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I think Kelly ratio only makes sense when we have a very good strategy that works so well or few strategies work so well. What is the point to calculate the Kelly ratio if we don't have a strategy that works well in real world? Even if we calculate Kelly ratio, it only makes sense if the...

Very impressive insight. Then which way do you choose to trade and why? For me, I feel statistical arbitrage requires accurate math and total understanding to a pro level, if not big amount can be easily lost with hold two derivatives or more and don't know when and how to cut lose when the...

May be you are right and I think this can be only known if you are in traders industry in ibanks/banks. I think the disadvantage of stat arb for individual trader is that it is almost impossible to do that in day trade time frame because it would request high frequency level of speed to do...

Thanks for sharing with insight. If normal distribution is not the best, then do you think we should use another kind of distribution or theory?

May be I am wrong but for me market wizard is a big book of marketing. The book itself helps the author to make money, and all those famous traders just talk whatever they want to present to cover up stuff or get more big customers. For me, may be I am wrong again, Paul wants to cover up his...

This case can be not apple/orange case if statistical arbitrage can provide a better winning chance and margin in general.

Do you agree with statistical arbitrage is better than momentum like trend? May be you have no clue and I am fine with this.

seem like almost no one uses statistical arbitrage over here so no one replies.

My last post using Ernie Chan terms in the topic making it so confusing so I want to make this new post to talk about what I really mean. Ernie Chan has two books and he claims that statistical arbitrage strategies with two or more derivatives (he means the term Mean-reverting to describe these...

I don't know how to correctly backtest arbitrage strategy. Chan mentioned like 6 math formula in his new book but there are no very default formula or code of each. It is also hard to get the correct data to backtest. In Chan book, all results are without commission fee. This could be a big...

I know this and I am one of the an active persons in his blog comments. If I ask a question like this in his blog, he would definitely just say the same answer as he wrote in his book.

I am talking about the book "Algorithmic Trading: Winning Strategies and Their Rationale" by Ernie Chan. His "Mean-reverting" should be arbitrage with two or more financial derivatives involved but not the common anti trend with one derivative. He mentioned his trading experience with...

I am reading a book and the author claims that mean-reverting strategies are much better than momentum strategies. Do you think so and why?