2 ms·

Consider you have some extra money, what do you do with it? Do you put it (or keep it) in a bank-account? That is an investment choice you have. If you have mor

Consider you have some extra money, what do you do with it? Do you put it (or keep it) in a bank-account? That is an investment choice you have. If you have more money than you need for living then you are already investing it in some way, maybe a bank-account. And you make this investment decision following some algorithm in your head. So if you algorithm was so great wouldn't it make sense to use it rather than put money into a low-interest bank-account? My point is when it comes to investing, inaction IS action too. Therefore an investment algorithm does not need to beat the market. It just needs to beat doing nothing. Consider that if you have earnings you can put money into an IRA account and then trade with it almost for free.

ben_w 6y ago
> So if you algorithm was so great wouldn't it make sense to use it rather than put money into a low-interest bank-account? It wasn’t great outside of the spreadsheet. I forget the exact numbers, but imagine: making 0.1% per transaction sounds amazing until you find out the transaction fee is 1%. > Consider that if you have earnings you can put money into an IRA account and then trade with it almost for free. This was the UK in 2005 — no IRAs [0], and I received 5% on my current account around then. [0] Actually it’s worse than that — if you went into a UK bank in the early 2000s and said “IRA”, I’d expect the armed response unit to be called.
- beagle3 6y ago
  But the transaction fee is not 1% if you are a professional. It’s now higher, but there was a time you could easily get closer to 0.05% with some effort and nontrivial but not huge volume. Iirc, last I checked, bitmex cost 0.075% to take liquidity, and paid 0.025 to give liquidity (which should be noted, is more than a tick - so, market making on bitmex is free money in an unpredictable market - which has made it technically expensive) INET had a similar incentive structure before they were bought by Nasdaq, as did BATS when it started - it’s a common way to jumpstart liquidity in a new exchange. Robinhood and IB will let you trade for free today (with other hidden and hard to quantify costs related to their order flow transactions instead) So there’s no general solution - the details keep changing - but there’s likely a way to make nice profit of 0.1%.

ben_w 6y ago

> So if you algorithm was so great wouldn't it make sense to use it rather than put money into a low-interest bank-account? It wasn’t great outside of the spreadsheet. I forget the exact numbers, but imagine: making 0.1% per transaction sounds amazing until you find out the transaction fee is 1%. > Consider that if you have earnings you can put money into an IRA account and then trade with it almost for free. This was the UK in 2005 — no IRAs [0], and I received 5% on my current account around then. [0] Actually it’s worse than that — if you went into a UK bank in the early 2000s and said “IRA”, I’d expect the armed response unit to be called.

beagle3 6y ago
But the transaction fee is not 1% if you are a professional. It’s now higher, but there was a time you could easily get closer to 0.05% with some effort and nontrivial but not huge volume. Iirc, last I checked, bitmex cost 0.075% to take liquidity, and paid 0.025 to give liquidity (which should be noted, is more than a tick - so, market making on bitmex is free money in an unpredictable market - which has made it technically expensive) INET had a similar incentive structure before they were bought by Nasdaq, as did BATS when it started - it’s a common way to jumpstart liquidity in a new exchange. Robinhood and IB will let you trade for free today (with other hidden and hard to quantify costs related to their order flow transactions instead) So there’s no general solution - the details keep changing - but there’s likely a way to make nice profit of 0.1%.