Why is it so hard to beat the market?

Quote from stocktrader3429:

I consider the SP500 the market and it's 14.9 YTD return. I don't care whether or not I beat the market, but that's generally the consensus when talking about funds and how they did compared to the market. I was just curious.

So essentially it all boils down to long-term returns to add credibility, correct?
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Size DOES matter too.

Since you are not a trader, but an investor, it may be better to compare your performance with that of a mutual fund manager.

Bill Miller is considered one of the best in the industry. His Value Trust Fund outperforms the S & P 500 for fifteen consecutive years. As of September 30, 2006, the Total Fund Assets was US$19.4 billion. Unless something unexpected happens in the next few days, his fund will underperform the S & P in 2006, and he won't be able to extend his streak to sixteen years.

It is an extreme example, but may give you some pointers.
 
Thanks for the tip. I wil check him out. And this is what I've been saying all along, I'm not a trader, I'm an investor. I'm not at all good at trading, so I don't even play that game.
 
Quote from stocktrader3429:

Thanks for the tip. I wil check him out. And this is what I've been saying all along, I'm not a trader, I'm an investor. I'm not at all good at trading, so I don't even play that game.
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stockinvestor3429
 
100 trades is a lot more statistically significant. It would raise my confidence level that this isnt merely luck.

But, Im usually not comfortable until I see at least 200 trades, based on my experience of running, oh, hundreds of millions of backtests.

My backtest system shows me my %win and profit factor "on the fly" as im crunching, so that if 1000 trades go by and the numbers are pure crap, I dont bother waiting for it to finish.

This has given me a very good feel for what pure randomness can produce in any trading system and about 200 trades is the point where the stats begin to "level out" and become somehwhat accurate, although there are a few exceptions where it took 500-1000 trades before the stas leveled out.

This is precisely why I cant trade a strategy like yours which only does 10-20 trades a year. It would literally take me several years with of trades before discovering that the system doesnt actually work. I just cant work with sample sets that small and be confident enough to trade them.

So for example, lets assume your method actually works. Like many methods, it may stop working one day. How do you determine this? With only 10-15 trades a year, 1,2 or even 3 down years in a row would not mean the method stopped working, but it *may*

Now thats a horrible situation to be in, crossing your fingers, hoping that trade number 100, or 200, shows that the method still works.

PS: 1% return a month is awesome (to the previous poster)




Quote from stocktrader3429:

Well, yes, I can agree with you there, TraderDragon. A lot of people fall in the right place at the right time and get rich.

Since things fall back to the number of trades. Let's say I continue to long-invest (10 - 15 trades per year) for the next 10 years, and the number of trades wouldn't even compare to the number of trades some of you do per month. In that case, would you still call it sheer luck with a 30 percent compounded ROI? And hopefully, in those 10 years, we'll experience both up and down markets to really test my knowledge.
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Okay, I understand why the number of trades now matter. Thanks for the clarification. Even though I can't do anything about it, but I will now focus my attention to the number of trades I do and how my performance measures accordingly.

Thanks very much. That helped a lot.
 
I like the part where those that use TA are just being smarty pants boys/girls and just gambling. YA, right, then all of wall street are gamblers.

The other part i like is this guy says he trades news........... That is not a science with all the BS that the street etc can throw out.

Personally i think this guy is fishing and doing a stroke job.


Could i be wrong? Sure, and it would not be the first time. But intuition still says this is a fishing expedition. good trading to all in the new year. O, yes, trading on fundamental analysis is a joke, come on .............ever hear a company named Enron, Worldcom.

Fun on the way up, tough coming down for moonbeam traders. (less than one year is not exactly what i would call INVESTING, more like trading within a one year time frame. SO long.
 
Quote from traderdragon2:

100 trades is a lot more statistically significant. It would raise my confidence level that this isnt merely luck.

But, Im usually not comfortable until I see at least 200 trades, based on my experience of running, oh, hundreds of millions of backtests.

My backtest system shows me my %win and profit factor "on the fly" as im crunching, so that if 1000 trades go by and the numbers are pure crap, I dont bother waiting for it to finish.
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traderdragon2,

What backtesting software do you use?
 
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