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.
Topic: A Death Knell to Short-term/Intra-day Traders. (Read 32 times)
In this post, I will argue why it is mathematically impossible for a short-term/Intra-day trader to make a profit with the help of two established and widely known concepts
1. The Efficient Market Hypothesis (EMH)
It suggests that the current prices of assets in an efficient market already reflect all available information that is publicly available. So it is almost impossible for short-term intra-day traders to benefit from that information.
Even if there are any mispricing opportunities for nanoseconds, there is no chance that you can compete with High Frequency Trading Firms which are located specifically near exchange servers equipped with advanced algorithms and insanely fast hardware.
2. The Random Walk Hypothesis and Stochastic Processes
It suggests that price movement is random in the short term and more likely to follow a Stochastic Process. Here is the breakdown;
dS = μSdt + σSdWt
Where:
dS: Change in stock price
μ: Drift constant (expected return)
S: Current stock price
dt: Change in time
σ: Volatility
dWt: Wiener process (Brownian motion), representing random noise
For very short-term (intra-day) trading μSdt is almost negligible (EMH and other variables). It only leads to the conclusion that short-term price movements are entirely driven by random noise components (σSdWt). So it is like gambling with a 50/50 chance but with a house edge (exchange fee for every order).
1. The Efficient Market Hypothesis (EMH)
It suggests that the current prices of assets in an efficient market already reflect all available information that is publicly available. So it is almost impossible for short-term intra-day traders to benefit from that information.
Even if there are any mispricing opportunities for nanoseconds, there is no chance that you can compete with High Frequency Trading Firms which are located specifically near exchange servers equipped with advanced algorithms and insanely fast hardware.
2. The Random Walk Hypothesis and Stochastic Processes
It suggests that price movement is random in the short term and more likely to follow a Stochastic Process. Here is the breakdown;
dS = μSdt + σSdWt
Where:
dS: Change in stock price
μ: Drift constant (expected return)
S: Current stock price
dt: Change in time
σ: Volatility
dWt: Wiener process (Brownian motion), representing random noise
For very short-term (intra-day) trading μSdt is almost negligible (EMH and other variables). It only leads to the conclusion that short-term price movements are entirely driven by random noise components (σSdWt). So it is like gambling with a 50/50 chance but with a house edge (exchange fee for every order).
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