Making money with a losing strategy
- Thread starter jcl
- Start date
which you don't with a losing strategy. Only under very specific circumstances does another sub-par strategy lower risk-adjusted returns, over a longer period it is almost always more favorable to abandon losing strategies and search and replace with more profitable ones...I have no clue why people still argue about this. Its completely beyond my comprehension. But oh well...
yeah, you guys must be pretty pissed off, all those guys coming into the city to play with Asian exotic girls. What other reason could there be given the all-year-round humid and hot climate, the complete NO-fun factor to drive cars (from one red light to the next), the one (or now two) casinos to chose from. Its just as easy to setup and run a business at very favorable tax rates out of HK (plus you can take your sports car to racing tracks in mainland). Having lived in both cities I personally would not even have to think whether to settle for HK or Singapore.
I am of course half joking, Singapore is definitely a fun place (for a very limited time) ;-)
I am of course half joking, Singapore is definitely a fun place (for a very limited time) ;-)
Quote from savagemp5:
I came here for entertainment toobtw I'm from Singapore, a country with 1/6 a Millionaire, or 16.66%
don't forget Facebook is now also in town (of course only because of the favorable business climate not because its far away from American tax authorities).
If I don't understand the math, then you don't understand reality. I suggest you take some time, and start trading with some real money with your concept before you reply.
Let us know when you see the flaw in your logic.
It looks good on paper, but the problem with real life is that the drawdowns and profit of each strategy do not mirror each other, so you can't really leverage up the trade size. Uncorrelated doesn't always stay uncorrelated, so now you need to account for that. And the biggest flaw is that Strategy B is a loser.
What a stupid way to say something meaningless.
"It looks good on paper" ...?
Did I read that correctly? You do realize that you just admitted you said something wrong in your prior post by writing that, right?
Yada yada yada ... "correlations break down" yada yada. Wow. Real insight there smarty.
Nice resort to ad hominem attacks BTW.
Basically, you're saying you haven't been able to do something, so, it must be impossible to do. This is based on your version of the "real world" ... I haven't heard that line before on ET. Nope. Never (heavy sarcasm because I know you're a bit dense...)
Back in the fall of 2009 I took an ETF/Equities winning strategy (that I had built on E*Trade & VBA) over to a commodity trading firm in Chicago who wanted to build out an equities desk. We tried for months to replicate my (proven, audited and able to turn on E*trade any given day and watch) results with no luck. It was a transition from E*Trade to MF Global and RealTick but also from a ~$35-50k self-funded retail account to a $450k account before being levered.
Just didn't work. The strategy had an almost 100% losing rate. Everyone got frustrated and the thing blew up and flopped. No one was willing to try and take the opposite side of the signal but I was always curious... was it as simple as a 1/0 just backward or was it something else.
I was able to recover some costs by turning back on the same code on E*Trade but the trade was already starting to get arb'd out.
As that trade died I started working with many traders on incubator projects (where I would fund if they had winning strategies) and I found over and over that consistency, whether winning or losing, was the holy grail much more than P&L volatility.
Just my 0.02c as well as experience.
Just didn't work. The strategy had an almost 100% losing rate. Everyone got frustrated and the thing blew up and flopped. No one was willing to try and take the opposite side of the signal but I was always curious... was it as simple as a 1/0 just backward or was it something else.
I was able to recover some costs by turning back on the same code on E*Trade but the trade was already starting to get arb'd out.
As that trade died I started working with many traders on incubator projects (where I would fund if they had winning strategies) and I found over and over that consistency, whether winning or losing, was the holy grail much more than P&L volatility.
Just my 0.02c as well as experience.
Consistency but above all positive expectancy. I rather trade a system with positive expectancy but higher return volatility than a system with negative expectancy but very low return variability.
Expected value is the key in anything related to financial product pricing, betting games, basically anything on which money is wagered on future outcomes. Its preposterous that adding strategies with negative expected value adds value to the overall strategy portfolio. It may reduce risk at certain times but at all times does a lot more damage through total return reduction that the reduced risk profile cannot make up, in sum risk adjusted returns suffer, period. No strategy, is always close to -1 negatively correlated, otherwise it would be a hedge.
I hate the world "hedge" used in retail circles. Its such a misunderstood term. Years ago we had "tape reading" buzzwords, then "pairs trading", then "options trading" (with all its glorious pnl profile terminology), now its "hedging".
The concept of a hedge is a TEMPORARY RISK REDUCTION, NEVER A PERMANENT NOR TEMPORARY RETURN ENHANCEMENT approach.
I find it infinitely entertaining how some of the laziest suck every buzzword from brokers' and "trading coaches' " tits and pretend they found a new way to get rich quick.
Expected value is the key in anything related to financial product pricing, betting games, basically anything on which money is wagered on future outcomes. Its preposterous that adding strategies with negative expected value adds value to the overall strategy portfolio. It may reduce risk at certain times but at all times does a lot more damage through total return reduction that the reduced risk profile cannot make up, in sum risk adjusted returns suffer, period. No strategy, is always close to -1 negatively correlated, otherwise it would be a hedge.
I hate the world "hedge" used in retail circles. Its such a misunderstood term. Years ago we had "tape reading" buzzwords, then "pairs trading", then "options trading" (with all its glorious pnl profile terminology), now its "hedging".
The concept of a hedge is a TEMPORARY RISK REDUCTION, NEVER A PERMANENT NOR TEMPORARY RETURN ENHANCEMENT approach.
I find it infinitely entertaining how some of the laziest suck every buzzword from brokers' and "trading coaches' " tits and pretend they found a new way to get rich quick.
That's why you need robust negative correlation e.g. a long gamma strategy and a short gamma strategy, rather than two short gamma strategies that are independent in normal markets but correlate a lot in a crash.
For example, if you run trend-following and global macro, they are both long gamma. So, the diversification won't work as robustly. Ditto if you are a short vol options trader and a value investor. What you want to be is a trend-follower and a value investor, for example.