5 ms·

Even if it's a zero sum game (which it's not), most participants are not quant/algo based. As long as you can beat 50% percentile, you can make a profit. Sure

Even if it's a zero sum game (which it's not), most participants are not quant/algo based. As long as you can beat 50% percentile, you can make a profit. Sure you may not be as profitable as top quant companies, but do you really mind that much?

tryitnow 9y ago
Why on earth do you think the top quant companies will leave alpha on the table for you to snatch up? That sounds too much like wishful thinking to me. Furthermore, if someone is really smart enough to beat the market consistently why on earth would they trade just on their own personal account? Work for a hedge fund and use other people's money to leverage your bets.
- dsacco 9y ago
  > Furthermore, if someone is really smart enough to beat the market consistently why on earth would they trade just on their own personal account? Alternatively, if you have a strategy that empirically works, and a strategy for identifying such strategies, why take on investors to share the risk? You can scale up your own investment and leverage yourself with less regulatory oversight. Why on earth do you think the top quant companies will leave alpha on the table for you to snatch up? It's not so much that they leave alpha on the table, rather that there is so much alpha available, and the capacity constraints and reward profiles are so different for many of them, that individuals can prosper outside of a firm. They just normally don't, because they lack the same training (and because it's very competitive).
- SomeStupidPoint 9y ago
  Some strategies only work with small investment sizes or require a lot of effort, so don't scale well. Big firms leave tons of (for them) small opportunities on the table, because it's not worth their time. Similarly, there are people who can regularly beat the market that don't have much to offer large funds because their methods don't scale.
  - ant6n 9y ago
    Like Buffet who said it's easy to invest even you only have a couple million, and much harder when you have billions.
- ozi 9y ago
  Strategies have varying degrees of scalability. It's possible to find consistent returns on a personal scale that would be unfeasible to scale to $100M+ portfolios
branchless 9y ago
Trading is a zero sum game. You are making nothing. You win, someone else loses.
- jtoll 9y ago
  Trading is not a zero sum game. It doesn't matter if nothing's being made, that's not the point. It's an important service providing pricing and liquidity which facilitates capital allocation, diversification, and risk management. Trading is an absolutely essential part of the economy. As a simple example, a farmer hedges his wheat crop selling wheat futures. That allows him to reduce some of his risk, thereby allowing him to plant more (i.e. growing the economy). The market marker who bought the wheat futures may be trading multiple commodities. This trade diversifies his risk, allowing him to trade more of other commodities, allowing other farmers to offset more of their risks (i.e. growing the economy). Investment companies or hedge funds enter the market purchasing futures, to diversify their risks, allowing them to invest more in equity markets, which fund companies (i.e. growing the economy). If my point isn't already clear, markets and trading facilitate the diversification and allocation of risk capital to market participants thereby growing the economy. It's the conduit for capital which does make something.

tryitnow 9y ago

Why on earth do you think the top quant companies will leave alpha on the table for you to snatch up? That sounds too much like wishful thinking to me. Furthermore, if someone is really smart enough to beat the market consistently why on earth would they trade just on their own personal account? Work for a hedge fund and use other people's money to leverage your bets.

dsacco 9y ago
> Furthermore, if someone is really smart enough to beat the market consistently why on earth would they trade just on their own personal account? Alternatively, if you have a strategy that empirically works, and a strategy for identifying such strategies, why take on investors to share the risk? You can scale up your own investment and leverage yourself with less regulatory oversight. Why on earth do you think the top quant companies will leave alpha on the table for you to snatch up? It's not so much that they leave alpha on the table, rather that there is so much alpha available, and the capacity constraints and reward profiles are so different for many of them, that individuals can prosper outside of a firm. They just normally don't, because they lack the same training (and because it's very competitive).
SomeStupidPoint 9y ago
Some strategies only work with small investment sizes or require a lot of effort, so don't scale well. Big firms leave tons of (for them) small opportunities on the table, because it's not worth their time. Similarly, there are people who can regularly beat the market that don't have much to offer large funds because their methods don't scale.
- ant6n 9y ago
  Like Buffet who said it's easy to invest even you only have a couple million, and much harder when you have billions.
ozi 9y ago
Strategies have varying degrees of scalability. It's possible to find consistent returns on a personal scale that would be unfeasible to scale to $100M+ portfolios

branchless 9y ago

Trading is a zero sum game. You are making nothing. You win, someone else loses.

jtoll 9y ago
Trading is not a zero sum game. It doesn't matter if nothing's being made, that's not the point. It's an important service providing pricing and liquidity which facilitates capital allocation, diversification, and risk management. Trading is an absolutely essential part of the economy. As a simple example, a farmer hedges his wheat crop selling wheat futures. That allows him to reduce some of his risk, thereby allowing him to plant more (i.e. growing the economy). The market marker who bought the wheat futures may be trading multiple commodities. This trade diversifies his risk, allowing him to trade more of other commodities, allowing other farmers to offset more of their risks (i.e. growing the economy). Investment companies or hedge funds enter the market purchasing futures, to diversify their risks, allowing them to invest more in equity markets, which fund companies (i.e. growing the economy). If my point isn't already clear, markets and trading facilitate the diversification and allocation of risk capital to market participants thereby growing the economy. It's the conduit for capital which does make something.