4 ms·
Noobie Question: Does this actually work? I thought alpha was very little and always fleeting so only big hedge funds generate profit from it.
by prakhar897 3y ago
Noobie Question: Does this actually work? I thought alpha was very little and always fleeting so only big hedge funds generate profit from it.
- radiusvector 3y agoI'm a trader who runs a couple of profitable strategies. You can generate alpha by implementing quantitative (or discretionary) strategies as long as you adhere to the basic principles of profitable trading with a strong emphasis on risk management. There are a million possible trading strategies, which of these will suit your personality/risk tolerance/system design is a matter of personal choice.
- greenyoda 3y agoCould you please say more about what the "basic principles of profitable trading" are, or point us to a reference?
- andruby 3y agoI hope there's more to it than "buy low, sell high"..
- dave333 3y agoBuy upward momentum, and sell downward momentum.
- radiusvector 3y agoSure. A trade can be decomposed into entry and exit criteria. Only trade when you have an edge, i.e your model suggests that there is a higher probability of an outcome in your favor rather than a pure coin toss - either in entry or in exit. Even coin toss entries can make money if you have an edge in exits and vice versa. All in all, you can be right less than 50% of the time per trade, and still have alpha if your winning trade is 2 times your losing trade. Standard expected value stuff. Heck, I know traders who bat 30 or 35% and make colossal amounts of dollars.
- claytonjy 3y agois your strategy more profitable than indexing? or are you aiming for something else, like beta-neutrality?
- MuffinFlavored 3y agoSlightly related: what are "big players" more likely to do to get exposure to the S&P directionally: 1. SPY shares long/short on margin/leverage 1. SPY options 1. SPX options 1. /ES e-mini futures 1. a blend of all Does one trump another in popularity?
- paulpauper 3y agothere is always new stuff if you are astute enough to find it. look at r/wallstreetbets...some guys making tons of $ consistently there, albeit there is lot of survivorship bias too. position sizing is key. you run tests on certain strategies, like buying 0-day calls on dips in the morning, flip for profit at close. Use Kelly formula to optimize position size. etc.
- dev_0 3y ago[dead]
- bmitc 3y agoThere's pennies on the ground that the big places don't care about.