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Can Day Trading be profitable for retail?

  #104 (permalink)

New York, NY
 
Trading Experience: Beginner
Platform: Vanguard 401k
Broker/Data: Yahoo Finance
Favorite Futures: Mutual funds
 
Posts: 1,039 since Jul 2012
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Seems like your argument rests on a very narrow generalization of equities and FX traders and trading style (beta exposure) such as:


Quoting 
Higher win rate in equities doesn't attract other retail traders because of return.
Equities investor/trader - Trader hopes to beat the S&P, last year 20% annual ROI
Forex trader - Traders hopes to turn is 10k into 100k by the end of the year. - leads to the much lower win rate

and incorrect assumptions such as:


Quoting 
The reason why theses traders are in riskier markets such as forex is for the higher return not win rate.

You can match your first order risk measures like vol simply by adjusting leverage.

The supporting data for no-arbitrage between asset classes is staring in your face even without my input. There are huge asset managers that are in the business of finding inefficiencies between asset classes and their rebalancing decisions may include moving $1B from value stocks in 1 Asian market to another, or $1B from commodities to equities, or developing country FX pairs to US equities. Harvard's endowment is in the business of moving hundreds of millions from Brazilian lumber to US equities on a low frequency. We know that there's almost no such asset manager with >2 Sharpe, so their R^2s must be extremely weak, meaning there's very few advantages from choosing between equities or FX.

Bear in mind that a significant portion of the accounts I deal with are institutional in nature, including fairly large hedge funds, which do not shoot to turn 10k into 100k. Also, 2000+ is also a much larger sample than your meetup group.

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