I have spent over a decade educating myself about the economy. Despite all of this, I have come to realize that when you enter a trade, it is somewhat similar to spinning a roulette wheel. There is no way to actually know what will happen in the future. I have a business that makes returns between 40-60% usually. So the only way for trading to be worth my time is if it's leveraged trading such as currency pairs, options, or futures. To give examples, just in September, everyone (including the "best" economists in the world) are saying an upcoming recession is practically a guarantee. Now just 3 months later and they are saying the opposite. What are the best strategies to use to try to get high returns, but hedging risk if I guess wrong. I am of the opinion that technical analysis is not reliable. Can anyone change my mind on that? I have a practice currency trading account and a practice options account. So I have seen the potential risk and reward. For example, on Thanksgiving night, I put $100,000 fake dollars buying EUR/USD. I would have profited $50,000 right now, and a couple days ago it was at $75,000 profit.
There are definitely quantifiable edges in markets. For example, if you run a backtest in the SPY etf from 1993 to present, you will find that buying after 3 consecutive lower closes on the daily chart and holding 3 days, outperforms buying after 3 consecutive higher closes and holding 3 days. This is just one of numerous examples.
Is there any way to use this SPY example in an options strategy? Since it's only a planned 3 day hold period, is that enough time for options trading?
Your decade spent learning about the economy would have been long enough to earn a PhD in economics. Had that decade been spent on learning technical analysis and devising and testing strategies, you would know the answer to your question. If one doesn't know how to trade then yeah it's like a roulette wheel. None of know what will happen in the future but those of us who put in the time and work know what is more likely to happen given defined technical structure and characteristics. That and a sound viable methodology and disciplined behavior is enough to do very well.
What's the best place to start? Technically (no pun intended), I already know somewhat about different indicators. I just came to the conclusion that looking at them over different time periods would give different results. To give an example of the types of things I'm currently trying. In my practice Forex account, on 12/6/19, I bet $100,000 fake dollars betting against the USD by buying GBP/USD. I placed the trade 15 minutes before the monthly unemployment rate and Non-Farm Payrolls were announced. I guessed wrong. The numbers were very good for the US economy and drastically beat expectations. I expected to have a huge loss. But it only lost $3500 before reversing direction. I was about $10,000 in the profit before the UK election results were announced, now I'm $28k in fake profit. I picked GBP because it has a slim spread with the USD. I was making no prediction on the UK and I couldn't have predicted UK election results anyway. This all just seems so random.
'What are the best strategies to use to try to get high returns, but hedging risk if I guess wrong.' trend following 'I am of the opinion that technical analysis is not reliable. Can anyone change my mind on that?' use ET search engine. Pay attention to some persons like @Handle123 and @NoDoji
No. Saying X beats Y is far from implying an edge, as it say nothing about whether X beats Z, Z being a basic buy SPY in 1993 and holding to present. I suspect Z would crush X, certainly on an absolute return basis. On some kind of risk adjusted return basis, who knows.
%% Holding for 2 or 3 years works well; not much commissions, not much slippage.Dividends can help. [Original poster= Farmer John ; some truth, not a real polite answer .Actually '' making paper 50K on 100K in a week'' is the best way to lose a fortune; but markets are not a lotto/stupid tax on people that cant do math. I had a F auto dealer give me 2 lotto tickets; LOL I scratched them off . Guess what happened?? LOL NOT a lotto ad/stupid tax on people that cant do math],
I know it's a great way to lose money. Which is why it's still paper trading. You have about a 47% chance of doubling your money instantly with roulette if you put it all on black. Also a 53% chance of losing it all. High risk = high reward. I also asked about best ways to hedge risk. I also mentioned that I have a REAL business making >40% ROI, so the type of returns I'd expect from dumping cash into an index fund wouldn't satisfy me. And btw, WHAT MATH? I'm very good at math. So what problems should I be figuring out? Or is trying to "figure out" technical analysis similar to trying to "figure out" alchemy? You could try for centuries with no luck because there is no answer? No way to turn objects into gold? No way to reliably predict future market prices?