Out of curiosity: anyone here consistently predicts market direction?

Discussion in 'Options' started by Aquarians, Jul 26, 2020.

  1. Aquarians


    Leaving alone high frequency trading which by definition is predicting market direction with nearly 100% accuracy, anyone here managed to do it?

    I see posts here of guys selling naked puts and sometimes making a profit. Based on my backtests with such strategies, the market always beats me by a small margin. Not a huge one, just enough so on average I'm consistently losing. Say I risk $1000 in order to win $200, that's a 20% probability of making money on my side. And my calculations say the risk of losing money is at most 10%, so on average even when losing, I'd be losing $100 and making $200. That should be profitable but my calculations are always wrong, I lose money like 30% in these cases. That's a huge difference in calculations: me thinking risk is 10%, market offering 20% - and experience showing that every freaking time the market offers something it only does so to burn you: because if they offer 20% then somehow they know it's actually 30% and you is the one who will lose.

    One TSLA profitable trade is not "consistently predicting direction", also winning with high probability is not "consistently predicting direction" unless the times when you lose multiplied by the amounts you lose are significantly lower than the accumulated profits.

    To some extent options can avoid the need for guessing direction as long as you can guess the magnitude (volatility). But my experience with trading on vol is just as disappointing as with direction: the market always gets it slightly better than I am able to do.

    So... anyone here managed to consistently outsmart the market? (There was a "backtesting" thread a while ago and it made a point that 5 successful trades once a year does not qualify for that. Trading once a week for 30 years (or 1500 independent trades) with a Sharpe of > 3, I guess that does qualify).
    Grantx likes this.
  2. Not here but on Twitter literally everyone does.
    Just join their chat rooms and you too can make millions in penny stocks with zero risk!
    oddhours, Nobert, terzioglu and 2 others like this.
  3. speedo


    A trader doesn't "outsmart" the market, he or she understands what the market is saying and agrees with it. No one knows the next move of a market but if one has put in the work to understand price development and structures a plan with positive expectancy, he/she can know what is MORE LIKELY to happen next. Given appropriate discipline, patience, focus and courage, that is enough. I don't trade options so I am not qualified to speak to them but I would expect a similar dynamic with regard to understand price momentum or lack thereof and behavior. Learning to trade is a difficult thing and most will quit or blow themselves up before the lights turn on and one learns how to behave properly.
    beginner66, dennis86, Nobert and 10 others like this.
  4. 55% with at least 1:1 profit to loss ratio, is about the best i can do with an automated trading system, and that is will a system that works off signals that don't occur very often.

    The market chops back and forth a lot on most time frames, lots of false break outs etc

    Most other times it is a coin toss if you get stopped out or not, even less than a coin toss if you are aiming for >1:1 profit target.
  5. ZBZB


    trend following with short options is profitable if you know how to adjust when wrong.
    Grantx likes this.
  6. Grantx


    Takes real skill to do that beyond the basic understanding of options that most people have.
  7. speedo


    Markets cycle, they range (what many call "chop"), they breakout, they trend and as the trend matures, the trend channel often broadens and then evolves back into a range or it can reverse trend. Each of these environments call for different techniques. As an example, during trends most reversals fail so the safe play is to enter on pullbacks. During ranges most breakouts fail so the play is to fade the edges, given adequate range to profit vis a vis potential loss. A broad channel can be traded in both directions but recommended to only an experienced trader with appropriate skills and disciplines. The amateur does the opposite, he/she looks for trend reversals or trades low percentage breakout of channels or ranges.
    birdman likes this.
  8. smallfil


    Why make it complicated? Just follow the trends. Pullbacks and trading ranges does not mean a bear market. It is just areas where buyers get in.
    murray t turtle likes this.
  9. speedo


    For the beginner or developing trader, that would be the only environment I would recommend participating in. Other environments can be traded but require advanced levels of skill and discipline.
    murray t turtle likes this.
  10. AbbotAle


    You sure about that?

    Every strategy employed by every HFT firm makes a profit (almost) 100% of the time.

    If it's as lucrative as you say, you're best advised to get into the HFT game because you'll win 100% of the time.
    Last edited: Jul 26, 2020
    #10     Jul 26, 2020