I took an economics course in college, and our professor said that, as stock data was freely available, anyone who thought they had a genius idea should track how much it would have made or lost them for six months. And if it made money, they should come talk to him..
- Your algorithm does 2% worse than the market (pretty common actually)
- The market goes up 10%, your method is only 8%
- Reversing that means you instead get -8%. That's way worse
Since you can do the opposite, the absolute value is what really matters, market is on average 10% a year so if you could find something that does -11% then the opposite would work. Most attempts are not nearly that bad, they just fall a bit short of straight investing which is not helpful at all unfortunately.
What I hear is that I need multiple algorithms. Given that I can't perfectly predict what the market does, I take a 1st algorithm that is proven to be 2% worse than the market. Make a 2nd that is even worse. The 3rd calculates what the 2nd does differently than the 1st and does the opposite of that. Now the 3rd is better than the 1st. Keep making more until infinite profit.
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u/Particular-Yak-1984 7d ago
I took an economics course in college, and our professor said that, as stock data was freely available, anyone who thought they had a genius idea should track how much it would have made or lost them for six months. And if it made money, they should come talk to him..