Depends on the strategy...automated, mechanical, discretionary...who's using it and what its exploiting.
wrbtrader
Does a strategy become less effective or more effective once brought public?
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Depends on the strategy...automated, mechanical, discretionary...who's using it and what its exploiting.
wrbtrader
You took the words right out of my mouth.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.
Anyone selling you a strategy has an end game and it isn't you being profitable. To them you're a niche and they could care less if you make money. People need to sack up and find there own edge. 100% in agreement with you.
Most strategies shared online including this forum are freely shared (not sold). The problem is that people view such as "finding their own edge" because they did the research, backtested what they found when in fact its a strategy used / developed by someone else that decided to post it at Elitetrader.com or any other forum.
In fact, some forum owners are taking advantage of this via moving free sharing of trade strategies, custom indicators or mechanical trading systems via creating a private (elite) area for a fee...such as forum like Futures.io with its elite circle section while having other sections for free downloads of custom indicators / mechanical trading systems.
Anyways, you should check out the thread here at ET called Hall of Fame threads @ https://www.elitetrader.com/et/pages/hall-of-fame/
That thread all by itself has a lot of trade strategies and one of the biggest ones has been the AHG - Profitable Strategy for Struggling Traders @ https://www.elitetrader.com/et/threads/ahg-profitable-strategy-for-struggling-traders.99283/ and there's others in the Technical Analysis threads, some in the Journal thread section and the Strategy Development threads although when they started.
Another example maybe the biggest TA thread at this forum called the ACD Method but I can't find the direct link to it.
My point, rarely will you find someone that invents something new...a new edge. Usually its a reinvention (adapted) of something old by changing some rules, applying it to different markets and then giving it a new name.
Regardless, its not the trade strategy itself...the real edge is in the application. Reason why some traders say the edge is the trader.
Finding Your Own Edge should be defined as finding something that you've developed but it doesn't necessary mean that someone else out there has not found the same edge.
wrbtrader
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When it comes to trading you want to be the smallest fish in the biggest pond. Markets are driven by algos and massive trading firms who trade delta neutral. They don’t give a crap about what the public deems a “winning strategy”. Most winning strategies trade around relatively predictable algorithmic trades that the guys with big money won’t be able to trade because of either a directional bias or because they have too much money for the strategy to be viable. Us little guys gotta trade around them to exploit them. So my theory is publicizing a strategy has little to no impact on its success.
I understand that there is this common misconception about strategies working better if everyone used them.
In the end, when we work together and everyone buys a certain stock, then there is no other outcome than a big rally in the stock, right?
Now shift your perspective a little. From "chart" aka. the graph of the last traded price towards "market" aka. liquidity or passive/limit orders.
If there are 10.000 stocks offered at 10$ and I take all of them, where do you get your stocks from?
I can sell them to you, but I wont do so at 10$. I probably will offer them for 10.50$. If you want to have them, go ahead. You did not lose money, but I made 5k$ off of the fact that I had an edge over you.
If I share my ideas with you, you are as fast as I am and we will have to fight over the 10.000 shares at 10$. Maybe I only get 5000 or 8000 plus now we both wait for a sucker to pay 10.50$
Less profit, more risk. If you share the strategy with two of your buddies, there are 4 people now fighting over the 10.000 shares.
The same goes for posting limit orders. If I know that the stock is worth 10$, because I did my research and I post my buy limit at 9.50, others will join me. Perhaps they frontrun my order and post at 9.60...or 9.99.
So it doesn't matter which strategy you are running. You only make money if you act on information before everyone else because everyone competes over liquidity limitations.
This goes for HFT's that fight over miniscule price/size advantages as well as for hedgefunds that need to acumulate huge positions over days or weeks without tipping off everyone
In the end, when we work together and everyone buys a certain stock, then there is no other outcome than a big rally in the stock, right?
Now shift your perspective a little. From "chart" aka. the graph of the last traded price towards "market" aka. liquidity or passive/limit orders.
If there are 10.000 stocks offered at 10$ and I take all of them, where do you get your stocks from?
I can sell them to you, but I wont do so at 10$. I probably will offer them for 10.50$. If you want to have them, go ahead. You did not lose money, but I made 5k$ off of the fact that I had an edge over you.
If I share my ideas with you, you are as fast as I am and we will have to fight over the 10.000 shares at 10$. Maybe I only get 5000 or 8000 plus now we both wait for a sucker to pay 10.50$
Less profit, more risk. If you share the strategy with two of your buddies, there are 4 people now fighting over the 10.000 shares.
The same goes for posting limit orders. If I know that the stock is worth 10$, because I did my research and I post my buy limit at 9.50, others will join me. Perhaps they frontrun my order and post at 9.60...or 9.99.
So it doesn't matter which strategy you are running. You only make money if you act on information before everyone else because everyone competes over liquidity limitations.
This goes for HFT's that fight over miniscule price/size advantages as well as for hedgefunds that need to acumulate huge positions over days or weeks without tipping off everyone
Hedgefunds, work together, Retail don't, too untrusting, why retail fail.
Early 2000's we did work together over Yahoo Chat rooms, Retail where getting somewhere, then they brought out the PDT rules, ruined it over night
Hedgefunds, work together, Retail don't, too untrusting, why retail fail.
Early 2000's we did work together over Yahoo Chat rooms, Retail where getting somewhere, then they brought out the PDT rules, ruined it over night
No they don't and no you did not. "Working together" is for the sheep who push the stock higher so the initiator can unload.
Hedgefunds 100% do not work together since pumping a stock as a pool is illegal price manipulation which can easily be proven via the mandatory audit trail
Exactly right and it's incredible that this simple logic is so complicated for many or they even deny it. When you reveal your strategy, you're competing with others and it becomes a case of "who gets it first", in the end everyone will shift the entry points so much that the initial strategy is completely lost.
Hedgefunds, work together, Retail don't, too untrusting, why retail fail.
Early 2000's we did work together over Yahoo Chat rooms, Retail where getting somewhere, then they brought out the PDT rules, ruined it over night
Of course this is going on but its illegal. I remember it was going on between the Banks in currency trading and for many years many denied such was occurring until the infamous Cartel got caught.
https://www.bbc.com/news/business-48292946
In fact, over the years...other Banks have been caught and fined via using the infamous Bloomberg chat rooms to arrange their positions with other financial firms. I still remember so many Forex retail traders screaming the markets were rigged. Yet, so many others would come out and say it wasn't true...you gotta find your edge.
https://www.bloomberg.com/news/arti...-fx-tips-how-chatrooms-cost-banks-1-2-billion
https://www.bloomberg.com/news/arti...traders-on-trial-for-chats-that-cost-billions
https://www.bloomberg.com/news/arti...st-even-after-10-billion-in-fines-traders-say
I don't know about Hedgefunds but I do know about institutional trading firms. I have sat in an office with an institutional trader and watched a friend call another institutional trader at another firm to discuss their planned positions. I now that can't be legal...right ?
Further, I've seen traders from the same firm plan their positions together (hedges).
The things is this. None of the above situations involves someone revealing their trade strategy to another financial firm. Instead, it involves letting another financial firm know when your firm is buying / exiting a position so that they can profit too...like some kind of insider scheme.
Gotta be naive to believe that Hedgefunds aren't doing it too...not about strategy revealing but about revealing / organizing your buying / exiting of positions with other firms.
P.S. The institutional trading firms I visited...mainly traded money from very large pension plans although they have their fingertips into other stuff like University Endowment Funds.
They've found other ways to become competitive after very poor returns that many know about.
wrbtrader
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Of course this is going on but its illegal. I remember it was going on between the Banks in currency trading and for many years many denied such was occurring until the infamous Cartel got caught.
https://www.bbc.com/news/business-48292946
In fact, over the years...other Banks have been caught and fined via using the infamous Bloomberg chat rooms to arrange their positions with other financial firms. I still remember so many Forex retail traders screaming the markets were rigged. Yet, so many others would come out and say it wasn't true...you gotta find your edge.
https://www.bloomberg.com/news/arti...-fx-tips-how-chatrooms-cost-banks-1-2-billion
https://www.bloomberg.com/news/arti...traders-on-trial-for-chats-that-cost-billions
https://www.bloomberg.com/news/arti...st-even-after-10-billion-in-fines-traders-say
I don't know about Hedgefunds but I do know about institutional trading firms. I have sat in an office with an institutional trader and watched a friend call another institutional trader at another firm to discuss their planned positions. I now that can't be legal...right ?
Further, I've seen traders from the same firm plan their positions together (hedges).
The things is this. None of the above situations involves someone revealing their trade strategy to another financial firm. Instead, it involves letting another financial firm know when your firm is buying / exiting a position so that they can profit too...like some kind of insider scheme.
Gotta be naive to believe that Hedgefunds aren't doing it too...not about strategy revealing but about revealing / organizing your buying / exiting of positions with other firms.
P.S. The institutional trading firms I visited...mainly traded money from very large pension plans although they have their fingertips into other stuff like University Endowment Funds.
They've found other ways to become competitive after very poor returns that many know about.
wrbtrader
To be honest, if you have to call your competition in order to discuss positions, you are probably a shitty hedge fund.
I'm not an idiot, I know that it is done and that it is illegal. But it doesn't improve your returns. When it comes to FX and Libor, they fixed and manipulated one price in order to shine up their own portfolio in another.
Like buying up all German30 stocks in order to prop up a huge FDAX position.
This is not "together" either.