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Are random trading strategies more successful than technical ones?

journals.plos.org

11–20 of 76 posts

Re: Are random trading strategies more successful than technical ones?

#11

>Recently Taleb has brilliantly discussed in his successful books [15], [16] how chance and black swans rule our life, but also economy and financial market behavior beyond our personal and rational expectations or control. Actually, randomness enters in our everyday life although we hardly recognize it. Therefore, even without being skeptic as much as Taleb, one could easily claim that we often misunderstand phenome…

>the FAANG index in which each company is worth at least $100 billion has pretty much beaten everything else since 2009. In some sense I think this speaks more to the way that the US regulatory framework allows dominant players in a given market segment to retain and reinforce their dominance. You can argue that these type of investments are "quality" or "safe", but the reasoning behind that label isn't going to be b…

They're also information technology companies. Maybe it shows just how of a part of daily life they are? The only ones whose I don't interact directly with (intentionally) on a daily basis are Apple and Facebook. For most people Facebook would be included in their daily use.

How many other companies are there that aren't IT related that you interact with on a daily basis? You might use your chair and toothbrush every day, but that doesn't require anything from the company that sold you the chair. Using Google does require Google's servers to respond though.

Re: Are random trading strategies more successful than technical ones?

#12
Sadly, the abstract doesn’t include the result, so here it is so you can decide if you want to read more:

> Our main result, which is independent of the market considered, is that standard trading strategies and their algorithms, based on the past history of the time series, although have occasionally the chance to be successful inside small temporal windows, on a large temporal scale perform on average not better than the purely random strategy, which, on the other hand, is also much less volatile.

Re: Are random trading strategies more successful than technical ones?

#13
I love stuff like this. Pure comedy gold. It reminds me that someone can have all the knowledge, all the statistical tools in the world and still make huge mistakes (no, not explaining it, making too much money atm...maybe in a few decades). To the man with a hammer.

Re: Are random trading strategies more successful than technical ones?

#14
post #10

Doesn't the conclusion indirectly also indicate that day trading is a zero sum game? If the answer is yes, then the only way you can make money from day trading is from commissions you earn performing day trade on behalf of other parties with money.

Poker is a "zero sum game", yet experts routinely win money from the suckers. Unlike Craps, Poker as a huge skill component.

Re: Are random trading strategies more successful than technical ones?

#15

>Recently Taleb has brilliantly discussed in his successful books [15], [16] how chance and black swans rule our life, but also economy and financial market behavior beyond our personal and rational expectations or control. Actually, randomness enters in our everyday life although we hardly recognize it. Therefore, even without being skeptic as much as Taleb, one could easily claim that we often misunderstand phenome…

> Consider this obvious thought experiment: given a choice between having to choose between a $10 bill or a $20 bill on the sidewalk, all else being equal, everyone will choose the $20.

Where's the experiment part?

Re: Are random trading strategies more successful than technical ones?

#16
post #10

Doesn't the conclusion indirectly also indicate that day trading is a zero sum game? If the answer is yes, then the only way you can make money from day trading is from commissions you earn performing day trade on behalf of other parties with money.

The conclusion does not imply anything about day trading being a zero sum game.

Re: Are random trading strategies more successful than technical ones?

#17
Prices are pretty well modeled using Brownian motion. Most economists should know this while almost no one in the normal population will be aware of it. Sometimes people are just lucky, but overall the more trades you make the more you'll converge on the average return rate.

I would also like to note, that predicting price is different from predicting an overall increase in the value of the underlying security.

https://en.wikipedia.org/wiki/Brownian_model_of_financial_ma...

Re: Are random trading strategies more successful than technical ones?

#18
post #10

Doesn't the conclusion indirectly also indicate that day trading is a zero sum game? If the answer is yes, then the only way you can make money from day trading is from commissions you earn performing day trade on behalf of other parties with money.

This is a misunderstanding of zero-sums games.

Zero-sums game are actually proven to have a winning strategy.

Chess is a zero sum game.

Re: Are random trading strategies more successful than technical ones?

#19
post #10

Doesn't the conclusion indirectly also indicate that day trading is a zero sum game? If the answer is yes, then the only way you can make money from day trading is from commissions you earn performing day trade on behalf of other parties with money.

No.

First they ran in simulation, not the real market. It may be that that act of being in the market changes the market enough to make your strategy work. (though typically it is the opposite - things work in simulation but applying them to the market makes them not work). As such this paper doesn't really tell us anything useful.

Even if we ignore the above, they only tested a few different strategies. That says nothing about any other trading strategy that someone might apply: any of them might work.

I still think day trading is a bad way to invest, but this paper doesn't prove anything even though it speaks to my bias.

Re: Are random trading strategies more successful than technical ones?

#20

Prices are pretty well modeled using Brownian motion. Most economists should know this while almost no one in the normal population will be aware of it. Sometimes people are just lucky, but overall the more trades you make the more you'll converge on the average return rate. I would also like to note, that predicting price is different from predicting an overall increase in the value of the underlying security. https…

On average, but prices come from the value of the company behind them long term which is not always brownian and so someone who knows the company can get in/out ahead of someone who trusts only brownian motion.
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