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Ask HN: How to beat S&P 500 algorithmically?

8 points by piyiotisk 5y ago

cercatrova 5y ago
If anyone knew, they certainly wouldn't tell you. If you knew, you wouldn't be asking this question and you'd be rich already.
- throwaway2a02 5y ago
  Not necessarily, maybe there's a strategy that returns 1 extra percent per year compared to just holding the ETF long term. Not quite enough to make a day and night difference, but enough to make it worth it. Still, I personally wouldn't share it had I had one, since generally the more traders use it the less effective it gets.
  - ausudhz 5y ago
    Unless you've enough money to make that 1% extra worth your time and investment on finding the strategy, I'd rather stick on the ETF.
TheAlchemist 5y ago
I highly recommend you "The Little Book That Still Beats the Market" by Joel Greenblatt. This approach works - it's just a longer term algorithm. You will need patience, but over time, you will probably beat S&P 500 by a large margin. Now, if you are looking for algorithms that trade 1000 times a day etc - forget it, or go find a job at an algorithmic trading shop.
- piyiotisk 5y ago
  Thanks for the reply. Seeing an algorithm trade 1000 times per day seems cool but I’ve realised is not a sustainable strategy even if you find something profitable since the costs of doing that many trades will make it unprofitable. I am basically learning algorithmic trading. I know it’s really hard and if someone finds something profitable they probably wouldn’t share it but it’s very motivational if you find something that beats the market even by a small margin.
  - TheAlchemist 5y ago
    The real problem is not in finding an algorithmic strategy that seem to work on historical data - the problem is how to validate sure it will work in the future and how to be confident it's still working even if it's loosing money for some time ?
    - piyiotisk 5y ago
      Yes exactly that. Even if you backtest for many years it’s still possible that you’ll lose money because future although correlated to the past can always have different patterns. Still it’s a really fascinating field to explore.
d--b 5y ago
First you need to define “beat”. Usually people think of it as “better return”, but investors prefer Sharpe or other measures. Then you need to define a term. Eventually holding treasury bonds is likely to “beat” s&p. You just need to wait for the next big selloff. And then there is no magic bullet nor free lunch. It’s all a big casino. Anyone who assures you otherwise is not to be trusted.
- MeinBlutIstBlau 5y ago
  >Anyone who assures you otherwise is not to be trusted. I had a college roomate who gambled with his student loans in the stock market. He tried to convince me to invest a few weeks before COVID tanked the market. He even questioned me why I was waiting to pull the trigger.
deleted 5y ago
[deleted]
joshtam 5y ago
If anyone had the k owledge to do this, they wouldn't ever tell is how they've achieved it. You'll never hear the right answer in a HN thread.
aristofun 5y ago
Wasn’t it shown many times already that it’s impossible to generally and reliably beat the market unless you have some cheat (inside) or in some very specific rare cases? Isn’t it what they teach in economics classes these days?

8 points by piyiotisk 5y ago

If anyone knew, they certainly wouldn't tell you. If you knew, you wouldn't be asking this question and you'd be rich already.

throwaway2a02 5y ago
Not necessarily, maybe there's a strategy that returns 1 extra percent per year compared to just holding the ETF long term. Not quite enough to make a day and night difference, but enough to make it worth it. Still, I personally wouldn't share it had I had one, since generally the more traders use it the less effective it gets.
- ausudhz 5y ago
  Unless you've enough money to make that 1% extra worth your time and investment on finding the strategy, I'd rather stick on the ETF.

TheAlchemist 5y ago

I highly recommend you "The Little Book That Still Beats the Market" by Joel Greenblatt. This approach works - it's just a longer term algorithm. You will need patience, but over time, you will probably beat S&P 500 by a large margin. Now, if you are looking for algorithms that trade 1000 times a day etc - forget it, or go find a job at an algorithmic trading shop.

piyiotisk 5y ago
Thanks for the reply. Seeing an algorithm trade 1000 times per day seems cool but I’ve realised is not a sustainable strategy even if you find something profitable since the costs of doing that many trades will make it unprofitable. I am basically learning algorithmic trading. I know it’s really hard and if someone finds something profitable they probably wouldn’t share it but it’s very motivational if you find something that beats the market even by a small margin.
- TheAlchemist 5y ago
  The real problem is not in finding an algorithmic strategy that seem to work on historical data - the problem is how to validate sure it will work in the future and how to be confident it's still working even if it's loosing money for some time ?
  - piyiotisk 5y ago
    Yes exactly that. Even if you backtest for many years it’s still possible that you’ll lose money because future although correlated to the past can always have different patterns. Still it’s a really fascinating field to explore.

d--b 5y ago

First you need to define “beat”. Usually people think of it as “better return”, but investors prefer Sharpe or other measures. Then you need to define a term. Eventually holding treasury bonds is likely to “beat” s&p. You just need to wait for the next big selloff. And then there is no magic bullet nor free lunch. It’s all a big casino. Anyone who assures you otherwise is not to be trusted.

MeinBlutIstBlau 5y ago
>Anyone who assures you otherwise is not to be trusted. I had a college roomate who gambled with his student loans in the stock market. He tried to convince me to invest a few weeks before COVID tanked the market. He even questioned me why I was waiting to pull the trigger.

deleted 5y ago

[deleted]

joshtam 5y ago

If anyone had the k owledge to do this, they wouldn't ever tell is how they've achieved it. You'll never hear the right answer in a HN thread.

aristofun 5y ago

Wasn’t it shown many times already that it’s impossible to generally and reliably beat the market unless you have some cheat (inside) or in some very specific rare cases? Isn’t it what they teach in economics classes these days?