"Moneyball" and Trading

Discussion in 'Trading' started by lindq, Sep 30, 2011.

  1. lindq


    If you're a systems trader like me, you'll probably really enjoy Moneyball, in theaters now.

    Striking parallels between trading and baseball, and the need to stick with your program.
  2. margin call looks like a trading thriller , out soon also, supposedly based on a true story,, over course exaggerated. going to google the supposed true story now. looks like a world saved from ending in the trailer, very cliche. but of course any trading movie is a score for traders.
  3. It's a good book, as was The Blind Side. The one thing I take issue with is that the Billy Beane system really hasn't done much of anything for the A' in the past 6-7 years since the release of the book.

    Heck, Michael Lewis might be interested in digging into the Tampa Bay Rays organization. Those guys operate on a small payroll like the A's, in the toughest division in all of baseball and have made it to the post-season with a great deal of consistency the past several years. They also develop players as well as any team in the league.
  4. lindq


    His 'system' became public knowledge, thereby negating his edge.

    One line in the movie struck me as having a clear application to trading. I can't quote it directly, but it referenced the need to think of statistical probabilities not in terms of one at-bat, or one game, but as a long process over time.

    Very interesting the battle that Billy had with the old staff of scouts who fought for relying on their opinions and instincts, instead of his studies of statistical probabilities.

    How often do we have that battle within ourselves?
  5. Check out deadspin about the issue. The theory is finding undervalued assets based on the premise that outs are the key to the game. So look for the players that have the lowest net outs (fielding and hitting) then you will construct a team. Beane, found so many unsexy players but who kept the inning going and won games. In trading terms, he essentially found an arb. But this was discovered quickly and now the arb is gone.

    TB has discovered another arb. The draft pick arb.
  6. It’s a coincidence you should have posted this today, because while playing tennis this morning it occurred to me there are also some parallels between systematic trading and tennis, too…

    Let’s say you regularly play the same opponent, or that you are playing a long match. Over the course of a large number of points, you will win a certain number of them (not so many in my case!), and you can work out the percentage of points that you win (“% winners”). If you can also identify a recurring (but avoidable) event/mistake that again and again causes lost points, and you subsequently avoid repeating that mistake, your % winners will increase, and you’ll play better tennis overall (as your average winner and average loser won’t have changed).

    If your average shot improves, you play better tennis.

    If your average trade improves, your PnL is better.

    [BTW - I don’t expect a Nobel Prize for these insights]
  7. You are saying if you can just reduce the number of unforced errors, you'll play better tennis overall.

    But what if by trying to avoid the mistakes, you would also drastically reduce the number of "winners" because you will be taking less chances. That is the more pertinent parallel in trading imo.
  8. Moneyball has no parallels with trading. Maybe with long term investing, but it has nothing in common with trading. Read Blue Ocean if you want something that will help you with trading.
  9. works over the season (or seasons), but not neccessarily in a 5 or 7 game series. Pinella cleaned La Russa's clock IMHO because Tony was not willing to deviate from the system.

    You see the same thing with professional poker players who know how to make money over the course of a lifetime but not always in a tournement.

    Hard to know in trading if somehow this time is different, but didn't you already think that through when you were of sound mind and body putting the system together?
  10. lindq


    That's a very good point, and the one in which the statistical advantage in baseball falls apart. It's also briefly touched on in the film.

    The problem is that over the course of a season, a statistical system can work for you. But in a 5-7 game series, the sample period is too small. Thus, you may show a good win/loss going into the playoffs, but that's where your advantage ends. At that point, you really do need a few "star players" to step up to bat.

    There's no parallel for this in trading, unless you consider something like a short term trading "contest". A consistently profitable systems trader is likely to lose against someone who just throws caution to the wind and lucks out over a short period of time.
    #10     Oct 1, 2011