I do believe that insider trading is rampant. I've seen many occasions where a large corporate announcement sends a stock up or down, but hours before, you can see the price of the stock slowly slide in the direction. Obviously a certain amount of that may be random/explainable, but I've seen it a lot and my intuition says more is going on. This also seems relatively easy to quantitatively measure, I'd love to see a real analysis of it.

There is a company who will break down a brand new car into its component parts and by knowledge of materials and production processes can tell to a very narrow margin what the cost of producing that car is - and therefore the profit potential of each sale. The information about the number of cars sold is either public or more easily obtained than the actual company accounts (public in many jurisdictions due to car registrations).

There are other companies who will buy a bunch of iPhones for example and by carefully analysing the serial numbers can deduce to within a reasonable margin exactly how many have been sold.

Using information like this I'm sure most large trading firms have very good models of the likely performance of each publicly listed company.

I wonder how far down this rabbit hole things go. Do they have people standing outside factories counting how many cars leave on the back of the truck? Do they have access to systems like Galileo in the travel industry where they could figure out how many seats had been booked on a plane, or how many rooms were booked in a hotel? They can then take a good guess at staffing / fixed costs and arrive very much in the correct ball park.

AKA the German Tank Problem (https://en.wikipedia.org/wiki/German_tank_problem). Fascinating application of statistics.

To make that random would be a huge waste and also destroy the potential for creating visible patterns helpful within a lot of industries.

Edit: I just thought about redemption codes, which yes, do aim to be randomized have a huge space relative to the issued codes. In those cases, I see what you mean. Serials of digital media are often and intentionally randomized.

So not everyone randomises.

[0] https://www.bloomberg.com/news/articles/2017-01-27/hedge-fun...

He follows him to a private jet and finds out it's flying to mid-sized city that happens to be the corporate headquarters of a particular company. In the movie it's sort of implied that this activity is illegal.

I wonder if it actually was, and if so, why that would be different than what those hedge fund guys you reference were doing?

Yes. They do. I took a car ride with someone a few years ago who claimed to work for a consulting firm that the big banks+others hire to gather on the ground intel from companies through things like factory tours and shooting the sh*t with employees at bars near the warehouses etc.

Matt Levine writes on the topic pretty regularly. Here's an example with a number of interesting situations.

www.businesslive.co.za/amp/rdm/business/2018-02-01-matt-levine-the-fine-line-between-insider-trading-and-knowing-more-than-others/

This is famously the Eddie Murphy rule - it was a crime to steal the briefcase, but not to trade on the knowledge gained from the contents of said briefcase.

iirc 'Trading Places' is on netflix, and Planet Money[0] did an entertaining episode about this.

[0] https://www.npr.org/sections/money/2013/07/09/200401407/epis...

"Meals on Wheels is accused of receiving insider information about big market movements from dozens of investment bankers. The Meals on Wheels endowment has seen 10x growth in the past 18 months. It looks like the group they provide for will be fed forever, even if we went through another Great Depression-level financial catastrophe. Should they be allowed to keep these funds? It certainly looks bad for the government to fine them hundreds of millions of dollars with the recent cuts in government-provided social programs."

Mostly as an exercise for myself, I've been curious to make a system that would do this. Cameras on all the entrances, license plate tracking, and maintaining an "inventory" of vehicles in the facility.

You could track shift change, number of consumer vehicles (estimating number of people working), number of semis, etc.

Throw things into mechanical turk and you could categorize semis. Maybe that factory that makes big things needs one big component for every unit, and it's super obvious when it comes in on a semi. Boom, that's going to be a strongly correlated factor to production.

Consumer vehicles versus true production over time could help find increases in efficiency.

There are tons of ways to leverage little bits of data, and I think a vehicle in/out tracker would get you a LOT of information.

Of course the problem with that is getting up to the second video feeds (as apposed to delayed video feeds from SKY etc) from a fixed view point. I'm sure you could pay some money to get essentially a security camera feed at the game but that would be expensive.

Which made me wonder whether someone could turn up the night before a big game, park a drone on the roof broadcasting the video to a van with the computers processing the results while evading detection...

Totally unfamiliar with the gambling side of things. Do they set odds at the start of the game and maintain them throughout? There are already companies who will do live "coding" of game events to create a stream of data about the game. Players on the field, time on the field, location of the ball, location of the players, who has possession, possession by player.

There are some other trackers out there targeted for coaches. E.g. track player running speed. If they are going 10% slower than typical after the start of a play in American football, it's a good sign that they need to come out.

The common problem with your idea and mine are getting high enough quality for relatively modest prices. A standard dash cam isn't enough to grab a license plate, it'd have to be at least somewhat better tuned. Drone video from a distance is going to be tough to use to discern who is who and to get valuable info.

I can tell you from professional experience that is most often not insider trading. You might be surprised at the amount of meaningful information that can be legally obtained through research.

I used to (very legally) find and analyze data that would lead to better conclusions than street analysts. The results of equity earnings are basically an open secret among institutional investors before they're announced.

In theory, yes, in practice no.

The reality is this kind of short term incite based investing does not really scale. Over time the money you spend on paying people to do this is less than your risk adjusted long term benefit.

There was somebody who recently demonstrated that you can derive useful information from simply reading SEC filings, which orthodox theorists would presume should already be reflected in stock prices.

The caveat is what most fund managers would call capacity. My trading strategy can't scale without severe cuts in those returns. It's extremely easy to buy 10 contracts and hold for 5 ticks. I've never experienced slippage at all. Operating at mutual fund sizes, I would be trading at volumes that would slip 25 ticks before filling completely. My strategy can't and won't ever scale to that level...it would degrade to negative profitability likely with two or three million dollars of daily volume. Effectively this means I have major limits to compounding...like most day traders, I merely skim returns off of a fixed amount of capital.

So yeah, I do well enough for myself, and there are thousands of traders just like me. The quant firms may be on another level, but it's not because they have better returns than you can get as a day trader, it's because they have better capacity.

Today, it's extremely difficult to get information 5 minutes sooner than everyone else without insider trading. Also, doing such quick analysis can be pretty error-prone, it's not uncommon that bad stories send a stock up and good stories send it down because the price is based on the perception rather than the fundamentals. So even if you have the right information, you may make the wrong bet. I'm sure some are better than others at this, but to make money, you'll need to be better than 50% of everyone else.

You're assuming parent is trading on news, information, or fundamentals. A technical trader wouldn't care about anything you've mentioned.

I don't believe it's possible to consistently make money ignoring "news, information, or fundamentals". Otherwise you're just fitting curves to noisy data. If it could work consistently, then you would be able to read the future.

I’m not here to argue if it works, I’m arguing that there are people who trade stocks with no concern for anything that you mentioned. Argue the effectiveness all you like, people still do it.

By the way, people read the future all the time: it will rain today and it will snow in four months.

I can't perfectly read 5 minutes into the future, nor is it necessary. All that is necessary is to have a slight edge. Just like running a casino, a small statistical edge is enough assurance that any individual game outcome doesn't matter because you will have more wins than losses. And a tiny edge is not hard to do.

I'm doing fine without news feeds at all. An economic calendar and some basic technical analysis is sufficient enough of an edge to win more than I lose.

I guess you could technically call that "trying to read the future", but the (big) difference is that the horizon is on the order of probably a few milliseconds at most, not 5 minutes.

Five minutes from now I'm going to be sitting on my bed.

Five minutes from now I'm going to be male.

Five minutes from now I'm going to have a nose.

That I can read these aspects of the future has no bearing on me being able to tell the future of coin flips.

You'd think so. It turns out that there is plenty of news out there at the right time. Thing is, no-one has the time to continuously check the top 50 or so online news sources to see if their individual interests are being mentioned.

The larger corporations might be on top of things but there will be plenty of individual investors reacting to the news. You just need to react before they do.

First of all, 5 minutes is a very long period of time in the world of high frequency trading, where machines are executing millions of trades every millisecond. Secondly, the same machines are equipped with AI algorithms for reading real-time news feeds, earnings releases, etc, and reacting very quickly on the news. Thirdly, the amount of money that the machines (and their owners) are trading with dwarfs any impact that individual investors would have on market prices.

5 minutes is plenty of time, well shorter than most successful day traders who are trying to predict on 15 minute or hourly horizons, or swing traders trying to predict on daily horizons. There are plenty of trends that occur on the horizons of minutes, hours, days, even weeks.

> First of all, 5 minutes is a very long period of time in the world of high frequency trading, where machines are executing millions of trades every millisecond. Secondly, the same machines are equipped with AI algorithms for reading real-time news feeds, earnings releases, etc, and reacting very quickly on the news. Thirdly, the amount of money that the machines (and their owners) are trading with dwarfs any impact that individual investors would have on market prices.

This comment reads like a science fiction fan's made up ideas about how NASA works. You've taken snippets of vague ideas about the truth and mishmashed them into a frankenmonster that would never exist in reality.

* Millions of trades every millisecond is an exaggeration several orders of magnitude off from the real world volumes of HFT firms.

* HFT algorithms don't use AI. They wouldn't be able to react fast enough if they did. HFT algorithms in practice are rarely more complicated than linear regression.

* Those who use AI in their algorithms are doing so with incredibly varied levels of success. They are typically trading on horizons much longer than HFT firms. They are trading volumes orders of magnitude lower than HFT firms, even if those volumes are orders of magnitude higher than individual investors. From what I can tell, outside of text analysis of the potential sentiment generated by news, the finance industry is pretty pessimistic about AI.

* There are plenty of traders operating successfully across several time horizons. It is not necessary to be faster than HFT firms to be successful. Most day traders like me actually depend on the liquidity provided by HFT firms in order to be profitable; we couldn't do it without the deep books that they provide.

* Likewise, a lot of the predictability of how the market moves comes from the market effects of large actors: when you trade $100M in a day in a single direction, you move the market with you, and that creates a trend pattern that smaller traders can pick up on and take for a ride.

Comparing returns between income-oriented day traders and compounding-orieted mutual funds is like comparing top speed between f1 cars and endurance cars. You can certainly do it, but you're not doing anything worthwhile with your time by doing so. My strategy has high returns but low capacity and no compounding potential...simply put, I'm not competing against the S&P 500, I'm making an income. In fact, most of my excess returns end up in SPY.

1). never stop studying about what is going on

2). practise, practise, practise (otherwise known as paper trading) before you ever lay down any coinage

3). don't let emotions ever take you away from whatever strategy your paper trading comes up with

4). whatever the environment you had when you did your paper trades, don't allow that to change when you finally put some coinage down.

5). take a holiday from trading if the markets get too volatile (your definition of volatile applies here)

6). remember that many of your trades will lose coinage, it is up to you to determine what you put in place to mitigate this, others will make enough to cover these losses, if you keep to the rules you have.

7). if your success at paper trading does not see the same success in coinage trading, stop and do a complete review of what has happened and go back to paper trading.

8). keep meticulous records of all your trades, paper or real and continually look for further insights into yourself as you do this.

9). continually look at what your goals are and why you are doing this.

10).don't spend any coinage that you cannot afford to spend on this, in other words, keep calm and steady.

That's like saying that having a very complex system for playing blackjack to have an advantage over the house isn't gambling.

My definition of gambling is "any event in which money is bet on the outcome of an event in which the user does not have 100% perfect knowledge". If you're an insider trader, you're not gambling. If you're Joe-average day trader, you're a gambler.

Being a good gambler is a skill that can be developed. If your game of choice is the stock market, then those things he's talking about are part of how he pushes the odds in his favor.

What I think you need to add to your definition is an addendum that says that what you bet is significant enough that you will suffer significant harm from losing. So if you cannot afford to lose that $5 you put down on some race, then that is significant. if putting down $1,000,000 on some event and losing means nothing to you, then are you still gambling or having entertainment.

My father's advice to me from a very young age, was to treat all "bets" as a loss anda form of entertainment. So only use what you could afford to lose. if you cannot afford to lose anything, then you don't lay down resources on the expectation of "winning", that is the mug's game. So as far as day trading is concerned, follow the rules that I set out above, which are the same rules that I received from others who have actually been successful in day trading. Interestingly enough, I have had the same advice from those who were unsuccessful and they admit they broke the rules as laid out.

Your caveat there often swallows the rule. Many bet on the market and make big bucks only to lose multiples of it later.

there's no guarantee it will be created immediately, execute at all, and if it creates a market order you might very well not like the price it does end up executing at

Sounds like you are eyes wide open anyway.

I doubt longer than 5 years profitably.

Effectively, brokers and exchanges have almost infinite ROI: with small and fixed investments in infrastructure and marketing they take _percentage_ of your traded volume.

And shady trading rooms will screw you on commissions, spread, high margins on volatile instruments, and in very unlikely event if you manage to cash out more money than deposited, they will hold your account for "review of illicit trades".

But even on real and legal exchanges far less than 50% of capital wins, I assure you.

This industry is filled with secrecy on one side, and paradoxically, with a wealth of free information on the other side. It's just that information is so abundant and complex, a normal person has no chance of using it anyway. Especially if they think it's impossible.

The hoards of "get-rich-quick" dudes with no emotional control rushing into this thinking they can learn to day-trade in a month, loosing their life savings and then ranting on forums about how it is all just a big casino - they do not help the situation either. Well I guess in a way they do help real managers to keep their jobs.

So you keep wondering. Just stay away from the markets :)

Not even. After you take your brokerage's fee structure into account, you've got to nominally outperform the market by a fairly decent margin in order to stay ahead of the market. The amount by which you need to depends on the rate at which you incur those fees, so day traders are giving themselves the toughest row to hoe in this department.

Based on what? The conditions for stat arb to be possible haven't really changed.