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A friend of mine works for a small company that develops the models that many automated tradings are based on. It's so secret that he won't even tell me which c
by mixmax 18y ago
A friend of mine works for a small company that develops the models that many automated tradings are based on. It's so secret that he won't even tell me which companies use the software, only that it's some of the major global players. He does tell me about the software in broad terms though, and it is obvious there is a market for a new player in there. Basically almost everyone is using the same models and algorithms, just with different tweaks. And it's based on 20 year old principles. Start writing code that looks for different patterns (weather, psychological factors, etc.) and you might be able to beat them.
- davidw 18y ago> The effect of the sun seems to have been quite big. For shares traded in New York, for instance, annualised returns on perfectly sunny days averaged 24.8%, compared with 8.7% on perfectly cloudy days. Moreover, unlike some stockmarket “anomalies” discovered by economists, investing by the sun would have been more profitable than simply investing in the market index, even after subtracting trading costs. Alas, this does not guarantee profitable trading in the future. Even assuming the effect really exists, investors, now they have been alerted to it, will probably arbitrage away any excess returns to be had by exploiting it. http://www.economist.com/finance/displaystory.cfm?story_id=E1_RNQSDS http://www.economist.com/finance/displaystory.cfm?story_id=E... So... it seems as if people really do think of everything - why wouldn't they, with millions or billions on the line. What hope does an individual have?
- mixmax 18y agoWhat hope does an individual have? More than you think. Especially if you change your attitude towards the problem a bit ;-)
- davidw 18y agoMy attitude is that it's pretty clear how I can take on (or rather, simply run around) even big players as a small startup. It's less clear how I can come out ahead stock picking as an individual. So it's better to not dick around with stock picking, put my money in cash (like it has been for a while), or an index fund, and just concentrate on the startup stuff.
- kingkongrevenge 18y ago> What hope does an individual have? A whole lot of people support themselves by trading successfully. The thing is, making decent money by trading is a full time job, not an after-hours hobby. You CAN make money designing trading strategies. People do it. The question is simply whether the EV returns on your time will be higher than working on an actual job or businesses. Someone smart enough to make a winning trading system is also smart enough to get paid a lot in other endeavors. So more often than not it's a wash. Except traders get to work in their underwear...
- nandemo 18y agoPeople who support themselves by trading successfully are likely working for a company (bank or hedge fund, etc). Often they are dealers, who make money on the bid-ask spread, so they don't bear as much risk as (say) traders working on prop desks. These depend more on the success of their trades for their income, but even so they get a non-negative income. Now, independent day traders working in their underwear is a different story. Not only they bear all the risk of their trades, they're likely "losers" (in the game theory sense) in average.
- newaccountname 18y agoKnowing even the slightest basics about Einstein's random walk, I would be somewhat surprised if the percentage difference between any arbitrarily categorized sets of days weren't that large.