing is deluding themselves.

[Officer Farva]

My fund has made a ton of money. Their volume is above a million shares daily, enought to classify their behavior as "daytrading". Its possible to make money doing just about anything in the stock market, however unlikely. A lot of it depends on your strategy, luck, and timing. Sounds a lot like poker...

[Paluka]

[ QUOTE ]
My fund has made a ton of money. Their volume is above a million shares daily, enought to classify their behavior as "daytrading". Its possible to make money doing just about anything in the stock market, however unlikely. A lot of it depends on your strategy, luck, and timing. Sounds a lot like poker...

[/ QUOTE ]

What do you mean by "fund"? Is this a group of professionals? This isn't really what I was talking about. I was talking about individual semi-pro trader just trying to pick good stocks and trade against "trends". I'm not talking about groups of pros or people who have access to information like what big orders are out there etc...

[Officer Farva]

You're right. I am referring to a group of professionals.

[adios]

[ QUOTE ]
1. Are 2+2ers behaving like the unsklanskified masses on the possibility of success in an arena they don't understand.

[/ QUOTE ]

Only speaking for myself, yeah pretty much.

[ QUOTE ]
2. What percent of active traders make decent money (is it more than the 5-10 percent that do it in poker)?

[/ QUOTE ]

How would you define "active trader?"

[ QUOTE ]
3. If it is possible, what is the time investment required?

[/ QUOTE ]

When your fish food nada.

[ QUOTE ]
4. What is the bankroll/investment money needed to begin with low ROR?

[/ QUOTE ]

If you lose no bankroll's big enough.

[ QUOTE ]
5. Are Sklansky/Zee/other brilliant minds on this board deftly navigating the stock market the way they tear thru poker fields? If not, why not?

[/ QUOTE ]

Since the market is so effecient, how can anyone "beat" it?

[BadBoyBenny]

[ QUOTE ]
1. Are 2+2ers behaving like the unsklanskified masses on the possibility of success in an arena they don't understand.


[/ QUOTE ]

On average, the unsklanskified masses lose at poker, but on average the unsklaskified masses win in investing (assuming they do something rational like picking a low cost index). So the answer is yes, but for good reason.

[ QUOTE ]
2. What percent of active traders make decent money (is it more than the 5-10 percent that do it in poker)?


[/ QUOTE ]

I have no idea... To me, the best anaolgy to active trading is that it is like playing in a game with a higher rake, but faster tables. You have to have a much bigger edge to overcome trading fees.

[ QUOTE ]
3. If it is possible, what is the time investment required?


[/ QUOTE ]

It depends on the person. In my mind, a succesful trader would not have to have more or better information than everyone else, he would just have to act on the information he gets more quickly and rationally than everyone else.

[ QUOTE ]
4. What is the bankroll/investment money needed to begin with low ROR?

[/ QUOTE ]

It depends on how big of bets you make. How much money is in any stock at any given time would be important information. To overcome trading fess your buy-in would have to be significantly large though. I have no idea how much and don't intend to try and find out.



[ QUOTE ]
5. Are Sklansky/Zee/other brilliant minds on this board deftly navigating the stock market the way they tear thru poker fields? If not, why not?

[/ QUOTE ]

It's impossible to tell... maybe. Unlike poker, where all the players mentioned have probably proved their worth over hundreds of thousands of bets, stock pickers don't have the volume of trades to prove statisitcally that they are not an abberation.

I don't know whether any of them actively trade, but I would think that each of them would make more money faster analyzing poker tables than businesses. Why would they not let there excess money sit and work for them in an indexs
while they write books and make plus EV poker plays?

- Benny

[GeorgeF]

1. Are 2+2ers behaving like the unsklanskified masses on the possibility of success in an arena they don't understand.

Stocks are much different than poker in that the poker player has a choice about playing. If you have more income than you spend you must invest. Your only choice is which vehicle. While you can say I don't understand poker so I will not play, you don't get to say I don't understand so I will not invest. If you have the money you must do something with it, even if that means putting it in a jar and burying it.

2. What percent of active traders make decent money (is it more than the 5-10 percent that do it in poker)?

Few if any make any money. My guess is that close to 0% of active retail investors come out ahead over time. I suggest you go to a good bsuiness library and research the subjest there. There is plenty of academic work on the who wins / who looses type questions.

3. If it is possible, what is the time investment required?

My guess is that you would have to spend almost all your waking hours for about 5 years to develop a system. If it worked probably 4 hrs a day to keep it going. You might be able to use your 'research' as the basis of an advanced business or mathematics degree.

4. What is the bankroll/investment money needed to begin with low ROR?

You could subscribe to a newsletter like bobbrinker.com or no load fund x and use the time you save not thinking about stocks to earn money by working (at a job for a salary). My guess that any effort you put into stock picking will not be rewarded especially if you have a small bankroll.

I personally think that you should stick with mutual funds until you have 100k. Then try some newsletters until you have 500k. Then it might be worth you thinking on your own.

5. Are Sklansky/Zee/other brilliant minds on this board deftly navigating the stock market the way they tear thru poker fields? If not, why not?

Although I like the books published by 2+2, poker is not like chess where each player is assigned a rating that precisely determiones the chess ability of any individual. It is not clear how good any individual player is, 2+2 authors included.

You also put too much emphasis on the stock market. The real business of stocks and bonds is investment banking, thats where the real money is. Retail investors that come out ahead in stocks and bonds are really just the upper end of the bottom of the investment world.

[Nottom]

[ QUOTE ]
3. I would bet, that the amount of money that firms spend in one month researching or predicting stock direction - exceeds the combined total money wagered in poker over the last ten years.

[/ QUOTE ]

I think you are seriously underestimating how much money is wagered in poker. Party alone is raking more than $1Mil/day which means there is probably a least $50M/day being wagered on that one site and Party is just a small % of the toal amount being wagered on Poker on a daily basis.

I'd set a conservative estimate of how much has been wagered on poker in the last 10 years at half a Trillion dollars minimum.

I don't think we are seeing that kind of money being put into stock reasearch.

[Snuffleupagus]

[ QUOTE ]
This guy might be on to something:

www.getfolio.com (http://www.getfolio.com)

[/ QUOTE ]

I read it and it looks interesting. Has anyone used this?

[moondogg]

[ QUOTE ]
[ QUOTE ]
This guy might be on to something:

www.getfolio.com (http://www.getfolio.com)

[/ QUOTE ]

I read it and it looks interesting. Has anyone used this?

[/ QUOTE ]


The first item from their "Questions" page:
[ QUOTE ]

1. The "wonderful" results of most systems are often the result of computer modeling and the ability to pick the best curve to make the retrospective data appear most positive. When followed prospectively many of these models perform much more poorly.


[/ QUOTE ]

/images/graemlins/confused.gifThat is not even a goddamn question. Seems like they really got their act together.

Now I'm going to believe they they are making 43.93% annually for 15 years using a "value strategy." Such spectacular returns from diversification and value investing? Sure, why not?

If these clowns can make a 43% return every year, why are they even bothing to sell a service, and why do they not already have more money than Bill Gates?

It's debatable whether it's possible to come up with a system to steadily beat the market. If such a system was developed, it would never be sold to the public, as it would be absolutely priceless to it's owner, a nonstop money-printing machine. If, however, such as system ever became public domain, it would immediately cease to have relevance. A flood of cash would immediately flow into it, and either the potential profit would be diluted to virtual non-existence, making it unprofitable, or (worse yet) the market would over-compensate, causing the once-profitable system to now be a losing system.

Such a system, if possible, would only have value if kept a secret. Therefore, if anyone ever tries to sell you such a "system", they are either a liar or an idiot.

[Snuffleupagus]

Thanks for your response. It does sound too good to be true. That's why I was curious to see if anyone had tried it.

Email him what you said and tell us what he has to say. Should be interesting. /images/graemlins/wink.gif

Here is the contact link:

http://www.getfolio.com/investment_stocks/professional_money.asp