Professionals and larger funds have supercomputers and 200 genius PhD, isn't mechanical systems just exploiting certain efficiencies? Wouldn't the professionals figure them out too and exploit them until it disappears? What leaves you as a retail trader to be successful?
Innovation. Nothing is perfect. If "genius PhDs" arbitrage all of the current opportunities away with their supercomputer algos they will create new market characteristics which will be exploited. Game theory.
High volatile instruments have strong and very strong trends. When you have an algorithm which can find that you're in one 50% of the time and your entry is within the 1st third of the overall move, your reward to risk ratios for several trades in a row will be extremely high. That is when trading becomes very mechanical and very "easy". Nothing is going to stop that from working. Too much size caught on the wrong side of the move that has to get out and more money keeps piling in from those who see it correctly.
You are overestimating ability of PhD from unrelated fields to finance to understand markets. Before they do most are already fired.
i had a system called oddball it was developed on a cray. it ran for 12 years in a private fund trading index futures. i left that fund and went out on my own as a bond trader and released oddball about 2000 in a magazine. it ran for about 2.5 years until it was overused to death. so when pandora gets out she destroys everything is the lesson.
Size Size Size. If you've got something going, and you can work it without issue, try to size it up to a point where you figure you could *not* do it without brutalizing Bid/Ask/Spreads. I sincerely doubt you'll pass $10,000,000. The 100s of PhDs you're referring to are trying to work *multiples* of that, and they have no interest our little inefficiencies. We (remain) speedboats in an ocean of tankers. They will certain mow over us without blinking, should we not be as nimble as we are able to be. But as long as it takes them weeks and days to get into and out of positions, we will (still) have inefficiencies to exploit. We are the grease of the economic gearbox. "Arbitrage: it's whats for dinner." ("I got a dozen more where those came from!" Yeah yeah yeah. We get it. )
Long Term Capital Management (LTCM). Google it. Great lesson for you. Markets have a way of knocking the hubris out of ANY academic. One of the best bond traders I ever saw didn’t even finish high school. And he stood next to the GS and JPM brokers.
Waiting for Intraday trends, joining them, risking 10 and making 40 will never stop working, some tiny little exploit you can do 1000times per day might fade to nothing, but not this.
%% Occasional bear markets; + 200 years of US stock market uptrends/ dividends. PHD may have an advantage.But that is balanced with a PHD saying some it stands for phenominal dud LOL-LOL,