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The problem is not the sharpe ratio. The problem is this will not work with commission and slippage. It will consistently lose. I can almost guarantee it.

Just came across this 2009 paper on sharpe ratios of traders: it seems to prove that it is possible to beat the market and that trading experience increases the odds of beating the market: http://www.plosone.org/article/info:doi/10.1371/journal.pone.0008036#pone-0008036-g004 "These...

How about this idea: as consumer and business spending took a nose dive in the last 4 years, industries that used to support oligopolies now don't have enough sales to support multiple competitors. So the top pack is thinning out resulting in only one or two clear leaders per industry, i.e...

This seems to be a direct response to Einstein's "God does not play dice"

Okay, I forgot to mention: it not only has to be losing big time, it has to be losing more than the expected commission and slippage in the reverse algorithm.

Okay, on a more serious note, may be one way to check the OP's proposition is to simply run the losing algorithm without commission and slippage. If it is still losing big time, then the reverse algorithm might work.

This strategy is similar to but probably better than regularly buying lottery tickets. Chances of hitting the jack pot is extremely low, but if you did, you never have to trade again. This may be a worthwhile expense if it is a tiny tiny percentage of your cash flow or net worth. Say you spend 5...

Two more things that may or may not have been touched in this thread. First is the fact that if you are back testing, then day trading will give you a lot more statistics and perhaps a little more confidence in your back tests than swing trading because of the large number of trades. Likewise...

Yes agreed, it's population -> GDP -> stock market GDP is made up of producing and consuming. Every new person on this earth is guaranteed to consume. Some of them might even produce.

That may be the case, I am no expert here. But I think it remains true that it is exceedingly difficult to prove statistical significance of a positive expectation. I am not arguing there are no traders who consistently show a positive expectation over a very long course of time. But I don't...

Okay, let's change the experiment. You put 1,000,000 monkeys in front of trading screens for 5 years. Then rank order by average annual PL. Those average PLs will also form a Gaussian. Will those monkeys at the positive end be considered skilled traders? They would have replicated their...

Or it could be that all successful traders just got lucky for a while and the smart ones quit while they were making money while the rest lost it all or will eventually lose it all. You put 1,000,000 monkeys in front of trading screens for a year and their PL distribution will form a Gaussian...

Not stopping, just pacing myself. I've been beating my head against a brick wall for a month. need to refuel then will take the hill.

I've had similar experiences -- hoping it's going to be that way this time as well.

I think you nailed my sentiment. Good analysis. I always remind myself of the "infinite power of editing" when I write code AND manuscripts to try to get things down quickly. But I am also wary of "backing myself into corners" when I code. Sometimes I get over-specified in my class structures...

thanks all for the words of encouragement and discouragement (for the latter, I mean you two hatetherisk and shopster, LOL). yes one year is short, but at the same time feels long without a break. this might be a combination of burnout plus getting to the real meat of the problem. up to now I've...

my problem is simple: the stats are still not good enough for me to be comfortable going live. I am close though and I have been steadily improving those stats in the last year. the only problem is that the algorithm is a little too selective and the number of trades are low so I am not...

absolutely correct -- that's why I let the algorithm trade for me.

I have spent a year building strategies, and I have come a long way since the beginning. I have built a complete ATS from scratch for TWS, and a complete independent back testing and plotting framework; I built an SQL database and data cleaning routines to automatically download and store all my...

If you have a positive expectation but large draw downs, then money management can indeed save you from blowing up during those draw downs. If you have a negative expectation however, no amount of money management will save you. It will merely slow down your inevitable march to complete ruin.