Re:Using an automated day trader to generate income
by paddy_m on Monday December 08, 2008 @09:05PM
(#390789)
Check out "My Life as a Quant" by Emanuel Derman http://www.amazon.com/My-Life-Quant-Reflections-Physics/dp/0...
and this book about Fischer Black's (of Black Scholes) work in finance. http://www.amazon.com/Fischer-Black-Revolutionary-Idea-Finan...
Re:Using an automated day trader to generate income
by mattmaroon on Monday December 08, 2008 @07:43PM
(#390681)
What's the merit to publishing a successful algorithm? Or using a previously published algorithm that any hedge fund manager or resourceful individual can find and implement trivially.
Re:Using an automated day trader to generate income
by matt1 on Monday December 08, 2008 @09:08PM
(#390793)
A better question is how do you know your algorithm is successful? If it predicts correctly 10 days in a row, have you got a winner? It's like those guys that advertise by saying "We outperformed the market by 6.2% on average the last four years." Put enough monkeys in front of a trading terminal and you're going to have some that outperform the market by 6.2%; doesn't mean you should invest your money with them.
Re:Using an automated day trader to generate income
by gaius on Tuesday December 09, 2008 @05:19AM
(#391164)
Have you ever wondered how every fund manager has a fund in the top 25%? It's easy, they launch several funds in one sector, then after a few years merge them all into the top one, and use its historical performance for the marketing materials not the average of them all.
Re:Using an automated day trader to generate income
by mattmaroon on Tuesday December 09, 2008 @02:23AM
(#391077)
You can't. You can only know your algorithm was successful. The market is changing, so even if you could prove, given variance and sample size, that your algorithm was +EV and not merely lucky, you would only be proving that it was +Ev and not merely lucky. Not that it will be in the future.
and on having the "secret sauce" to beat the market. Read about Edward Thorpe. He's a badass. He wrote the book "beat the dealer" which was the bible on counting cards and beating vegas at blackjack.
Then he figured out how to price options (convertibles, really) and made a killing in his own hedge fund (Princeton Newport Associates, I believe).
He had the secret sauce, used it to make a killing instead of publishing it. YEARS later, black and scholes published the essentially SAME formula for price options and eventually won a nobel price for their work.
But Thorpe stuck to his guns and made his fortune. Merits to both sides, I suppose.