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+--- Thread: Trading and Beating the Market (/showthread.php?tid=7951)
Trading and Beating the Market - AntonyMullen - 09-03-2024
Been doing some reading on personal investing lately and that's got me converted to the index investing camp. It seems like in a deep market (equities) with nearly instantaneous dissemination of information, it's nearly impossible to beat the market. I want to say that opportunities to beat the market do present themselves - in the past I've outperformed with stock picks - but the more I think about it, the more I think that that was probably not due to my superior alpha generation abilities, but just due to luck (after all, ~50% of the index's return comes from securities that outperform).
Now we get to trading as a career. Despite having worked in the industry and having seen traders that can consistently generate positive PNL, it's hard to believe that I have any special insight that allows me to see something that the rest of the market is missing (even in markets with fewer participants). I've heard (from a reputable source) that if you back out the market making activity, a good portion of traders have negative lifetime PNL on the spec risk they take. I've also seen traders that do phenomenally well in one asset class fail spectacularly when it comes to taking spec risk on another.
I understand that there are ways to generate PNL that don't involve taking a view (market making; for physical traders, optimizing assets) but the bread & butter of any (risk-taking) trading business is taking spec risk, and it's hard for me to take a view when I have no informational advantage or edge. I initially got into this field because I saw the markets as a problem to "solve", but the more I observe the market, the more it just seems nonsensical, chaotic and unpredictable. Maybe that means I'm not cut out to be a trader, and if so, then so be it, but I at least want to hear WSO's thoughts on this.
RE: Trading and Beating the Market - phoenixdomo - 09-03-2024
Seems like you have just came to the very basic conclusion that yes some people can beat the market and generate alpha but it is very difficult.
RE: Trading and Beating the Market - Ugutzad - 09-03-2024
Trading can be a wild ride. Beating the market is more about having a solid strategy and staying patient than any secret formula. It’s like finding a rhythm – once you’re in sync with the market’s ups and downs, things start to click. One thing that’s helped me is using tools from sites like clickcapital.io . They’ve got some neat resources that can make a difference. But remember, it’s all about learning, adapting, and not getting too discouraged by the bumps.