Stupidest advice I have ever heard. To succeed consistently in trading, not investing, you need to have mind set of people like RenTech crew.
Gamblers eventually blow up.
Can a retail trader succeed in algorithmic trading? (Kevin Davey vs Ernest Chan)
- Thread starter edward22245
- Start date
Stupidest advice I have ever heard. To succeed consistently in trading, not investing, you need to have mind set of people like RenTech crew.
Gamblers eventually blow up.
You are new here, so I will give you some benefit of the doubt. Get it in your head, you can not find algo with positive expectancy ANYWHERE. The only way to get it is to create it yourself.
Suggest trying what Davey advocates... find out for yourself.
Wow! So much talking past each other -- all convinced of their correctness, but in various grades ignorant of the rest of the picture. Like the whole Touching The Elephant -- all convinced that they've got the right story.....
FWIW, I like much of what Chan and Davey have put together. But even they speak in absolutes -- and I'm convinced that they're both smart enough to qualify their various statements were you to corner them at a holiday party...
• Finding a decision rule with positive expectancy is a nearly trivial operation.
• Finding a decision rule with positive expectancy on daily data that goes back 20+ years is (IMO) foolhardy.
• Finding a decision rule with positive expectancy on daily data that may be tweaked every 6-9-12 months to continue that positive outcome set is an operation that *may* benefit from pattern-recognition routines that inhabit the machine-learning space, but ...
• machine learning depends on data stability that is at odds with the very nature of time-series phenomena, and
• developing a meta-algo to modify a floor-level algo is *also* a nearly-trivial maneuver -- just google "time-series decomposition" for examples that go back half a century.
In my tick-scalping days, I put T/A up that looked good for 20-30 minutes; I relied on it for the next minute or two. For trend-exploitation, I put up daily candles that go back maybe 6-12 months, and rely upon it for the next week or so. HINT.
FWIW, I like much of what Chan and Davey have put together. But even they speak in absolutes -- and I'm convinced that they're both smart enough to qualify their various statements were you to corner them at a holiday party...
• Finding a decision rule with positive expectancy is a nearly trivial operation.
• Finding a decision rule with positive expectancy on daily data that goes back 20+ years is (IMO) foolhardy.
• Finding a decision rule with positive expectancy on daily data that may be tweaked every 6-9-12 months to continue that positive outcome set is an operation that *may* benefit from pattern-recognition routines that inhabit the machine-learning space, but ...
• machine learning depends on data stability that is at odds with the very nature of time-series phenomena, and
• developing a meta-algo to modify a floor-level algo is *also* a nearly-trivial maneuver -- just google "time-series decomposition" for examples that go back half a century.
In my tick-scalping days, I put T/A up that looked good for 20-30 minutes; I relied on it for the next minute or two. For trend-exploitation, I put up daily candles that go back maybe 6-12 months, and rely upon it for the next week or so. HINT.
Ok, wait a minute: Everytime traders are talking about big players and market manipulation, everyone seems to agree that algos are running the game.
So, assuming that this is right - someone stating that 85% of market is driven by them - that means, that big banks, players etc. actually have financial algorithms, that work and are profitable.
If this is true, why is there, after decades of banks etc using them, no market for retail traders, for buying them, even if it is not the best/newest version of all?!
Coders working for banks could make a fortune with it/ at least there must have been some leaks...
Furthermore, you say that one can only create a robot on your own. Why? Can't you imagine that developers, that aren't actually into trading, would like to sell their robot for a good price, when if performs well?!
Especially if these developers don't have big money...
I think they are both "right" in their own way. If you look at what Kevin Davey does, it's a little different from Chan's strategies. Kevin Davey isn't looking for any one strategy to be hugely profitable on it's own (or even work forever). He builds a portfolio of strategies with very small edges that have a low-ish correlation with each other, and constantly prunes and adds strategies. I may be mistaken, but Chan is looking for a more concentrated portfolio of strategies that will a) be able to stand by themselves and b) work for a long time (assuming tweaking along the way).
They're not the ones gambling. They have a paycheck/salary coming in, with full benefits package.
You need to spend a little more time in the trenches. Algorithmic trading edges aren't like used cars that will keep chugging along for 20 years with a little love - they have a lifespan on the order of months. Some edges will vanish on their own as the market evolves, others will persist but require execution advantages/edges not available to retail - such as speed, infrastructure, or customer order flow.
The "trading robots" you see on sites like collective2 aren't serious edges. Only an idiot would sell a serious proven edge to random Internet anons for pennies on the dollar, and idiots don't develop profitable trading algos. If you have a proven edge, you raise capital to trade it yourself or sell it to a quant fund for serious lump-sum cash and a job.
Both of them are nice guys, and I've complimented them for their contributions, but neither one of them is really "killing it" in this game. I tend to learn a lot more from those with serious (1M+) skin in the game, and I don't mean OPM.