/r/exWallStreetBets | deleterobinhood@gmail.com
Feeling lucky?
Let's say someone asks if you want to gamble.
- You have a 60% chance of doubling (+$100).
- You have a 40% chance of halving (-$50).
- You have $100 and can play 1000 times.*
Should you play? No. Life is not a coin flip. If you're like 28% of humans, you will go bankrupt. The mathematical fact for why is called the Kelly Criterion. But it's not intuitive.
The notebook included (fall-of-genius-traders.ipynb) makes the concept practical. Except it supposes you're a genius.
- research_papers - 20+ studies on ranging topics
- gambling (health destruction) - how destructive habits and well-being are formed from trading
- market structures - how financial markets work
- Robinhood (toxicity & regulation) - how Robinhood users lose money by design
- WallStreetBets (retail) - how group psychology impacts individual prices and performance
- robinhood_loss_screenshots - 50+ images of losses from /r/wallstreetbets.
- cropped_screenshots - 30+ images of losses (cropped) /r/wallstreetbets
- robinhood_ux_animations_screenshots - gifs, mp4, and images of Robinhood's beautiful and play user interface.
- everything else (below)
- Only 3% of traders make money. 1.1% of them make more than minimum wage. (study)
- Majority of "veteran traders" (3+ years) are those with persistent losses. (study)
Why are they still bad? Why haven't they quit? The answers lie in math and psychology.
No one goes into trading expecting to lose money and form an addiction. But that's what happens.
Most Degen joke they are gambling, but they really don't see it this way. Markets have a way of deceiving people to thinking they have an edge. The average degen trader makes 100s of trades each month. 720 trades/year is the minimum to be considered a daytrader. (trader tax status)
Each one of those trades are inherently slightly bad bets. (Your bid is unconditionally lower than the most favorable midpoint price.)
These losses compound quickly. As a daytrader, there is pressure to make more trades, to justify it as a full-time occupation.
Your grandmother does not see smoking as a single event, but as a activity... Risk-taking (trading) is an activity, not a single event. Once you put dynamics explained, the results in behavioral finance become total nonsense
-Nassim Taleb (How you will go bust on a favorable bet.
Primary motives are:
- To provide a master resource for the relevant people (eg Robinhood employees, policy or social responsibility activists). 2. See: Am I suggesting regulating Robinhood?
- To get users to delete Robinhood. Or convince others to do so.
- To simply be helpful, for whatever your project may be.
Why Robinhood (not all brokerages)?
Robinhood stands above the competition. Robinhood is "democratizing" massive financial losses.
- They are culpable for the $5 billion wealth transfer from the poor to rich (Bloomberg, study).
- They are purveyors of lottery options (average 12.6% bid-ask spread).
- They optimize for destroying lives- (options) trading addiction and minimal guardrails (see: Why 100% of daytraders are poor.
- Robinhood users trade 14X more stocks & 88X more 1-10 day expiry options vs Schwab's. (NYT)
They take no action to curb the virality of said wealth and life destruction.
Robinhood uses its playful user interface (see: ux folder) to engages users, which can be good. But so far, there's little sign they optimize for the user's well-being.
The best way everyone can help would be to star this repo and sharing this repo.
If you're more motivated (thank you), please feel free to
- add suggestions, correct mistakes
- add additional data (coding, datasets), resources, analyses, ...
- email me: if you or anyone you know work at Robinhood, consider "whistleblow"ing eg providing real data, leadership culpability.
- email me: let me know if you feature the work.
- No permission needed, but I'd appreciate a shoutout (eg on a YouTube video).
It's not clear how frequently (if at all) I will make updates. I'm quite busy. But the more people engage, the more time and energy I will set to growing this.
A lot of the language is intentionally unhedged (100% instead of 99%) to make the lessons absolutely clear.
Am I suggesting regulating Robinhood or trading?
Not sure. That's for you to decide and if you want to action, all things considered. You can read academics paper arguing for regulation in "research_papers" folder.
"There are daytraders who make money."
Assume they're lying, lucky, new (not sufficient data), etc.. Assume it's not you.
Are all trades really 50% odds? No. A lot of the language is oversimplified to make the lessons absolutely clear.
If GOOGL is $100, but you sell a $110 call option, your chance of profiting is high. But your risk is proportionally high. Your potential loss is enormous if GOOGL goes to $120. - Ultimately, the risk/reward will always be slightly negative (but lead major losses long-run). It's why market makers (eg Citadel pay to be the counterpart for your trade.
If pros can do it, why can't I? Most pros who work 100+ hours a week are wasting their lives. That said, the pros that do make money on betting risk less than 1% per trade (see: Kelly Criterion).