Comment by stouset | Hacker News Reader

Comment by stouset | Hacker News Reader

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> but I already proved it to myself

Every year there are people who beat the indexes and there are people who perform worse than the indexes. Every successive year some proportion of the winners stay winners and some become losers. The interesting thing to note is that—if you look at the statistics—winning one year has almost no bearing on whether or not you win the next year.

Still, there are participants who flipped that weighted coin year after year and caught heads five years in a row. It doesn't mean they have a successful strategy. It just means that if you flip a 45/55 coin five years in a row, two out of one hundred people will get a string of heads.

I've personally witnessed all of my day-trading friends go through this (I almost said "learn this lesson" but I'm not sure they have). For a while they beat the index and they're convinced their strategy is sound. One day something unexpected happens and they're suddenly in the hole. Often this is compounded by having an enormous tax bill on "gains" that no longer exist, necessitating selling off holdings that are deep in the red, making it even harder to get back to positive.

Do some individuals exist who can reliably beat the markets? Sure. They just are exceedingly likely to not be you, and none of them are offering their services to you.

Agreed about the statistic of failure rate. For consistent profitablity it's probably at or below 2%, even if it's higher in a given year. The reason is not only lack of a strategy that doesn't depend on specific market conditions, but often (unless you're talking about algos) is psychological. Trading is psychologically very difficult.

You're right in that most of the time, the directional probability of the market is close to 50% for a 1:1 trade.

There are instances where the directional probability is significantly above 50% to make a trade have a positive EV (if it's not 1:1, the baseline is not 50%, and there are similarly moments where the directional probability for a different risk-reward is above its baseline for some direction). Different strategies tailor to different RRs, but you can absolutely find those entries.

However, as you said it's easy to get caught up in the illusion of profitability for a given market condition. For example, in a strong bull market like the post COVID stimulus, you could trade to the long side in a large timeframe and just win money because of the anomaly of such a protracted spike in the daily charts.

That's not a sustainable strategy though which explains what happened to your friends. A price action system that takes into account markets structure works in every environment, be it ranging, surging or a bear market.

Learning price action TA takes time to learn though, it's a skill like when we learned to code till the time we got paid for it. And trading, in general, goes against how our brain works. Psychology is the great barrier to profitability once you have a strategy. It explains the high failure rate. it being a hard skill is why there's so few people doing it, But it's not because it needs a very high IQ or Rafa Nadal's strength of mind. Most people could get there, but it takes a lot of effort, and theres so much deception and scamming around it, it's easier to pretend it's impossible based on the amount of people that fail.

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