Author Topic: Getting risky in here... Jumping out of the index funds  (Read 12222 times)

mtn

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Getting risky in here... Jumping out of the index funds
« on: January 31, 2018, 09:28:55 AM »
Anybody ever done it? I'm about to jump out of index funds with my IRA and into a "day trading" strategy (algorithm).

I've run approximately 100 backtests with this strategy on Quantopian with various starts and ends. It almost never loses. Obviously live trading won't be as good, but I'm still ready to jump in.

Note: I say day trading, but this strategy only has you buying (if you buy) on the first of the month, and you sell throughout the month (or don't). It isn't day trading in the traditional sense; in a single month the most transactions that I have seen was 17 transactions--and that was starting with $500,000 initial capital.

Travis

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Re: Getting risky in here... Jumping out of the index funds
« Reply #1 on: January 31, 2018, 09:48:18 AM »
Anybody ever done it? I'm about to jump out of index funds with my IRA and into a "day trading" strategy (algorithm).

I've run approximately 100 backtests with this strategy on Quantopian with various starts and ends. It almost never loses. Obviously live trading won't be as good, but I'm still ready to jump in.

Note: I say day trading, but this strategy only has you buying (if you buy) on the first of the month, and you sell throughout the month (or don't). It isn't day trading in the traditional sense; in a single month the most transactions that I have seen was 17 transactions--and that was starting with $500,000 initial capital.

If it's so obvious, why are you doing it? And with your retirement savings no less? 

GuitarStv

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Re: Getting risky in here... Jumping out of the index funds
« Reply #2 on: January 31, 2018, 09:52:31 AM »
Why do you believe that your algorithm will beat the other people in the market consistently?

Fysidiko

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Re: Getting risky in here... Jumping out of the index funds
« Reply #3 on: January 31, 2018, 09:54:36 AM »
What's your algorithm? Not much point posting this if you aren't willing to tell us (and a few people seeing it here is hardly going to turn the market against you).

mtn

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Re: Getting risky in here... Jumping out of the index funds
« Reply #4 on: January 31, 2018, 09:55:00 AM »
Anybody ever done it? I'm about to jump out of index funds with my IRA and into a "day trading" strategy (algorithm).

I've run approximately 100 backtests with this strategy on Quantopian with various starts and ends. It almost never loses. Obviously live trading won't be as good, but I'm still ready to jump in.

Note: I say day trading, but this strategy only has you buying (if you buy) on the first of the month, and you sell throughout the month (or don't). It isn't day trading in the traditional sense; in a single month the most transactions that I have seen was 17 transactions--and that was starting with $500,000 initial capital.

If it's so obvious, why are you doing it? And with your retirement savings no less?

Sorry, I guess it isn't so obvious--Live trading won't be as good because there will be slippage. My algorithm and its backtests have an immediate strike, in the real world I'll be off by a few cents per trade. I've figured it to be about 1-2%, worst case--which still puts me way better than my 401k (all Vanguard).

And I'm doing it within the IRA (which accounts for about 20% of my retirement savings) becasue capital gains would crush this if I were to do it in a taxable account. That, and the results have been impressive in the backtests.

mtn

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Re: Getting risky in here... Jumping out of the index funds
« Reply #5 on: January 31, 2018, 10:04:06 AM »
What's your algorithm? Not much point posting this if you aren't willing to tell us (and a few people seeing it here is hardly going to turn the market against you).



It is a modified version of these two:
https://www.quantopian.com/posts/my-version-of-andreas-clenow-momentum-strategy
https://www.quantopian.com/posts/long-only-value-momentum-strategy-with-filter-first-algo

PM me and I'm happy to share my exact algorithm--I don't want to publicly though.

mtn

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Re: Getting risky in here... Jumping out of the index funds
« Reply #6 on: January 31, 2018, 10:04:57 AM »
Why do you believe that your algorithm will beat the other people in the market consistently?

I only care about it beating me--and by me, I mean the typical Bogle/Mustachian mix of investments. And so far it has done that in backtests.

Travis

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Re: Getting risky in here... Jumping out of the index funds
« Reply #7 on: January 31, 2018, 10:10:04 AM »
Anybody ever done it? I'm about to jump out of index funds with my IRA and into a "day trading" strategy (algorithm).

I've run approximately 100 backtests with this strategy on Quantopian with various starts and ends. It almost never loses. Obviously live trading won't be as good, but I'm still ready to jump in.

Note: I say day trading, but this strategy only has you buying (if you buy) on the first of the month, and you sell throughout the month (or don't). It isn't day trading in the traditional sense; in a single month the most transactions that I have seen was 17 transactions--and that was starting with $500,000 initial capital.

If it's so obvious, why are you doing it? And with your retirement savings no less?

Sorry, I guess it isn't so obvious--Live trading won't be as good because there will be slippage. My algorithm and its backtests have an immediate strike, in the real world I'll be off by a few cents per trade. I've figured it to be about 1-2%, worst case--which still puts me way better than my 401k (all Vanguard).

And I'm doing it within the IRA (which accounts for about 20% of my retirement savings) becasue capital gains would crush this if I were to do it in a taxable account. That, and the results have been impressive in the backtests.

1-2% difference in your overall ROI, or more like 7.01% vs 7.0%?  What's in your 401K that sucks so bad this would be a better strategy?

Dicey

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Re: Getting risky in here... Jumping out of the index funds
« Reply #8 on: January 31, 2018, 10:26:14 AM »
This is suuuuuch a bad idea.

You're taking something that requires no work and turning it into something that does. Are you including the value of your time in your returns calculations? How long have you worked on this algorithm? 

If it's as good as you say it is, why not just sell it for a huge price and be instantly FIRE?

dougules

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Re: Getting risky in here... Jumping out of the index funds
« Reply #9 on: January 31, 2018, 10:31:10 AM »
Are you trolling us?

anisotropy

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Re: Getting risky in here... Jumping out of the index funds
« Reply #10 on: January 31, 2018, 10:35:16 AM »
Anybody ever done it? I'm about to jump out of index funds with my IRA and into a "day trading" strategy (algorithm).

I've run approximately 100 backtests with this strategy on Quantopian with various starts and ends. It almost never loses. Obviously live trading won't be as good, but I'm still ready to jump in.

Note: I say day trading, but this strategy only has you buying (if you buy) on the first of the month, and you sell throughout the month (or don't). It isn't day trading in the traditional sense; in a single month the most transactions that I have seen was 17 transactions--and that was starting with $500,000 initial capital.

Yes I've heard of this method, it's a momentum strategy. Momentum works, it is one of the biggest middle finger to the EMH. My concern about this strategy in general is getting whipsawed when the trend is not clear (usually at inflection points).

BigHaus89

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Re: Getting risky in here... Jumping out of the index funds
« Reply #11 on: January 31, 2018, 10:48:20 AM »
Have fun losing money. This is a fools errand.

Eric

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Re: Getting risky in here... Jumping out of the index funds
« Reply #12 on: January 31, 2018, 10:56:11 AM »
Your own proprietary algorithm that backtests well?  What could go wrong?

ChpBstrd

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Re: Getting risky in here... Jumping out of the index funds
« Reply #13 on: January 31, 2018, 11:29:59 AM »
How far back do the backtests go?
E.g. if they only cover the past several years (a historic bull market) then a strategy of leveraging synthetic longs on tech stocks probably beats everything else. However, we don't get to relive the past and the market has been known to rotate sectors, bear/bull conditions, bubbles and panics, etc. Chasing strategies that worked in the past is as dangerous as chasing the unicorn stocks of any givrn era. Do your backtests cover all historical conditions, or account for conditions that have not yet happened, but could?

Second, not all risk is equal. The risk of an index fund losing 25% occurs in the same scenario as some options strategies losing 250%.

Last, if this is truly a durable oportunity to generate alpha and not a coincidence of past returns, why has a hedge fund not yet identified this algorithm and arbitraged it away?

You don't owe me answers to these questions, you owe answers to yourself.

anisotropy

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Re: Getting risky in here... Jumping out of the index funds
« Reply #14 on: January 31, 2018, 12:00:46 PM »

Last, if this is truly a durable oportunity to generate alpha and not a coincidence of past returns, why has a hedge fund not yet identified this algorithm and arbitraged it away?


They have, in a way. Renaissance Technologies is one of the famous ones out there. The industry didn't really pour that much resources into quant funds in its earnest until 16/17. So far, the results are encouraging.

The problem, like I said in my earlier reply, is when the trend breaks down or momentum slows, the algo gets confused and can lose money.
http://www.businessinsider.com/aqr-two-sigma-man-group-quant-hedge-funds-post-losses-2017-8

Also, it is hard to assess the strategy as a whole since algos can be really different from each other. Ren Tech (super secretive flagship fund) has produced index crushing results for well over a decade, in fact, the results are so good some people even question if they are real.

waltworks

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Re: Getting risky in here... Jumping out of the index funds
« Reply #15 on: January 31, 2018, 01:20:54 PM »
If I were you, I'd go work for a hedge fund and get paid 2/20 to risk *other people's* money on your awesome algo.

But hey, good luck. Let us know how it went in 5 years. I'll be out riding my mountain bike taking whatever returns the market happens to give me.

-W

Financial.Velociraptor

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Re: Getting risky in here... Jumping out of the index funds
« Reply #16 on: January 31, 2018, 02:53:27 PM »
Anybody ever done it? I'm about to jump out of index funds with my IRA and into a "day trading" strategy (algorithm).

I've run approximately 100 backtests with this strategy on Quantopian with various starts and ends. It almost never loses. Obviously live trading won't be as good, but I'm still ready to jump in.

Note: I say day trading, but this strategy only has you buying (if you buy) on the first of the month, and you sell throughout the month (or don't). It isn't day trading in the traditional sense; in a single month the most transactions that I have seen was 17 transactions--and that was starting with $500,000 initial capital.

Best of luck.  I've consistently beaten the market with an income centric options strategy since I start in 2009.  I remain concerned that I am untested in a bear market.  Theoretically, my approach has less risk that long equity but I haven't proven it yet.  Thus, I'm 40% in fixed income, variable rate, and preferreds.  My budget will survive a bear.

My advice is this: be able to make ends meet without this strategy.  The peanut gallery here doesn't want to believe it but plenty of people make money trading the markets.  They just happen to be the ones who have the luxury to NOT make a trade and sit on their hands when the only thing(s) on offer are like picking up nickles in front of a steamroller.

Good trading, sir!

dougules

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Re: Getting risky in here... Jumping out of the index funds
« Reply #17 on: January 31, 2018, 03:39:58 PM »
Anybody ever done it? I'm about to jump out of index funds with my IRA and into a "day trading" strategy (algorithm).

I've run approximately 100 backtests with this strategy on Quantopian with various starts and ends. It almost never loses. Obviously live trading won't be as good, but I'm still ready to jump in.

Note: I say day trading, but this strategy only has you buying (if you buy) on the first of the month, and you sell throughout the month (or don't). It isn't day trading in the traditional sense; in a single month the most transactions that I have seen was 17 transactions--and that was starting with $500,000 initial capital.

Best of luck.  I've consistently beaten the market with an income centric options strategy since I start in 2009.  I remain concerned that I am untested in a bear market.  Theoretically, my approach has less risk that long equity but I haven't proven it yet.  Thus, I'm 40% in fixed income, variable rate, and preferreds.  My budget will survive a bear.

My advice is this: be able to make ends meet without this strategy.  The peanut gallery here doesn't want to believe it but plenty of people make money trading the markets.  They just happen to be the ones who have the luxury to NOT make a trade and sit on their hands when the only thing(s) on offer are like picking up nickles in front of a steamroller.

Good trading, sir!

Peanut gallery's response:
a)  You will probably make money since you're riding the overall market like the rest of us.  It's more about how you will do in relation to passive investing.  2009 to now is not a very good test of a strategy. 
b)  You're talking in terms of making money off of trading (speculation) and not in terms of making money off of simply owning profitable businesses over time (investment). 
c)  Trading costs money.  A lot of passive investing is about reducing friction costs. 
d)  Trading is a job in and of itself.  You'll either have to do your homework or pay somebody else to do it.  What's the point of passive income if it's not actually passive?
« Last Edit: January 31, 2018, 03:50:39 PM by dougules »

gerardc

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Re: Getting risky in here... Jumping out of the index funds
« Reply #18 on: January 31, 2018, 03:49:21 PM »
Uhh, successful back-testing means beating the index, not simply a positive return. I say go for it OP, that sounds like an interesting hobby and only 20% of your stash isn't risky. Worst case you won't beat the index and make 6% return instead of 7%.

Eric

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Re: Getting risky in here... Jumping out of the index funds
« Reply #19 on: January 31, 2018, 04:30:10 PM »
Uhh, successful back-testing means beating the index, not simply a positive return. I say go for it OP, that sounds like an interesting hobby and only 20% of your stash isn't risky. Worst case you won't beat the index and make 6% return instead of 7%.

Yeah, that's not the worst case.

ysette9

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Re: Getting risky in here... Jumping out of the index funds
« Reply #20 on: January 31, 2018, 05:04:55 PM »
I’m curious to see how this goes. If you do best the market, i’d like to know by how much, and how much time you end up putting in to do it.

gerardc

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Re: Getting risky in here... Jumping out of the index funds
« Reply #21 on: January 31, 2018, 05:19:21 PM »
Uhh, successful back-testing means beating the index, not simply a positive return. I say go for it OP, that sounds like an interesting hobby and only 20% of your stash isn't risky. Worst case you won't beat the index and make 6% return instead of 7%.

Yeah, that's not the worst case.

That was an hyperbole obviously, worst case is the world explodes and we all die.

eudaimonia

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Re: Getting risky in here... Jumping out of the index funds
« Reply #22 on: January 31, 2018, 05:38:02 PM »
What's your algorithm? Not much point posting this if you aren't willing to tell us (and a few people seeing it here is hardly going to turn the market against you).

It is a modified version of these two:
https://www.quantopian.com/posts/my-version-of-andreas-clenow-momentum-strategy
https://www.quantopian.com/posts/long-only-value-momentum-strategy-with-filter-first-algo

PM me and I'm happy to share my exact algorithm--I don't want to publicly though.

Three most important questions to answer as a quant trader: 1) did you take into account the vig (spread + comm + slippage for every trade), 2) how many degrees of freedom do you have? 3) Finally, have you contaminated the data with your testing (was this run with walk-forward out of sample data)?

If you can't answer 1) yes, 2) less than 5, and 3) yes then you can't trust your results. Even if all of those three are ok there is still a 70% chance your out of sample data will fail. Committing all your funds to 1 algo is insane. For my own trading I have at least a half dozen systems running (all that meet the parameters above) and I am constantly working on new ones to replace the systems that fail.

Capt j-rod

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Re: Getting risky in here... Jumping out of the index funds
« Reply #23 on: January 31, 2018, 06:10:45 PM »
I "play" with my ameritrade account. It is NOT part of my retirement. I have done well but when I add up all the hours and bullshit, I can't really beat the Vangard. It's like heating your home with wood. By the time you take the time, buy the saws, do the work and heat your house you could have worked at Home Depot and paid the gas bill with money to boot. However, if you enjoy, the work, the outdoors, the exercise, and the wonderful warm heat... Go for it. Especially if you still have enough money left to pay the gas bill LOL

waltworks

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Re: Getting risky in here... Jumping out of the index funds
« Reply #24 on: January 31, 2018, 06:24:22 PM »
I like the heating with wood analogy.

For me, investing means NOT WORKING. If I have to spend time creating strategies to follow, monitoring the market, not sleeping at night, etc - that's not investing. That's a job. F that.

-W

anisotropy

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Re: Getting risky in here... Jumping out of the index funds
« Reply #25 on: January 31, 2018, 06:49:10 PM »
a)  You will probably make money since you're riding the overall market like the rest of us.  It's more about how you will do in relation to passive investing.  2009 to now is not a very good test of a strategy. 

I disagree, considering how poorly most active funds did since then, a strategy that consistently beat the market (as F.V pointed out in his post) after 2009 is nothing short of spectacular. Of course, it also matters how much the strategy outperforms the index returns net of fees and taxes, but a beat is a beat.

To the OP:
There are many methods that investors can outperform the index, be it value, momentum, quant, macro, etc; but investors using proven strategies rarely beat the market due to psychological reasons. The important part (to me) is to stick with your chosen method but also update your degree of belief from time to time.
http://www.philosophicaleconomics.com/2017/09/pmbtdo/

Good luck, maybe one day the people that beat the market on a 5yr or 10yr or even 15yr period could get together for a drink or something.

Padonak

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Re: Getting risky in here... Jumping out of the index funds
« Reply #26 on: January 31, 2018, 08:19:11 PM »
nvm will pm
« Last Edit: January 31, 2018, 08:40:44 PM by Padonak »

blinx7

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Re: Getting risky in here... Jumping out of the index funds
« Reply #27 on: January 31, 2018, 08:26:41 PM »

I personally don't think it is worth it, but it may be fine to do this with:

A small percentage of your savings
A small percentage of your time
Limited risk (e.g., not naked calls)

Plus make sure to keep really good records so you can track your performance in good times and bad and also figure out your dollar per hour.  Ask yourself if you are beating the market, if so is by taking on extra risk or just smart trades, and what's your dollar per hour return (i.e., gains versus index divided by hours worked).

I'm sure there are folks flying under the radar who with lots of knowledge and experience are managing to come out ahead on average and enjoy the experience.  I don't think it's that many people, or the average returns are that spectacular, but if you can make is a sustainable side hustle and enjoy it more, and make more, than driving Uber, why not?


aspiringnomad

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Re: Getting risky in here... Jumping out of the index funds
« Reply #28 on: January 31, 2018, 10:18:33 PM »

Best of luck.  I've consistently beaten the market with an income centric options strategy since I start in 2009.  I remain concerned that I am untested in a bear market.  Theoretically, my approach has less risk that long equity but I haven't proven it yet.  Thus, I'm 40% in fixed income, variable rate, and preferreds.  My budget will survive a bear.


I believe it, but I'd be curious to hear how you've beaten the market over that time period with an income-centric portfolio. The S&P has returned >11% seven of the nine years since 2009 and >15% in five of those years. Fixed income and preferred equity have largely underperformed those returns which leads me to believe that your option strategy must have been high-risk or that the other 60% of your portfolio somehow made up the shortfall and then some.


I'm sure there are folks flying under the radar who with lots of knowledge and experience are managing to come out ahead on average and enjoy the experience.  I don't think it's that many people, or the average returns are that spectacular, but if you can make is a sustainable side hustle and enjoy it more, and make more, than driving Uber, why not?


This is probably true, but not likely due to any genius investing prowess. For one, in a large population of investors there is going to be some significant number of people (but not percentage) who beat the market through sheer luck. And secondly, that luck can easily be achieved by owning a substantial amount of just one stock that outperforms the market along with a basket of market tracking ETFs, which I bet happens often. See me, for example. Individual stocks currently represent ~10% of my portfolio, but they're almost all tech stocks (e.g., AAPL, GOOGL, etc.). It's a somewhat risky concentration but given the run that tech has had, it means that thanks to ~10% of my portfolio, I've outperformed the S&P with a stupidly simple investing thesis: these giant tech companies have an outsize ability to attract top talent and some would increasingly become unregulated utilities of sorts (GOOGL has been in such an unprecedented sweet spot where they technically have competition and yet they have no real competition for search). And hey, if I'm wrong, it's just a small percentage of my portfolio. That thesis worked out pretty well, but even if it's obvious to a lot of people, my portfolio is probably not replicable in an active fund scenario where investors expect something significantly more sophisticated and less dependent on passive ETFs for the other 90~ of the portfolio. It's also not replicable over several decades.

Now if I could just go back and unsell AMZN...another company that's been successful in seeking to be an unregulated utility of sorts.

Radagast

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Re: Getting risky in here... Jumping out of the index funds
« Reply #29 on: January 31, 2018, 10:30:34 PM »
Are you including the value of your time in your returns calculations?
I am increasingly thinking that, except for special circumstances, every minute spent on investing after learning of Vanguard Target Date funds (err toward the more distant dates) and S&P500 funds (when those aren't available) is wasted, if you factor in the value of your time.

AdrianC

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Re: Getting risky in here... Jumping out of the index funds
« Reply #30 on: February 01, 2018, 08:04:47 AM »
What's your algorithm? Not much point posting this if you aren't willing to tell us (and a few people seeing it here is hardly going to turn the market against you).

It is a modified version of these two:
https://www.quantopian.com/posts/my-version-of-andreas-clenow-momentum-strategy
https://www.quantopian.com/posts/long-only-value-momentum-strategy-with-filter-first-algo

PM me and I'm happy to share my exact algorithm--I don't want to publicly though.

The Mechanical Investing board at Motley Fool might be a good resource. Some very smart folks on there.

http://boards.fool.com/mechanical-investing-100093.aspx?mid=32970649

MasterStache

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Re: Getting risky in here... Jumping out of the index funds
« Reply #31 on: February 01, 2018, 08:27:43 AM »
I like the heating with wood analogy.

For me, investing means NOT WORKING. If I have to spend time creating strategies to follow, monitoring the market, not sleeping at night, etc - that's not investing. That's a job. F that.

-W

Yep!!

dougules

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Re: Getting risky in here... Jumping out of the index funds
« Reply #32 on: February 01, 2018, 11:07:13 AM »
a)  You will probably make money since you're riding the overall market like the rest of us.  It's more about how you will do in relation to passive investing.  2009 to now is not a very good test of a strategy. 

I disagree, considering how poorly most active funds did since then, a strategy that consistently beat the market (as F.V pointed out in his post) after 2009 is nothing short of spectacular. Of course, it also matters how much the strategy outperforms the index returns net of fees and taxes, but a beat is a beat.


If you'd been running your strategy since the 90's I'd say it was a somewhat decent test.  The strategy hasn't even seen a bear market yet.  Only when the tide goes out do you discover who's been swimming naked.

anisotropy

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Re: Getting risky in here... Jumping out of the index funds
« Reply #33 on: February 01, 2018, 11:27:14 AM »
a)  You will probably make money since you're riding the overall market like the rest of us.  It's more about how you will do in relation to passive investing.  2009 to now is not a very good test of a strategy. 

I disagree, considering how poorly most active funds did since then, a strategy that consistently beat the market (as F.V pointed out in his post) after 2009 is nothing short of spectacular. Of course, it also matters how much the strategy outperforms the index returns net of fees and taxes, but a beat is a beat.


If you'd been running your strategy since the 90's I'd say it was a somewhat decent test.  The strategy hasn't even seen a bear market yet.  Only when the tide goes out do you discover who's been swimming naked.

Yes that is very true, I agree with this wholeheartedly. But a key part of outperforming the market is to recognize opportunities at different stages of the market cycle, if one spotted a low risk environment (09 - present) and acted accordingly, I gotta give credit where credit is due.

mtn

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Re: Getting risky in here... Jumping out of the index funds
« Reply #34 on: February 01, 2018, 11:57:07 AM »
So, I've put this into play. So far I'm up approximately 9.5% in 9 days (including weekend days). Obviously this is a "bull" pick for the algorithm, I'll have days of similar if not greater loss soon I'm sure.

This has been 3 buys (2 were the same stock) and 1 sell. I had modified the algo to get in earlier--so I bought on the 23rd, then remodified to get in only on the first of the month, so in the future I won't have 2 buys of the same stock in the same 9 day period.

For those asking about backtests and stuff, I'm only able to go back to 2002. But I have 5 corrections and a recession. Every single backtest--no matter start date or amount of initial capital--had me holding only cash from June 1st 2008 through May 31st 2009.

AdrianC

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Re: Getting risky in here... Jumping out of the index funds
« Reply #35 on: February 01, 2018, 02:30:10 PM »
Anybody ever done it? I'm about to jump out of index funds with my IRA and into a "day trading" strategy (algorithm).

So, I've put this into play. So far I'm up approximately 9.5% in 9 days (including weekend days). Obviously this is a "bull" pick for the algorithm, I'll have days of similar if not greater loss soon I'm sure.

?

mtn

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Re: Getting risky in here... Jumping out of the index funds
« Reply #36 on: February 01, 2018, 02:38:18 PM »
Anybody ever done it? I'm about to jump out of index funds with my IRA and into a "day trading" strategy (algorithm).

So, I've put this into play. So far I'm up approximately 9.5% in 9 days (including weekend days). Obviously this is a "bull" pick for the algorithm, I'll have days of similar if not greater loss soon I'm sure.

?

Yeah, I lied in the earlier post--I'd already been in with about 5% of my IRA earlier. I put in the rest of the 15% today.

dougules

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Re: Getting risky in here... Jumping out of the index funds
« Reply #37 on: February 01, 2018, 03:47:35 PM »
a)  You will probably make money since you're riding the overall market like the rest of us.  It's more about how you will do in relation to passive investing.  2009 to now is not a very good test of a strategy. 

I disagree, considering how poorly most active funds did since then, a strategy that consistently beat the market (as F.V pointed out in his post) after 2009 is nothing short of spectacular. Of course, it also matters how much the strategy outperforms the index returns net of fees and taxes, but a beat is a beat.


If you'd been running your strategy since the 90's I'd say it was a somewhat decent test.  The strategy hasn't even seen a bear market yet.  Only when the tide goes out do you discover who's been swimming naked.

Yes that is very true, I agree with this wholeheartedly. But a key part of outperforming the market is to recognize opportunities at different stages of the market cycle, if one spotted a low risk environment (09 - present) and acted accordingly, I gotta give credit where credit is due.

The fat lady hasn't sung yet, though.  You can't give credit until the whole cycle has played out.  The "opportunity" may look like a good idea now, but you won't know until at least the bottom of the next recession. 

harvestbook

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Re: Getting risky in here... Jumping out of the index funds
« Reply #38 on: February 01, 2018, 03:49:24 PM »
Hmm, already massaging facts kind of signals to me this is an unreliable test. But good luck with it.

Rockies

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Re: Getting risky in here... Jumping out of the index funds
« Reply #39 on: February 01, 2018, 10:03:50 PM »
As we saw in the bitcoin bull market, all the sudden everyone became a technical analysis, day trading genius. Its easy to make money on a frothy market, but will your methods work when things turn around or stay stagnant?

Dicey

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Re: Getting risky in here... Jumping out of the index funds
« Reply #40 on: February 02, 2018, 08:52:25 AM »
Anybody ever done it? I'm about to jump out of index funds with my IRA and into a "day trading" strategy (algorithm).

So, I've put this into play. So far I'm up approximately 9.5% in 9 days (including weekend days). Obviously this is a "bull" pick for the algorithm, I'll have days of similar if not greater loss soon I'm sure.

?

Yeah, I lied in the earlier post--I'd already been in with about 5% of my IRA earlier. I put in the rest of the 15% today.
Wait! What? By your own admission you're a lying speculator?

Why does this feel like it's going to turn into a cautionary tale? I think I'll go pop some popcorn...

mtn

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Re: Getting risky in here... Jumping out of the index funds
« Reply #41 on: February 02, 2018, 10:01:43 AM »
Anybody ever done it? I'm about to jump out of index funds with my IRA and into a "day trading" strategy (algorithm).

So, I've put this into play. So far I'm up approximately 9.5% in 9 days (including weekend days). Obviously this is a "bull" pick for the algorithm, I'll have days of similar if not greater loss soon I'm sure.

?

Yeah, I lied in the earlier post--I'd already been in with about 5% of my IRA earlier. I put in the rest of the 15% today.
Wait! What? By your own admission you're a lying speculator?


Meh. Thought it was easier than saying "I'm in 5%, going to get to 20% on the first of the month".


Dicey

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Re: Getting risky in here... Jumping out of the index funds
« Reply #42 on: February 02, 2018, 10:57:11 AM »
Anybody ever done it? I'm about to jump out of index funds with my IRA and into a "day trading" strategy (algorithm).

So, I've put this into play. So far I'm up approximately 9.5% in 9 days (including weekend days). Obviously this is a "bull" pick for the algorithm, I'll have days of similar if not greater loss soon I'm sure.

?

Yeah, I lied in the earlier post--I'd already been in with about 5% of my IRA earlier. I put in the rest of the 15% today.
Wait! What? By your own admission you're a lying speculator?
Meh. Thought it was easier than saying "I'm in 5%, going to get to 20% on the first of the month".
Yup, "meh" is what I think of your strategy. You're free to do whatever you want with your own money. I'm slightly concerned others might think your plan is worth considering. Of course it completely flies in the face of the Principles of Mustachianism, so my level of concern is not much above watching and waiting, hence the popcorn.

AdrianC

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Re: Getting risky in here... Jumping out of the index funds
« Reply #43 on: February 02, 2018, 10:59:06 AM »
Meh. Thought it was easier than saying "I'm in 5%, going to get to 20% on the first of the month".

Sure.

So it seems you have your entire IRA in 2 or 3 stocks? Isn't that more risky than index funds?

mtn

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Re: Getting risky in here... Jumping out of the index funds
« Reply #44 on: February 02, 2018, 11:22:32 AM »
Meh. Thought it was easier than saying "I'm in 5%, going to get to 20% on the first of the month".

Sure.

So it seems you have your entire IRA in 2 or 3 stocks? Isn't that more risky than index funds?

With the 5% it was in 1 stock. With the (now 20%) it is in 4 stocks. Yes, this is definitely more risky than index funds. Never thought it wasn't. Potential for bigger reward.

AdrianC

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Re: Getting risky in here... Jumping out of the index funds
« Reply #45 on: February 02, 2018, 01:29:18 PM »
With the 5% it was in 1 stock. With the (now 20%) it is in 4 stocks. Yes, this is definitely more risky than index funds. Never thought it wasn't. Potential for bigger reward.

Ah. I misunderstood the thread title. Some use trend following/momentum as a way to potentially reduce risk.

Well, best of luck.

DarkandStormy

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Re: Getting risky in here... Jumping out of the index funds
« Reply #46 on: February 02, 2018, 02:06:54 PM »
Anyone can back test and look like a genius.  You have the HUGE advantage of actually seeing how things played out.

gerardc

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Re: Getting risky in here... Jumping out of the index funds
« Reply #47 on: February 03, 2018, 08:20:55 AM »
Anyone can back test and look like a genius.  You have the HUGE advantage of actually seeing how things played out.

Depends, his algorithm probably doesn't have this advantage (it needs to output decisions based on past events, not future). If it has many hyper-parameters, then choosing them using back-testing performance IS an advantage, but if it has only a few (as it should), overfitting should be minimal.

Mighty-Dollar

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Re: Getting risky in here... Jumping out of the index funds
« Reply #48 on: February 03, 2018, 01:28:15 PM »
I'm about to jump out of index funds with my IRA and into a "day trading" strategy (algorithm).
If this algorithm is so fool-proof then tell us if the market has bottomed out yet? When do you get back in? Every sell strategy needs not just an exit point, but a re-entry point.

Cycling Stache

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Re: Getting risky in here... Jumping out of the index funds
« Reply #49 on: February 03, 2018, 06:40:34 PM »
Meh. Thought it was easier than saying "I'm in 5%, going to get to 20% on the first of the month".

Sure.

So it seems you have your entire IRA in 2 or 3 stocks? Isn't that more risky than index funds?

With the 5% it was in 1 stock. With the (now 20%) it is in 4 stocks. Yes, this is definitely more risky than index funds. Never thought it wasn't. Potential for bigger reward.

What stocks did you buy and when?

If we're going to have threads like this, let's at least have the specific purchases listed in the thread at the time the purchases are made so people can see how this works.

And don't worry--posting your stock picks in an MMM forum is not going to cause a massive rush on those stocks that will negate your gains.  There's a guy who has been doing this for a couple of years with a momentum thread, and it's helpful to see how he's doing in real time so there's at least credibility to the thread.

Thanks.