95%/5%

[wayneL]

Ok I've noticed a few folks starting to preach this 95/5 business here on the forum. So here are a couple of musings/questions:

* Do the people preaching 95/5, presume themselves to be in the 5%? If so, how do they quantify this? By what measure do we separate the 5% "elite" from the 95% of presumably losers?

* I there a fractal at work? Of the 5%, is there a further separation of 95/5? What does that say about the 95% of the 5%? Does this continue up a fractal scale?

* Transversely, is there a 95/5 fractal thing going on with the first 95%, (and so on) or are all the 95% just ####ing plebs?

* Is the 95/5 principle in danger of becoming a cliche'?

* Should we just let go of comparisons as Lao Tzu suggested all those years ago?

 

[tech/a]

Why would anyone bother answering such cynasism.

Your standing by with a double barrelled shot gun ready to blow heads off.

Your taking an "A" typical plebian view of standing fully cocked armed with the "Us Vs Them" rehetoric.

5% of the 95% no doubt will be plebians.
As will 5% of the 5%.

I guess we both have views on where we both fit then!

 

[wayneL]

Why would anyone bother answering such cynasism.

Your standing by with a double barrelled shot gun ready to blow heads off.

Your taking an "A" typical plebian view of standing fully cocked armed with the "Us Vs Them" rehetoric.

5% of the 95% no doubt will be plebians.
As will 5% of the 5%.

I guess we both have views on where we both fit then!

Cynical? Moi? Surely you jest?

I do however appreciate good spelling, and am amused when folks leap to delusions.

Us verses them? How do you know whether I consider myself us or them? The attitude of fools. Who is us and who is them? I consider us all us, hence my questions.

A philosophical undertaking.

Cheers

PS - Nice bite

 

[2020hindsight]

well for 95% of last year I was doing just fantastic - does that help my rank?

(let's not talk about the other 5% )

 

[wayneL]

Good reading:



Some folks are offended by Alain's proposition however. Que sera, sera.

 

[barney]

Ok I've noticed a few folks starting to preach this 95/5 business here on the forum. So here are a couple of musings/questions:

* Do the people preaching 95/5, presume themselves to be in the 5%? If so, how do they quantify this? By what measure do we separate the 5% "elite" from the 95% of presumably losers?

* I there a fractal at work? Of the 5%, is there a further separation of 95/5? What does that say about the 95% of the 5%? Does this continue up a fractal scale?

* Transversely, is there a 95/5 fractal thing going on with the first 95%, (and so on) or are all the 95% just ####ing plebs?

* Is the 95/5 principle in danger of becoming a cliche'?

* Should we just let go of comparisons as Lao Tzu suggested all those years ago?

Hi Wayne, Hope that crook back is a bit better ................. I am definitely one of the 95% plebs :bonk: ........... and no I'm not happy about ..... but if people like me weren't giving all the 5 percenters someone to take money off, there would be no market ............. I have no malice towards the 5 percenters, cause in a few years I want to be one :taz: ................ "Fractally" speaking I think I'd be in the 95%/95% bracket, but I also have a lot more room for improvement than many, so its not all bad news :grinsking (Gotta love smileys !!)

 

[pepperoni]

Is this like the 20% of effort yields 80% of results. that one is right.

If its some sort of success/failure ratio id say its 98/2 tops ie 2% have net worth over 2m, 2% have income over 200k etc ... 5% would be a gross overstatement.

The other 98% do nothing, or do ill informed things that distort markets for most, and make profit opportunities for few (very few).

 

[wayneL]

Hi Wayne, Hope that crook back is a bit better ................. I am definitely one of the 95% plebs :bonk: ........... and no I'm not happy about ..... but if people like me weren't giving all the 5 percenters someone to take money off, there would be no market ............. I have no malice towards the 5 percenters, cause in a few years I want to be one :taz: ................ "Fractally" speaking I think I'd be in the 95%/95% bracket, but I also have a lot more room for improvement than many, so its not all bad news :grinsking (Gotta love smileys !!)

I'm in the 1/6,000,000,000 bracket. I'm also one of the 100%. Fractally, I'm one of the 100% of the 100%.

An interesting philosophical passage from Lao Tsu (indulge me, I'm having a moment... a few moments in fact ):

Thus, that which is seen as beautiful
is beautiful compared with that
which is seen as lacking beauty;
an action considered skilled
is so considered in comparison
with another, which seems unskilled.

That which a person knows he has
is known to him by that which he does not have,
and that which he considers difficult
seems so because of that which he can do with ease.
One thing seems long by comparison with that
which is, comparatively, short.
One thing is high because another thing is low;
only when sound ceases is quietness known,
and that which leads
is seen to lead only by being followed.
In comparison, the sage,
in harmony with the Tao,
needs no comparisons,
and when he makes them, knows
that comparisons are judgements,
and just as relative to he who makes them,
and to the situation,
as they are to that on which
the judgement has been made.

Through his experience,
the sage becomes aware that all things change,
and that he who seems to lead,
might also, in another situation, follow.
So he does nothing; he neither leads nor follows.
That which he does is neither big nor small;
without intent, it is neither difficult,
nor easy. His task completed, he then lets go of it;
seeking no credit, he cannot be discredited.
Thus, his teaching lasts for ever,
and he is held in high esteem.

 

[prawn_86]

Not too sure about the whole 95/5% thing, i would be interested to see some research? Actual empirical evidence.

One thing that is becoming more known and accepted is the fact that the Pareto principle (80/20 rule) is beginning to be shown to not apply in anywhere near the number of cases once thought.

Figures like this just seem a bit 'gimmicky' for my liking, and while i understand what they are trying to say, it is a bit too much "self-help/The Secret" style for my liking.

Perhaps these sort of theories are good for 95% of people and 5% can see above/through them

 

[Timmy]

I am just trying to work out what you mean by 'transversely'. Is that something to do with Dracula?

 

[r m]

Cynical? Moi? Surely you jest?

I do however appreciate good spelling, and am amused when folks leap to delusions.

Us verses them? How do you know whether I consider myself us or them? The attitude of fools. Who is us and who is them? I consider us all us, hence my questions.

A philosophical undertaking.

Cheers

PS - Nice bite

If you are going to comment on spelling errors it is best to make sure you don't make any of your own. Verses? Are you going to sing for us? Or Versus.

Anyway, what is it with all this philosophy? Pedantry is where it is at.

 

[wayneL]

I am just trying to work out what you mean by 'transversely'. Is that something to do with Dracula?

It's a word often used by amateur philosophers. :

It means a concept which lies across the original concept, integral to it but at a different angle. :

 

[wayneL]

If you are going to comment on spelling errors it is best to make sure you don't make any of your own. Verses? Are you going to sing for us? Or Versus.

Anyway, what is it with all this philosophy? Pedantry is where it is at.

LOL

Ah yes, a concept dear to my heart. It is true, I fall well short of my ideals... particularly with spelling.

 

[r m]

I'm in the 1/6,000,000,000 bracket. I'm also one of the 100%. Fractally, I'm one of the 100% of the 100%.

An interesting philosophical passage from Lao Tsu (indulge me, I'm having a moment... a few moments in fact ):

...
Through his experience,
the sage becomes aware that all things change,
and that he who seems to lead,
might also, in another situation, follow.
So he does nothing; he neither leads nor follows.
That which he does is neither big nor small;
without intent, it is neither difficult,
nor easy. His task completed, he then lets go of it;
seeking no credit, he cannot be discredited.
Thus, his teaching lasts for ever,
and he is held in high esteem.[/I]

Are we back to US politics? Obama is always banging on about change and leadership. Is he the sage? The sage on the stage, ready for a new age. How will I know? He appears to be doing neither nothing or something, so he could be.

 

[lesm]

Below is an article from an anonymous trader that has appeared in a few different fora, where this type of discussion has been held.

"From Successful Anonymous Trader:

You simply cannot have any confidence if you do not have a method or way of identifying trades along with money management guidelines. You're lost in the woods, so to speak. I was there for many years. What did I do? This may help a lot of you:

I threw out 99% of all the crap I learned about oscillators, divergences, Elliott Wave, cycles, timing, seasonals, Gann, pitchforks, volume, Fractals, RSI, stochastics, overbought/oversold (this is a good one--the stock indexes, currencies and cotton for example everyone said were overbought and topping in February and March this year). Look at what they did. Needless to say, I don't pay any attention to this anymore either, etc., etc. The list goes on to infinity almost. I went back to the basics. I went back to simple chart patterns, (a simple moving average and trendline now and then for a visual aid.)

I came up with a low risk money management plan and put it together with trading with the trend and, presto, an effective and time tested trading plan. The plan is simple and has worked since trading began and will last me a lifetime. What a relief not to have to spend countless hours every night trying to find a new way to trade. I am sick and tired of that after 7-years.

I believe at becoming an expert at one stock or market and its behavior and then putting all your skills and energy to work in a concen(traded) manner. Get good at that market and trade the heck out of it. Increase your size over time and you'll make more money with less effort. There are lots of professionals that do this. Look at some floor traders or locals that stay in the pit for many years trading one market exclusively.

One thing that I have learned this year, is that I am trying to cut back on the number of trades I take and be more selective and not trade in congestion as much as I did before. I miss some good trades out of congestion, but I save myself a lot of mental energy, buy myself some more free time during the day, and get better and more profitable trades.

My attitude is changing now to one or two good trades, and that is all I need to make my week ( a triple or a home run, so to speak). There are plenty of them during any given week.

Trading is fun. Once you have a method and money management in place, it allows you to concentrate on trading and not on searching and researching. That gets old and frustrating. Make it your goal to find a simple method for next year. One thing that you can hang your hat on will last you a lifetime. Trading is simple. Remember that it's the Execution or Implementation of your trading plan that is the bigger challenge.

Most people make finding the method a big challenge. That is because there is so much junk thrown at traders. They feel like a child in a candy store and have to try every doodad in the place. When they are done, they are sick and never want to see another candy store (trading gizmo) again. They could have had the plain piece of milk chocolate at the front of the store (simple method price patterns) which would have done everything they desired and fulfilled all their needs.

I wish to all a great new year. I hope some will be able to end their journey in search of the holy grail or indicator that will turn their life around. Search for simplicity. You will be surprised what has been right under your nose all the time, right there in front of you on the chart or price bars. Pay attention to what they say...they will tell you everything. You need to listen and get to know them. It can be that simple. "

 

[barney]

I'm in the 1/6,000,000,000 bracket. I'm also one of the 100%. Fractally, I'm one of the 100% of the 100%.

An interesting philosophical passage from Lao Tsu (indulge me, I'm having a moment... a few moments in fact ):

Thus, that which is seen as beautiful
is beautiful compared with that
which is seen as lacking beauty;
an action considered skilled
is so considered in comparison
with another, which seems unskilled.

That which a person knows he has
is known to him by that which he does not have,
and that which he considers difficult
seems so because of that which he can do with ease.
One thing seems long by comparison with that
which is, comparatively, short.
One thing is high because another thing is low;
only when sound ceases is quietness known,
and that which leads
is seen to lead only by being followed.
In comparison, the sage,
in harmony with the Tao,
needs no comparisons,
and when he makes them, knows
that comparisons are judgements,
and just as relative to he who makes them,
and to the situation,
as they are to that on which
the judgement has been made.

Through his experience,
the sage becomes aware that all things change,
and that he who seems to lead,
might also, in another situation, follow.
So he does nothing; he neither leads nor follows.
That which he does is neither big nor small;
without intent, it is neither difficult,
nor easy. His task completed, he then lets go of it;
seeking no credit, he cannot be discredited.
Thus, his teaching lasts for ever,
and he is held in high esteem.

Awareness of the equilibrium between the mind and body equals spiritual freedom/enlightenment perhaps ........... the perfect state of existence?? ......... Humility with substance !

You are getting into some deep stuff Wayne …………. You’re not taking those funny painkillers again are you ….

 

[wayneL]

Are we back to US politics? Obama is always banging on about change and leadership. Is he the sage? The sage on the stage, ready for a new age. How will I know? He appears to be doing neither nothing or something, so he could be.

I guess all he needs now is a cloaky thing and a turban... hang on a minute! He's got those already!

:bowdown:

LOL

 

[chops_a_must]

A philosophical undertaking.

I was going to blog this topic... thanks Wayne. :

But... by definition and inference, didn't the 5% ride Enron into bankruptcy?

And haven't the 5% been buying these financials right from the top?

How can you make money if the 95% of people aren't going in your direction after you get in? Or is it just the 5% that realise that they need the 95%?

Might be a case of measuring the incalculable...

 

[lesm]

Another on Day Trading.

Do Day Traders Make Money? (Part 1)
by Unknown Author

There have been a number of studies of day traders at specific firms that have attempted to answer the question of whether day traders make money. However, for several reasons, there is no definitive answer to the question. An initial problem is defining the term "day trader" and determining exactly how many day traders there are. Additionally most day traders do not publicly disclose their results. But we can piece together the various sources of information and come to some general conclusions.

Day traders were described in the preliminary prospectus for All-Tech (filed in 1998) as those who engage in the buying and selling of securities many times during the course of a day based on short-term price volatility. They typically close out open positions by the end of trading day in order to manage risk when the markets are closed. Positions are sometimes closed within minutes of the initial purchase or sale. Recent estimates of the number of dedicated "day traders" (that operate at day trading firms) are in the 5,000 range. Others estimate that there may be another 250,000 people that use some kind of software or dedicated systems to trade full time from home. These people should be differentiated from the more than 5 million people that have online accounts and that might occasionally place one or more day trades.

There have been many studies that have concluded that most day traders lose money, but there have also been studies that documented successful trading by day traders. The data currently available seems to imply the following results.
The majority of new day traders probably do lose money.
At some firms a very high percentage of day traders lose money.
However, there is some evidence that a majority of (surviving) day traders at some firms are profitable and many traders generate tremendous returns on their money.
Industry commentators also suggest that day-traders using software at home are much less successful than those trading at professional day trading firms. (See The Net Effect Of Day Trading from Inter@ctive Week (11/23/98))

Many investment industry veterans have suggested that day trading is a fad or and/or argue that it is based on faulty numbers. There have also been a number of studies and press articles that have concluded that the vast majority of day traders lose money. But some of these same people might be surprised to learn that there are also some legitimate studies suggesting that day traders do in fact make money buying and selling stocks intra-day.

Supporters of day trading can refer to a study that was published in the March/April 1998 edition of the respected Journal of Financial Economics. In "The Trading Profits of SOES Bandits" ( Abstract), Jeffrey H. Harris and Paul H. Schultz studied several weeks worth of data from two day trading firms and did indeed find evidence that the traders made money at the expense of market makers.

SOES bandits was the term used to describe individual investors who use Nasdaq’s Small Order Execution System (SOES) for day trading. 1000 shares was the maximum size allowed in SOES at the time of the study but SOES trading rules have changed since 1996, removing some of the day traders' advantages. Harris and Schultz studied data from two different firms and found that in aggregate, traders at both firms made money after commissions for the several weeks studied.

Harris and Schultz discussed the fact that SOES bandits were able to trade profitably with market makers even though they have less information. They suggest that because bandits keep the profits and bear the losses from their trades they have greater incentives to trade than the employees of market-making firms. The Bandits typically closed positions by placing limit orders through Instinet or SelectNet (a system that allows bids and offers to be sent electronically to all market makers in a stock). The principal advantage of SelectNet and Instinet to SOES bandits is that they allow trades within the Bid/Ask Spread.

Its important to note that theoretically, there is a simple reason why it is possible for market makers and traders to make money buying and selling stocks. In fact, many professionals (market makers and professional traders) consistently make money doing just that. See The Bid/Ask Spread and Market Makers for more on this topic.

The authors found that "SOES bandits make money only if they can close out positions within the spread through SelectNet or Instinet. Bandits who both initiate and close positions through SOES usually lose money." Interestingly, they found that trading profits declined when the holding period exceeded one minute and twenty seconds. Bandits lost money in positions held for more than five minutes.

This topic is also discussed in Saints or sinners? from CNNfn (9/1/99). According to the article "Finance professors are, in fact, divided about the viability of day trading" and Professor Schultz suggests it's a game best left to young people with good memories because the fast pace of trading.

On the other hand there have been a number of studies and investigations with less encouraging results. The most frequently cited is a study by Ronald L. Johnson for the NASAA. Johnson concluded in An Analysis of Public Day Trading at a Retail Day Trading Firm - Report of the Day Trading Project Group Findings and Recommendations (8/9/99) that the majority of traders studied lost money and the vast majority of traders ran the risk of losing their entire stakes.

In an administrative complaint filed last year against a now-defunct day-trading firm, Massachusetts securities regulators alleged that only one of the branch's 68 accounts made money. According to an article in the NYTimes (Do Diligence (RR) (8/1/99)) day trading has exceptionally high "washout rates" and "regulators who have examined the books of day-trading firms say that more than 9 out of 10 traders wind up losing money. Because most of these people disappear quietly when their cash runs out, few who replace them in the trading rooms know about them or their failures."

Gretchen Morgenson from the NY Times also discusses the topic with Harvey Houtkin in 2 Brokerage Firms Well Known in Frenzied Day-Trading World (RR) (7/30/99). Morgenson spotted the following statement on the All-Tech web site: "Electronic Day Trading attracts people dead-ended or unhappy in their current field of endeavor and people with a desire to make trading their life's work." According to Master of a New Universe from The Washington Post (5/16/99), Mr. Houtkin estimated that one in three people survive to become full-time day traders while one of All-Tech's regional managers estimated the figure to be more like one in ten.

 

[Bill M]

I don't like this 95%/5% statement much at all because it doesn't represent the true facts.

In 2006 there were only 38% of all Australians directly invested in the sharemarket.

That means 62% didn't have a clue nor really cared or invested in the stockmarket.

Back to the 38%, there would probably be 95% long term investors and 5% successful professional traders.

So out of the whole population your are looking at about 1 to 2% who are successful professional traders.

Considering my favourite hero is Warren Buffett, I will stick with my long term investments in the stockmarket. That puts me in the 36% bracket of sharemarket investing.