The sad truth about trading is

[Fractals 'R Us]

These anti-trading threads are good for building up the ignore list...

I don't suppose that Dinosaurs knew that they were, well.... dinosaurs, until it was very nearly over for them....

Later

 

[Index piker]

Quote from Index piker:

There is NO question as to the superiority of passive investing as a whole compared to active investing.

Quote from lindq:

That statement is absolutely incorrect and only demonstrates your ignorance of trading and investing in general.

I'm sorry for you but there is nothing inaccurate or incorrect in my above statement. Maybe you should re-read the except I posted of Sharpe's.

btw: My personal portfolio is not really relevant to the discussion , I'm trying to leave the personal stuff out for now , perhaps later in separate thread.

 

[Index piker]

Quote from Fractals 'R Us:

These anti-trading threads are good for building up the ignore list...

I don't suppose that Dinosaurs knew that they were, well.... dinosaurs, until it was very nearly over for them....

Later

Too much unintended irony in that missive not to laugh.

 

[l2tradr]

Weak argument. Just because the average is X, doesn't mean that a certain group can't consistently beat the average, especially with no regulatory or liquidity constraints faced by large institutions. Just because the average person in US makes $40K a year it doesn't mean that a large group of people that educate themselves, work hard etc can't consistently beat that average (like doctors for instance).

Lastly, if you never pursue your dreams (whether it is to be a great scientist, race car driver, trader etc.) you will never even have the chance to achieve great things. I can't live with that regret. Maybe you can.

Good luck and say hello to Mr. Vanguard

 

[Index piker]

Quote from talontrading:

When I was a struggling trader, I used to believe what you wrote here, but the fact is you're wrong. The pyschological demands of trading are EXTREME... I really used to think it's as simple as telling someone where to buy and sell and then they do it and make money, but that is just not true.

I also taught a few people and had dramatically different results... from one of them becoming a professional and making a ton of money to one of them completely leaving the business to a few of them still struggling 4 years after the experiment. the difference was not in how or what they were taught, which was very similar and i actually spent more time and energy on the ones who "failed" than the one who is still making a lot of money. looking back, the real difference is discipline. i also see that on trading desks... the guys who make it and the guys who don't... it's discipline and focus not analytical prowess that makes a winner.

i will post a simple system with a winning edge later in the day.. something i've used for years profitably... and then i'd challenge readers on this board to apply it CONSISTENTLY for a year and come back and tell us what your results have been. i know from past experiments like this, not one person will do that.

I agree with talon.
Discipline is essential for either approach active or passive.
The advantage passive indexing has in this regard is in massively reducing the required decision points thus decreasing the opportunity for violating your discipline.

 

[hermit]

The 'truth' isn't sad at all, its the very fact that most people fail at it makes the rewards for those who suceed more rewarding.

 

[talontrading]

There is FAR less no trader involved trading that you would think. (This is not speculation on my part, I know this for a fact.) A lot of the systems and models that run as black boxes still have a trader that turns them off and on. More of the black boxes run on people's kitchen tables than you would probably think, but even the big institutional ones have a trader involved almost always. One reason is that quantitative models that work don't tend to work forever... which gives you something to ponder in your backtesting for sure.

Quote from indexer:

By automated, I meant no trader involved.

Of course there are semi-discretionary traders who take signals from a system and execute them.

 

[catholic_trader]

Quote from Swan Noir:

Don't wait a year to come back and tell us how that is working out for you. Come back in 90 days. He may be a true genuis AT THIS (At This is all that counts) but the odds are many thousands to one against that.

BTW, is it your religion that defines you as a trader or does the small c in catholic indicate the universal nature of your trading?

I'm coming up on 2 years as a follower. I can tell you that I have learned absolutely nothing and like Posh Spice am quite proud of it.

By catholic, all I mean is that my interest in making money is not limited to 'default' trading dogma which may ultimately reflect an adherence to mediocrity (per Piker's notes) but ANY/ALL which indeed defy the odds consistently. Swan Noir, Swan Noirs exist and they are more common than we are willing to accept!

 

[MandelbrotSet]

Quote from Index piker:

I certainly lose NO sleep over my investments and have been quite profitable since instituting my plan late last year.

Quote from Dustin:

I'm surprised nobody picked up on this.

Great catch Dustin, I try not to particpate too much in these types of threads anymore, as they consume a large amount of time, and really, go nowhere.

The way I figure it, there's no need for me to waste my time on Index piker ... the folly of his logic will be shown to him soon enough in the next market downturn.

Don't want to spend all of my lovely Sunday trading posts with the clueless, so I'll bid you to have a nice weekend, Index piker.

Ciao

 

[talontrading]

Ok... as promised... here is a system that has an edge. I know this because 1) I backtested it rigorously and 2) i have used it for quite a while and made a good return with it.

Index Adds / Drops from S&P 500
On the days following an announcement that a stock will be added to the S&P 500, work a limit order to buy that stock at the settlement of the announcement day. If not filled, don't chase the market.

On days following an announcement of a drop from the S&P 500, work a limit order to short that stock at the settlement price of the announcement day.

On the close of the day that the change is actually effective, flip the position. If you were unable to fill on the limit order then get short the addition and get long the deleted stock.

If there is no offsetting position (for instance, an addition announced without a deletion) then "hedge" the position with equal dollars of SPY or futures (though you will be creating a taxation issue with futures.)

The portfolio is hence always long/short equal dollars. If you buy $100K of ABC and sell $100K of XKY on the announcement day the values might be +125K ABC and -112K XYZ on the effective date. Doesn't matter, on that day you then short 100K ABC and buy 100K XYZ.

Exit the trade 25 days after the effective change date.

Do not trade deletions due to corporate actions, takeovers, bankruptcies, etc.

Think long and hard about position sizing. There is no stop so theoretically the entire investment is at risk. I like to risk no more than 2% of my account on any trade, but that's really not possible here. Maybe allocate 15% of capital to each trade. Be aware that you can go many weeks with no positions or have on 4 positions at once.

That's it... do the work... it's hard to backtest because it's not like Buy when the 3 period XMA crosses over the 28 period SMA and the RSI is > 70 and ADX is < 15 or bullshit like that... those kinds of things don't tend to have a great edge, but here I have just given you a system that is supported by a vast body of academic research and works in real time.

Not one person here will do this for a year. Hard to believe but I would be wililng to bet.

I think my explanation is clear, but I think that because I wrote it lol. If it's not ask and I will attempt to clarify.

Quote from hopeful:

Please use this as a napkin. If it is truly a profitable system then I will run it through my backtesting machine and let you know if it works!