Quote from acrary:
Here's a example. Years ago when the Stock Traders Almanac first came out one of the tendencies described was the last two days and first 5 days of the month being market movers. I verified the condition existed and persisted from month to month in the SP futures. I could have stopped there and used a envelope strategy to try to catch any trend starting around the end of a month. This would be how a person with only market data might analyze the market. I went on to try and figure out why the market moved during those days. I knew mutual funds were big and thought maybe it was caused by inflows into the funds. There were and are sources of mutual fund flows available so I got some data and did some tests. I found that fund flows in and out had a lag due to reserves in the funds, but the tendency was for large inflows to be put to work within 5 days after receipt and outflows caused selloffs in the funds around 3 days after the funds were disbursed. I setup the software to do a weekly trade based on buying when inflows were strong and sell when inflows were weak. If the inflows remained on the side I was already in then no new trade was initiated. From 2001 - 2002 there were no losing trades and the average winner was 28k per-contract in the SP. That's a difference between mapping to market data and pulling the profits out of the market based on a edge.
I went on to build a whole series of models based on this edge things like ... if the market early in the week went against my edge then I'd initiate new positions to take advantage of the opportunity knowing they'd be active within a day or two.
Anyway, there's a example for you. There's lots of these edges around...just don't expect to find them in the o, h,l, c data.
Made $200. I dont want to even know what it would have made