Any strategy works as long as only one investor knows about it - page 2
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May I ask what you 'smoke'? ))
Absolutely right question. (Somehow I didn't notice it at first... - it's a very interesting topic...)
Despite the excessive maximalism of the topicstarter, we must admit that it has a reasonable grain. I would only formulate the ratio differently:
Any simple profitable strategy will probably (though not necessarily) remain so as long as the amount of money invested in trades in that strategy is unable to generate a noticeable (easily computable) market response.
After that, her days are numbered. Amen.
Despite the excessive maximalism of the topicstarter, we must admit that it has a reasonable grain. I would only formulate the ratio differently:
Any simple profitable strategy will probably (though not necessarily) remain so as long as the amount of money invested in trades in that strategy is unable to generate a noticeable (easily computable) market response.
After that, her days are numbered. Amen.
In general, if you think about it... Market fluctuations are determined by big players (various funds, etc.). They make large trades and this creates an imbalance in the market, which seeks to compensate for the imbalance and arrive at an equilibrium state. The question is whether all private investors in the world (even assuming they use the same strategy) can make adjustments to the market with their transactions commensurate with the influence of the big players...
In general, if you think about it... Market fluctuations are determined by big players (various funds, etc.). They make large trades and this creates an imbalance in the market, which seeks to compensate for the imbalance and arrive at an equilibrium state. The question is whether all private investors in the world (even assuming they use the same strategy) can make adjustments to the market with their trades commensurate with the influence of the big players...
I'm sure that the above ratio applies to players of all calibres.
It's just that there are factors in it that are difficult to formalise. For example, what does simple strategy mean? Or easy to calculate? I wouldn't take the trouble to articulate it unequivocally...
I would say that the response is not easy to calculate, but easy to detect.
Any simple profitable strategy will probably (though not necessarily) remain so as long as the amount of money invested in trades in that strategy is unable to generate a noticeable (easily computed) market response.
After that, her days are numbered. Amen.
Yep, we've gotten to the concept of "market impact". The market influence decreases very simply - we should not hit the market with a thousand lots, but to divide the order into small pieces and send them for some time.
Strategies are more likely to stop working because the markets are becoming more efficient.
You should not hit the market with a thousand lots, but divide the order into small chunks and send them over a period of time.
Yep, getting to the concept of "market impact".
1. The impact is reduced very simply - do not hit the market with a thousand lots, but divide the order into small pieces and send them over a period of time.
2. Strategies are more likely to stop working because the markets are becoming more efficient.
1. ...Will help some strategies to last for a while ...
2. Well that's how I claim to anatomise the self-regulating mechanism of said efficiency. :) As mechanical trading evolves, this self-regulation itself becomes more and more efficient. :))
And then the efficiency of "entry" tends to decrease. It is most normal to have a dozen strategies on a large depot.