Sharing trading strategies

[El Greco]

Why ? Why would anyone with a successful trading strategy share it with others ? It is almost certain that the more people knowing it the less effective it will be. So, why would anyone in a trading forum share his precious winning strategy ? Why would anyone write a book explaining it ? I can think of 3 reasons: 1) those strategies don't really work and those people talk out of their a** or are simply trying to make money by selling a book 2) a few of those strategies do work but with the vast amounts of information available it is highly improbable that enough people will follow (and thus break) the strategy 3) some people are already very successful, they have all the money they will ever need and now they feel they could help others. I tend to believe that in the vast majority of cases no.1 is true. Am I missing something ?

[The Central Scrutinizer]

why ? Why would anyone with a successful trading strategy share it with others ? It is almost certain that the more people knowing it the less effective it will be. So, why would anyone in a trading forum share his precious winning strategy ? Why would anyone write a book explaining it ? I can think of 3 reasons: 1) those strategies don't really work and those people talk out of their a** or are simply trying to make money by selling a book 2) a few of those strategies do work but with the vast amounts of information available it is highly improbable that enough people will follow (and thus break) the strategy 3) some people are already very successful, they have all the money they will ever need and now they feel they could help others. I tend to believe that in the vast majority of cases no.1 is true. Am i missing something ?

#1

[The True Scotsman]

This is why I don't read "business and investing books". Most of them are full of BS and, if you look, most business authors come out with a new book (it seems) every few months (including: Robert Kiyosaki, Donald Trump, Susan Orman, etc).

In my opinion, the best strategy for becoming a good investor is: 1) study economics and accounting, 2) know the companies, commodities, etc that you are investing in well, and 3) gain experience.

[The Central Scrutinizer]

This is why I don't read "business and investing books". Most of them are full of BS and, if you look, most business authors come out with a new book (it seems) every few months (including: Robert Kiyosaki, Donald Trump, Susan Orman, etc).

For some reason, I find Suzie Orman particularly annoying.

In my opinion, the best strategy for becoming a good investor is: 1) study economics and accounting, 2) know the companies, commodities, etc that you are investing in well, and 3) gain experience.

I would say 1) Study business 2) Invest in what you understand 3) Be very patient

[theprestige]

While I'm sure the previous posters in this thread are largely correct in their responses, I take a somewhat more optimistic view: The more action being generated, the more action there is to get in on. So if I have a successful strategy for generating action, I want to promote it as much as possible, to increase the number of people generating action for me to get in on.

I don't doubt that some trading is structured as a zero-sum game. But I think most trading happens when both parties have a reasonable expectation that they will be better off--or have more "action"--as a result of the trade. Most trading (of any kind, from straight barter to naked short sales) is properly understood to be win-win (not counting incompetence, outright fraud, etc.).

This is partly because different strategies favor different temperaments and different short- and long-term goals. Different strategies accomodate different strengths and weaknesses in each trader.

Then there's all the other things surrounding the trading strategy itself. Everybody who wants to can find out Warren Buffet's basic strategy. But what sets Berkshire-Hathaway apart is the other stuff. Trading strategies are largely about what to do with information. How to get information, and how to interpret information, are something else entirely, and I think they often have a lot more to do with a trader's success than the trading strategy itself.

tl;dr -- If I my trading strategy makes me rich, I want it to spread far and wide: Richer counterparties mean richer trades for me to make.

[drkitten]

Why ? Why would anyone with a successful trading strategy share it with others ? It is almost certain that the more people knowing it the less effective it will be. So, why would anyone in a trading forum share his precious winning strategy ? Why would anyone write a book explaining it ? I can think of 3 reasons: 1) those strategies don't really work and those people talk out of their a** or are simply trying to make money by selling a book 2) a few of those strategies do work but with the vast amounts of information available it is highly improbable that enough people will follow (and thus break) the strategy 3) some people are already very successful, they have all the money they will ever need and now they feel they could help others. I tend to believe that in the vast majority of cases no.1 is true. Am I missing something ?

#4 : the person who "invents" the strategy doesn't have enough money to make it worth his while to follow it, so he simply publishes it and makes more money from the publishing.

I.e. if I have a high-probability way to beat the S&P by 1% each year, I could put $100,000 into the market and make $1000/year over what I could make on an index fund.

Or I could sell the strategy privately to Deutche Bank for a million dollars.

Or I could sell the strategy publically via the trade press for several million if the book does well.

[Clownshoes]

Just curious does anyone here make their living trading?

Also, What books would you guys recommend to start out with to understand this stuff. I literally don't know where to start.

[Kevin_Lowe]

I don't doubt that some trading is structured as a zero-sum game.

Share trading is a zero sum game.

[Barsdamian]

I make a small part of my income from betting live sports markets and let me tell you...when I have a long-term profitable angle I share it with no one. Sharing it is a sure-fire way to make sure it won't be profitable for long.

[drkitten]

Just curious does anyone here make their living trading?

I certainly don't. It's a profitable sideline, but a hell of a career.


Also, What books would you guys recommend to start out with to understand this stuff. I literally don't know where to start.


"A Random Walk Down Wall Street" by Burton Malkiel
"One Up On Wall Street" by Peter Lynch
"The Intelligent Investor" by Benjamin Graham
"The Motley Fool Investment Guide" by the Gardner Brothers

[roger]

Share trading is a zero sum game.
I disagree.

You are buying/selling companies. Would you say buying or selling a company is a zero-sum game?

No, you wouldn't, because companies take resources, such as labor, rocks dug out of the ground, and cash, and turn them into higher value products such as titanium dioxide. Running a titanium dioxide business is not a zero sum game, neither is running McDonalds.

So I sell mydioxide business to you, and buy into the hamburger business. I'm still making money, you're making money, because we are all on a rising tide (over the average of several decades) fueled by the businesses actually adding value (bad mixed metaphor). Why did we make that transaction? Maybe I have a great idea for hamburgers, or maybe I don't have the cash reserves to handle the fluctuations in the Ti dioxide business like you do - we trade risk/reward with each other to suit our appetite and needs.

If you reply that you are just talking about the 1ms that the actual trade takes place, well, we all pay brokerage fees, so in that 1ms we are all a little worse off. Sure, you could add the brokerage income and it'd all come out even, but by this point 'zero sum' has become meaningless - you could characterize about every transaction in the world as zero sum in that situation.

[The Central Scrutinizer]

Share trading is a zero sum game.

Incorrect. A zero sum game requires winner(s) and loser(s).

Mr Jones owns 1000 shares of Coca Cola. I buy them from him for $50/shr. Who won? Who lost?

Mr Jones now uses that money to buy a chicken farm. In the meantime, the value of the Coca-Cola has now risen to $60/shr. Who won? Who lost?

But thank you for sharing!

[Ziggurat]

Why ? Why would anyone with a successful trading strategy share it with others ?

Depends what you mean by "successful". If you mean "beats the market", then no, I don't expect anyone to share any strategies that work, and if they do, either something about its implementation prevents widespread use, or the strategy will stop working.

But that might not be your goal. Maybe your goal is to hedge against certain kinds of risks (your day job is in the tech industry, so you want to counterbalance tech industry slumps), or take a particular risk profile (more risk than the market, less risk than the market, etc). Strategies for doing stuff like that don't have to fail if shared, because they represent goals which will not be universal.

[roger]

Why ? Why would anyone with a successful trading strategy share it with others ?Well, for the same reason guitar makers share their innovations. For the same reason gardeners share their techniques. For the same reason bowl turners have seminars where they share everything they know. For the same reason Vegas makes huge bucks hosting conventions of doctors, plumbers, dental assistants, actuaries, etc.

You advance the state of the art. You receive feedback that is far more valuable than what you shared (think: somebody points out your trading strategy fails in instance X, or can be improved by Y in certain instances). You are a brotherhood. And, in trading, there is ample evidence that people don't take the advice anyways (for the individual investor, and many institutional investors, there's not much need to read more than Graham, who published back in the 20s).

[Clownshoes]

I certainly don't. It's a profitable sideline, but a hell of a career.




"A Random Walk Down Wall Street" by Burton Malkiel
"One Up On Wall Street" by Peter Lynch
"The Intelligent Investor" by Benjamin Graham
"The Motley Fool Investment Guide" by the Gardner Brothers



What would be a good book to start with to just understand the language of investing. I think if I could just understand some of the terms they use I would have a better grasp on it.

[roger]

To illustrate: Warren Buffet, an investor directly out of the Graham mold (Graham was his teacher at Columbia), endlessly shares his wisdom. What he doesn't do is tell you what he is buying while he is buying it. Once done with the big accumulation he will then share his info.

Why? I'm sure part of it is altruism, but much of it is also quid pro quo. By sharing he learns what others thinks. He has made billions from society, and now he is giving back. But in return he gets good data. Oh, not from somebody like me, but surely when he is sitting around playing bridge with Bill Gates and the like. Graham did it for people like him, Fisher, Munger, etc., they do it for our generation, and our generation is publishing their best ideas and so it goes.

And let's not forget ego - for the most part it feels good for people to say "wow - what a great idea". For many that is worth more than the hypothetical loss.

I'll admit I'm talking more about investing. So far as I know the trading companies in NY, London, etc., are not sharing a lot of the specifics of their trading algorithms. But I don't travel in those circles.

OTOH I belong to a forum populated mostly by people that control millions to billions of institutional money. They share their best ideas with a 2-fold purpose: first, to belong you are required to share (so there are no free loaders), and because they receive very sharp/penetrating analysis of their ideas. How to lose?

[El Greco]

I think we need to differentiate between investing (medium to long-term strategy) vs trading (short to extremely short-term strategy). Eg, there's rarely "investing" in Forex. Both terms have been mentioned in the thread, but I feel some use them interchangeably.