The sad truth about trading is

Quote from lurefo:

Hehe Jff, good point.

"Piker" should be more appropriate for Mandie. :)
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Now you are being unkind to Pikers.

Personally I think that you are still hunting too far up the food chain.
 
Thank you very much for posting your system with an edge. It was a real eye opener for me as it relates to my so called backtesting.

I work days so I’m relegated to backtesting with end of day data looking for an edge in the short to intermediate term. I have not been at it too long but can tell you it’s been entirely focused on the OHLC. Additionally, I have most certainly not found any edge what so ever worth committing real hard earned money to.

Anyway, I had not considered any thing outside of the daily/weekly/monthly bars and all their respective derivatives. Now, per your excellent post, I will do my best to broaden my thinking as to where I might find an edge. Also please know that I will do my homework on the subject you put forth.

Thank you for your generosity.






Quote from 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.
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Quote from jjf:

Now you are being unkind to Pikers.

Personally I think that you are still hunting too far up the food chain.
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wanker comes to mind

but feel free to correct and add your own suggestions
 
Quote from crash n burn:

wanker comes to mind

but feel free to correct and add your own suggestions
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looks like all the losers came out to play.

you're gonna have good company with index pikey, lurefo, jjf and the assorted half-wits that populate this site! :D
 
I generally agree with the sentiment of your posts, and I think they are a good warning to anyone wanting to trade as a counterpoint to the largely bogus (in my opinion) claims that there's a sufficient "learning process" that one can go through and automatically become successful at trading -- likening it to medical school is particularly absurd.

However, there clearly are skills involved in this field (although skills that by no means guarantee success), and it's also very clear that hundreds, if not thousands, of traders achieve returns far beyond what luck/leverage would predict (just look at GS or RenTech).

That said, I agree that the majority of people who attempt trading would be better off having used a passive strategy involving infrequent trading.

Quote from Index piker:

Unfortunately the facts just don't really conform to your assertion that successful trading or investing for that matter are like other professions in which one learns a specific skill set.

1) The ability to prove skill and to impart that skill to others is virtually non-existent compared to other TRUE professions like medical or dental school.


2) Study, hard work, effort precisely do not lend themselves to outperformance because there is virtually no skill to learn in the first place.

3)success is more or less dependent upon luck (idiosyncratic risk ) and the amount of market risk assumed.
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I decided to start a new thread since I don't agree with "the sad truth about trading" and that's not why i'm posting here. Index Piker, sorry for interjecting a way to make money into your thread! [joke]

http://www.elitetrader.com/vb/showthread.php?s=&threadid=181368



Quote from occam:

I generally agree with the sentiment of your posts, and I think they are a good warning to anyone wanting to trade as a counterpoint to the largely bogus (in my opinion) claims that there's a sufficient "learning process" that one can go through and automatically become successful at trading -- likening it to medical school is particularly absurd.

However, there clearly are skills involved in this field (although skills that by no means guarantee success), and it's also very clear that hundreds, if not thousands, of traders achieve returns far beyond what luck/leverage would predict (just look at GS or RenTech).

That said, I agree that the majority of people who attempt trading would be better off having used a passive strategy involving infrequent trading.
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