Human Traders Are Trouncing the Machines

I think trading is more of an art than science. science would help the mechanical aspect of a trade in some form of fashion. it'd take a natural talent to be one of the bests or else there'd be a lot of average Joes with gazillion of dollars. Market is too small for having many billionaires.
 
Art is completely subjective, one man's masterpiece is another's garbage. Science is measurable and can be repeated over and over again with showing the same pattern. Building a trading algorithm based on science requires a lot of creative thinking - that's the only part that is "art" even though that's definitely the wrong word for it.
 
d08 said:
I'm also not entirely sure you need to think outside the box - I'd say you just need persistent hard-work to analyze and exhaust all ideas. There's creativity involved and some smarts but you don't need to be the smartest guy to do that.
More...

creativity is out of the box thinking. when analyzing, the best results come from out of the box thinking as the usual analyzing has been done over and over again in past. out of the box thinking seperates you from the crowd.

to make a statement that out of the box thinking is not needed can only be made by someone who was thinking out of the box for years and had the ability to find something in case out of the box thinking would be useful. most statements that something is not needed or cannot be done is made by people who were not successful. the question remains: why were they not successful? can be because they are not fitted for the job and miss the required abilities, or it can indeed be true what they stated as they have all what is needed to make a well funded statement.

on ET i guess 95% are not fitted for the job and miss the required abilities to make a well funded statement.
 
comagnum said:
Well the thing is investors do care about a traders or a funds performance and they do compare them. I don't think quants would declare in their prospectus " does not work in bull markets", doesn't math work all the time?, or maybe they forget to include bull market conditions into their formulas - rookies!
More...

In fact they would disclose what expectation of returns is for particular market environments. The return characteristics of many neutral quant funds is the they do "okay" during periods of low volatility and incredibly well during periods of high vol. "Managed" equity funds which happen to be long stocks/short vol during a bull market will do well by definition. It is these funds which get hammered when the market sells off and vol goes up. The fact is that math works all the time. Whether one wants to incorporate directionality into a model depends on the product/fund that is trying to be developed. Given how correlation behaves in low vol, anyone managing or "picking" stocks in this climate are bound to do well until they don't.

I professionally trade and this limits my investing in other funds. However, if I were to choose a shop to pay 2/20 (or more), it would probably be Rentec. It's unlikely stock picking funds will have equivalent sharpe or longevity.
 
You must log in or register to reply here.
Back
Top