My point is when it comes to investing, inaction IS action too. Therefore an investment algorithm does not need to beat the market. It just needs to beat doing nothing.
Consider that if you have earnings you can put money into an IRA account and then trade with it almost for free.
It wasn’t great outside of the spreadsheet.
I forget the exact numbers, but imagine: making 0.1% per transaction sounds amazing until you find out the transaction fee is 1%.
> Consider that if you have earnings you can put money into an IRA account and then trade with it almost for free.
This was the UK in 2005 — no IRAs [0], and I received 5% on my current account around then.
[0] Actually it’s worse than that — if you went into a UK bank in the early 2000s and said “IRA”, I’d expect the armed response unit to be called.
Iirc, last I checked, bitmex cost 0.075% to take liquidity, and paid 0.025 to give liquidity (which should be noted, is more than a tick - so, market making on bitmex is free money in an unpredictable market - which has made it technically expensive)
INET had a similar incentive structure before they were bought by Nasdaq, as did BATS when it started - it’s a common way to jumpstart liquidity in a new exchange.
Robinhood and IB will let you trade for free today (with other hidden and hard to quantify costs related to their order flow transactions instead)
So there’s no general solution - the details keep changing - but there’s likely a way to make nice profit of 0.1%.
But, even if I’d implemented it perfectly, and even if the algorithm has survived the financial crash, it would’ve only worked if I could trade for free, and other people copying the algorithm would probably have made it stop working.