5 ms·

Great point. And even if you are "with the crowd" more often than you are not, your timing/sizing on each trade you make as a day trader or mom-and-pop investor

Great point. And even if you are "with the crowd" more often than you are not, your timing/sizing on each trade you make as a day trader or mom-and-pop investor is very likely to be worse than an institutional trading firm. So you can be right on a "buy" vs "sell" decision 51% of the time, but an algo trading firm has probably executed with better timing/trade size and beaten you to a percentage of the profit. A friend who works in quant finance said something along the lines of "if a trader can identify a mom-and-pop investor, it's like taking candy from a baby" in terms of making an easy profit.

Ntrails 10y ago
I'd rather just try really hard to get people to understand that active trading is negative sum, and that unless (As a mom and pop investor) you are properly bench-marking against a relevant index - you're just lying to yourself. Sure HFT guys are faster than you to get short term signals and make money on the micro scale - but even ignoring that way too many people are thinking they're beating the market and they really really aren't.
- SEJeff 10y ago
  You just nailed it! I work for a very large HFT and my portfolio for my 401k and extra retirement (in the market) is primarily low cost / fee vanguard index funds. You really can't beat a FPGA with tick to trade times in the milliseconds. Your optical nerve likely hasn't even processed a number changing yet.
  - hendzen 10y ago
    I'm assuming you mean nanoseconds?
    - SEJeff 10y ago
      Yes, but people roll their eyes when you say that even if it is true.
      - hendzen 10y ago
        Fair enough. If you're not in the nanos what is the point of even bothering with FPGAs and all the pain involved? CPUs can handle single digit micros just fine.
        SEJeff 10y ago
        Agreed, if you're ever in Chicago look me up. Would be fun to grab beers with like minded techies (and that goes for anyone really).
        hendzen 10y ago
        Definitely - not there very often but will keep in mind!
  - got2surf 10y ago
    I'm looking at low cost/fee index funds as well (I strongly agree with you that I don't want an active trading strategy for my retirement account). Have you looked at things like Motif Investing? I'm torn on whether I want to create a sector-balanced Vanguard-style index, or just invest in an existing index.
  - NDT 10y ago
    silly question, but why do your LinkedIn and Github say you work at a generic "Financial Industry Company" rather than Jump? especially since Jump is quite prominent.
- got2surf 10y ago
  Yes! Completely agreed. The fact that it's a negative sum game is really hard to explain to people who've had some moderate success trading (and there are plenty of those anecdotal examples out there). But that's a great point that any kind of active trading strategy needs to be compared against the right index. I think this holds true for pension/sovereign funds which invest in multiple hedge funds as well - comparing to the overall market performance may be less relevant than comparing to sector-weighted market performance, for example.

Ntrails 10y ago

I'd rather just try really hard to get people to understand that active trading is negative sum, and that unless (As a mom and pop investor) you are properly bench-marking against a relevant index - you're just lying to yourself. Sure HFT guys are faster than you to get short term signals and make money on the micro scale - but even ignoring that way too many people are thinking they're beating the market and they really really aren't.

SEJeff 10y ago
You just nailed it! I work for a very large HFT and my portfolio for my 401k and extra retirement (in the market) is primarily low cost / fee vanguard index funds. You really can't beat a FPGA with tick to trade times in the milliseconds. Your optical nerve likely hasn't even processed a number changing yet.
- hendzen 10y ago
  I'm assuming you mean nanoseconds?
  - SEJeff 10y ago
    Yes, but people roll their eyes when you say that even if it is true.
    - hendzen 10y ago
      Fair enough. If you're not in the nanos what is the point of even bothering with FPGAs and all the pain involved? CPUs can handle single digit micros just fine.
      - SEJeff 10y ago
        Agreed, if you're ever in Chicago look me up. Would be fun to grab beers with like minded techies (and that goes for anyone really).
        hendzen 10y ago
        Definitely - not there very often but will keep in mind!
- got2surf 10y ago
  I'm looking at low cost/fee index funds as well (I strongly agree with you that I don't want an active trading strategy for my retirement account). Have you looked at things like Motif Investing? I'm torn on whether I want to create a sector-balanced Vanguard-style index, or just invest in an existing index.
- NDT 10y ago
  silly question, but why do your LinkedIn and Github say you work at a generic "Financial Industry Company" rather than Jump? especially since Jump is quite prominent.
got2surf 10y ago
Yes! Completely agreed. The fact that it's a negative sum game is really hard to explain to people who've had some moderate success trading (and there are plenty of those anecdotal examples out there). But that's a great point that any kind of active trading strategy needs to be compared against the right index. I think this holds true for pension/sovereign funds which invest in multiple hedge funds as well - comparing to the overall market performance may be less relevant than comparing to sector-weighted market performance, for example.