It is amazing how many people believe they are above average drivers. It is amazing how much individual EV manufacturers are valued when the entire market for EV is not even close to what the market is valuing those companies.
How to know if my edge is going away?
- Thread starter Oadmani
- Start date
There is no other edge than Prudent Risk Management.
Prudent risk management is not in and of itself and edge. For example - at the game of roulette there's no risk management scheme that will overcome the house's edge. If your strategy doesn't capitalize on elements of market behavior that are non-random to a degree that you can over come the costs of trading and be profitable in the long run - no amount of Prudent Risk Management can overcome that.
But, to return to the OP's question: There are a handful of market behaviors that aren't random that have been present in stocks and commodities since the dawn of freely traded markets. Various methods / systems / algos that lean on these elements are robust across a wide set of parameter values. They are very simple to describe. Yes, they have losing periods but they've withstood the test of time.
But, to return to the OP's question: There are a handful of market behaviors that aren't random that have been present in stocks and commodities since the dawn of freely traded markets. Various methods / systems / algos that lean on these elements are robust across a wide set of parameter values. They are very simple to describe. Yes, they have losing periods but they've withstood the test of time.
For seasoned long-only practitioners, identifying a waning edge can be a nuanced challenge. Here's a technical toolkit to aid in this endeavor:
Performance Degradation:
- Lagging Returns: Monitor for underperformance relative to historical benchmarks or the broader market. This might indicate a weakening ability to select winners.
- Volatility Fluctuations: Increased return volatility, with larger positive and negative swings, could suggest difficulty in consistent security selection.
- Market Dynamics: Evaluate if significant market changes (e.g., growth-oriented markets challenging value strategies) are impacting your strategy's efficacy.
- Competitive Landscape: Assess if widespread adoption of your approach has diminished its effectiveness.
- Security Characteristics: Analyze changes in target securities (e.g., companies prioritizing buybacks over dividends impacting high-dividend strategies).
- Backtesting: Regularly backtest your strategy with new data to ensure it continues to identify profitable opportunities.
- Sharpe Ratio: Monitor the Sharpe Ratio for a decline, potentially indicating a weakening edge.
- Assumption Review: Re-evaluate the underlying assumptions of your strategy; are they still valid in the current environment?
%%When the market and your P&L is going down?
LOL /good + good;
for even more accuracy use a longer time period to measure//////////////////////////////////.............................................
One trade tells me little ,long or short [inverse[.
And use more than a gambler's measure also.
Business[non casino LOL] is not a gamble. but sure has risk.
Wisdom is profitable to direct.