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Fellow lazy portfolio owner checking in - staying the course since 2004. When I see people talking about their individual algorithm I have two major thoughts. The first is, of everyone who reports anecdotal profit, how many silent losers are there? And secondly, the idea that an amateur algorithm could defeat a hedge fund trying the same strategy is naive.
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On February 26 2020 12:21 calgar wrote:Fellow lazy portfolio owner checking in - staying the course since 2004. When I see people talking about their individual algorithm I have two major thoughts. The first is, of everyone who reports anecdotal profit, how many silent losers are there? And secondly, the idea that an amateur algorithm could defeat a hedge fund trying the same strategy is naive.
No one has really posted anything thats implementable in a trading/investing algorithm
1.
TVIX if market dropping and FNGU if market steam rolling.
I'll only hold TVIX for a week tops
No definition of what a market drop or "steam rolling" is. FNGU dropped 8% today along with a 15% drop yesterday so I wonder if that constitutes a "market drop"
2.
Strategy: Buy gold stocks (which are something you own and not a contract of obligation, so even if the holding bank defaults, they are still yours). Chose US gold miner for the following point.
Buying gold stocks only is a implementable strategy but no sane person would put their entire portfolio in gold stocks due to lack of diversification. Gold stocks are already in the index
3.
My methods of technical analysis are wyckoff, wave theory, volume-spread analysis, channeling, supply and demand, price action, order flow, price action, and others (but named are main)
Thats a list, not an algorithm. Now if he can list how all those things are put together into a way to screen stocks with buy sell signals then thats interesting.
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with algos dominating the action, it‘s just the usual. buy at supports when they trend up. sell on a big drop and wait, sell on new lows.
algos pushing it down now. sell at resistances. just my 2c. i think most indicators don‘t matter when it‘s CB and algo action. they are psychological tools that worked when people were trading. volume matters though, but i personally don‘t look at it often.
pay attention to the date repos end btw. 3/13. i think the drops are just big players fronteunning that.
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On February 26 2020 13:37 CorsairHero wrote:
Thats a list, not an algorithm. Now if he can list how all those things are put together into a way to screen stocks with buy sell signals then thats interesting.
lol as far as I know algos that are consistently profitable cost millions of dollars are in the hands of financial institutions. good luck getting your hands on them
good luck finding a solo retail trader who has one, and, if he does, is willing to give it out for free. All the "algos" "bots" and "scripts" Ive seen in the retail trade world, including those advertised by "trade gurus" lose money. That's just my experience as someone who trades for a living.
I think you're looking for a shortcut that practically doesn't exist. I spend hours a day charting everything I trade. I don't have a "screener" - I have a list of things that I have found a pulse on and regularly trade. Once in a while if I come across what I believe to be a good trade setup on something I don't trade regularly, I will take it (like that oil long i posted about here, or that bynd trade). The closest thing I ever did to screening was simple screening for spikes in options activity on thinkorswim, which I don't do anymore.
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And that should be pretty obvious.
Trading is a zero sum game. If someone wins, someone else loses. That means that it is impossible for one algorithm to be profitable for everyone. Because not everyone can win.
All of the trading market is about everyone trying to pull one over over someone else.
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On February 26 2020 20:11 Simberto wrote:
And that should be pretty obvious.
Trading is a zero sum game. If someone wins, someone else loses. That means that it is impossible for one algorithm to be profitable for everyone. Because not everyone can win.
All of the trading market is about everyone trying to pull one over over someone else.
That is not true, trading stocks being a zero sum game is only true in very specific circumstances and if the company in the end goes bankrupt with no return at all to the stock owners.
Lets take a very simple example:
- Joe buys 1 stock from X Company for 1 dollar. The stock was new equity and thus it was not bought from anyone-
- 1 year later Bob buys Joes 1 stock in X Company for 20 dollars.
- 1 additional year later Bob still own the stock in X Company but now it is valued at 40 dollars at the stock exhange.
So Simberto, now please explain to me how this trade has been a zero sum game? Joe obviously earned 9 dollars, has bob lost 9 dollars? No Bob has lost 10 dollars but on the other hand he owns a stock valued at 40 dollars.
As long as the market keeps rising it is theoretically possible for literally everyone to make money trading. Until all the companies goes bancrupt and return no money to the stock owners that is.
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On February 26 2020 20:26 Shuffleblade wrote:Show nested quote +On February 26 2020 20:11 Simberto wrote:
And that should be pretty obvious.
Trading is a zero sum game. If someone wins, someone else loses. That means that it is impossible for one algorithm to be profitable for everyone. Because not everyone can win.
All of the trading market is about everyone trying to pull one over over someone else. That is not true, trading stocks being a zero sum game is only true in very specific circumstances and if the company in the end goes bankrupt with no return at all to the stock owners. Lets take a very simple example: - Joe buys 1 stock from X Company for 1 dollar. The stock was new equity and thus it was not bought from anyone- - 1 year later Bob buys Joes 1 stock in X Company for 20 dollars. - 1 additional year later Bob still own the stock in X Company but now it is valued at 40 dollars at the stock exhange. So Simberto, now please explain to me how this trade has been a zero sum game? Joe obviously earned 9 dollars, has bob lost 9 dollars? No Bob has lost 10 dollars but on the other hand he owns a stock valued at 40 dollars. As long as the market keeps rising it is theoretically possible for literally everyone to make money trading. Until all the companies goes bancrupt and return no money to the stock owners that is.
The stock market, and economic activity in general, are not zero sum games.
He said trading is a zero sum game and I'm inclined to agree. Traders focus on transactions. For a transaction to occur there MUST be a counterparty to every trade (unlike in your hypothetical in which the chain started off with no seller). We are talking about trading, not investing.
Derivatives such as futures markets and options markets are undoubtedly straight up zero sum games. And, low and behold, this is what most traders gravitate towards.
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That would pretty much be my answer, too.
Economic activity can turn stuff into more stuff. If it were a zero sum game, humanity as a whole would still have the same net worth as it had in 8000BC, which is clearly untrue.
Trading, however, is a transaction between two people, which doesn't create new value, and is thus a zero sum game.
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On February 26 2020 21:03 BerserkSword wrote:
The stock market, and economic activity in general, are not zero sum games.
He said trading is a zero sum game and I'm inclined to agree. Traders focus on transactions. For a transaction to occur there MUST be a counterparty to every trade (unlike in your hypothetical in which the chain started off with no seller). We are talking about trading, not investing.
It doesn't matter if you focus on the transactions, they still don't happen in a vacum and the item you are trading still exist. Since you are trading parts of complex ever changing companies whichs value is constantly changing it cannot be a zero sum game. Consider me buying a piece of furniture (or basically any other commodity in existence) even if I bought the item as a trader and focused on thetransaction with the intent to sell it for more money either later or to a different market it is not a zero sum game.
What do you mean my hypothetical situation, are you saying no companies ever issue new equity and that only exist as theorical possiblity that companies don't use? Either way stock is created as a company is formed, therefore it gained in the start without a seller.
Whatever, then lets say Joe bought his bloody share from a person for 1 dollar, it doesn't make any difference. My argument still stands, Joe earned 9 dollars, has Bob lost 9 dollars? How, please explain how you believe the sums from the transaction example becomes zero. Who gained Money from who, because that is how easy zero sum games work.
On February 26 2020 21:03 BerserkSword wrote:
Derivatives such as futures markets and options markets are undoubtedly straight up zero sum games. And, low and behold, this is what most traders gravitate towards.
Interesting, I found an example to better illustrate my thoughts on this on Quora.
Many people keep repeating that the derivative market is a zero-sum game. It's not.
This is why.
They are looking at the derivatives market in isolation: that every contract has a buyer and a seller; for one to win $1, the other has to lose $1.
But the derivative market does not operate in isolation. It interacts with the underlying market (the market in which the underlying instruments are priced and traded) and that changes things.
Here is a different way of looking at the interacting markets.
Assume you buy 100 shares of a stock that trades for $100 and then sell a covered Call for $102 strike for $2 premium.
Your cost basis for the stock is $98 ($100 you paid and you got $2 premium).
Suppose the stock closes at $108 at expiration.
Your profit is ($102-$98)*10o =$400.
The Call buyer's cost basis is $104 ($102 Strike + $2 premium).
So, the buyer's profit is ($108-$104)*100 =$400.
Where did this net profit of $800 come from? From the underlying market.
Two of you engaged in a complex contract that involved both the underlying market and the derivative market. And you both made money. [In the opposite situation - if the stock had closed at, say $95, both of you would have lost money too].
Since derivatives is trading with stocks it is not a zero sum game, it just isn't. The only way you could argue so is if you believe that the opportunity to earn money= earning money.
You could argue that the buyer earned his 400 dollars from 800 dollars that the seller would have earned if he wouldn't have done the call but that line of thinking is only viable if the Sellers only other options besides making the call would be to keep the shares. What if he would have sold them instead? Never bought them at all? Kept them for yet Another day and then the value plummets to 95 dollars?
Point being, just because I owned stocks today that fell in value that doesn't mean I lost money because I missed a chance to sell, that simply isn't how it works. A missed opportunity to earn money is not a loss and if you could have lost money but didn't you didn't earn money.
Derivatives is also trading items, it simply means a contract, if I sign a contract that I am willing to buy up to 2 kg of oranges in may for 1 dollar per orange am I doing a zero sum gam? No goddamnit I am not.
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United States43582 Posts
On February 26 2020 20:26 Shuffleblade wrote:Show nested quote +On February 26 2020 20:11 Simberto wrote:
And that should be pretty obvious.
Trading is a zero sum game. If someone wins, someone else loses. That means that it is impossible for one algorithm to be profitable for everyone. Because not everyone can win.
All of the trading market is about everyone trying to pull one over over someone else. That is not true, trading stocks being a zero sum game is only true in very specific circumstances and if the company in the end goes bankrupt with no return at all to the stock owners. Lets take a very simple example: - Joe buys 1 stock from X Company for 1 dollar. The stock was new equity and thus it was not bought from anyone- - 1 year later Bob buys Joes 1 stock in X Company for 20 dollars. - 1 additional year later Bob still own the stock in X Company but now it is valued at 40 dollars at the stock exhange. So Simberto, now please explain to me how this trade has been a zero sum game? Joe obviously earned 9 dollars, has bob lost 9 dollars? No Bob has lost 10 dollars but on the other hand he owns a stock valued at 40 dollars. As long as the market keeps rising it is theoretically possible for literally everyone to make money trading. Until all the companies goes bancrupt and return no money to the stock owners that is.
I take it you’re unfamiliar with opportunity cost. Joe clearly didn’t know the stock was going to double or he wouldn’t have sold it. He was betting that the coming returns in the next year would be low while Bob bet the stock would continue to rise. Joe lost that bet.
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United States43582 Posts
On February 26 2020 22:59 Shuffleblade wrote:
Point being, just because I owned stocks today that fell in value that doesn't mean I lost money because I missed a chance to sell, that simply isn't how it works. A missed opportunity to earn money is not a loss and if you could have lost money but didn't you didn't earn money.
That is how it works though. It’s called opportunity cost.
The decision to hold isn’t any less active than the decision to buy more or to sell. You can evaluate your hold decision and holding in the last 2 days was a mistake.
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On February 26 2020 23:14 KwarK wrote:
I take it you’re unfamiliar with opportunity cost. Joe clearly didn’t know the stock was going to double or he wouldn’t have sold it. He was betting that the coming returns in the next year would be low while Bob bet the stock would continue to rise. Joe lost that bet.
No, you are simplifying things when things are not simple.
Do you know that Joe wasn't forced to sell his shares for other reasons? Maybe to pay debts, open his own company or to buy a house? How do you know Joe had the option to keep it and wait one more year?
Maybe Joe thought it would climb in value but sold it to buy another stock he thought would increase in value even more?
Imagine Joe sold the share and bought another share that increased even more in value, did Joe still lose his bet?
Its like your perspective is confined to +/- on the stock charts, open your eyes.
Opportunity cost indeed, that however has nothing to do with zero sum game or not. When making one decision, no matter what you lose all other options and the opportunities that were there.
Are you arguing that if I didn't buy the one stock that increased the most in value I lost money because I could have earned more by buying the right one?
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Lets specifically take a look at the transaction in the hypothetical example.
Lets take a very simple example:
- Joe buys 1 stock from X Company for 1 dollar. The stock was new equity and thus it was not bought from anyone-
- 1 year later Bob buys Joes 1 stock in X Company for 20 dollars.
- 1 additional year later Bob still own the stock in X Company but now it is valued at 40 dollars at the stock exhange.
1st transaction is Joe buying 1 stock for 1 dollar. With the benefit of hindsight, we know that Joe can sell that stock 1 year later for 20 dollars, so in this trade, Joe has earned 19 dollars minus whatever the opportunity cost involved in him having 1 dollar tied up in that stock for a year is. At the cost of the seller, who lost exactly that amount.
In the second transaction, Bob buys 1 stock for 20 dollar. With the benefit of hindsight, we know that that stock will be worth 40 dollars a year later. Thus, Bob earns 20 dollar minus the opportunity cost of having 20 dollar tied up in that stock for a year. Joe loses exactly this same amount.
Things could have turned out differently, and the stock could be worth only 2 $ after year 2. In that case, Bob would have lost 18 dollars on that transaction (- opportunity cost), while Joe would have won that same amount.
So, the basic idea of trading is to guess better than others what something is/will be worth. And one of the people involved in the trade wins, while the other loses.
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Yup, Joe is 20 dollars poorer than he would have been if he didn't sell the stock, and Bob is the same 20 dollars richer. Net wealth went up from year 2 to 3, but that has nothing to do with the zero-sum nature of trading.
Owning stocks isn't a zero-sum game. Trading stocks is.
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On February 26 2020 23:43 Simberto wrote:Lets specifically take a look at the transaction in the hypothetical example. Show nested quote +
Lets take a very simple example:
- Joe buys 1 stock from X Company for 1 dollar. The stock was new equity and thus it was not bought from anyone-
- 1 year later Bob buys Joes 1 stock in X Company for 20 dollars.
- 1 additional year later Bob still own the stock in X Company but now it is valued at 40 dollars at the stock exhange.
1st transaction is Joe buying 1 stock for 1 dollar. With the benefit of hindsight, we know that Joe can sell that stock 1 year later for 20 dollars, so in this trade, Joe has earned 19 dollars minus whatever the opportunity cost involved in him having 1 dollar tied up in that stock for a year is. At the cost of the seller, who lost exactly that amount. In the second transaction, Bob buys 1 stock for 20 dollar. With the benefit of hindsight, we know that that stock will be worth 40 dollars a year later. Thus, Bob earns 20 dollar minus the opportunity cost of having 20 dollar tied up in that stock for a year. Joe loses exactly this same amount. Things could have turned out differently, and the stock could be worth only 2 $ after year 2. In that case, Bob would have lost 18 dollars on that transaction (- opportunity cost), while Joe would have won that same amount. So, the basic idea of trading is to guess better than others what something is/will be worth. And one of the people involved in the trade wins, while the other loses.
Wait a second here, this is getting really interesting.
So imagine Bob bought 2k shares from Joe at the price of 20 $ each, Joe got paid a total of 40k $.
But instead of the stock increasing in value a year later as in my example, the stock falls back to the value of 1 dollar.
Are you telling me Joe earned 78k $, even though he only got 40k. So he would be taxed for earning 78k $, thats crazy....... But not true.
Opportunity cost is not actual cost, earning money is not the same thing as not taking an opportunity to earn money. The opponortunity to buy shares exist for everyone equally, so technically if my example had happened I would have earned 38k $ because I didn't buy 2k shares that lost value. Yay me I have earned so much money today by not doing bad trades!
You know what I could have won the lottery today too but I didn't so guess I lost money aswell 
Edit: Obviously I am wrong here, as per usual :p I will say, just like last time, even if its true, I dont Think it makes sense..
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Opportunity cost only makes sense in context of the next best alternative. The existence of bad trades does not necessarily mean that you "made" money by doing nothing unless you can prove that there was nothing else you could have spent your money on that was better.
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Why buying all at once over spreading it out a bit is better for long term investors. If asume the price at any moment is random, a slightly upwards biased rng function.
Maybe its because in the long run the market goes up. On average every day is a plus. So the earlier you get in the better your end result will be on average.
Spreading it out (for example 1 year) has the advantage of getting an average price and a lower variance at the cost of a little bit of the average return over that year. If you have a relatively short horizon buying all at once is more risky,the longer your horizon the more sense it makes to buy all at once over spreading it out?
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United States43582 Posts
On February 27 2020 00:02 Shuffleblade wrote:Show nested quote +On February 26 2020 23:43 Simberto wrote:Lets specifically take a look at the transaction in the hypothetical example.
Lets take a very simple example:
- Joe buys 1 stock from X Company for 1 dollar. The stock was new equity and thus it was not bought from anyone-
- 1 year later Bob buys Joes 1 stock in X Company for 20 dollars.
- 1 additional year later Bob still own the stock in X Company but now it is valued at 40 dollars at the stock exhange.
1st transaction is Joe buying 1 stock for 1 dollar. With the benefit of hindsight, we know that Joe can sell that stock 1 year later for 20 dollars, so in this trade, Joe has earned 19 dollars minus whatever the opportunity cost involved in him having 1 dollar tied up in that stock for a year is. At the cost of the seller, who lost exactly that amount. In the second transaction, Bob buys 1 stock for 20 dollar. With the benefit of hindsight, we know that that stock will be worth 40 dollars a year later. Thus, Bob earns 20 dollar minus the opportunity cost of having 20 dollar tied up in that stock for a year. Joe loses exactly this same amount. Things could have turned out differently, and the stock could be worth only 2 $ after year 2. In that case, Bob would have lost 18 dollars on that transaction (- opportunity cost), while Joe would have won that same amount. So, the basic idea of trading is to guess better than others what something is/will be worth. And one of the people involved in the trade wins, while the other loses. Wait a second here, this is getting really interesting. So imagine Bob bought 2k shares from Joe at the price of 20 $ each, Joe got paid a total of 40k $. But instead of the stock increasing in value a year later as in my example, the stock falls back to the value of 1 dollar. Are you telling me Joe earned 78k $, even though he only got 40k. So he would be taxed for earning 78k $, thats crazy....... But not true. Opportunity cost is not actual cost, earning money is not the same thing as not taking an opportunity to earn money. The opponortunity to buy shares exist for everyone equally, so technically if my example had happened I would have earned 38k $ because I didn't buy 2k shares that lost value. Yay me I have earned so much money today by not doing bad trades! You know what I could have won the lottery today too but I didn't so guess I lost money aswell Edit: Obviously I am wrong here, as per usual :p I will say, just like last time, even if its true, I dont Think it makes sense..
The math in your example is wrong. It’s wrong but not for the reason you’re saying.
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On February 26 2020 20:04 BerserkSword wrote:Show nested quote +On February 26 2020 13:37 CorsairHero wrote:
Thats a list, not an algorithm. Now if he can list how all those things are put together into a way to screen stocks with buy sell signals then thats interesting. lol as far as I know algos that are consistently profitable cost millions of dollars are in the hands of financial institutions. good luck getting your hands on them good luck finding a solo retail trader who has one, and, if he does, is willing to give it out for free. All the "algos" "bots" and "scripts" Ive seen in the retail trade world, including those advertised by "trade gurus" lose money. That's just my experience as someone who trades for a living. I think you're looking for a shortcut that practically doesn't exist. I spend hours a day charting everything I trade. I don't have a "screener" - I have a list of things that I have found a pulse on and regularly trade. Once in a while if I come across what I believe to be a good trade setup on something I don't trade regularly, I will take it (like that oil long i posted about here, or that bynd trade). The closest thing I ever did to screening was simple screening for spikes in options activity on thinkorswim, which I don't do anymore.
it almost like you're making the case for index investing since trading is too unpredictable, unexplainable and time consuming for wealth building in the retail space
index investing takes 0 minutes a day if automated
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On February 27 2020 01:52 CorsairHero wrote:Show nested quote +On February 26 2020 20:04 BerserkSword wrote:On February 26 2020 13:37 CorsairHero wrote:
Thats a list, not an algorithm. Now if he can list how all those things are put together into a way to screen stocks with buy sell signals then thats interesting. lol as far as I know algos that are consistently profitable cost millions of dollars are in the hands of financial institutions. good luck getting your hands on them good luck finding a solo retail trader who has one, and, if he does, is willing to give it out for free. All the "algos" "bots" and "scripts" Ive seen in the retail trade world, including those advertised by "trade gurus" lose money. That's just my experience as someone who trades for a living. I think you're looking for a shortcut that practically doesn't exist. I spend hours a day charting everything I trade. I don't have a "screener" - I have a list of things that I have found a pulse on and regularly trade. Once in a while if I come across what I believe to be a good trade setup on something I don't trade regularly, I will take it (like that oil long i posted about here, or that bynd trade). The closest thing I ever did to screening was simple screening for spikes in options activity on thinkorswim, which I don't do anymore. it almost like you're making the case for index investing since trading is too unpredictable, unexplainable and time consuming for wealth building in the retail space index investing takes 0 minutes a day if automated
I am certainly not making that case. It is apples and oranges. Trading has an extremely high learning curve and takes certain personality traits to do successfully. Just because most people can’t make a living off of it or accumulate wealth with it does not mean it’s too unpredictabl and unexplainable to do as a retail participant. In return you have the ability to make profits investors can only dream of.
I only spend hours a day because I enjoy it. And I will never say no to more money. I could take the rest of the year off and be perfectly fine. Hell I can move somewhere cheap and retire. Everyone’s market participation should be tailored to their individual goals and whatnot.
Automated investing, whatever that really means, still requires capital. The risk is lower but so is the reward. It’s easier than trading but it also means you have to work a regular job unless you were blessed with a lot of starting capital. And you won’t see the major returns until farther down the road, assuming you’re lucky and most of the time you’re in the market are up years
The only thing I’m invested in is bitcoin (which I also trade) since I’m one of those libertarian fanatics lol. Otherwise I prefer the huge returns in a short amount of time trading allows for. Not saying your way is wrong but you should understand that your way is not the objectively best way. Just because that guy who posted here yesterday trades a leveraged etf like tvix doesn’t mean he’s a wall street bets gambler
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EPT
