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I'm new and can understand what information the first picture is trying to convey. I can't really form an opinion because of my experience but I understand what the graph represents.
The 2nd graph doesn't make much sense to me.
"Trading Method" axis cannot increase or decrease ie increasing trading method? Whats that mean.
The method doesn't change with more confirmations? The quality of the method or validity?
The method is a constant. it does not change up or down.
However, a method that uses more and more confirmations would lead to increasing indecision.
What I really want to convey was the fact that when beginner traders build a method they seem to pile up a number of confirmations( technical, statistical, etc) on top. This not only leads to indecision but to increasing the risk to reward.
Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You may lose more than your initial investment. All posts are opinions and do not claim to be facts. Please conduct your own due diligence. Use only Risk capital when trading Futures.
1 800 771 6748 local 561 367 8686 email [email protected]
Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You may lose more than your initial investment. All posts are opinions and do not claim to be facts. Please conduct your own due diligence. Use only Risk capital when trading Futures.
1 800 771 6748 local 561 367 8686 email [email protected]
I am particularly interested in the "empirical" part.
Let's see if he resorts this argument to some quant fund that has nanosecond execution while most of us still argue in the millisecond domain.
Trading futures and options involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results. You may lose more than your initial investment. All posts are opinions and do not claim to be facts. Please conduct your own due diligence. Use only Risk capital when trading Futures.
1 800 771 6748 local 561 367 8686 email [email protected]
Well he is a quant. Nothing wrong with that. But I would like to see how trading faster will make more money per trade than a longer duration trade.
I suspect that the argument is in your illustration and the interpretation of it. My interpretation is that the more trades you make, the less money you make per trade. So he would need to argue that he can make more money per trade by taking more trades.
But I suspect that his interpretation is for overall profit, and not per trade. So the real argument is perhaps on the interpretation of your illustration. Perhaps you can clarify what you intended.
I thought it was fairly obvious. Let us assume "skilled trading" is simply recognizing when to choose to allocate to a risk-free asset with return Rf or the market portfolio with return Rm. Then, just using one-factor CAPM,
Rp - Rf = a + b*(Rm-Rf) + c*Max(0, Rm-Rf) + ep, Rf < Rm
I think most traders should recognize that Max(0, Rm-Rf) has the payoff of a free call option, and if I give you a free option, you want the volatility to increase because then it is priced higher. All else equal, if you want exposure to higher volatility, you want to trade more frequently.
