I'm here to explain why short-term or intra-day trading just doesn’t work mathematically, using two well-known ideas.
First up, we have the Efficient Market Hypothesis (EMH). This theory says that asset prices in a well-functioning market already include all the public info out there. So, for short-term traders, it’s super tough to cash in on any of that info. Even if there are pricing errors that last for just a split second, you can’t compete with High Frequency Trading firms. They have their setups right next to exchange servers and use super advanced algorithms and lightning-fast tech.
Next, let’s talk about the Random Walk Hypothesis and Stochastic Processes. This suggests that price changes are random in the short run and tend to follow a stochastic model. To break it down:
dS = μSdt + σSdWt
Here’s what the terms mean:
dS is the change in stock price
μ is the drift constant (expected return)
S is the current stock price
dt is the time change
σ is the level of volatility
dWt is the Wiener process (Brownian motion), which stands for random noise.
For those super short trades, μSdt barely makes a difference (thanks to EMH and other factors). This leads to the idea that short-term price shifts are purely based on random noise (σSdWt). So, when you’re trading this way, it’s kind of like playing a game of chance where you’ve got a 50/50 shot but the house always wins because of those trading fees on each order.
When did things stop being simple? All this mathematical formulas and hypotheses for what?
One thing I know about trading is you can't win it all 100%. With the more trades you make, sometimes you make silly mistakes or the market reacts differently. The advantage about long term trades especially for Assets like Bitcoin is that they will always rise at one point, but this does make short term trading something so bad.
Every decision that we make in life is a gamble, from the education you took at school to that woman you decided to marry. Things can just turn out to be as good or as bad.
After 'Big Bang', there is no 'before' beyond that.
To prove that mathematically it is impossible to be profitable in the long term doing Short-term/Intra-day trading.
I also know believe that. My argument though was specifically oriented toward Intra-day traders where it is impossible to win even 50% (break even let alone profitable).
I guess you are referring to the psychological and skill aspects of trading which has nothing to do with my post. Just like no matter how skilled a poker player you are you can not beat GTO players (no one can beat nobody) when the rake is involved in the long term. (You see I did not give a dice/roulette example as I also believe skill is involved in trading)
This is exactly why short-term trading is bad as even if you leave BTC, short-term traders can not even beat the S and P 500 over the long term. It is a negative EV game. It reflects in many reports where 7/10 Intra-day traders suffer losses. But none who held bitcoin for the long term as markets simply go ahead in the long term no matter what (supported by forces of evolution).
I rather have an illusion of free will and will constantly try to make conscious better choices. I consider my self as compatibilist.
Hypotheses and Theories can also be wrong after a certain time most especially when someone "more intelligent" brings up another theory, you know?
It's just a hypothesis anyway, why was I stressing myself
Do you have a study you carried out proving your stats? I would love to see it.
Just because someone doesn't come here announcing the trades they won doesn't mean they didn't win.
The problem is you thinking that intraday or short term traders only do it for a week or two. Dude some people who have mastered the game do this for years with proper risk management. it's only noobs with a mindset of getting rich over night who get their accounts burnt and they give up within a short time. The game is about living to fight another day.
It isn't. The fact that there are Thousands or millions of trades per minute across different platforms means that there are some folks that are ripping big. Obviously not everyone will win but there will always be winners. In order for one to win, there must be a loser.
The same can apply when you are trading. You simply just don't behave like a duck when making trading decisions. Ever heard of risk management?
EMH and Random Walk are both called hypotheses because they both predict certain correlations between two variables which are testable. Since we have done extensive testing and have scientific conses, both have become scientific theories.
Now I do not think you understand the stature of scientific theory. It is not just a hunch of a creative brilliant person, to have the stature of scientific theory it has to go through rigorous testing and scrutiny to build a scientific consensus in favor.
Yes, scientific theory can change (Falsifiability, an essential trait of a good theory) but not because of the passage of time or some more 'intelligent people' but because of new evidence. It's a cumulative and collaborative process built upon the work of many researchers over time while acknowledging some pioneering individuals.
So just because it is falsifiable does not mean they are not correct it is quite the opposite; scientific theory represents the most accurate and updated explanation of any phenomenon.
EMH and RWH have already established theories. Just a quick Google search will reveal everything to you but since you have asked I will leave some interesting reading (which you can read and come back to) material for you;
For EMH (with critical aspects, not only favorable stories so that you can make up your mind)
https://www.sciencedirect.com/science/article/pii/S2212567115014161 (harsh criticism you might like it.)
https://journals.openedition.org/fcs/3821
https://www.researchgate.net/publication/324971038_THE_EFFICIENT_MARKET_HYPOTHESIS_A_CRITICAL_REVIEW_OF_LITERATURE_AND_METHODOLOGY
For RWH
https://www.chicagobooth.edu/~/media/34F68FFD9CC04EF1A76901F6C61C0A76.PDF
https://people.math.rochester.edu/faculty/akrish11/Research/student-papers/Random%20walk%20hypothesis%20paper.pdf (Just read conclusion)
https://www.caluniv.ac.in/dj/BS-Journal/vol-35-36/iv.%20Revisiting_Random.pdf (This one does not negate RWH but concludes that the market is not efficient, interesting one)
It is like saying just because a dice gambler doesn't come up here announcing the bets they won doesn't mean they didn't win. Of course, you can win for a short term but it will never be a way to make sustainable profit.
Well, this is true by definition otherwise they are being called long-term investors. .
I know that some people have mastered the scam of luring noobs into believing that Intra-day/short-term trading can lead to fortune and they are making millions by selling videos/courses. All they will tell you is that the fault lies in you. You are not practicing enough. It is like practicing roulette strategy, no matter how patient and skilled you are you will always lose in the long term.
Jus see the number of bets in any reputed online casino and you will be amazed that this argument still holds .
really!!
This one is an argument I even used with fellow forex traders 15 years ago! And that was before everyone had fast internet, social media spread out, etc. Today it is even faster to see everything you can possibly know or find out priced in to the market.
We are always behind the true news readers, and every day we are falling even further behind.
I used to follow live news and announcements with 10 second delay but even today you can't compete. Markets move as the information is known, if not before.
Traders refuse to accept this.
Remember we are talking about crypto trading not the stocks, big traders might use bots that we can't compete with but it doesn't mean we also have to aim for their profits, we can keep things simple and make profits too unlike stocks. Let's assume we buy bitcoin/USDT pair now and we just wait for the 1% rise in price which will surely happen 99% of the time in the next 24 hours when you see the rise just sell it and then buy back when price goes in red and just keep repeating to make decent profits.
EMH surfaced around 1970. However, similar concepts were already floating if you came to this realization by yourself kudos! This shows you are an original thinker which is a rare trait nowadays (but might be common in 1990 ).
And definitely will be behind news creators.
I am assuming you already are a billionaire doing this '99% sure' strategy of yours Or the 1% always get you .
I didn't exactly come to realize it by myself, but my many many mistakes and years of trading forex led me to this.
People in crypto are just the next generation, but even lazier than forex traders, and even more degen.
Same greed tho. And def same fallacies. With even more powerful tools and bigger leverages and less controls. They actually think crypto is better. It is for volatility, yes but for your points crypto is even putting traders at a bigger disadvantage because the news creators have so much more control and timing ahead.
You're an original thinker, just look at the majority of forum threads and how they stand to yours
This needs some deep introspection though. I have seen people repeating the same mistakes again and again mindlessly even after many years.
The next generation in general will always be lazy (to the old ones;D). Still, I agree with you on the increasing tendency to take bigger risks as opportunities are also in abundance.
News creators/influencers have so much power over traders nowadays. Look at meme coin space; everyone is telling everyone to hold it so that they can dump it .
Thanks a lot for such words of appreciation, it means a lot especially when it comes from reputed and experienced members like you.
No problem, you deserve it. I actually used to be way way more active in Trading section long ago but I found it got more and more low quality.
Please post more such things, I know there are people out there who enjoy this a lot. Science is lacking, pseudo science is the trend in crypto trading
I killed my social media long ago best decision ever. My life is cleaner and focused now
Sorry for the late reply.
Sure I will try my best thanks for putting your energy and time into reflecting on my topic. Only sincere intellectuals can identify a good post.
You might like this one as well just contextualize it with trading (instead of gambling); Loss Aversion: A Critical Factor for Responsible Gambling.
Wow! I wish I had such courage and clarity. Maybe you can post an off-topic thread about your experience, this will be a great help.
Nah it wasn't really courage. I lost a lot of time, I lost a lot of health, and I don't want to blame anything, or anyone, but it was my involvement in crypto, especially altcoins, that pushed me to do this. I wasted a lot of previous years in forex, anyway so it wasn't crypto specifically, but my time in crypto really made me a slave to social media. I didn't sleep enough. My work suffered in quality. My personal relationships.
I recently reinstalled Telegram but only to communicate with one or two people. No trading please, the forum is enough
BTW I replied to you on your thread that you shared. Keep the discussions up, I am active in Gambling anyway