When a winning strategy is brought public and more people start to trade it, does that strategy become less effective, meaning the smart money figures out a lot of people are trading the same way so they figure out how to exploit that. Or does the strategy become more effective, more buyers, more follow through etc.
Does a strategy become less effective or more effective once brought public?
- Thread starter BearTrades
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Of course when someone buys a lot of shares of a stock 1 second before you then you'll have to pay higher price, your edge is gone.
But no one cares about 99.99% of strategies. You can give your strategy away and no one would care. There are millions of them out there. Everyone is interested in strategies used by the most successful, secretive hedge funds, with $billions in capacity.
But no one cares about 99.99% of strategies. You can give your strategy away and no one would care. There are millions of them out there. Everyone is interested in strategies used by the most successful, secretive hedge funds, with $billions in capacity.
We really need to quantify what type of strategy. I have never traded in a situation where a seconds worth of execution has ever mattered. Just use a limit order?
In general though your statement is not totally true. It depends on what limits are sitting when you purchase. If there's enough liquidity you could get a great fill despite being late to the show.
You dont need 1000s of people. Just one large hedge fund could be enough.
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I generalized a bit because this topic was discussed many times.
There are probably many scenarios, but generally all actively trading hedge funds are very secretive and concerned about losing their edge(s), even some new ETFs are awaiting approval of non-transparent way of trading/holdings.
While HFTs mainly profit from front-running trades, also trying to outdo each other as there isn’t enough room for everyone.
All this shouldn’t apply much to retail trading.
Feeder Cattle is one favorite market but being Open Interest is low at about 45k over 8 contract months, would not take much to undo a strategy.
Strategy becomes public= less effective.
Believe I posted something about this recently where methods completely shut down once the public knew about it, more so when pits were open. And if you are talented enough, you make a new system on how to take advantage of those who bought that method.
I know some methods I have bought in past, have to really think outside the box of either when safer to trade those systems or trade against them. I recently been going through old material long forgotten to see if they now been, many trending does well. "Futures Truth", don't know if still in business http://futurestruth.com/, they use to keep track of systems.
Strategy becomes public= less effective.
Believe I posted something about this recently where methods completely shut down once the public knew about it, more so when pits were open. And if you are talented enough, you make a new system on how to take advantage of those who bought that method.
I know some methods I have bought in past, have to really think outside the box of either when safer to trade those systems or trade against them. I recently been going through old material long forgotten to see if they now been, many trending does well. "Futures Truth", don't know if still in business http://futurestruth.com/, they use to keep track of systems.
Publicly available strategies are as good as using no strategies. When you run a backtest, you will find that most of them lose money, even more so when commission and slippage are accounted for.
Profitable strategies, on the other hand, will never be divulged to the public. So instead of being obsessed with other people's edge
, go find your own edge. 
Profitable strategies, on the other hand, will never be divulged to the public. So instead of being obsessed with other people's edge
, go find your own edge.