Your Favourite Online Broker?

Discussion in 'Business & Economics' started by Xerxes, Jan 29, 2004.

  1. zanket Human Valued Senior Member

    Messages:
    3,777
    You can always find people who “predicted” a crash. When you look closer you find that their skill is indistinguishable from luck. After all, lottery winners predicted their numbers too. Look at the US market from 1995 to 1999. By 1996 you heard almost continuous warnings of an imminent crash. But if you took your money out then, you may have lost the huge gains from 1997-1999. It’s also unpredictable when the market will recover after a crash. Those who stayed out of the market too long after the 1987 crash missed big gains just a few months later.

    Many studies have shown that investors who time the market (get in & out based on their predictions) do worse on average than do buy & hold investors. The reason is simple--the market timers really had no clairvoyance, so they lost the general (7.5% average) rise in the market whenever they were out of it. Plus they increased their transaction costs over those of the buy & hold investor.
     
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  3. Architectonic Registered Senior Member

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    15
    The crashes are always in the direction of the trend. The people did not predict a large crash, but simply observed that the market was turning around and traded accordingly. These people would have got back in a few months later when the market started trending again. It was not a case of broken clocks being correct twice a day....

    I would agree with this, in fact I would even guess that without even gathering any actual data. The key words are "on average".
     
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  5. zanket Human Valued Senior Member

    Messages:
    3,777
    If you think you might be above average in the clairvoyance dept., why not try paper-trading for a while? There’s at least one online brokerage that will do all the calculations for you (can’t remember the name). If you are above average then you could trade with confidence. If you found out you are average then you might save yourself many years of saving for retirement by switching to buy & hold.
     
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  7. Architectonic Registered Senior Member

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    15
    I have, for several months (on actual notepad) and several months online, on the rather sleepy ASX100 (asx200 on actual notepad). Overall I averaged 5% a month. Plenty of mistakes, brokerage certainly was a factor, but overall it was successful. I'm currently saving up now, so I can trade with a similar plan/method without brokerage taking a chunk out of the profits.

    edit - I should note, that by mistakes, I don't neccesarily mean losses. Some losses are unavoidable unless you are clairvoyant.
     
    Last edited: Feb 23, 2004

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