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I had the same result from most papers. My personal conclusion is that when people get a winning strategy they don’t publish. I personally put my money where my

I had the same result from most papers. My personal conclusion is that when people get a winning strategy they don’t publish. I personally put my money where my mouth was for a few years: https://austingwalters.com/backtesting-our-100-yoy-profit-generating-strategy/ https://austingwalters.com/backtesting-our-100-yoy-profit-ge... That being said, I try to be honest too. This can disappear any time and the model I use may only be good in this environment. I do not know. I think that’s the challenge with papers, you don’t honestly know when or if the strategy works. It clearly won’t forever regardless. That’s why I don’t share my exact method. And after doing all the research myself AND trying to sell my algorithm. I honestly don’t think the industry knows what it’s doing either. People are worried about sharpe ratios and all this BS stuff. The reality is for these models you mitigate risk via temporary and ever changing methods. Can’t really publish on that.

vkou 7y ago
I hope that your personal implementation of your strategy takes into account 2008 ;). Because, hooo, boy, your 20% YoY returns sound great, but may not be taking enough risk of a similar collapse into account.
- lettergram 7y ago
  It does take those risks into account and I tested it on 2006-2008 previously. However, there is little point in testing a collapse with the same model. If the stock market collapses anyone investing would be out of luck. Your standard models won’t be able to track that, because it’s usually something like a “black swan” event[1]. Instead you’d want some sort of meta model. In either case. I’m getting 100% YoY returns when I augment my model, in real life. I think even a 50% loss one year wouldn’t be the end of the world. [1] https://en.m.wikipedia.org/wiki/Black_swan_theory https://en.m.wikipedia.org/wiki/Black_swan_theory
  - joeblow9999 7y ago
    ill take the warren buffett position
trilila 7y ago
Winning strategies are not published generally speaking. You wont see many business people blogging in detail about how they went for 0 to 1. Which is shy most blogs about business are a load of BS. Reading your statement and this article confirms my long suspicion that relying on internet strategies is a bad startegy.
- hos234 7y ago
  There are no winning strategies. Its all BS. There are people who are addicted to tracking weather fluctuations on Pluto and there are people who are not.
  - hsitz 7y ago
    There are definitely winning strategies. The issue is whether they can be reliably identified beforehand (thus rewarding skill), or whether people who implement them are just lucky (regardless of whether they believe they were skilled or not).
    - SiempreViernes 7y ago
      If you can't tell untill aftarwards, it is merely a strategy that won, not one that will make you win.
      - DoctorOetker 7y ago
        strategies like accusing your loyal customers for insurance fraud sounds like a win...
  - downandout 7y ago
    Ever hear of the Medallion Fund, which has averaged ~40% annual returns since the late 1980’s? https://www.bloomberg.com/news/articles/2019-03-07/jim-simons-reveals-clues-to-medallion-fund-s-long-unrivaled-run https://www.bloomberg.com/news/articles/2019-03-07/jim-simon...
arnioxux 7y ago
Is your "winning" strategy so different from other social data / sentiment analysis approaches? There is some novelty with how you weigh the sentiments (based on how much of an insider or expert they are) but I am sure existing trading strategies weren't just taking a dumb average of a twitter firehose either. Shouldn't it be easy for some large firm to replicate your approach and make the alpha disappear?
- lettergram 7y ago
  > Shouldn't it be easy for some large firm to replicate your approach and make the alpha disappear First, I don't think alpha ever fully disappears. Second, after speaking with twenty or so firms very few are using sentiment directly. Those that do, I suspect don't take the additional steps to build complex NLP based systems and weight insiders/experts. Even if you weight experts, the methods for doing so are also complicated (cross check against LinkedIn should be easy enough, but also limits information). Anyway, I personally haven't seen much difference in the back testing.
p1esk 7y ago
If your algorithm was successful, why did you try to sell it?
- semi-extrinsic 7y ago
  Just a guess, but: if you come up with a successfull algorithm, you still need to have money that can be invested in order to use the algorithm. So maybe someone else with 100x more money to invest would pay more for the algorithm than you could earn from it in a lifetime.
- albertshin 7y ago
  If you have a 100k ARR business and someone offers 5-6x* rev today, why not check out early and move onto the next one? * Don't know what trading strats trade at
dvfjsdhgfv 7y ago
> I had the same result from most papers. My personal conclusion is that when people get a winning strategy they don’t publish. This is kind of obvious to me. It is also the reason the OP posted their results. I'm sure if they found one strategy that worked, after putting that much time into their research it would be really stupid to announce to the whole world that it works. On the other hand, in the trading world where everyone is a competitor, you might want to deliberately introduce some confusion - but it looks like plenty of actors are doing this anyway.
mtgx 7y ago
Would this work on cryptocurrencies, too?
hobbescotch 7y ago
It seems that you consider the sharpe ratio to be not worthwhile. Would you be able to elaborate on that point? As someone who is getting into algotrading, I’m currently using the sharpe ratio to quantify risk, but would like to hear another take on it.
- lordnacho 7y ago
  Think there's a paper by Andrew Lo about how to adjust it for different distributions.

vkou 7y ago

I hope that your personal implementation of your strategy takes into account 2008 ;). Because, hooo, boy, your 20% YoY returns sound great, but may not be taking enough risk of a similar collapse into account.

lettergram 7y ago
It does take those risks into account and I tested it on 2006-2008 previously. However, there is little point in testing a collapse with the same model. If the stock market collapses anyone investing would be out of luck. Your standard models won’t be able to track that, because it’s usually something like a “black swan” event[1]. Instead you’d want some sort of meta model. In either case. I’m getting 100% YoY returns when I augment my model, in real life. I think even a 50% loss one year wouldn’t be the end of the world. [1] https://en.m.wikipedia.org/wiki/Black_swan_theory https://en.m.wikipedia.org/wiki/Black_swan_theory
- joeblow9999 7y ago
  ill take the warren buffett position

trilila 7y ago

Winning strategies are not published generally speaking. You wont see many business people blogging in detail about how they went for 0 to 1. Which is shy most blogs about business are a load of BS. Reading your statement and this article confirms my long suspicion that relying on internet strategies is a bad startegy.

hos234 7y ago
There are no winning strategies. Its all BS. There are people who are addicted to tracking weather fluctuations on Pluto and there are people who are not.
- hsitz 7y ago
  There are definitely winning strategies. The issue is whether they can be reliably identified beforehand (thus rewarding skill), or whether people who implement them are just lucky (regardless of whether they believe they were skilled or not).
  - SiempreViernes 7y ago
    If you can't tell untill aftarwards, it is merely a strategy that won, not one that will make you win.
    - DoctorOetker 7y ago
      strategies like accusing your loyal customers for insurance fraud sounds like a win...
- downandout 7y ago
  Ever hear of the Medallion Fund, which has averaged ~40% annual returns since the late 1980’s? https://www.bloomberg.com/news/articles/2019-03-07/jim-simons-reveals-clues-to-medallion-fund-s-long-unrivaled-run https://www.bloomberg.com/news/articles/2019-03-07/jim-simon...

arnioxux 7y ago

Is your "winning" strategy so different from other social data / sentiment analysis approaches? There is some novelty with how you weigh the sentiments (based on how much of an insider or expert they are) but I am sure existing trading strategies weren't just taking a dumb average of a twitter firehose either. Shouldn't it be easy for some large firm to replicate your approach and make the alpha disappear?

lettergram 7y ago
> Shouldn't it be easy for some large firm to replicate your approach and make the alpha disappear First, I don't think alpha ever fully disappears. Second, after speaking with twenty or so firms very few are using sentiment directly. Those that do, I suspect don't take the additional steps to build complex NLP based systems and weight insiders/experts. Even if you weight experts, the methods for doing so are also complicated (cross check against LinkedIn should be easy enough, but also limits information). Anyway, I personally haven't seen much difference in the back testing.

p1esk 7y ago

If your algorithm was successful, why did you try to sell it?

semi-extrinsic 7y ago
Just a guess, but: if you come up with a successfull algorithm, you still need to have money that can be invested in order to use the algorithm. So maybe someone else with 100x more money to invest would pay more for the algorithm than you could earn from it in a lifetime.
albertshin 7y ago
If you have a 100k ARR business and someone offers 5-6x* rev today, why not check out early and move onto the next one? * Don't know what trading strats trade at

dvfjsdhgfv 7y ago

> I had the same result from most papers. My personal conclusion is that when people get a winning strategy they don’t publish. This is kind of obvious to me. It is also the reason the OP posted their results. I'm sure if they found one strategy that worked, after putting that much time into their research it would be really stupid to announce to the whole world that it works. On the other hand, in the trading world where everyone is a competitor, you might want to deliberately introduce some confusion - but it looks like plenty of actors are doing this anyway.

mtgx 7y ago

Would this work on cryptocurrencies, too?

hobbescotch 7y ago

It seems that you consider the sharpe ratio to be not worthwhile. Would you be able to elaborate on that point? As someone who is getting into algotrading, I’m currently using the sharpe ratio to quantify risk, but would like to hear another take on it.

lordnacho 7y ago
Think there's a paper by Andrew Lo about how to adjust it for different distributions.