What is the simplest trading strategy?
- Thread starter kut2k2
- Start date
The picture so far ...
The simplest strategy is Buy the n-day high, Short the n-day low.
The simplest metastrategy is Trade With The Trend.
Arbitrage is certainly an important metastrategy but I contend that despite being a single word, it is considerably more complicated a concept than trading with the trend.
The simplest strategy is Buy the n-day high, Short the n-day low.
The simplest metastrategy is Trade With The Trend.
Arbitrage is certainly an important metastrategy but I contend that despite being a single word, it is considerably more complicated a concept than trading with the trend.
???
Buy an instrument on an exchange & simultaneously sell the same instrument at a higher price on another exchange (or the reverse, sell & buy cheaper), that's far less complicated for a concept than trade with the trend.
Granted, this has become the exclusivity of HFT firms, but as a concept, it is a simple as it gets.
Buy an instrument on an exchange & simultaneously sell the same instrument at a higher price on another exchange (or the reverse, sell & buy cheaper), that's far less complicated for a concept than trade with the trend.
Granted, this has become the exclusivity of HFT firms, but as a concept, it is a simple as it gets.
You've just described trend trading using two exchanges rather than one. That's more complicated.
Sorry, the key aspect in the concept of arbitrage is the simultaneous buy & sell transactions ... the money is made on the price difference over geography, not over time
So it sounds like they are equally complex, with the difference being either location or time. But as you said, HFTs have killed the simplest form of arbitrage for retail traders.
"As a trading strategy, statistical arbitrage is a heavily quantitative and computational approach to equity trading. It involves data mining and statistical methods, as well as automated trading systems." -- wikipedia
"In economics and finance, arbitrage (/ˈɑrbɨtrɑːʒ/) is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices." -- wikipedia : Arbitrage
So arbitrage and trend trading are tied for the simplest metastrategy. One taking advantage of time, the other taking advantage of location.
I don't need a crystal ball to find trends. I can find them in the present and once found, I can ride them to profits. Just like you can find exchange differences in the present ... well, not any more thanks to HFTs. Seems to me the biggest difference is that arbitrage is simple only in theory due to HFTs while trend trading is still simple in both theory and practice, HFTs be hanged.