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jcl
Registered: Jan 2012
Posts: 407 |
04-29-12 12:09 PM
While working on a couple different trade strategies, I found an interesting trend. The more time I spent with implementing an algorithm, the less profitable it turned out to be. Quite frustrating. The most profitable algorithms were also the simplest.
Have you made similar experiences?
BTW, these are the algos tested so far:
Simple frequency filters - Sharpe ratio ~ 2
Seasonal trading, AI based - Sharpe ratio ~ 1.5
Curve pattern detection, Frechet algorithm - Sharpe ratio 1.2 .. 1.5
Support/resistance, AI based - Sharpe ratio 1.0 .. 1.2
Price action, AI detected bar patterns - Sharpe ratio 0.9 .. 1.2
Conventional TA, f.i. RSI, MACD etc - Sharpe ratio below 1
For comparison, I've read that professional human traders achieve a Sharpe ratio in the 1.03 area.
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trhudson
Registered: Aug 2002
Posts: 184 |
04-29-12 02:00 PM
Quote from jcl:
While working on a couple different trade strategies, I found an interesting trend. The more time I spent with implementing an algorithm, the less profitable it turned out to be. Quite frustrating. The most profitable algorithms were also the simplest.
For comparison, I've read that professional human traders achieve a Sharpe ratio in the 1.03 area.
Very interesting that the most profitable were the simplest...but not surprising. However, I find it shocking that a human trader's Sharpe ratio is around ~1.03.
Not doubting, but is there a source available for the human trader's data quoted? I would like a more in-depth look at how that study was performed.
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jcl
Registered: Jan 2012
Posts: 407 |
04-29-12 04:40 PM
I got that from the book "Thinking, Fast and Slow" by Daniel Kahneman. According to his statistics, the profit difference between professional trading and throwing a coin is very small. For the traders that was also a shocking surprise.
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SteveNYC
Registered: Jul 2010
Posts: 787 |
04-29-12 04:56 PM
Quote from jcl:
I got that from the book "Thinking, Fast and Slow" by Daniel Kahneman. According to his statistics, the profit difference between professional trading and throwing a coin is very small. For the traders that was also a shocking surprise.
Lol.
How much does the book cost?
$100?
Does Mr. K trade?
Btw, how do you throw a coin?
I would wager that Mr. K's book is a validation on his ability to trade.
P.S. I don't like the title of the book. It will make you a bad trader.
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SteveNYC
Registered: Jul 2010
Posts: 787 |
04-29-12 05:01 PM
Quote from trhudson:
Very interesting that the most profitable were the simplest...but not surprising. However, I find it shocking that a human trader's Sharpe ratio is around ~1.03.
Not doubting, but is there a source available for the human trader's data quoted? I would like a more in-depth look at how that study was performed.
The book is probably a $1000 junk.
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jcl
Registered: Jan 2012
Posts: 407 |
04-29-12 05:54 PM
Quote from SteveNYC:
Does Mr. K trade?
I would wager that Mr. K's book is a validation on his ability to trade.
Well, I don't think that Daniel Kahneman does trade. At least not since he won the Nobel prize of economics in 2002.
It might sound like a strange concept, but reading a book can sometimes be useful. Of course only when the author knows more than the reader. But for you this is certainly not a problem.
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