The Perfect Edge

Discussion in 'Strategy Development' started by ElectricSavant, Feb 18, 2006.

    • Use a microscopic amount of capital and try to get at least a 30% yield per year.
    • Enter with a high probability signal.
    • Get paid high interest to carry.

    • ===============
      Another way & that sounds fine also;
      don't enter so often.

      By not entering so often can mean;
      collecting an insurance premium for over night holds.

      True , have to exclude insuring some situations;
      & its a fine habit to work.

  1. murray,

    Explain what you mean by overnight insurance premium,
    you keep mentioning it :)

    I can't see mto understand what you mean :)
  2. I believe murray uses options in his Hedging...

  3. No, no, no, no, NO !!!
    Never measure a strategy strictly on the basis of win-rate.
    Some of the best strats only "win" 50% of the time.
    Instead, use Sharpe, Sortino, MAR, VAMI, etc. as a proxy for a long-term successful strat.
  4. Who did this?

    shoot... I can manipulate win-rates at will...its the drawdown that matters to me...

    Never measure a strategy strictly on the basis of win-rate.
  5. ===============

    Will illustrate with one of your seasonal quotes ''peach farming'' & insurance premium .

    Have 4 peach trees, 3 trees one year old,too young to fruit,
    1 older tree =10 years planted .

    10 year old tree has probably only has peaches 40-50% of summer time.Good investment, but OVERNIGHT frosts killed 60-50% of return on investment .

    Coolweb that 10 year tree has still been a good , tasty, helpful seasonal investment, even with 40% sucess or so hit rate.

    Actually borrowed ''insurance premium for overnight holds'' as a paraphrase from Rich Dennis derivative /Jack Schwager book.

    Except use it for stocks, [not futures], like long oil/gas stocks am in now ,
    could gap down next week , probably more likely to gap up.

    Any insurance co collects premiums monthly, even thoiugh they pay out claims like some unfavorable gaps/ loss claims.

    They gapped GM against me when holding short overnight ,
    was short it, they gapped it up against me ,;
    but gaps usually folow certain patterns, like insurance co reduced my rate for good driving record lately:cool:
  6. lundy


    when short stock overnight you collect interest (insurance premium)?
  7. murray,
    You are trying to say don't enter so often so you don't get gapped?

    A Gap up or Gap down in price doesn't happen out of nowhere, it is precursed by a few days of price action either euphoric or dead cat rallies.

    So an OIL/energy , Like I went into TXU & XEC on friday,

    will unliekly gap down because it has already went down for 20 days or so.

    Gap down would not be "CONGRUENT" with the big players money run when they just re-invested 2 days ago.

    So Gap ups and Gap downs and overnights really never bothered me,

    They are almost 99% predictable in either direction.

    don't know about all the insurance premium thing though :D
  8. ===================
    Main point being dont just enter any old swingtrade because there is a risk.[more so than intraday trading], with an individual energy stock as compared to XLE .

    The insurance premium is a rather accurate comparison;
    because there is a risk, wish it was as low as 99% predictable , insurance companies /swing traders would be much richer than they already are.

    American swing traders would be much richer if it was as low as 99% predictable;
    hope you are right in long run about gaps being 99% predictable
    :cool: Probabilities can be figured as you hinted

    I am comfortable with swing trading for years;
    the occasional gap pain[ a reason more do not trade that way]
    is put into perspective with the way insurance companies make money.

    #10     Feb 18, 2006