3 ms·
It looks like it is mean reversion. This is my first time hearing that term. The way I discovered this algorithm was initially I wanted to buy the previous day
by Kibae 5y ago
It looks like it is mean reversion. This is my first time hearing that term.
The way I discovered this algorithm was initially I wanted to buy the previous day's best performing sector ETF, with a hypothesis that the momentum would continue. But I learned that it actually ended up losing money.
So I decided to inverse the algorithm. There are still a few optimizations I can test out, e.g. Buying the previous day's worst performing sector.
- Grustaf 5y agoNo offence, but how can you have spent any time trading without knowing about mean reversion? It's the most basic and well known phenomenon in trading, along with momentum.
- sowbug 5y agoNot everyone learns by studying prior art. Some people's brains are wired to need to get their hands dirty before an abstract concept or solution makes sense. I'm sure that in the ~60 seconds I wrote this post, some brilliant future software engineer just reinvented binary search.
- MR4D 5y agoUnderstanding and knowing about mean reversion is essential to anyone writing an algorithm used in real world finance, along with a bunch of other terms. It is also clear from other posts by the author that this has not been tested in the real world, only back tested. Practitioners largely consider back testing to be somewhat irrelevant as it’s hard to achieve real world results that compare favorably to the back test. It is essentially over fitting the curve.
- andyxor 5y agothere are a whole lot of people losing money in the markets while knowing all about prior art and terminology. There is a good reason successful hedge funds like RenTech are not hiring finance people but mathematicians who have no idea about "mean reversion" and other pseudo-scientific terms.
- Grustaf 5y agoQuant funds hire theoretical physicists and mathematicians because it’s the math part in “financial mathematics” that is hard, it’s just easier to teach a mathematician finance and Python/C++, than taking an average finance major or developer. It’s definitely not the case that they want people to reinvent the wheel. Options pricing for example is a Nobel prize winning discovery.