Updated: Apr 16, 2022
I have been addicted to strategy innovation research recently. The more I dig into this field the more I realized how many mistakes we have made in portfolio management. We almost lose 99% chances to make alpha. It's not your fault, neither is mine. It is the nature or say the limit of our human being. We are so far from perfect!
Let's start from sharing a simple strategy back test curve.
From the curve you can say that in a simple 2-3 rules strategy, it can make five times profit in just 50-60 trading sector with each sector holding 2-3 winning bars. One-third of this achievement will take 5000 trade section, which is 22 years!
The curve is not smooth enough? Let's see another one.
This is a 4 rules in-sample-trading curve that takes 600 trade sectors and makes more than 20 times better performance in just 1/8 time period!
Still not good enough? How about this one? A machine selected strategy, randomly.
I know most of the big guys like Goldman Sachs has already equipped with AI trading technologies, something better than this.
So what do you think? Retail traders curse these institutional players to have taken too much from the market?
I think it might be their mercy not having taken all of the profit. The only reason that I can think of is liquidity or the fact they need to keep the retail traders in the game to provide counter partners with certain level of enthusiasm.
Of course, all the strategies still subject to coordination from the brokers who must have proper reliability and algo capability in their platform system to get sound robot trading effects...
I don't want to say too much here to depress the retail traders' confidence. Actually the whole industry needs a lot confidence and attention to run the games. It's nothing wrong.
For me I am just amazed by the facts and would like to share my two cents.
Another place I usually share my strategy studies is the forum on www.finew.org everybody is welcome to join me there and reveal more interesting things in this field.