Could it be THIS easy to beat the market?

[Gazillionaire]

Take any market. Say you are long in the market, 100% of your portfolio (just for this simple example, it could be any number really). When the market goes up by 1%, your investment in the market goes up by 1%. Conversely, when the market goes down by 1%, your investment in the market goes down by 1%.

But could that relationship really be the exact optimal one? Maybe if the market goes up by 1% you should only increase your amount in by .9% (thus selling a bit). And maybe if the market goes down by 1% you should only decrease your amount in by .8625% (thus buying a bit). Or maybe something akin to the reverse of that is best.

That sort of thing. I bet there is some optimum strategy. I intend to test this to find out.

See you on the rich side LOL.

Do you mean scaling out less/slower on your winners and cutting incremental losses slightly more/faster on your lossers so that there is a positive imbalance on a fully hedged trade?
Sounds like a grid strategy from forex for breakouts with a predefined range. Problem is how do you anticipate this distance before price action suddenly reverses or goes all choppy?
The forex community have been trying to figure this out since 2008.

 

[Concinnity]

Do you mean scaling out less/slower on your winners and cutting incremental losses slightly more/faster on your lossers so that there is a positive imbalance on a fully hedged trade?
Sounds like a grid strategy from forex for breakouts with a predefined range. Problem is how do you anticipate this distance before price action suddenly reverses or goes all choppy?

If that is what he means, it makes more sense. A lot of people disagree with being long and short the same asset they will say you're just paying extra commissions or etc why not just be long or short, they don't understand the strategy or potential effectiveness of it particularly from a mental standpoint.

Basically you just slowly add to each side at a preferable price. Just for purely easy example sake let's say your long 100 shares of QQQ and short 100 shares of TQQQ. Market drops a lot, you add 5 share of QQQ, than market goes up some, you add 5 short share to TQQ. Effectively squeezing in your average over time on each side, than at one point if the direction becomes clear to you and/or you've built up enough positive spread you can completely release one side and let the other run in your favor, choosing to cut the trade if it eats pass your positive spread you made.

People poop on this all day long, because they never can comprehend that there's more than one way to trade. But unless the market is trending really hard in one direction, you just keep getting a better average on each side. Sure it's not perfect and can go wrong, but it's very low risk strategy and interesting concept / way to trade if nothing else at least it is from my point of view. Not something I am currently doing or have high interest in, but think there can be something there to it personally. Although I can understand the criticism like too much work, too complicated, potentially additional fee's / commissions etc... no doubt and that's fair.

 

[SoyUnGanador]

Since you're always buying high and selling low its a loser.

But that is EXACTLY what any buy and hold strategy does LOL!!!! That is what I am trying to say... that might not be ideal (although it might)!!!

 

[SoyUnGanador]

Your maths make no sense. How do you increase amount by selling if up, and decrease by buying when you are down? In the end, you are still up or down by 1%? Huh?

Overnight, sometimes I have to wonder about you LOL. Your account is $100. It is in SPY. SPY increases by 1% the next day. You account, AND THE MONEY YOU HAVE INVESTED IN SPY, also increases by 1%. But is that the exactly optimal amount to increase your investment in SPY? Maybe it is, but maybe you should sell a little, buy a little, etc. etc. Those small differences on the margin, each and ever day, might make a difference. Or might not, I have no clue. But it would really shock me if that is perfectly optimal LOL, no real chance of that I think...

 

[KCalhoun]

The challenge is, scaling is hard in choppy markets, especially for swingtrading.

I like the idea of trading both instruments in a pair to hedge eg TQQQ/SQQQ but I've found it easier for day vs swing trading.

 

[tomorton]

But that is EXACTLY what any buy and hold strategy does LOL!!!! That is what I am trying to say... that might not be ideal (although it might)!!!

A few years back people wanted to buy company shares to get the dividend. So the ideal situation would be to be fully invested in stocks and see the share prices keep rising, while the companies pay the share-holders a twice-yearly dividend from their profits. Of course the dividend payments are not committed to buying additional shares, the cash can be spent in whatever way you want.

Investing for that kind of value seems to have fallen out of favour.

 

[Nine_Ender]

Take any market. Say you are long in the market, 100% of your portfolio (just for this simple example, it could be any number really). When the market goes up by 1%, your investment in the market goes up by 1%. Conversely, when the market goes down by 1%, your investment in the market goes down by 1%.

But could that relationship really be the exact optimal one? Maybe if the market goes up by 1% you should only increase your amount in by .9% (thus selling a bit). And maybe if the market goes down by 1% you should only decrease your amount in by .8625% (thus buying a bit). Or maybe something akin to the reverse of that is best.

That sort of thing. I bet there is some optimum strategy. I intend to test this to find out.

See you on the rich side LOL.

Your strategies seem to be all over the place no real plan at all. It wasn't long ago you were calling a huge crash, then US markets went up ( still in a well defined range ). You said you bought some QQQ puts as a "hedge" to your TQQQ and none of that really made sense. There is no "free money" in markets. In fact, the most money is often made understanding market inefficiencies and sentiments and knowing when to do something different. Or longer term patient plays.

 

[smallfil]

If that is what he means, it makes more sense. A lot of people disagree with being long and short the same asset they will say you're just paying extra commissions or etc why not just be long or short, they don't understand the strategy or potential effectiveness of it particularly from a mental standpoint.

Basically you just slowly add to each side at a preferable price. Just for purely easy example sake let's say your long 100 shares of QQQ and short 100 shares of TQQQ. Market drops a lot, you add 5 share of QQQ, than market goes up some, you add 5 short share to TQQ. Effectively squeezing in your average over time on each side, than at one point if the direction becomes clear to you and/or you've built up enough positive spread you can completely release one side and let the other run in your favor, choosing to cut the trade if it eats pass your positive spread you made.

People poop on this all day long, because they never can comprehend that there's more than one way to trade. But unless the market is trending really hard in one direction, you just keep getting a better average on each side. Sure it's not perfect and can go wrong, but it's very low risk strategy and interesting concept / way to trade if nothing else at least it is from my point of view. Not something I am currently doing or have high interest in, but think there can be something there to it personally. Although I can understand the criticism like too much work, too complicated, potentially additional fee's / commissions etc... no doubt and that's fair.

What this is trying to do is hedge a position. Stock could be trending up for example which means, your short position is tanking and losing at the same time. I agree it is a waste of time. There is another more simpler way. Why not, take both long and short positions on different stocks? Both positions as long as aligned with their major trends could be making monies. If the Stockmarket tanks, the short position benefits more but, both positions could still make monies. Now, if the Stockmarket rallies, the long position benefits. This is how I hedge my positions. You got the best of both worlds. Just my 2 cents.

 

[Nine_Ender]

The challenge is, scaling is hard in choppy markets, especially for swingtrading.

I like the idea of trading both instruments in a pair to hedge eg TQQQ/SQQQ but I've found it easier for day vs swing trading.

Scaling is not hard if you choose the right assets to trade. You're constantly trying to countertrend the strongest trends which is rarely going to work for multi-day or multi-week trades. My scaling is pretty basic it mostly is normal size, half size, or overweight. Overweight I add shares on a really strong move ( actual or expected ). If it fails I may cut the excess weight or the whole position. For juniors or extra risks stocks, I may take a smaller base position.

This week could be wild but I suspect a lot of big moves will be temporary and a lot of people will get whipped around. My eyes will be on Gold miners, Energy producers, and Copper miners. For different reasons. Gold is a potential break out but I'll cut quickly if the Gold price move ends. Copper is a good long term areas but potential weakness this week can't be ignored; I cut back my exposure a lot last week. Energy is a continuation and earnings play that has to be managed.

 

[Concinnity]

What this is trying to do is hedge a position. Stock could be trending up for example which means, your short position is tanking and losing at the same time. I agree it is a waste of time. There is another more simpler way. Why not, take both long and short positions on different stocks? Both positions as long as aligned with their major trends could be making monies. If the Stockmarket tanks, the short position benefits more but, both positions could still make monies. Now, if the Stockmarket rallies, the long position benefits. This is how I hedge my positions. You got the best of both worlds. Just my 2 cents.

Yeah, it makes sense the thing is you're being a directionless trader when first initiating the trade, if that makes any sense. In other words it's really irrelevant if the market tanks or goes up a lot, that's kind of the point of the strategy is too slowly add at the extremes. If the market just shoots up, it's true your short is losing money you can than add a small amount to your short and anytime price drops below there if you add to your long, you now have improved your spread. You could even add a small amount to your long when you see it screaming up and than anytime it goes above that price, if you add to your short you have now locked in and again improved your average.

I totally get what you're saying too. But there are a vast amount of ways to trade and view the markets, that's what makes it a market. You don't always have to be right in the direction to make money.