6 ms·

This is really interesting. Have your strategies out performed buy and holding index funds, or are you mainly just doing this with a small amount of capital to

This is really interesting. Have your strategies out performed buy and holding index funds, or are you mainly just doing this with a small amount of capital to learn how the markets work? I have always wanted to try algorithmic trading to learn about it, but I have always read it is a fools errand to think you will beat just buy and hold.

nemothekid 3y ago
1. I think buying and holding is more probable to have a higher return 2. Sometimes you get a cool api and think wow this would be fun, and next thing you know you've lost thousands on boneheaded trades. I did something similar during the pandemic with Rust with the Polygon API (and instead of interactive brokers, I used tradier). Eventually I learned I actually had more fun building the thing than actually trying to beat the market.
- _zkyx 3y ago
  I have won and lots thousands for sure. Haha. When stocks were on a rip the bot was making lots of money just because everything was going way up. Then, in 2022 when everything went way down, like tons of tech stocks, my bot sucked. So, I really need to add shorting or something. I'm still exploring things on the strategy side.
  - pqdbr 3y ago
    Isn't the trend detection equally applicable to shorting as well, with swapped signals? Or do you believe there are more fundamental changes needed so your app can trade in shorting as well?
    - _zkyx 3y ago
      Yeah, right now I'm only set up to buy stocks. I haven't tried to short anything yet. I want to get to this eventually since it would be nice to make money when the market goes down too.
      - Fripplebubby 3y ago
        I'm sure you know this, but for others reading this who are novices at finance / trading, like I am - the gotcha here is that while the strategy may be symmetric, the risk is not - when buying a stock, there is a floor to how much money you can lose (the price you paid for the stock), while with short-selling, there is no such floor, since the price can rise to any amount and increase your losses to infinite. I believe that traders will use hedges to account for this, however, these hedges will eat into your profits if they are not exercised (but may save your bacon if they are!).
        _zkyx 3y ago
        Yeah, I haven't explored this yet. The unlimited risk thing bothers me thought. Which probably sounds funny since this whole things is risky as hell. But, I was more looking into options or something to hedge but honestly everything takes so much time to learn about, test, and then do. So, I just wanted to focus on this and then expand.
  - stouset 3y ago
    Aka, everyone thinks they’re an investing genius when the whole market is going up.
    - _zkyx 3y ago
      Yes, 100%. Everything looks amazing while the markets are going up. Sometimes, I've just shut the entire thing down when there is Fed news or the markets are taking a dump. That's a legit strategy too. Only run it while the markets are going up.
_zkyx 3y ago
This is going to sound crazy given all the scams out there. But I was interested in testing the idea of small compounding returns. Like, could you get a daily 0.5% compounding return. Sure, you could go all in on TSLA for example and get a 1% daily return. But, could you do that with automation, using lots of small bets, across the entire market. You can, but there is a scale issue here. In that you need to make exponentially large bets as your bank roll increases. So, it's capped. Well, that's what I've seen. So, yes you can beat it but only with smaller amounts of money.
- makestuff 3y ago
  That makes sense to me and lines up with what buffet says about there are alot of people on wall street who can average 50% returns with 100k but once it gets into the millions it is much harder to find alpha.
  - mhh__ 3y ago
    One of the issues arbitrageurs have is that as they get good and bigger they can run out of things to arbitrage.
  - cholmon 3y ago
    I don't follow Berkshire Hathaway much, so I'm not aware of what Warren Buffet has said on this topic, but it sounds super interesting. After a bit of digging, I found this Q&A from the 2019 shareholder meeting: https://www.youtube.com/watch?v=geRIJQJXRVo&t=17980s https://www.youtube.com/watch?v=geRIJQJXRVo&t=17980s And the meeting minutes in PDF form (see page 120, question #32): https://s3.amazonaws.com/static.contentres.com/media/documents/0a11de45-f116-4978-9a9d-fa2b5a0788a8.pdf https://s3.amazonaws.com/static.contentres.com/media/documen... The text from that document... 32. It’s easy to make 50% on a million, but much more difficult on larger amounts WARREN BUFFETT: Station 9. We’re just about — yeah, we’ve got time for a couple more. AUDIENCE MEMBER: My name is John Dorso (phonetic), and I’m from New York. Mr. Buffett, you’ve said that you could return 50 percent per annum if you were managing a one-million-dollar portfolio. What type of strategy would you use? Would you invest in cigar butts, i.e., average businesses at very cheap prices? Or would it be some type of arbitrage strategy? Thank you. WARREN BUFFETT: It might well be the arbitrage strategy, but in a very different, perhaps, way than customary arbitrages, a lot of it. One way or another, I can assure you, if Charlie was working with a million, or I was working with a million, we would find a way to make that with essentially no risk, not using a lot of leverage or anything of the sort. But you change the one million to a hundred million and that 50 goes down like a rock. There are little fringe inefficiencies that people don’t spot and you do get opportunities occasionally to do, but they don’t really have any applicability to Berkshire. Charlie? CHARLIE MUNGER: Well, I agree totally. It’s just you used to say that large amounts of money, they develop their own anchors. It gets harder and harder. I’ve just seen genius after genius with a great record and pretty soon they’ve got 30 billion and two floors of young men and away goes the good record. That’s just the way it works. It’s hard as the money goes up. WARREN BUFFETT: When Charlie was a lawyer, initially, I mean, you were developing a couple of real estate projects. I mean, if you really want to make a million dollars — or 50 percent on a million — and you’re willing to work at it — that’s doable. But it just has no applicability to managing huge sums. Wish it did, but it doesn’t. CHARLIE MUNGER: Yeah. Lee Louley (phonetic), using nothing but the float on his student loans, had a million dollars, practically, shortly after he graduated as a total scholarship student. He found just a few things to do and did them.
mhh__ 3y ago
Out perform relative to a number or your expectation? You might want returns that aren't correlated just to an index - this is a major reason to look to invest in (say) a hedge fund.

nemothekid 3y ago

1. I think buying and holding is more probable to have a higher return 2. Sometimes you get a cool api and think wow this would be fun, and next thing you know you've lost thousands on boneheaded trades. I did something similar during the pandemic with Rust with the Polygon API (and instead of interactive brokers, I used tradier). Eventually I learned I actually had more fun building the thing than actually trying to beat the market.

_zkyx 3y ago
I have won and lots thousands for sure. Haha. When stocks were on a rip the bot was making lots of money just because everything was going way up. Then, in 2022 when everything went way down, like tons of tech stocks, my bot sucked. So, I really need to add shorting or something. I'm still exploring things on the strategy side.
- pqdbr 3y ago
  Isn't the trend detection equally applicable to shorting as well, with swapped signals? Or do you believe there are more fundamental changes needed so your app can trade in shorting as well?
  - _zkyx 3y ago
    Yeah, right now I'm only set up to buy stocks. I haven't tried to short anything yet. I want to get to this eventually since it would be nice to make money when the market goes down too.
    - Fripplebubby 3y ago
      I'm sure you know this, but for others reading this who are novices at finance / trading, like I am - the gotcha here is that while the strategy may be symmetric, the risk is not - when buying a stock, there is a floor to how much money you can lose (the price you paid for the stock), while with short-selling, there is no such floor, since the price can rise to any amount and increase your losses to infinite. I believe that traders will use hedges to account for this, however, these hedges will eat into your profits if they are not exercised (but may save your bacon if they are!).
      - _zkyx 3y ago
        Yeah, I haven't explored this yet. The unlimited risk thing bothers me thought. Which probably sounds funny since this whole things is risky as hell. But, I was more looking into options or something to hedge but honestly everything takes so much time to learn about, test, and then do. So, I just wanted to focus on this and then expand.
- stouset 3y ago
  Aka, everyone thinks they’re an investing genius when the whole market is going up.
  - _zkyx 3y ago
    Yes, 100%. Everything looks amazing while the markets are going up. Sometimes, I've just shut the entire thing down when there is Fed news or the markets are taking a dump. That's a legit strategy too. Only run it while the markets are going up.

_zkyx 3y ago

This is going to sound crazy given all the scams out there. But I was interested in testing the idea of small compounding returns. Like, could you get a daily 0.5% compounding return. Sure, you could go all in on TSLA for example and get a 1% daily return. But, could you do that with automation, using lots of small bets, across the entire market. You can, but there is a scale issue here. In that you need to make exponentially large bets as your bank roll increases. So, it's capped. Well, that's what I've seen. So, yes you can beat it but only with smaller amounts of money.

makestuff 3y ago
That makes sense to me and lines up with what buffet says about there are alot of people on wall street who can average 50% returns with 100k but once it gets into the millions it is much harder to find alpha.
- mhh__ 3y ago
  One of the issues arbitrageurs have is that as they get good and bigger they can run out of things to arbitrage.
- cholmon 3y ago
  I don't follow Berkshire Hathaway much, so I'm not aware of what Warren Buffet has said on this topic, but it sounds super interesting. After a bit of digging, I found this Q&A from the 2019 shareholder meeting: https://www.youtube.com/watch?v=geRIJQJXRVo&t=17980s https://www.youtube.com/watch?v=geRIJQJXRVo&t=17980s And the meeting minutes in PDF form (see page 120, question #32): https://s3.amazonaws.com/static.contentres.com/media/documents/0a11de45-f116-4978-9a9d-fa2b5a0788a8.pdf https://s3.amazonaws.com/static.contentres.com/media/documen... The text from that document... 32. It’s easy to make 50% on a million, but much more difficult on larger amounts WARREN BUFFETT: Station 9. We’re just about — yeah, we’ve got time for a couple more. AUDIENCE MEMBER: My name is John Dorso (phonetic), and I’m from New York. Mr. Buffett, you’ve said that you could return 50 percent per annum if you were managing a one-million-dollar portfolio. What type of strategy would you use? Would you invest in cigar butts, i.e., average businesses at very cheap prices? Or would it be some type of arbitrage strategy? Thank you. WARREN BUFFETT: It might well be the arbitrage strategy, but in a very different, perhaps, way than customary arbitrages, a lot of it. One way or another, I can assure you, if Charlie was working with a million, or I was working with a million, we would find a way to make that with essentially no risk, not using a lot of leverage or anything of the sort. But you change the one million to a hundred million and that 50 goes down like a rock. There are little fringe inefficiencies that people don’t spot and you do get opportunities occasionally to do, but they don’t really have any applicability to Berkshire. Charlie? CHARLIE MUNGER: Well, I agree totally. It’s just you used to say that large amounts of money, they develop their own anchors. It gets harder and harder. I’ve just seen genius after genius with a great record and pretty soon they’ve got 30 billion and two floors of young men and away goes the good record. That’s just the way it works. It’s hard as the money goes up. WARREN BUFFETT: When Charlie was a lawyer, initially, I mean, you were developing a couple of real estate projects. I mean, if you really want to make a million dollars — or 50 percent on a million — and you’re willing to work at it — that’s doable. But it just has no applicability to managing huge sums. Wish it did, but it doesn’t. CHARLIE MUNGER: Yeah. Lee Louley (phonetic), using nothing but the float on his student loans, had a million dollars, practically, shortly after he graduated as a total scholarship student. He found just a few things to do and did them.

mhh__ 3y ago

Out perform relative to a number or your expectation? You might want returns that aren't correlated just to an index - this is a major reason to look to invest in (say) a hedge fund.