dudestupid
dudestupid
Joined: Sep 11, 2010
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October 25th, 2010 at 4:12:35 PM permalink
My wife is unemployed and we often discuss profitable ways for her to fill her time. We half-jokingly discussed video poker, but a quick search turned up no good machines at nearby Indian casinos.

Sometimes we joke about day trading stocks, whenever an E-Trade baby commercial pops up. In the long run, the markets have tended upwards. Would day trading have a higher expected return than VP?
I suppose "would it be less volatile" isn't a valid question. That would depend on what you are doing.

I guess every 2 weeks, when that portion of my paycheck goes into my 401K, I'm gambling it and assuming I've got an edge on the house.
odiousgambit
odiousgambit 
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October 25th, 2010 at 4:28:10 PM permalink
Quote: dudestupid

I guess every 2 weeks, when that portion of my paycheck goes into my 401K, I'm gambling it and assuming I've got an edge on the house.



essentially, yes. One old assertion is that the market, invested broadly and with dollar cost averaging , properly managed so that becoming-worthless or hopelessly flat stocks are sold, etc, will lose money often over 5 years, rarely over 10 years, has never lost money over 15 years [even during the great depression with these parameters], and has been a better investment than any and all others over all 20 year periods.

Sometimes this is disputed, especially if constant dollars are used.

As far as the Great Depression goes, or the last bust goes for that matter, note that it is not going to hold up if you pick a date like october 1929 and just see what happened to investing all your money in one day then. Dollar cost averaging by definition is employed over time, precluding that.

Honestly, the real deal, indisputable, is what happens with time periods like 40 years. Sort of like the Casino's perspective on the long run with its HA.

edited

PS: this does not address Day Trading. I am not sure about all that and what the theory is.
the next time Dame Fortune toys with your heart, your soul and your wallet, raise your glass and praise her thus: “Thanks for nothing, you cold-hearted, evil, damnable, nefarious, low-life, malicious monster from Hell!” She is, after all, stone deaf. ... Arnold Snyder
thecesspit
thecesspit
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October 25th, 2010 at 5:24:03 PM permalink
Quote: dudestupid

My wife is unemployed and we often discuss profitable ways for her to fill her time. We half-jokingly discussed video poker, but a quick search turned up no good machines at nearby Indian casinos.

Sometimes we joke about day trading stocks, whenever an E-Trade baby commercial pops up. In the long run, the markets have tended upwards. Would day trading have a higher expected return than VP?
I suppose "would it be less volatile" isn't a valid question. That would depend on what you are doing.



Day trading is not long term investment. Very different, and the latter I'd be pretty certain you'd do alright with some simple and sound practices (dollar cost averaging, avoiding high-cost managed funds etc) whereas the former is very choppy, volatile and has the trade commission fees that can eat up any small edges you can find.

You'd be better working out how to bet on sports or learning to play online poker.

[p]I guess every 2 weeks, when that portion of my paycheck goes into my 401K, I'm gambling it and assuming I've got an edge on the house.



Kind of. It's a much better gamble than shoving a large amount in at random times as well, and past performance suggests you should have a house edge, as long as the house doesn't charge too much on each dollar in the plan.
"Then you can admire the real gambler, who has neither eaten, slept, thought nor lived, he has so smarted under the scourge of his martingale, so suffered on the rack of his desire for a coup at trente-et-quarante" - Honore de Balzac, 1829
mkl654321
mkl654321
Joined: Aug 8, 2010
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October 25th, 2010 at 6:42:35 PM permalink
Quote: dudestupid

My wife is unemployed and we often discuss profitable ways for her to fill her time. We half-jokingly discussed video poker, but a quick search turned up no good machines at nearby Indian casinos.

Sometimes we joke about day trading stocks, whenever an E-Trade baby commercial pops up. In the long run, the markets have tended upwards. Would day trading have a higher expected return than VP?
I suppose "would it be less volatile" isn't a valid question. That would depend on what you are doing.

I guess every 2 weeks, when that portion of my paycheck goes into my 401K, I'm gambling it and assuming I've got an edge on the house.



What can kill day traders is commissions, which amount to a small -EV on every bet/trade. A winning VP player COLLECTS a commission on every bet--his (often tiny) positive EV. The oft-quoted long-term results of the market are irrelevant, because a day trader's time horizon is far shorter than that.

Your 401k contribution is also slightly -EV due to the commissions that your plan pays every time it buys or sells, but those commissions are much lower on a dollar-for-dollar basis than what the individual trader pays.

Positive EV video poker returns about 101% over the long haul. The stock market is purported to yield an annualized return of about 9%. So if Person A bought $X worth of stocks, and Person B ran the same money through a VP machine nine times in a year, they should achieve similar results. However, it's quite easy to bet several thousand dollars at VP even in a single session, so the value of positive EV play is the ability to get a lot of money in action in a short period of time--which in turn, makes a rate of return of +1% acceptable.
The fact that a believer is happier than a skeptic is no more to the point than the fact that a drunken man is happier than a sober one. The happiness of credulity is a cheap and dangerous quality.---George Bernard Shaw
JerryLogan
JerryLogan
Joined: Jun 28, 2010
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October 25th, 2010 at 9:04:32 PM permalink
Quote: mkl654321

What can kill day traders is commissions, which amount to a small -EV on every bet/trade. A winning VP player COLLECTS a commission on every bet--his (often tiny) positive EV. The oft-quoted long-term results of the market are irrelevant, because a day trader's time horizon is far shorter than that.

Your 401k contribution is also slightly -EV due to the commissions that your plan pays every time it buys or sells, but those commissions are much lower on a dollar-for-dollar basis than what the individual trader pays.

Positive EV video poker returns about 101% over the long haul. The stock market is purported to yield an annualized return of about 9%. So if Person A bought $X worth of stocks, and Person B ran the same money through a VP machine nine times in a year, they should achieve similar results. However, it's quite easy to bet several thousand dollars at VP even in a single session, so the value of positive EV play is the ability to get a lot of money in action in a short period of time--which in turn, makes a rate of return of +1% acceptable.



More nonsense by the village idiot. Saying that a vp player collects a commission on every bet because he's at one of those +EV machines is total BS. When I play I want to see cash, not some stupid theoretical amount of make believe money.

A 401k has been the backbone of savings in this country for years. Yes it's taken a hit, but I watched mine rise to unimagineable heights from when I started it until today. A clown like mkl wouldn't understand that of course, since he blew all his money on the poker machines playing at an "advantage".
ElectricDreams
ElectricDreams
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October 25th, 2010 at 11:04:30 PM permalink
Quote: mkl654321

What can kill day traders is commissions, which amount to a small -EV on every bet/trade. A winning VP player COLLECTS a commission on every bet--his (often tiny) positive EV. The oft-quoted long-term results of the market are irrelevant, because a day trader's time horizon is far shorter than that.

Your 401k contribution is also slightly -EV due to the commissions that your plan pays every time it buys or sells, but those commissions are much lower on a dollar-for-dollar basis than what the individual trader pays.

Positive EV video poker returns about 101% over the long haul. The stock market is purported to yield an annualized return of about 9%. So if Person A bought $X worth of stocks, and Person B ran the same money through a VP machine nine times in a year, they should achieve similar results. However, it's quite easy to bet several thousand dollars at VP even in a single session, so the value of positive EV play is the ability to get a lot of money in action in a short period of time--which in turn, makes a rate of return of +1% acceptable.



In that case I suggest mutual funds should then hedge some of their investments by betting perfect strategy, 101% VP machines. You know, as a way to diversify ;-)
weaselman
weaselman
Joined: Jul 11, 2010
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October 26th, 2010 at 6:42:48 AM permalink
Quote: mkl654321



Positive EV video poker returns about 101% over the long haul. The stock market is purported to yield an annualized return of about 9%.



Not day trading though.
A (skilled) day trader used to easily make 25-50% a year before the crash, but had to be ready for long periods of being in the red. Many day traders who were not quite ready are now doing software QA or driving taxi cabs. Some of those who were, are still doing good though.
In short, day trading with "optimal strategy" has definitely way higher EV then visual poker, but it requires way more skill, much larger bankroll, and poses an awful lot more risk and volatility.
"When two people always agree one of them is unnecessary"
SanchoPanza
SanchoPanza
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October 26th, 2010 at 6:50:54 AM permalink
Quote: thecesspit

Day trading is not long term investment. Very different, and the latter I'd be pretty certain you'd do alright with some simple and sound practices (dollar cost averaging, avoiding high-cost managed funds etc) whereas the former is very choppy, volatile and has the trade commission fees that can eat up any small edges you can find.


Most of the day traders I know are trying to capitalize on market inefficiencies.
mkl654321
mkl654321
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October 26th, 2010 at 7:36:26 AM permalink
Quote: JerryLogan

More nonsense by the village idiot. Saying that a vp player collects a commission on every bet because he's at one of those +EV machines is total BS. When I play I want to see cash, not some stupid theoretical amount of make believe money.

A 401k has been the backbone of savings in this country for years. Yes it's taken a hit, but I watched mine rise to unimagineable heights from when I started it until today. A clown like mkl wouldn't understand that of course, since he blew all his money on the poker machines playing at an "advantage".



If you want to know who the true idiot is, keep in mind that Jerry plays Double Double Bonus, a game that returns 98.9% with PERFECT play, and I play FPDW and FPJW, which return about 100.7%. Which one of us is the idiot?

And I'm sure he thinks that it's impossible to win at video poker, because he plays only losing games! I'm sure he really does think that a player edge is "some stupid theoretical...blah blah", but I'm also sure that his losses at DDB are real. Don't be like JerryLogan, a bitter old curmudgeon who has lost thousands playing bad video poker games and then sneers at anyone else who was smart enough to play the good games instead!

The value of VP as a moneymaker is that you can cycle a goodly amount of money through the machine in a short period of time. And you WILL see that cumulative 1% (inherent advantage+slot club benefits) over time. And I would ask anyone who is inclined to believe JL rather than me, to look at his and my posts on various threads, and see who makes more sense.
The fact that a believer is happier than a skeptic is no more to the point than the fact that a drunken man is happier than a sober one. The happiness of credulity is a cheap and dangerous quality.---George Bernard Shaw
mkl654321
mkl654321
Joined: Aug 8, 2010
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October 26th, 2010 at 7:39:01 AM permalink
Quote: weaselman

Not day trading though.
A (skilled) day trader used to easily make 25-50% a year before the crash, but had to be ready for long periods of being in the red. Many day traders who were not quite ready are now doing software QA or driving taxi cabs. Some of those who were, are still doing good though.
In short, day trading with "optimal strategy" has definitely way higher EV then visual poker, but it requires way more skill, much larger bankroll, and poses an awful lot more risk and volatility.



Actually, day trading will "regress to the mean". Anyone day trading over the last several years would have had to endure several bloodbaths, no matter which direction they played. For every trader who made 25%, there's someone who made -25%. It is, after all, a zero-sum game.
The fact that a believer is happier than a skeptic is no more to the point than the fact that a drunken man is happier than a sober one. The happiness of credulity is a cheap and dangerous quality.---George Bernard Shaw

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