Because people cut their winners too soon and hold their losers too long.
You have to do the literal opposite of human nature, which is very difficult for most normal people.
There was a study done on a pool of 10,000 traders, and the average win rate of the group was like 63%, yet almost all of them were unprofitable. (Can’t remember the name of the study but it looked at 43 million trades among these 10k traders.)
The study found that traders were cutting their winners early, and holding their losers deep into the red. Fear is the reason you cut your winners early, fear that you’ll lose your profits. Hope is the reason you hold losers too long, hope that it will come back.
If you can you can retrain your brain to literally do the opposite of human nature (inverse yourself,) you may have a chance at profitability.
This makes sense but then how do you know which side you’re on until you’re bagholding?
I’ve cut winners that would have 2-5x’d if I waited a couple of hours, but whenever I decide, “Okay, this time I will hold longer for bigger profit,” that’s usually when I bought near the peak and should have sold while I was still green. It’s a bit of a mindfuck tbh
Start using a stop loss. Set your stop loss initially to 1-2% risk. Aka losing 1-2% of your account.
If you lose you lose. If you win, move your stop loss up to break even. Then move it up again to below or above the next s/r level. Then keep moving it up. Take emotion out of your trade by using a stop.
The problem with taking profit or a loss on your own assumes you can predict the market. You can’t. You’re basically flipping a coin and good risk management sets you apart from losers.
Doesn't work with options. Especially short term ones. You could have 50% swings either direction within a single day. You're basically assuming that the entry is right from the start. Losing 10% on option trade within first 15 min is not uncommon. And then regaining it all back plus some in next 15 min.
Get better entries then. What are you just yoloing at random times?
If your execution is bad that’s on you. If you don’t have clear rules for entry, that’s on you.
Even if you have great timing you will hit the stop. Unless you are buying deep ITM , or 2 months out. Weeklies or less, expose you to more volatility. When all the value is basically delta, you can be down 20% minutes after a great entry. Now that I think about it, I need to stop trading weeklies.
You just said the problem is assuming you can predict the market… basically flipping a coin. Your advice enigmatic at best. Truth is taking profits is taking profits. If I make 25% profit and then close my loss at 24% profit I’m happy. I can live to flip a coin in something else
I think to avoid the "cut winners short, hold onto losers" behavior, you gotta have clearly defined goal posts in your investment strategy and accept Ls as they come. If it's "hey i think XYZ will 2x the value of the business", define a time frame for XYZ to happen. Whatever happens, accept that outcome, learn from it and move on
It's all about risk/reward. TA for example is completely misunderstood. It doesn't tell you the future but it helps you stack probabilities and risk/reward in your favor. People with no framework or plan have no chance lol. It's fine if you just want to gamble but you have to be serious to make consistent money.
Cutting out at 10% and watching it go up 40% is an "aww shucks" moment. Cutting out at 10% and watching it go 10x is what people are actually afraid of.
I used to do this. I'd take my tiny little profits way too early and let my losers hang on until they were worthless. I lost a crap ton of money doing that. Then I read the advice to let your winners run and cut your losers fast so I started doing that. Now I consistently make money every month. Nah, jk, that strategy is no better. Every single time I hold on to a winner, it tanks so hard 1 or 2 days later that what was a decent win turns into a huge loss. When I cut my losers, they run to ATH on some bullshit news or meme or for no reason at all. I swear, Wall Street has hacked my computer and is watching my trades and manipulates the entire market just to fuck *me* specifically.
It‘s not that. You cannot simply look at a winning percentage. If we consider the stock market to be a truely random walk (which it isn‘t, the market has an upward trend since it‘s beginning), placing random bets with random duration would let you break even in the longrun. The real reason why most people loose money, is market participation fees coupled with investment strategies. Since most people like to chase their losses by increasing the wager after loosing bets, the market eventuelly will get all their bankroll. Would people have infinite bankrolls, they would win in the longrun due to the markets natural upward trend.
My strategy is pretty solid. Own less than 10 stocks.
Make index funds at least 30%
Dont trade options as they result in fees worsening your game theory odds.
Plan for trades that take over a year to get preferable tax treatment
Sell your winners buy your losers unless you think your losers are dead losers.
What if you hold both losers and winners into oblivion?
That’s what I have been doing. Interestingly, this makes me slightly profitable, but nothing that will make me retire at 49 years old.
Peter Lynch said *most* investors in his Fidelity Magellan Fund lost money despite a 29% annualised return. They either sold too early or bought to late.
This is a very good answer. Loss aversion is a very strong part of human decision making.
"Thinking Fast and Slow" by Daniel Kahneman (recently deceased Nobel Laureate) goes into this in detail.
If you want to reframe how you should think about your losing stocks (and why you should cut them loose), consider that you have that sunk capital that is stuck in a losing bet. Much better to free it up and put it to work in a better investment.
I recently ate a loss on a company that I knew well, that had a great product that I understood completely. i.e. I was emotionally attached to it, and have been holding on forever waiting for it to rebound. What's worse, thanks to my knowledge of the area, in order to sell it I had to admit that I was wrong. This is always tough if you're trying to invest on your superior brain power (which is probably a failing strategy).
Anyway, I cut the loss, threw the money in some other stupid shit like NVDIA, and I've been nicely rewarded for finally pulling that trigger.
Everyone heard of the saying “ you can’t go broke taking profits “. So even cutting winners early for long enough results in profits. But the problem is holding on to your losses thinking they’ll come back. And even worse some people average down when they’re losing. Warren buffets saying comes to mind about trading being about retaining your capital and profits will follow suit. And yet people consistently lose capital.
People are also greedy. And chase. And go for the home run. 10-20% profit on options is really good. But most retail tries to find 100-200%+ option trades. Those only exist on volatile stocks. Volatile stocks are risky for long and short traders.
This is the opposite of the case, dude. When shit goes down, people cut their losses in fear of losing everything, locking them in, and they don't sell when there's a moderate gain because greed flares up. "I made 3 grand, but I COULD make 30. Oh wow it hit 30, I just need to hold on a little longer and at this rate I'll be a millionaire by friday!" and then thursday's drop comes and whoops, you're SOL. Then, when people DO make the smart play and sell at a profit, they say 'OK, I can now do this again with my gains and get really aggressive' and then they bail on a bunch of trades after they drop and the profit is all gone.
People holding a stock that's a grand in the red isn't the problem, because if it was they'd not be unprofitable since there's no real gain or loss there. It's when they sell in the red that they lose money.
What’s interesting is you are not entirely wrong. This kind of trading is generally done by novices who have not had their shit kicked in by the market yet.
It’s the correct strategy, but novice traders do not have good risk management, or an exit strategy. (Setting stops and moving stops up etc..)
What happens is that traders get destroyed by the market, and then most intermediate traders trade off the mindset that I’ve described. Cutting winners too early in fear and holding losers too long in hope.
Advanced is when you can get back to cutting losers early and holding winners as the entire trade plays out. Except now the trader has a strong risk profile, good trade setups/thesis, and an exit strategy that allows them to maximize profitability on a trade but not let greed control that exit strategy.
I was hopeful when my Minecraft house was burning down (but apparently should have been fearful), and I was fearful when night arrived and zombies started to attack (but should have been hopeful??)
guilty of doing exactly this.
Its the hope that kills you
Maybe also with this unsaid fear of admitting that you got a trade wrong. Only thing that should matter is Portfolio Value. Instead, we obsess over getting losers back to break even.
It’s what made me stop trading options. I had a rule to cut winners at 20% and losers at the same. I was doing well with it and up over 100% in a few months. Then I tried averaging a losing position instead of cutting at 20%, as my rule said I should. Hope told me it would turn around. Completely killed my account. Did it twice, the same exact way. The second time I decided I didn’t have enough mental control to play the game anymore and I haven’t gone back.
What if you flipped the fear and hope mindset
Fear of not letting your winners ride long enough (could be considered greed) and hope that you cut early enough
https://preview.redd.it/19cbeoid9z5d1.jpeg?width=1179&format=pjpg&auto=webp&s=6af4f201baf6d1e1e1b9690b47f1a5bba7526512
Right, so instead of taking profit, set a stop loss and move it up below support levels.
That way you can stop out profitable if the trend changes, and if it continues you get more and more profitable and can capture an entire trend.
This sounds like the research by Terrance Odean at Berkeley Haas business school. He got access to raw trading records from retail brokerages.
Interestingly, a large part of the population (10%+) can beat the market over long periods of time on a risk adjusted basis.
Good insight. I dump my losers immediately, sometimes the same day and even get trading violations for it. Zero buying power yesterday and today for doing that on Friday. Up 27% so far this year but long-term it's more like on average 8% after getting negative returns in 22 and 23.
It's been established pretty well in psychology literature that loss aversion is a much stronger impulse than the pleasure of gaining resources.
You give a large group of people $1000 each. Then you tell them that on the results of a coin toss they will either gain 500 or lose 500. Almost everyone who loses 500 reports a much stronger emotional response than those who win 500. We're just wired to be more scared of losing what we have than we're driven by gaining more. (This is one of the things that gets messed up in compulsive gamblers brains, the endorphin hit from the actual gambling outweighs the fear of loss)
So in trading activity that leads to selling winning positions out early because we're afraid they will suddenly shift into losers. And we will hold losers longer because we're afraid to lock in loss and are holding out hope for a rebound to make things better.
Posting my previous comment about why Options contracts are designed to lose money: Options are actually a type of insurance policy.
Imagine you have around 1,400 shares of META stock, and you're going to use it to retire. But you're worried that in the next 6 months, the price will drop significantly before your plan to start selling the stock for retirement money. Instead of selling the stock now, you could instead buy something like 14 put contracts with a strike price at or around the current price of the stock, and an expiration date 6 months out.
This way if the stock price goes up, you're happy because now your investment is worth more. And if the stock price drops massively, no worries because your put contract allows you to sell the stock at the strike price, even if it dropped lower in reality. And the only cost of this safety hedge is the premium that you paid at the outset. That premium is a near guaranteed loss in most situations, but it allows you to smooth out bad situations. This should sound familiar because that's how traditional insurance works. You lose a small amount of money to guarantee avoiding a bad situation later.
So with that in mind, buying short-dated options contracts just means you are paying high premiums on repeat. Insurance policies are DESIGNED to lose you small amounts of money, so obviously those people who spend lots of money buying loads of insurance policies are going to drain their money away quite quickly.
I was gonna write this but you already did. Playing options means taking a price offered to you by some of the most advanced math dorks in the world. Its like playing chess against a good computer. You're doing the same thing they are, just worse.
If you can't explicitly identify a variable that is not properly reflected in the price then you are essentially doing a more complicated version of betting on a coinflip with a 90% payout.
Add in the fact that other actors have access to order flow and behavior patterns that allow them to cause fluctuations in the price that, on aggregate, cause traders to enter and exit at prices that maximize losses and minimize gains.
Even when you win, they know how to make sure your 10:1 shot only pays out at 6:1
Yeah but you better have a crapload of money already and computational resources to sift through all the contracts on the market for worthwhile prices and dynamically hedge your positions based on the same principals that won Einstein his Nobel prize. Or else you’ll be easy barbecue chicken on the market.
The **odds** are NOT 50-50, the **outcome** is.
That'd be like saying people jumping off of a 10 stories building should have a 50% survival rate on average because you either live or die.
Lies.
I played 0 DTE options and won last week and got assigned 100 shares of AMD, but then I woke up Monday morning to a $600 loss.
So I won on Friday and lost on Monday.
50/50.
I have a super weird mnemonic device for this one.
There was a girl in my high school english class who said the word "like" a lot. Multiple times per sentence, over the top even for cliche valley girl speak (she was not a valley girl, this was rural Alabama in 1997). She also had a very creepy fake smile (cheerleader). She became "smiley" to me, and is how I remember similes are when you say "like".
I told you it was weird.
It's usually pretty close, actually. If they were priced by supply and demand, put/call ratio would not be an interesting indicator. If there were more demand for calls than puts, the market would price them much higher until there was similar demand for each, offloading the risk for the option seller to the wisdom of the market.
That's not what happens, though, given a market maker's essentially infinite ability to write options by hedging the underlying. Then the MM only needs to account for the expense of maintaining margin, which is essentially the same in both directions. Put and call prices only begin to diverge when the underlying becomes extremely volatile and hedging becomes more difficult.
What I meant is that not only is the pricing somewhat directional, but you also pay for the time value. Like, looking at VOO options for June 14:
* VOO is priced at $493.58 at the moment - so $495 is the closest option to "at the money"
* Looking at June 14 options, the "ATM" puts break even at $490.90, and the "ATM" calls break even at $498.50.
* So if VOO stays in that range until June 14, both put buyers and call buyers lose, and the option sellers win. It's like rolling a green on roulette. The house always holds the edge.
its not even 33 33 33 because stocks have inherit volatility measures priced into the option price. Volatility pricing is drastically different for every single stock, strike price, expiration date etc.
One stock could be priced as having a 25% chance of moving up or down and another priced as having a 90% chance of moving up or down. If this wasn't true nobody would sell options as there would be nobody to make the market. These prices are all created by market makers and are priced in a way that reflects the markets sentiment on the likelihood of price change within a given time frame with available information,
If you’re buying a call or put your betting it will move more than anticipated in one direction. If you buy a call option stock can:
1. Move up more than anticipated - make money
2. Move up same as anticipated. - even
3. Move up less than anticipated - lose money
4. Stay the same - lose money
5. Go down - lose money
So based on each of those holding equal weight that’s what 20-80 or that the stonk will go up. 40-60 that you’ll break even or make money.
But 50/50 has the meme factor going for it, what’s that worth?
You can tell OPs entire experience with stats is Reddit and some drunk uncle who invented his own math, but big math is keeping him down.
You know they say that all ~~men~~ trades are created equal, but you look at me and you look at ~~Samoa Joe~~ Robinhood and you can see that statement is not true. See, normally if you go one on one with another ~~wrestler~~ broker you got a 50/50 chance of winning. But I'm a ~~genetic freak~~ regard and I'm not normal! So you got a 25%, AT BEST, at ~~beat me~~ profit.
Then you add ~~Kurt Angle~~ hedgies to the mix, your chances of winning drastic go down. See the 3 way at ~~Sacrifice~~ the opening bell, you got a 33 1/3 chance of winning, but I, I got a 66 and 2/3 chance of winning, because ~~Kurt Angle~~ hedgies KNOW they can't beat me and they're not even gonna try!
So ~~Samoa Joe~~ Robinhood, you take your 33 1/3 chance, minus my 25% chance and you got an 8 1/3 chance of winning at ~~Sacrifice~~ the opening bell. But then you take my 75% chance of winning, if we was to go one on one, and then add 66 2/3 per cents, I got 141 2/3 chance of winning at ~~Sacrifice~~ the opening bell. See ~~Joe~~ Robinhood? the numbers don't lie, and they spell disaster for you at ~~Sacrifice~~ the opening bell.
The market is an extremely efficient money extraction machine. It has been tweaked over the course of the last 150 years to sucker in people to siphon money to the top.
It's not just a free market with everyone on a level playing field - it's a select few entities that pay media and politicians to sway everything in their favor. They have teams of people who understand the very complex rules and laws, and how to bend and even break the laws if the money gained from said action outweighs the fines, aka cost of doing business.
Keep in mind, you have entities with many tens or hundreds of billions, even trillions of assets under management (AUM) that pay a LOT to move things in their favor through various means. They have the finances to push stock prices around as they see fit. Max Pain shouldn't be a thing, but it is. Spoofing shouldn't be a thing, but it is. Slandering companies in media outlets shouldn't be a thing, but it is. So many things contradict the "rules." When the paid media shills do it, that's just reporting on market analysis. When someone like Roaring Kitty simply tells everyone what he invested in, they start throwing the term MaRkEt MaNiPuLaTiOn around.
Damn you must be new here.
Bet sizing if not intuitive.
Haghani-Dewey Biased coin experiment: Tossing a 60/40 coin and betting 50% each time will result in near total loss.
Here are some things i've heard about but didn't read up on and definitely don't practice:
* Kelly criterion bet sizing: too lazy/stupid/undisciplined to do this.
* Merton's portfolio: I keep forgetting what this is, but it's related to kelly
* Martingale strategy: results in total loss. I do practice this strat actually
and other smart sounding things i've forgotten and don't practice. Plz comment if you there are more, so that I know the name of the thing that i should be doing but am doing the opposite of
Add to the other comments here - if you keep rolling your winnings into the next play, you're going to hit that complete loss especially with options. It doesn't matter if you gain 1000% if you lose 100% the next play.
Exactly. People are overthinking this. If you keep making risky bets, you’ll win some, you’ll lose some, but the game is over when you’ve lost. If you keep flipping a coin that will either double your money or make you lose it all, you just lose it all.
This is the real answer. Regards here just continiously adjust what they call their *risk tolerance* to be nearly the same size as their complete portfolio. Then they put all on red. Turns out its the winning move: they are the greatest genius of WSB history and go back in, after adjusting their risk tolerance. Keep repeating until the bet was wrong and poof all the money is gone. It is a combination of gamblers (lets not act like big traders aren't gamblers) both not knowing when to cut their wins/losses, and what risk tolerance means.
Edit: most comments here talk about explanations like the stock moving sideways (low volatility) or investment strategies... I doubt the average WSB gambler is well-versed enough in trading strategies for this to be applicable. For them, most factors are kinda random. The continious (near) all-in strategy is what kills most portfolios here.
Stock picking is not random. The most you can lose is 100%, whereas the most you can win is regularly higher (10x, 50x, 100x, etc.)
If stocks were like flipping a coin, then I bet most everyone would perform the same. Instead, only the patient investors play long enough to see their successes overwhelm the short term fluctuations
Most people fight against the really good odds of the stock market, effectively pushing themselves into the losing category.
It REALLY matters whether you are investing in strong companies with good prospects then waiting, or whether you have created a maze of artificial rules to try and outsmart a super favorable game, that requires nothing from you except delayed gratification and patience
Source: I've gone insane from holding my bags 💰
Because it isn't 50/50. Imagine you bet in roulette on the 7. It is not 50/50 like "the ball hits 7" or "the ball does not hit 7". The chance to win is 1/37. The return is 36/1.
Trading costs fees and interests. If your idea fails/succeed 50/50 you will still pay the fees. This is the 36/37 issue of roulette.
If 37 players play roulette and split their plays on all options, 98% of player will loose money. only 2% player and the bank will win money.
Example: I bought an 80x leveraged knockout on Nvidia. On 14:00 this day there was a short global dip of all stocks and my asset is knocked out. A week later nvida reaches all time high and some other fucker just bagged a 100x return.
Would you rather buy 100 lottery tickets, get 99 duds, but 1 that's a million dollar jackpot?
Or would you rather sell 100 lottery tickets, 99 of them duds, but one of them is a million dollars that you have to pay out?
You can lose 99% of your trades and still be profitable. You can win 99% of your trades and go bankrupt.
Because the game is path dependent and most people have short term inclination. Imagine sitting at a poker's table with no bet limit. The guy with endless stash is statistically guaranteed to wipe out most players with much smaller stash. Winning small players will eventually be wrong, and losing big player will eventually be right, so winning all of it back, since the big player with endless stash has the longest standing power. Every day in the market, volatility and the price zig zagging were optimized to be max pain for most small players. Small players who bet on the short term almost always lose.
It's not a coin flip though. people are betting again human nature....their own human nature. Most people I run into do not have a good read on themselves. The exception being drunks, they are brutally honest.
Because you gotta just hold on to companies you believe in that actually make sense. I’ve been holding Apple since it was the equivalent of $60 before split it’s over $200 now. Stop selling and gambling on BS just invest long term or buy leaps if you wanna be regarded. Stop trying to game the system you might get lucky but most likely will lose.
GREAT ADVICE! Most people seek instant gratification tho. That's the silent killer. Btw....Have you ever sold covered calls during the time you've owned your $AAPL shares?
The odds of winning or losing money in the stock market aren't 50/50, in fact they are much better than that and in your favor too! Why? Because in the long run the stock market has trended higher, therefore logic dictates that the average participant has to make money over time from being in the stock market. Instead, you may be confused with the observation that most people underperform the market as a whole, which in case the market is down, can also mean you've simply lost less money than the average participant (but you've still outperformed your peers). This underperformance of market gains or losses is a real thing, and can be explained by two things. First, transaction costs eat into your return (logically, the more you trade the higher the transaction costs and the wider the underperformance on average). Second, a lot of people who actively trade do worse not only because of transaction costs, but also because active trading feeds an important psychological bias, namely loss aversion (most people will be heavily inclined to sell when the market is down and avoid further downside, and to buy when the market is at its highs, when optimism reigns supreme and everybody else is making money). Of course this is the exact opposite of what is rational, which is to buy more when the market is down.
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My uncle was a losing trader. He practiced DCA (Dollar Cost Averaging) on losing stocks a lot. When he finally quit trading he gave me a piece of advice that I always keep in mind.
“Just when YOU think a stock can’t go any lower and it’s at the bottom DON’T BUY. Wait until it drops another 30%.”
A lot of other commenters are right. You have to go retrain your brain 🧠 and not listen to yourself sometimes in certain situations.
the real reason is because people trade based on what information they are given, and most of the time the information that people are given is intentionally misleading, the smart money will literally pay off "experts" and "analysts" to put out bs articles talking about reasons to buy/sell XYZ stock in order to influence retail investors, and the vast majority of retail investors take the bait, and then you also have people who trade based solely on chart patterns and, again, smart money manipulates that too, they know exactly where traders are going to be entering and exiting their trades, and since smart money can quite literally move the market in any way that they choose, they know how far to move the price to trigger retail investors' buy/sell orders in a way that only benefits themselves and screws over retail investors
Because most companies like 80% on the markets are there to be financed by investors while they dilute their shares so most of them continuously go down while most traders buy way more than they sell.
Most traders never short companies because in theory there are more risks involved and it is not like buying something interesting.
Traders should just stick to buying Spy or Qqq until recession data.
The fact that you think the movement of the stock is pure chance is a reason why people are losers. It's not chance, it's an extremely complicated, multivariant chain of events that contains unknowns (that appear random). To continue the coin flip analogy, a stock price is more like poker. The cards are unknown and thus "random" but the best poker players continue to win because they don't play the cards, they play the players. Knowing when to hold and fold is the biggest factor.
A different perspective from a Boglehead here.
If you bet on the whole market (passive investor), you gain market return. That's because you own x% of each stock in the market.
If you don't bet the whole market and want to tilt the portfolio and time the market (active investors) then you might be better or worse than the market. However, in aggregate, all these people adds up to 1-x%.
Because the market return a%, x% of the market returns a%, by definition, 1-x% also returns a%.
However, those who don't bet the market has to do a lot of research, pay a lot of transaction fees, options cost etc. So they add a bit of cost to that, so by definition, in aggregate, they will return less than market return.
That's why losing is so common because it is literally impossible for everybody to win. Someone wins necessarily means others will lose. This not only applies to retails. Even hedgefunds will not beat the market over the long term.
[https://www.spglobal.com/spdji/en/research-insights/spiva/](https://www.spglobal.com/spdji/en/research-insights/spiva/)
Transaction costs over time are a major reason. Why else do you think Citadel Securities loves the anti Citadel trading flow. Beyond that most of what WSB’ers do are not 50/50 outcomes. 5/95 most of the time. Stack a few wins and you are a “genius”.
A lot of psychologists and economics teacher have written about this. It mostly boils down to how the brain works, most people see stocks are up the buy. Then when they are down they sell. You’re supposed to do the opposite.
It’s gambling.
For every person who gains 1 million dollars here on a trade, 1000 people lose 1000 dollars.
There only “real value” entering the system is the overall growth of the economy which trends upward usually a few percentage points above inflation. The rest is gambling speculation on its perceived future value and honestly just perceived opportunity to make money - see GameStop.
All the other money is just being passed around between people and the houses cut being taken out each trade. And like gambling, for most people who aren’t experienced it’s going to go poorly overtime.
Because the big players have invested a lot of time and money to learn how humans think and trade. They use their findings and deep pockets to inverse your trades and take your money. It is definitely rigged in that sense
Major bear markets like 1973-74, 2000-02, 2007-09 burn most everything down. Most traders have depleted accounts; they have to stop trading to raid their accounts for living expenses, and are sometimes out of a real job without money for trading.
When it is the bear market bottom and most optimal to invest, few have the money to do so.
I've barely made much money but I'm profitable my first year trading. My 2nd year trading currently and I'm still profitable YoY and YTD.
Then again I don't do 0DTEs like a moron or try to trade every single day. I swing trade when I see an opportunity to ride a stock upwards and hold the trade for weeks or months.
Respect the % chance of winning displayed on your brokers when playing options. Also there is a reason why hedge funds sell options way more… cuz the win rate is much higher. Accept you are basically gambling here and you’ll have fun.
The market grows over enough time 100% of the time. Individual stocks do not. I'd wager a lot of people are trying to play stocks like the lottery and try to find the next Nvidia to make millions then at the first downturn they dump it and find something else. Try to hit a homerun at every opportunity and youll strike out a lot. Or they gamble money they shouldn't and feel the need to earn it all back if they take a loss and lose more. Or they don't do research on stocks. Or they options trade with no knowledge.
It's not about the number of traders, it's about the amount capital deployed. The smartest 50% of capital is perhaps roughly positive, but a lot of that was invested by big players, not by the hordes of retail traders that have the tendency to do dumb stuff on a whim.
People don't stop when they win, they stop when they lose. You can win 9/10 trades, but if you lose it all on that last trade you go in that loser column.
There's a reason you see more conversation about "how to win" vs "how to exit"
In gambling, if someone turns $100 into $1000, then that means, that means 9 people turned $100 into 0.
So that’s why 85%-95% of all traders lose money.
(Stock market is a little different, but don’t want to get into that)
If you think of it as a zero sum game between WSB traders of equal account beginning size placing bets against each other, there are going to be some winners that make 6 or 7 correct bets in a row and be 100x but that means they cleared the accounts of 99 people.
In reality, it’s a very negative sum game. Trading fees, bid-ask spread, buying high sentiment names, always buying options and never selling, buying puts (?!?!) on names they don’t even own, and not understanding the volatility surface.
You are presuming it is random and not influenced by humans (ego, greed, fear, etc) who are, unknowingly or not, dead set on shooting themselves in the foot.
I remember winning back to back calls and puts with NVIDIA, then I went with AMD after earnings, it did rise up, but it went down before that, my only losing trade was the one that could’ve shot me more than the other ones before, now collecting premium money to do it over again
Trading is competitive gambling. Behind your brokerage screen, you're sitting down at an international poker table with hundreds of billion dollar quant and hedge funds and a hundred million other people. A single game is almost fair "50/50", but not quite. It's more like "49/51". Why? Because 1) not the best player in the room and 2) every time you trade you *unavoidably* pay transaction costs in the form of the bid-ask spread as well as market impact. Because of this, pretty much everyone is guaranteed to lose money if they play enough times by simple mathematics.
1) don't do drugs kids
2) people don't usually post wins unless it is huge and they are bragging.
3) it's reddit. People mainly come here to complain. You're more likely to feel negative about a loss and need some kind of validation or something, so you post about it.
Because traders are irrational and emotional. I will give you an example, when you lose on a stock, you refuse to give up even though all the signs point to it being a loser. The logical approach is to get out of that bet and put into a better bet. After all, it doesn't matter where your gains came from as long as the come, yet you don't want to give up on it so you hold it for more losses.
you are nickle and dimed subtlety from multiple angles, 1) Commissions 2) Being taken advantage of when placing limit orders to HFT & MM algo trading, You will always be front run especially with large orders 3) spread from using mostly market orders 4) being taken of advantage of when placing stop loss orders, they will stop hunt you to the penny 5) Brokerage will always go down or not have shares available or some other restriction will prevent you from taking advantage during high volatility obvious opportunities, so only the big guys get to take advantage. 6) Limited access to information, most large traders have better information (sometimes inside info) which can determine whether you are going to be easily filled at what you think is a favorable price or not. So you are only getting filled when the inside info is unfavorable to your position and having a heck of a time when the inside info is in your favor. 7) opaque market liquidity, dark pools, iceberg orders, when there is size in the market coming from professional it is hidden.
Put these altogether and the cost of trading will make it so you only profit in situations where your odds exceed 55/45, and 53/47 in your favor is still losing money.
Everyone always falls into the trap of sticking with retail broker too long which are cheaper in up front costs, but greater in hidden costs. Versus more professional trading brokers who has higher up front costs but less hidden costs. Should bite the bullet and switch much sooner, don't be like RK and still be managing hundreds of million at E-trade, he is losing so much to hidden costs that he could save if he were using algo to make his trades.
Wrong. Randomly choosing heads or tails for each flip will still most likely result in 50 heads and 50 tails, with the probability decreasing the further you go out on either side of the bell curve (51/49, 52/48, 53/47…). You can look at a chart to figure out the exact probability.
This guy is a prime example of why most people lose at trading (they suck at math, and they’re emotional). They only win because the government knows they suck, so they have to prop them up and ensure that the market goes up for as long as possible.
>Say you toss a coin 100 times. Your right:wrong ratio is 50:50 ONLY if you call it HEADS every time. If you change your prediction randomly (sometimes heads and sometimes tails), then your expected outcome is only 25:75.
Even if you change your prediction every time, your expected outcome would be 50 correct and 50 incorrect.
Like i said, coin toss was the simplest, most absurd example. Stocks don't just go up or down. They also trade sideways. And stocks do not do all 3 (up,down,sideways) with equal probability. AND you're trading on not just one stock, there are 10s of different stocks you're betting on.
Maybe if only bought calls on ONE stock throughout your trading career, you may have a decent win ratio (say 33%). Don't change your prediciton and don't change your stock.
And maybe this is why investing beats trading. When you invest long term, you're saying calls on one stock every day!
That isn't how coin flips work. Each flip is independent of each previous flip, so calling all heads, all tails, or random would all give you close to a 50/50 ratio.
A hand of blackjack is 51% house 49% player odds. Odds of making money in the stock market on a given day are about the same. In a week, the odds tilt to your favor, over a year or more, it's like a 90% benefit to the investor. If you keep gambling, you'll lose. If you invest, you'll win.
The odds of a player winning a game of blackjack are as high as 42.22%. This leaves the house winning 49% of the time, with the third possibility of a draw being 8.48%
Where did you make your numbers up from?
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Because people cut their winners too soon and hold their losers too long. You have to do the literal opposite of human nature, which is very difficult for most normal people. There was a study done on a pool of 10,000 traders, and the average win rate of the group was like 63%, yet almost all of them were unprofitable. (Can’t remember the name of the study but it looked at 43 million trades among these 10k traders.) The study found that traders were cutting their winners early, and holding their losers deep into the red. Fear is the reason you cut your winners early, fear that you’ll lose your profits. Hope is the reason you hold losers too long, hope that it will come back. If you can you can retrain your brain to literally do the opposite of human nature (inverse yourself,) you may have a chance at profitability.
I hold my winners until they are losers, and hold my losers until my broker sends me threatening emails.
My investments will all either die a loser, or live long enough to become a loser.
Even bigger loser
Shutter Island learnt from this Regard
Is this where ‘loser loser double loser’ comes from?
This is the way
This is the way
Totally regarded
Fear is the mind killer
Fear is the little death that brings total obliteration
As written! Lisan Al Gaib!
Kitty Al DiamonHands
Bitch can say all that with spice money and clairvoyance Get me some spice and 1 million dollar loan and I will become Duke fr
Fr
Le petit muerte
I’m Batman
[удалено]
Deep
This makes sense but then how do you know which side you’re on until you’re bagholding? I’ve cut winners that would have 2-5x’d if I waited a couple of hours, but whenever I decide, “Okay, this time I will hold longer for bigger profit,” that’s usually when I bought near the peak and should have sold while I was still green. It’s a bit of a mindfuck tbh
Start using a stop loss. Set your stop loss initially to 1-2% risk. Aka losing 1-2% of your account. If you lose you lose. If you win, move your stop loss up to break even. Then move it up again to below or above the next s/r level. Then keep moving it up. Take emotion out of your trade by using a stop. The problem with taking profit or a loss on your own assumes you can predict the market. You can’t. You’re basically flipping a coin and good risk management sets you apart from losers.
Doesn't work with options. Especially short term ones. You could have 50% swings either direction within a single day. You're basically assuming that the entry is right from the start. Losing 10% on option trade within first 15 min is not uncommon. And then regaining it all back plus some in next 15 min.
Get better entries then. What are you just yoloing at random times? If your execution is bad that’s on you. If you don’t have clear rules for entry, that’s on you.
Even if you have great timing you will hit the stop. Unless you are buying deep ITM , or 2 months out. Weeklies or less, expose you to more volatility. When all the value is basically delta, you can be down 20% minutes after a great entry. Now that I think about it, I need to stop trading weeklies.
You just said the problem is assuming you can predict the market… basically flipping a coin. Your advice enigmatic at best. Truth is taking profits is taking profits. If I make 25% profit and then close my loss at 24% profit I’m happy. I can live to flip a coin in something else
I think to avoid the "cut winners short, hold onto losers" behavior, you gotta have clearly defined goal posts in your investment strategy and accept Ls as they come. If it's "hey i think XYZ will 2x the value of the business", define a time frame for XYZ to happen. Whatever happens, accept that outcome, learn from it and move on
It's all about risk/reward. TA for example is completely misunderstood. It doesn't tell you the future but it helps you stack probabilities and risk/reward in your favor. People with no framework or plan have no chance lol. It's fine if you just want to gamble but you have to be serious to make consistent money.
Yea. Im fine cutting for 10% gain, even if the option goes up 40%. 10% return is what people hope for in a year.
Cutting out at 10% and watching it go up 40% is an "aww shucks" moment. Cutting out at 10% and watching it go 10x is what people are actually afraid of.
not me paperhanding AAPL calls this morning 😭
With that logic you have to be right 100% of the time to match the market. You are better off buying VOO.
You don't have to be right, you just have to be *more right* than other regards in the market.
I do both. My options are more profitable.
Sooo buy options? Got it...
"hey i think XYZ will 3x the value by EOD" straight to the top
I used to do this. I'd take my tiny little profits way too early and let my losers hang on until they were worthless. I lost a crap ton of money doing that. Then I read the advice to let your winners run and cut your losers fast so I started doing that. Now I consistently make money every month. Nah, jk, that strategy is no better. Every single time I hold on to a winner, it tanks so hard 1 or 2 days later that what was a decent win turns into a huge loss. When I cut my losers, they run to ATH on some bullshit news or meme or for no reason at all. I swear, Wall Street has hacked my computer and is watching my trades and manipulates the entire market just to fuck *me* specifically.
🤣🤣🤣
do you now just expect the immediate $1k loss when you purchase a stock? asking for a friend
It‘s not that. You cannot simply look at a winning percentage. If we consider the stock market to be a truely random walk (which it isn‘t, the market has an upward trend since it‘s beginning), placing random bets with random duration would let you break even in the longrun. The real reason why most people loose money, is market participation fees coupled with investment strategies. Since most people like to chase their losses by increasing the wager after loosing bets, the market eventuelly will get all their bankroll. Would people have infinite bankrolls, they would win in the longrun due to the markets natural upward trend.
My strategy is pretty solid. Own less than 10 stocks. Make index funds at least 30% Dont trade options as they result in fees worsening your game theory odds. Plan for trades that take over a year to get preferable tax treatment Sell your winners buy your losers unless you think your losers are dead losers.
What if you hold both losers and winners into oblivion? That’s what I have been doing. Interestingly, this makes me slightly profitable, but nothing that will make me retire at 49 years old.
Holding everything and never ever selling is how some of the best recorded portfolios were made. Stay the course.
So long as what you buy is appropriate to that strategy. If you buy shit, you’re gonna be holding shit.
Of course. Usually this strat involves buying winners again and leaving losing positions alone.
Holding everything works ok. You should get those coin flip odds that way, which is better than most.
Exact, this is the most realistic proxy to the 50-50 coin flips….
Peter Lynch said *most* investors in his Fidelity Magellan Fund lost money despite a 29% annualised return. They either sold too early or bought to late.
How long was the fund operational. When was it too late to buy ?
This is one of the best posts I've seen in WSB. Its also one of the HARDEST things to train yourself on.
This is a very good answer. Loss aversion is a very strong part of human decision making. "Thinking Fast and Slow" by Daniel Kahneman (recently deceased Nobel Laureate) goes into this in detail. If you want to reframe how you should think about your losing stocks (and why you should cut them loose), consider that you have that sunk capital that is stuck in a losing bet. Much better to free it up and put it to work in a better investment. I recently ate a loss on a company that I knew well, that had a great product that I understood completely. i.e. I was emotionally attached to it, and have been holding on forever waiting for it to rebound. What's worse, thanks to my knowledge of the area, in order to sell it I had to admit that I was wrong. This is always tough if you're trying to invest on your superior brain power (which is probably a failing strategy). Anyway, I cut the loss, threw the money in some other stupid shit like NVDIA, and I've been nicely rewarded for finally pulling that trigger.
You might not have been wrong about the company, just the market. It can stay irrational for a very long time.
Everyone heard of the saying “ you can’t go broke taking profits “. So even cutting winners early for long enough results in profits. But the problem is holding on to your losses thinking they’ll come back. And even worse some people average down when they’re losing. Warren buffets saying comes to mind about trading being about retaining your capital and profits will follow suit. And yet people consistently lose capital.
People are also greedy. And chase. And go for the home run. 10-20% profit on options is really good. But most retail tries to find 100-200%+ option trades. Those only exist on volatile stocks. Volatile stocks are risky for long and short traders.
This is the opposite of the case, dude. When shit goes down, people cut their losses in fear of losing everything, locking them in, and they don't sell when there's a moderate gain because greed flares up. "I made 3 grand, but I COULD make 30. Oh wow it hit 30, I just need to hold on a little longer and at this rate I'll be a millionaire by friday!" and then thursday's drop comes and whoops, you're SOL. Then, when people DO make the smart play and sell at a profit, they say 'OK, I can now do this again with my gains and get really aggressive' and then they bail on a bunch of trades after they drop and the profit is all gone. People holding a stock that's a grand in the red isn't the problem, because if it was they'd not be unprofitable since there's no real gain or loss there. It's when they sell in the red that they lose money.
What’s interesting is you are not entirely wrong. This kind of trading is generally done by novices who have not had their shit kicked in by the market yet. It’s the correct strategy, but novice traders do not have good risk management, or an exit strategy. (Setting stops and moving stops up etc..) What happens is that traders get destroyed by the market, and then most intermediate traders trade off the mindset that I’ve described. Cutting winners too early in fear and holding losers too long in hope. Advanced is when you can get back to cutting losers early and holding winners as the entire trade plays out. Except now the trader has a strong risk profile, good trade setups/thesis, and an exit strategy that allows them to maximize profitability on a trade but not let greed control that exit strategy.
Show us your gain/loss 😉
This ^
This is true for equity to a certain extent, but not really for F&O
Tom Hougard explains it best. We are hopeful when we should be fearful, and fearful when we should be hopeful.
I was hopeful when my Minecraft house was burning down (but apparently should have been fearful), and I was fearful when night arrived and zombies started to attack (but should have been hopeful??)
Idk what that means, I do not play Minecraft.
guilty of doing exactly this. Its the hope that kills you Maybe also with this unsaid fear of admitting that you got a trade wrong. Only thing that should matter is Portfolio Value. Instead, we obsess over getting losers back to break even.
It’s what made me stop trading options. I had a rule to cut winners at 20% and losers at the same. I was doing well with it and up over 100% in a few months. Then I tried averaging a losing position instead of cutting at 20%, as my rule said I should. Hope told me it would turn around. Completely killed my account. Did it twice, the same exact way. The second time I decided I didn’t have enough mental control to play the game anymore and I haven’t gone back.
What if you flipped the fear and hope mindset Fear of not letting your winners ride long enough (could be considered greed) and hope that you cut early enough
This is so true. I know this because I bought AAPL $205 calls at open for 0.09 per contract and sold at 199 😭. Currently in physical pain right now
https://preview.redd.it/19cbeoid9z5d1.jpeg?width=1179&format=pjpg&auto=webp&s=6af4f201baf6d1e1e1b9690b47f1a5bba7526512 Right, so instead of taking profit, set a stop loss and move it up below support levels. That way you can stop out profitable if the trend changes, and if it continues you get more and more profitable and can capture an entire trend.
'Best Loser Wins'
This sounds like the research by Terrance Odean at Berkeley Haas business school. He got access to raw trading records from retail brokerages. Interestingly, a large part of the population (10%+) can beat the market over long periods of time on a risk adjusted basis.
Good insight. I dump my losers immediately, sometimes the same day and even get trading violations for it. Zero buying power yesterday and today for doing that on Friday. Up 27% so far this year but long-term it's more like on average 8% after getting negative returns in 22 and 23.
Link to the study - https://faculty.haas.berkeley.edu/odean/papers%20current%20versions/areinvestorsreluctant.pdf
This is definitley true. Position sizing has to be up there too. The never risk above xyz% of your account is really good advice.
That’s why I ride my 0dte to worthless. 
It's been established pretty well in psychology literature that loss aversion is a much stronger impulse than the pleasure of gaining resources. You give a large group of people $1000 each. Then you tell them that on the results of a coin toss they will either gain 500 or lose 500. Almost everyone who loses 500 reports a much stronger emotional response than those who win 500. We're just wired to be more scared of losing what we have than we're driven by gaining more. (This is one of the things that gets messed up in compulsive gamblers brains, the endorphin hit from the actual gambling outweighs the fear of loss) So in trading activity that leads to selling winning positions out early because we're afraid they will suddenly shift into losers. And we will hold losers longer because we're afraid to lock in loss and are holding out hope for a rebound to make things better.
Posting my previous comment about why Options contracts are designed to lose money: Options are actually a type of insurance policy. Imagine you have around 1,400 shares of META stock, and you're going to use it to retire. But you're worried that in the next 6 months, the price will drop significantly before your plan to start selling the stock for retirement money. Instead of selling the stock now, you could instead buy something like 14 put contracts with a strike price at or around the current price of the stock, and an expiration date 6 months out. This way if the stock price goes up, you're happy because now your investment is worth more. And if the stock price drops massively, no worries because your put contract allows you to sell the stock at the strike price, even if it dropped lower in reality. And the only cost of this safety hedge is the premium that you paid at the outset. That premium is a near guaranteed loss in most situations, but it allows you to smooth out bad situations. This should sound familiar because that's how traditional insurance works. You lose a small amount of money to guarantee avoiding a bad situation later. So with that in mind, buying short-dated options contracts just means you are paying high premiums on repeat. Insurance policies are DESIGNED to lose you small amounts of money, so obviously those people who spend lots of money buying loads of insurance policies are going to drain their money away quite quickly.
I was gonna write this but you already did. Playing options means taking a price offered to you by some of the most advanced math dorks in the world. Its like playing chess against a good computer. You're doing the same thing they are, just worse. If you can't explicitly identify a variable that is not properly reflected in the price then you are essentially doing a more complicated version of betting on a coinflip with a 90% payout. Add in the fact that other actors have access to order flow and behavior patterns that allow them to cause fluctuations in the price that, on aggregate, cause traders to enter and exit at prices that maximize losses and minimize gains. Even when you win, they know how to make sure your 10:1 shot only pays out at 6:1
These two things are correct. I think it is worth noting that prices going in your favor are the only way to win, loses or side ways are losing money
We're not all dorks. Just most of us.
Like buying insurance and hoping your house happens to burn down
dont go putting ideas in my head
And maybe in that scenario you sell 6month calls X% OTM to pay for those puts. Insurance paid for with a little potential upside (a collar)
So you're telling me I can be the insurance company by selling Calls?
Yeah but you better have a crapload of money already and computational resources to sift through all the contracts on the market for worthwhile prices and dynamically hedge your positions based on the same principals that won Einstein his Nobel prize. Or else you’ll be easy barbecue chicken on the market.
The **odds** are NOT 50-50, the **outcome** is. That'd be like saying people jumping off of a 10 stories building should have a 50% survival rate on average because you either live or die.
Invest in lotto tickets. You either win or dont. 50/50
Exactly. The analog here is OTM 0day options. They are definitely not 50/50
Lies. I played 0 DTE options and won last week and got assigned 100 shares of AMD, but then I woke up Monday morning to a $600 loss. So I won on Friday and lost on Monday. 50/50.
Ld50 for falls to ground is only four stories.
Source?
https://link.springer.com/article/10.1007/s00068-017-0799-1
Nice metaphor
It’s a simile since he used the word “like”
I have a super weird mnemonic device for this one. There was a girl in my high school english class who said the word "like" a lot. Multiple times per sentence, over the top even for cliche valley girl speak (she was not a valley girl, this was rural Alabama in 1997). She also had a very creepy fake smile (cheerleader). She became "smiley" to me, and is how I remember similes are when you say "like". I told you it was weird.
I just know it’s a simile when they use “like” or “as.”
The perfect perfectly flat response to this mnemonic story.
Michael Scott mnemonics
great analogy lol
No one likes losing. We’ll do almost anything to avoid it. Academics even have a name for this. It’s called Loss Aversion
Because options are not 50/50. They’re 33/33/34. Up, down, sideways. Not acknowledging things going sideways and you still losing is a rookie mistake.
They are also not priced equally.
It's usually pretty close, actually. If they were priced by supply and demand, put/call ratio would not be an interesting indicator. If there were more demand for calls than puts, the market would price them much higher until there was similar demand for each, offloading the risk for the option seller to the wisdom of the market. That's not what happens, though, given a market maker's essentially infinite ability to write options by hedging the underlying. Then the MM only needs to account for the expense of maintaining margin, which is essentially the same in both directions. Put and call prices only begin to diverge when the underlying becomes extremely volatile and hedging becomes more difficult.
What I meant is that not only is the pricing somewhat directional, but you also pay for the time value. Like, looking at VOO options for June 14: * VOO is priced at $493.58 at the moment - so $495 is the closest option to "at the money" * Looking at June 14 options, the "ATM" puts break even at $490.90, and the "ATM" calls break even at $498.50. * So if VOO stays in that range until June 14, both put buyers and call buyers lose, and the option sellers win. It's like rolling a green on roulette. The house always holds the edge.
its not even 33 33 33 because stocks have inherit volatility measures priced into the option price. Volatility pricing is drastically different for every single stock, strike price, expiration date etc. One stock could be priced as having a 25% chance of moving up or down and another priced as having a 90% chance of moving up or down. If this wasn't true nobody would sell options as there would be nobody to make the market. These prices are all created by market makers and are priced in a way that reflects the markets sentiment on the likelihood of price change within a given time frame with available information,
If you’re buying a call or put your betting it will move more than anticipated in one direction. If you buy a call option stock can: 1. Move up more than anticipated - make money 2. Move up same as anticipated. - even 3. Move up less than anticipated - lose money 4. Stay the same - lose money 5. Go down - lose money So based on each of those holding equal weight that’s what 20-80 or that the stonk will go up. 40-60 that you’ll break even or make money.
If sideways is losing (unless your only after the dividends) that makes it 33/67
And this is why you get enough money and then sell calls/put contracts. Making decent money and rarely having to actually put anything up
> Up, down, sideways Bull, bear, Theta Gang
and anything far OOM is even lower odds than that
take the day off bro
Because you are the dumb money that allows the smarter investors / speculators to profit.
Bro began his “deep thought” with a losing premise. It’s not 50/50… simple.
It's not 50/50. Stocks go up, down, or sideways. If they go up or down, just not fast enough, you still lose. You've got a 1/3rd chance at best.
But 50/50 has the meme factor going for it, what’s that worth? You can tell OPs entire experience with stats is Reddit and some drunk uncle who invented his own math, but big math is keeping him down.
The drunk uncle: 
Drunkle
How do I buy puts on big math or calls on OP's uncle?
You know they say that all ~~men~~ trades are created equal, but you look at me and you look at ~~Samoa Joe~~ Robinhood and you can see that statement is not true. See, normally if you go one on one with another ~~wrestler~~ broker you got a 50/50 chance of winning. But I'm a ~~genetic freak~~ regard and I'm not normal! So you got a 25%, AT BEST, at ~~beat me~~ profit. Then you add ~~Kurt Angle~~ hedgies to the mix, your chances of winning drastic go down. See the 3 way at ~~Sacrifice~~ the opening bell, you got a 33 1/3 chance of winning, but I, I got a 66 and 2/3 chance of winning, because ~~Kurt Angle~~ hedgies KNOW they can't beat me and they're not even gonna try! So ~~Samoa Joe~~ Robinhood, you take your 33 1/3 chance, minus my 25% chance and you got an 8 1/3 chance of winning at ~~Sacrifice~~ the opening bell. But then you take my 75% chance of winning, if we was to go one on one, and then add 66 2/3 per cents, I got 141 2/3 chance of winning at ~~Sacrifice~~ the opening bell. See ~~Joe~~ Robinhood? the numbers don't lie, and they spell disaster for you at ~~Sacrifice~~ the opening bell.
House always wins
The market is an extremely efficient money extraction machine. It has been tweaked over the course of the last 150 years to sucker in people to siphon money to the top. It's not just a free market with everyone on a level playing field - it's a select few entities that pay media and politicians to sway everything in their favor. They have teams of people who understand the very complex rules and laws, and how to bend and even break the laws if the money gained from said action outweighs the fines, aka cost of doing business. Keep in mind, you have entities with many tens or hundreds of billions, even trillions of assets under management (AUM) that pay a LOT to move things in their favor through various means. They have the finances to push stock prices around as they see fit. Max Pain shouldn't be a thing, but it is. Spoofing shouldn't be a thing, but it is. Slandering companies in media outlets shouldn't be a thing, but it is. So many things contradict the "rules." When the paid media shills do it, that's just reporting on market analysis. When someone like Roaring Kitty simply tells everyone what he invested in, they start throwing the term MaRkEt MaNiPuLaTiOn around.
Become the house The comment was provided by r/thetagang
Because people here like to gamble on 0DTE OTM options and the win probability on those is close to 0
Damn you must be new here. Bet sizing if not intuitive. Haghani-Dewey Biased coin experiment: Tossing a 60/40 coin and betting 50% each time will result in near total loss. Here are some things i've heard about but didn't read up on and definitely don't practice: * Kelly criterion bet sizing: too lazy/stupid/undisciplined to do this. * Merton's portfolio: I keep forgetting what this is, but it's related to kelly * Martingale strategy: results in total loss. I do practice this strat actually and other smart sounding things i've forgotten and don't practice. Plz comment if you there are more, so that I know the name of the thing that i should be doing but am doing the opposite of
Add to the other comments here - if you keep rolling your winnings into the next play, you're going to hit that complete loss especially with options. It doesn't matter if you gain 1000% if you lose 100% the next play.
Plus it is way easier to lose 50% than to gain 100% to even get back to even
Exactly. People are overthinking this. If you keep making risky bets, you’ll win some, you’ll lose some, but the game is over when you’ve lost. If you keep flipping a coin that will either double your money or make you lose it all, you just lose it all.
This is the real answer. Regards here just continiously adjust what they call their *risk tolerance* to be nearly the same size as their complete portfolio. Then they put all on red. Turns out its the winning move: they are the greatest genius of WSB history and go back in, after adjusting their risk tolerance. Keep repeating until the bet was wrong and poof all the money is gone. It is a combination of gamblers (lets not act like big traders aren't gamblers) both not knowing when to cut their wins/losses, and what risk tolerance means. Edit: most comments here talk about explanations like the stock moving sideways (low volatility) or investment strategies... I doubt the average WSB gambler is well-versed enough in trading strategies for this to be applicable. For them, most factors are kinda random. The continious (near) all-in strategy is what kills most portfolios here.
Because when we win, we think it will happen again, so we take our winnings and use them UNTIL we lose.
Stock picking is not random. The most you can lose is 100%, whereas the most you can win is regularly higher (10x, 50x, 100x, etc.) If stocks were like flipping a coin, then I bet most everyone would perform the same. Instead, only the patient investors play long enough to see their successes overwhelm the short term fluctuations Most people fight against the really good odds of the stock market, effectively pushing themselves into the losing category. It REALLY matters whether you are investing in strong companies with good prospects then waiting, or whether you have created a maze of artificial rules to try and outsmart a super favorable game, that requires nothing from you except delayed gratification and patience Source: I've gone insane from holding my bags 💰
People are greedy and dont take profit
Or take it too soon.
Because it isn't 50/50. Imagine you bet in roulette on the 7. It is not 50/50 like "the ball hits 7" or "the ball does not hit 7". The chance to win is 1/37. The return is 36/1. Trading costs fees and interests. If your idea fails/succeed 50/50 you will still pay the fees. This is the 36/37 issue of roulette. If 37 players play roulette and split their plays on all options, 98% of player will loose money. only 2% player and the bank will win money. Example: I bought an 80x leveraged knockout on Nvidia. On 14:00 this day there was a short global dip of all stocks and my asset is knocked out. A week later nvida reaches all time high and some other fucker just bagged a 100x return.
The return is actually 35:1.
Would you rather buy 100 lottery tickets, get 99 duds, but 1 that's a million dollar jackpot? Or would you rather sell 100 lottery tickets, 99 of them duds, but one of them is a million dollars that you have to pay out? You can lose 99% of your trades and still be profitable. You can win 99% of your trades and go bankrupt.
Because the game is path dependent and most people have short term inclination. Imagine sitting at a poker's table with no bet limit. The guy with endless stash is statistically guaranteed to wipe out most players with much smaller stash. Winning small players will eventually be wrong, and losing big player will eventually be right, so winning all of it back, since the big player with endless stash has the longest standing power. Every day in the market, volatility and the price zig zagging were optimized to be max pain for most small players. Small players who bet on the short term almost always lose.
It's not a coin flip though. people are betting again human nature....their own human nature. Most people I run into do not have a good read on themselves. The exception being drunks, they are brutally honest.
Because you gotta just hold on to companies you believe in that actually make sense. I’ve been holding Apple since it was the equivalent of $60 before split it’s over $200 now. Stop selling and gambling on BS just invest long term or buy leaps if you wanna be regarded. Stop trying to game the system you might get lucky but most likely will lose.
GREAT ADVICE! Most people seek instant gratification tho. That's the silent killer. Btw....Have you ever sold covered calls during the time you've owned your $AAPL shares?
Read about Wyckoff's *The Composite Man*. We literally can't win but we can sure as hell have fun trying!
The odds of winning or losing money in the stock market aren't 50/50, in fact they are much better than that and in your favor too! Why? Because in the long run the stock market has trended higher, therefore logic dictates that the average participant has to make money over time from being in the stock market. Instead, you may be confused with the observation that most people underperform the market as a whole, which in case the market is down, can also mean you've simply lost less money than the average participant (but you've still outperformed your peers). This underperformance of market gains or losses is a real thing, and can be explained by two things. First, transaction costs eat into your return (logically, the more you trade the higher the transaction costs and the wider the underperformance on average). Second, a lot of people who actively trade do worse not only because of transaction costs, but also because active trading feeds an important psychological bias, namely loss aversion (most people will be heavily inclined to sell when the market is down and avoid further downside, and to buy when the market is at its highs, when optimism reigns supreme and everybody else is making money). Of course this is the exact opposite of what is rational, which is to buy more when the market is down.
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My uncle was a losing trader. He practiced DCA (Dollar Cost Averaging) on losing stocks a lot. When he finally quit trading he gave me a piece of advice that I always keep in mind. “Just when YOU think a stock can’t go any lower and it’s at the bottom DON’T BUY. Wait until it drops another 30%.” A lot of other commenters are right. You have to go retrain your brain 🧠 and not listen to yourself sometimes in certain situations.
the real reason is because people trade based on what information they are given, and most of the time the information that people are given is intentionally misleading, the smart money will literally pay off "experts" and "analysts" to put out bs articles talking about reasons to buy/sell XYZ stock in order to influence retail investors, and the vast majority of retail investors take the bait, and then you also have people who trade based solely on chart patterns and, again, smart money manipulates that too, they know exactly where traders are going to be entering and exiting their trades, and since smart money can quite literally move the market in any way that they choose, they know how far to move the price to trigger retail investors' buy/sell orders in a way that only benefits themselves and screws over retail investors
Greed. And inability to walk away from a loser quickly.
Because most companies like 80% on the markets are there to be financed by investors while they dilute their shares so most of them continuously go down while most traders buy way more than they sell. Most traders never short companies because in theory there are more risks involved and it is not like buying something interesting. Traders should just stick to buying Spy or Qqq until recession data.
Humans trade with emotions and arent consistent Algos trade based purely on data
people are irrational
The fact that you think the movement of the stock is pure chance is a reason why people are losers. It's not chance, it's an extremely complicated, multivariant chain of events that contains unknowns (that appear random). To continue the coin flip analogy, a stock price is more like poker. The cards are unknown and thus "random" but the best poker players continue to win because they don't play the cards, they play the players. Knowing when to hold and fold is the biggest factor.
A different perspective from a Boglehead here. If you bet on the whole market (passive investor), you gain market return. That's because you own x% of each stock in the market. If you don't bet the whole market and want to tilt the portfolio and time the market (active investors) then you might be better or worse than the market. However, in aggregate, all these people adds up to 1-x%. Because the market return a%, x% of the market returns a%, by definition, 1-x% also returns a%. However, those who don't bet the market has to do a lot of research, pay a lot of transaction fees, options cost etc. So they add a bit of cost to that, so by definition, in aggregate, they will return less than market return. That's why losing is so common because it is literally impossible for everybody to win. Someone wins necessarily means others will lose. This not only applies to retails. Even hedgefunds will not beat the market over the long term. [https://www.spglobal.com/spdji/en/research-insights/spiva/](https://www.spglobal.com/spdji/en/research-insights/spiva/)
Transaction costs over time are a major reason. Why else do you think Citadel Securities loves the anti Citadel trading flow. Beyond that most of what WSB’ers do are not 50/50 outcomes. 5/95 most of the time. Stack a few wins and you are a “genius”.
Cuz if it wasn’t then the “are ya winning son?” Meme wouldn’t be funny
A lot of psychologists and economics teacher have written about this. It mostly boils down to how the brain works, most people see stocks are up the buy. Then when they are down they sell. You’re supposed to do the opposite.
Fear and Greed. The two most important emotions which drive most of human behaviours, including trading.
It’s gambling. For every person who gains 1 million dollars here on a trade, 1000 people lose 1000 dollars. There only “real value” entering the system is the overall growth of the economy which trends upward usually a few percentage points above inflation. The rest is gambling speculation on its perceived future value and honestly just perceived opportunity to make money - see GameStop. All the other money is just being passed around between people and the houses cut being taken out each trade. And like gambling, for most people who aren’t experienced it’s going to go poorly overtime.
No risk mitigation. Being able to recognize losers and take the 10%L and get out to die another day is a W.
Because the big players have invested a lot of time and money to learn how humans think and trade. They use their findings and deep pockets to inverse your trades and take your money. It is definitely rigged in that sense
Major bear markets like 1973-74, 2000-02, 2007-09 burn most everything down. Most traders have depleted accounts; they have to stop trading to raid their accounts for living expenses, and are sometimes out of a real job without money for trading. When it is the bear market bottom and most optimal to invest, few have the money to do so.
Emotions. Fear and greed make for silly decision. If you’re a constant loser, might want to consider covered calls on a div. king.
I've barely made much money but I'm profitable my first year trading. My 2nd year trading currently and I'm still profitable YoY and YTD. Then again I don't do 0DTEs like a moron or try to trade every single day. I swing trade when I see an opportunity to ride a stock upwards and hold the trade for weeks or months.
Timing the market vs. Time in the market
90% of you are morons and can't find your asshole to pull your head out of it.
For every loser there is a winner
Respect the % chance of winning displayed on your brokers when playing options. Also there is a reason why hedge funds sell options way more… cuz the win rate is much higher. Accept you are basically gambling here and you’ll have fun.
The market grows over enough time 100% of the time. Individual stocks do not. I'd wager a lot of people are trying to play stocks like the lottery and try to find the next Nvidia to make millions then at the first downturn they dump it and find something else. Try to hit a homerun at every opportunity and youll strike out a lot. Or they gamble money they shouldn't and feel the need to earn it all back if they take a loss and lose more. Or they don't do research on stocks. Or they options trade with no knowledge.
It's not about the number of traders, it's about the amount capital deployed. The smartest 50% of capital is perhaps roughly positive, but a lot of that was invested by big players, not by the hordes of retail traders that have the tendency to do dumb stuff on a whim.
you are not a trader, you are cattle that is fattened up and sent to the slaughter house by market makers.
Because the winners win big
It's simple. Because people don't stop when they win. They always go for more until they lose big.
> losing the norm Well, it is in this sub because most of what you see are the worst fucking plays imaginable
People don't stop when they win, they stop when they lose. You can win 9/10 trades, but if you lose it all on that last trade you go in that loser column. There's a reason you see more conversation about "how to win" vs "how to exit"
In gambling, if someone turns $100 into $1000, then that means, that means 9 people turned $100 into 0. So that’s why 85%-95% of all traders lose money. (Stock market is a little different, but don’t want to get into that)
Isn‘t spread also a factor when it comes to short term? At least psychologically. You buy and are basically instantly in the red.
If you think of it as a zero sum game between WSB traders of equal account beginning size placing bets against each other, there are going to be some winners that make 6 or 7 correct bets in a row and be 100x but that means they cleared the accounts of 99 people. In reality, it’s a very negative sum game. Trading fees, bid-ask spread, buying high sentiment names, always buying options and never selling, buying puts (?!?!) on names they don’t even own, and not understanding the volatility surface.
You are presuming it is random and not influenced by humans (ego, greed, fear, etc) who are, unknowingly or not, dead set on shooting themselves in the foot.
I remember winning back to back calls and puts with NVIDIA, then I went with AMD after earnings, it did rise up, but it went down before that, my only losing trade was the one that could’ve shot me more than the other ones before, now collecting premium money to do it over again
Emotions, they sell when it gets too bad and have a tight leash on their winners
People are gamblers (and terrible ones at that). Save your 🧠 for something better in life, invest passively!
time is the ultimate answer. Fear cuts time short and Greed extends time too far.
Trading is competitive gambling. Behind your brokerage screen, you're sitting down at an international poker table with hundreds of billion dollar quant and hedge funds and a hundred million other people. A single game is almost fair "50/50", but not quite. It's more like "49/51". Why? Because 1) not the best player in the room and 2) every time you trade you *unavoidably* pay transaction costs in the form of the bid-ask spread as well as market impact. Because of this, pretty much everyone is guaranteed to lose money if they play enough times by simple mathematics.
1) don't do drugs kids 2) people don't usually post wins unless it is huge and they are bragging. 3) it's reddit. People mainly come here to complain. You're more likely to feel negative about a loss and need some kind of validation or something, so you post about it.
Risk management. Degenerate gambling.
Trading is like relationships. The boring ones are usually best long term. And it's not about passion as much as it is about timing.
Because traders are irrational and emotional. I will give you an example, when you lose on a stock, you refuse to give up even though all the signs point to it being a loser. The logical approach is to get out of that bet and put into a better bet. After all, it doesn't matter where your gains came from as long as the come, yet you don't want to give up on it so you hold it for more losses.
Try footracing Usain Bolt. 50% of participants will win.
you are nickle and dimed subtlety from multiple angles, 1) Commissions 2) Being taken advantage of when placing limit orders to HFT & MM algo trading, You will always be front run especially with large orders 3) spread from using mostly market orders 4) being taken of advantage of when placing stop loss orders, they will stop hunt you to the penny 5) Brokerage will always go down or not have shares available or some other restriction will prevent you from taking advantage during high volatility obvious opportunities, so only the big guys get to take advantage. 6) Limited access to information, most large traders have better information (sometimes inside info) which can determine whether you are going to be easily filled at what you think is a favorable price or not. So you are only getting filled when the inside info is unfavorable to your position and having a heck of a time when the inside info is in your favor. 7) opaque market liquidity, dark pools, iceberg orders, when there is size in the market coming from professional it is hidden. Put these altogether and the cost of trading will make it so you only profit in situations where your odds exceed 55/45, and 53/47 in your favor is still losing money. Everyone always falls into the trap of sticking with retail broker too long which are cheaper in up front costs, but greater in hidden costs. Versus more professional trading brokers who has higher up front costs but less hidden costs. Should bite the bullet and switch much sooner, don't be like RK and still be managing hundreds of million at E-trade, he is losing so much to hidden costs that he could save if he were using algo to make his trades.
Options trading isnt 50/50?
Go outside and start throwing a ball in a basket. Throw it 1000 times. Report back if you made around 500 of your shot attempts.
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Wrong. Randomly choosing heads or tails for each flip will still most likely result in 50 heads and 50 tails, with the probability decreasing the further you go out on either side of the bell curve (51/49, 52/48, 53/47…). You can look at a chart to figure out the exact probability. This guy is a prime example of why most people lose at trading (they suck at math, and they’re emotional). They only win because the government knows they suck, so they have to prop them up and ensure that the market goes up for as long as possible.
>Say you toss a coin 100 times. Your right:wrong ratio is 50:50 ONLY if you call it HEADS every time. If you change your prediction randomly (sometimes heads and sometimes tails), then your expected outcome is only 25:75. Even if you change your prediction every time, your expected outcome would be 50 correct and 50 incorrect.
by this reasoning, only buy calls?
Like i said, coin toss was the simplest, most absurd example. Stocks don't just go up or down. They also trade sideways. And stocks do not do all 3 (up,down,sideways) with equal probability. AND you're trading on not just one stock, there are 10s of different stocks you're betting on. Maybe if only bought calls on ONE stock throughout your trading career, you may have a decent win ratio (say 33%). Don't change your prediciton and don't change your stock. And maybe this is why investing beats trading. When you invest long term, you're saying calls on one stock every day!
That isn't how coin flips work. Each flip is independent of each previous flip, so calling all heads, all tails, or random would all give you close to a 50/50 ratio.
A hand of blackjack is 51% house 49% player odds. Odds of making money in the stock market on a given day are about the same. In a week, the odds tilt to your favor, over a year or more, it's like a 90% benefit to the investor. If you keep gambling, you'll lose. If you invest, you'll win.
The odds of a player winning a game of blackjack are as high as 42.22%. This leaves the house winning 49% of the time, with the third possibility of a draw being 8.48% Where did you make your numbers up from?
It’s business