Originally Posted by GreenFrog
It's a big assumption and I'm only saying it because the recent (past couple months) market movements by and large have been dictated by macro news in the U.S. and Europe. I agree with you that it's possible to exploit macro events after-the-fact, but I'm just saying it's pretty much impossible for your algorithm to predict that the market will go tanky tank or sky high tomorrow because that kind of movement is produced by such macro news.
I can't count the number of times on my hands that the market has gone 2% one day, followed by an upswing of 3% the very day after because of some translucent shit that some politician in Europe said about the euro debt crisis while we were asleep. That kind of stuff, I'm saying, your algo cannot predict; nor can anyone else's.
Don't take this as me shitting on your algo. I think it's awesome and great, brave, even, for you to tackle such a task in this kind of market. I sincerely hope it works out for you so I can invest in it too :P
Yeah, I know what you mean, and we've definitely gotten fucked on some of these positions when Moody's or Draghi come out and say some bullshit. On the other hand, look at how much of what these politicians/bureaucrats/ratings agencies say that everyone already knows. Like when Draghi said that there was "substantial downside risk" and the market tanked 1%. No shit! Downside risk? In Europe? I had no fucking idea!
And while we all scratch our heads at why the market seems so stupid, it is an example of the markets interpreting
the news as much, or perhaps more than, being dictated by
We just went through a little slump though, so I'm not denying it's a rough market. We like big swings -- rallies, crashes, anything easy to pick up on -- or choppy up-one-day-down-the-next volatility. We can capitalize on either of those things. What we don't like is what the market has been doing recently where it'll climb for three or four days and then drop for three or four days. When the oscillation is the duration of one position in our model, we tend to lose a lot of positions. Ultimately though the dip is still shorter and shallower than the worst we've seen in backtesting, and we just won three positions in a row so we are hopeful that we've snapped back out of it.