Good for this guy for making this app.<p>However, this makes me worried for him...<p>> There’s a 50% chance that I can lose $50.00 in a few days, but there’s also a 50% chance that I can make $100.00 or more in a few days. Why 50% chance? This number will be different for every person depending on his profit & loss history.<p>Ummm..... This doesn't seem true to me. What if the stock just stays flat? That's more often than not the default for many stocks.<p>if you make the dubious assumption that all three outcomes are equally valid then you loose 2/3s of the time.<p>If the stock stays flat then you lose as you have to pay commissions to enter into the trade and to exit the trade. Lots of people model algorithms, very few model them accurately, sometimes myself included unfortunately:)<p>> But swing traders need to win at least 50% of the time in order to be profitable.<p>If you don't pay any commissions or have any overhead, sure. But I'm guessing you pay commission and I'm guessing you have overhead.<p>I would read up on the Kelly Criterion to imporove your capital allocation. <a href="http://en.wikipedia.org/wiki/Kelly_criterion" rel="nofollow">http://en.wikipedia.org/wiki/Kelly_criterion</a><p>> You should stay away from stocks priced below $5.00 because these are Penny Stocks and involve a higher risk. You might consider stocks between $5.00 and $10.00, but again, they involve higher risk and even worse, they might go into Penny Stock territory.<p>This is just plain false. Being under $5 is one of 3 criteria that make up a penny stock, its a necessary but not sufficent condition. There are plenty of good companies with stock prices under $5.<p>The price of a stock isn't a good indicator of its risk.<p>> The reality is that it’s easier said than done! It’s actually very hard to make money in the stock market! You will win but you will also lose a lot! To put it into perspective<p>Full points to the author for realizing this! I'm still amazed at the number of people who think they can slap together some machine learning, nlp or deep learning and make money. People literally spend all their time doing this, if there was free money to be made someone would be making it:)
> But swing traders need to win at least 50% of the time in order to be profitable.<p>That's not true. It completely depends on your strategy/system. You can be highly-profitable with a 30% win-rate (or any number) granted the amount you win is far higher than the amount you lose. If my average win is $1000 and my average loss is $100, I can be profitable with only 10% wins (excluding commissions).
A tangential question: It seems that a lot of smart people believe in technical analysis, but to me it sounds like telling the future from tea leaves. Does it really work or are successes just part of the standard randomness of stock investing?
"The reality is that it’s easier said than done! It’s actually very hard to make money in the stock market!"<p>There should be a follow on sentence... It can be very difficult to make money in the stock market IN THE SHORT TERM. You should not do this... most people should not do this.<p>See this:<p><a href="https://personal.vanguard.com/us/insights/investingtruths/investing-truth-about-emotion" rel="nofollow">https://personal.vanguard.com/us/insights/investingtruths/in...</a>
The chances of the stock moving from {$25 - $24 = 4.00%decrease} is much more likely than a move from {$25 - $27.5 = 10% increase}-plain intuition. To be brutally honest, it will most likely hit both of those price targets assuming the stock has been trading between that range and they are within one standard deviation of the historical price records.<p>The most important part of being a trader is TIMING and the second most important part is being able to make decisions based off of analysis of technical parameters and NOT based off of your emotions.<p>This type of analysis tells me that you are not comfortable emotionally with losing more than $50 on one trade which I see as a sign that you should be looking into more traditional investment practices.<p>I would suggest you analyze the opportunity cost for the amount of research, training, and actual trading it will take before you become profitable. Don't forget about taxes!<p>As a seasoned trader, I can assure you this is the type of analysis that will result in lost money and unimaginable negative emotions. It is too simplistic and lacks both fundamental theory and actual technical analysis.
While this is interesting, it's pretty much useless. Traders can do the basic maths in their head, in a split second. If they can't, they have no chance of making sense of any sort of financial numbers and indicators.<p>Furthermore, the price of the stock doesn't really matter for anything above a penny stock. 100 shares at $25 is the same as 10 shares at $250, all else equal (for instance, market cap).<p>I also think larger positions are better, for instance $10K per trade is a good number. It's high enough that commissions are trivial, so you can make money off a 1-2% swing, rather than needing to make 3-4%. Of course, the ideal is 5-10% (well, more is ideal, but 5-10% is a realistic enough number for a short time frame, say a week or two), but it's nice to exit out of a trade that turned against you and still take a small profit at the end.<p>And of course, this app ignores the most important part - picking and timing stocks. Some understanding of technical analysis as well as sentiment is required, and basic market dynamics (supply vs. demand, volume, etc...).
>> I have the potential to make a higher 2R profit, with the same amount of risk as before, because I’m simply buying more shares.<p>What he's really doing here is demanding a much larger percentage gain in the stock price to get that higher return. It has nothing to do with the number of shares.
The development of this app, and the technical know-how gained is really something positive. However, doesn't it worry anyone how the Stock Market seems to be reduced to a mobile game? It`s not even about adding value to the market, but just piggy backing on this humongous money machine for the sake of individual gain... Please correct me if my perspective is missing some 'optimism'.
Nice job. This looks like a much better and more complete position sizing tool then the one I built (more of a learning exercise for me.) I wonder if the William Eckhardt position sizing algorithm was used.<p><a href="http://powerful-reaches-1118.herokuapp.com/" rel="nofollow">http://powerful-reaches-1118.herokuapp.com/</a> [very much a work in progress.]
> It’s actually very hard to make money in the stock market!<p>Can't you just buy an index fund, forget about it and come back to ~8% per year gain?
So won't high frequency traders discover your limits (by posting and canceling orders rapidly) and drive you into them, costing you money? I thought this was the simplest kind of fish for them to catch.