Gut Feel: That something special of Successful Traders

[vanzandt]

Most money is made using algorithms and it seems it's rather the human traders that are going bust more often. A human with all of the various emotions is far more unstable to do a task that requires ruthless discipline and an emotionless approach. Anything from sleep deprivation to marital problems to severe losing (or winning) streaks to massive volatility can and will affect the human trader. No amount of experience can save him from all these scenarios.

Human emotions are not an option.

 

[SoesWasBetter]

Algos outperform mostly due to the amount of trades they do, not their genius

Only Jack Hershey was able to do 1000 trades a day profitably.

 

[digitalnomad]

All these computer science folks that think they can apply a hundred different indicators, and back-test, and blah blah blah... they all go bust eventually.

If you think algo trading is just applying indicators and backtesting, you've been misled. I wish it was that easy.

 

[vanzandt]

.....And tomorrow will be a big up day barring unexpected geopolitical events.

 

[vanzandt]

If you think algo trading is just applying indicators and backtesting, you've been misled. I wish it was that easy.

I have the utmost respect for you.
So what is it?

 

[Overnight]

Bone pressed is always the preferred way of measurement.

Nobody ever saw this tangent coming. lol!

 

[digitalnomad]

Algos outperform mostly due to the amount of trades they do, not their genius.

In the HFT space, this holds true. Outside of that, there is a multitude of clever designs that can trade as little as a few trades per day, depending on conditions.

 

[digitalnomad]

I have the utmost respect for you. So what is it?

There's not many people I don't respect, for what it's worth. I could write a book about proper algo design, but I'll try to answer your question concisely by listing what I feel are critical elements/requirements.

Catalysts
Volatility
Volume
Data mining
Predictive modeling
Signal processing
Executable/Programmable
Trade management
Few degrees of freedom as possible
Quantitative performance monitoring
Slippage accuracy
Fill accuracy

That's just the tip of the iceberg. Predictive modeling, execution, fill/slippage accuracy were the most difficult during my research phase.

Also, pay no attention to all the psychology/risk management edge bullshit. Without a good predictive model as a starting point, you'll be up shit creek as a retail trader. I learned this the hard way.

 

[nonlinear5]

I'll play devil's advocate to an extent.
Consider the question from the contraposition: If "gut feel" is not important, then why is it that we see so many firms not performing as well as before?

That's because it became much more competitive out there. Some 20 years ago, institutions, professional traders and middlemen made (more or less) reliable income from order flow, spreads, commissions. Nowadays, they have to compete against each other.

 

[SoesWasBetter]

Once again, always dozens of master of the universe, claiming to have achieved GRAIL, and never a SINGLE specific data point .


Always generalized bullshit any moron could come up with..


digitalnomad's post a perfect example


no one is fooled