I've recently signed up at a site and received below e-mail. I don't see this on their blog, so I decided to keep their name private(replaced with XXXX). They can join ET and comment if they want. This seems absurd to me. I've recently attended another webinar where they pitched a similar idea. What do you guys think? One of our most important mantras at XXXXX is this: The biggest advantage you have as a systematic trader is that you can trade a bunch of mediocre stuff and get an extraordinary result. Or, in its shorter form... "Trade more sh*t". Let me show you what I mean... In our current Bootcamp, we’re building automated strategies you can trade at a retail FX broker. This is David vs Goliath to the small-time, solo retail traders out there. Why? - FX is the most efficient asset class in the world - FX brokers rarely give you good terms. Some actively bet against you But, with the team’s collective trading ability, we’re on track to spit out at least a few profitable strategies in the coming weeks. On our first pass, we built a cross-sectional mean-reversion strategy. It uses an ensemble of momentum factors to trade on the relative returns of a basket of currencies. Here’s the backtested equity curve of that strategy: Nothing to plan your retirement over, but pretty good for a retail FX strategy. It achieves a Sharpe Ratio after estimated trading costs of just over 0.8. Unsurprisingly, some of our members didn’t think this was worth trading…. “It’s been underwater for over a year twice in the backtest” they said. “I don’t think I could sit through that drawdown” they said. “How can we improve that?” they asked. “You improve that by trading more sh*t” we said. Being the lazy traders we are, we went in search of another basket of assets we could apply to this very same trade. We found a different basket of currencies and sped up the trade a little. It looked like this: Pretty good with a Sharpe Ratio of about 0.9 after costs. Again, our members didn’t love it…..“I don’t like that drawdown in 2009”.... “Didn’t do that well in 2017”....“How can we improve this?” “You trade more sh*t” we said. So we showed what happens if you trade those two strategies together at the same time: The backtested Sharpe ratio after costs jumps to 1.3, and there’s only one significant drawdown, which was back in 2009. All we did was combine two mediocre strategies, and we got a very good result. I know what you are thinking ...”James, add MORE strategies!”....and that’s exactly what we did. Or, to be specific, we added strategies with very different styles and properties. We built a strategy that trades intraday seasonality effects on a couple of FX pairs. We built another strategy that trades momentum effects around the weekend FX close period. The backtest Sharpe Ratio of these strategies was 1.2 and 0.9 after estimated costs. But what happened when we sandwiched all 4 strategies together? Well, it looked like this: That’s a backtest Sharpe Ratio (after costs) of over 2.6! We achieved that (in the backtest) just by combining 4 simple, mediocre strategies. None of them was sensational individually. The average Sharpe Ratio of each strategy was under 1. This is the power of Strategy Diversification as a retail trader — your biggest strength. It’s also a very practical approach. It’s a lot easier to make money in a backtest than in the real world. All market inefficiencies and trading opportunities diminish over time. And each of those strategies will decay. Some may not even make us any money in live trading. So what do we do? Well, we keep looking for more stuff to trade. And we retire those strategies that are not working out the way we expect. Systematic trading is a constant cycle of finding and replacing strategies. In XXXX, you’ll look over our shoulders as we show you exactly how we do this, based on our decades of professional and retail trading experience. You’ll also get to do it first hand with your new team, as we run through future Bootcamps together. Until then, and to recap your first pre-Bootcamp shift in approach: The biggest advantage you have as a systematic trader is that you can trade a bunch of mediocre stuff and get an extraordinary result. Or if you prefer something short enough to stick on your fridge door: Trade more sh*t!
On the surface... HOGWASH! Trade more only if it's "more quality plays". BTW... just what is the "mediocre stuff" you're supposed to trade for "extraordinary result"? (Ever hear, "you can't trade a sow's ear for a silk purse"?)
Not exactly a secret. Professional quant traders use hundreds/thousands of indicators for their systems. Not really an edge for David in the "David vs Goliath" metaphor given that large quant funds can have hundreds of PhD's working on discovering these indicators.
The Tldr is that you get better looking equity curves with non correlated streams. This is basic. But actually I have a question: how did they weight these strategies?
How much are they asking for this sh*t? Seems to be a current trend, some private guys showing some curve fitted back tests then charge several thousands for lemmings to join them and partake in some live chat. Those snake oil salesmen know exactly that they just a few hundred such clients to make the most money in their life. Disgusting.
What they’re saying is true, since hedge funds like QIM do exactly this: trade thousands of instruments in every market and every country they can find - always searching for more sh*t to trade. I actually do the same. But saying something obvious doesn’t make the person saying it provide anything of value, or have reasons to sell or license profitable strategies, so you’d have to research them at a deeper level.
But don't you need some minimum performance requirements? Also, I would assume it's much more costly to run many weak strategies than one or two good ones. Otherwise, wouldn't you simply match a diversified ETF portfolio?