Attention....Could I have your attention please!

[Rickshaw Man]

As the article correctly pointed out...and as you would have noted if you had read past the headline...such a system does not hold up when considering transaction costs.

Transaction costs are a serious drag on returns for any strategy that trades frequently, and they're often ignored by traders (and academics) thinking they've found the holy grail.

Your not paying attention:

On the other hand, buying and selling during the day has generally been a money-losing strategy — one that would have been far more painful if you had traded frequently, incurring steep costs, which would have compounded your losses.

 

[smallfil]

Now, that everyone knows the strategy, what happens when and if everyone starts doing it?
More buyers at the end of the day will mean higher prices? After all, the law of supply and demand still exists? More sellers the next day and not enough buyers will crash the prices?
Unintended consequences. Successful stock traders have an edge they use to make monies in the stockmarket, you do not see them going out and spreading it for everyone to use do you?

 

[Rickshaw Man]

Just like other general "canned" strategies... works best if you understand when it's less likely to work and is more risky.

Twenty six years of data, 21.00% a year on average. Call it what you want.

 

[Rickshaw Man]

Now, that everyone knows the strategy, what happens when and if everyone starts doing it?
More buyers at the end of the day will mean higher prices? After all, the law of supply and demand still exists? More sellers the next day and not enough buyers will crash the prices?
Unintended consequences. Successful stock traders have an edge they use to make monies in the stockmarket, you do not see them going out and spreading it for everyone to use do you?

Just keep following the gurus. An argument can be made for everything.

 

[Rickshaw Man]

This could be the basis for some strategy ideas. For example, perhaps fade a down move in after hours with ES and take advantage of the upward bias and exit at the open.

Exactly... make it your own. Just trying to help folks.

 

[Rickshaw Man]

Key point:

If you had bought the SPY at the last second of trading on each business day since 1993 and sold at the market open the next day — capturing all of the net after-hour gains — your cumulative price gain would be 571 percent.

On average 20.00% annually.

 

[Scataphagos]

Twenty six years of data, 21.00% a year on average. Call it what you want.

I didn't say the notion "hasn't had merit", but we should also consider the caveat. Since 1982, we've had the biggest decline in interest rates and the biggest money-pump by the Fed in all of financial history. Likely not the same in the future.

 

[Rickshaw Man]

I didn't say the notion "hasn't had merit", but we should also consider the caveat. Since 1982, we've had the biggest decline in interest rates and the biggest money-pump by the Fed in all of financial history. Likely not the same in the future.

Since the strategy is a long only, i fail to see how FOMC printing would be a negative.

 

[Scataphagos]

Since the strategy is a long only, i fail to see how FOMC printing would be a negative.

It's not. It's a big factor in how positive it has been. Will "such conditions" (lowering rates a large amount and "print-money") continue to be the same in the future?

 

[smallfil]

Just keep following the gurus. An argument can be made for everything.

I do not follow any guru. No different than following any study. You have to have your own opinion as long as you have tested it yourself.