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Sunday, June 06, 2021

Retail gamblers found the holy grail... To be a rogue trader!

Retail gamblers found the holy grail... To be a rogue trader!

I just had a little look into "robots". I've known from reading some of the BIS reports that Forex quants mostly vanished after 2008.
But I wanted to go on these FX retail sites that are heavy in the "automated" very short term "trading", which is not actually day trading as they run these programs 24/24 there is no "end of the day so let's stay out of the market for 2/3 of the time to compound profits faster" πŸ˜„

Here is how I expect an exchange with an "automated" day gambler would go:

My day gambling strategy works muahahaha it does well on backtest for 1 years.
  Me: "That's simply because the pair you tested it on has been trending for 1 year you numbskull"

Well you just have to apply it in the right conditions!
  Me: "With your crystal ball? If you know what they are, why not just manually take 1 trade?"

Aha! Because of the power of compounding! Rather than risk 1% to make 5% I will make 2% 25 times.
  Me: "Your brain on holiday? Forgot you would also compound spread costs and losses?"

Well forget it, if you rly zoom in and can't see anything it looks magical! Doesn't depend on the 1 year trend!
  Me: "Then it depends on the 1 month trend?"

No! no matter what you say I have an idiotic answer!
Usually starts with "You just have to"!
I'll throw idiotic answers at you until you get bored and give up on me because I am hopeless!
  Me: "Well done I give up" "Thanks for the laugh though" πŸ˜‚

Take a good friend of mine, UDNCNY:


I can tell you for a fact that an "automated strategy" of the kind I am going to describe would work. Don't even need to backtest it.
The strategy is as follow: Take about any indicator ( RSI , Bollinger Bands , etc). When the price goes down (< 30 RSI or lower band) then goes back up to the middle ( RSI 50 or center of Bollingers) you sell. And of course the same on the opposite with buying.
Yes that strategy would work, we can quickly eyeball it:


In practice this is not even what they do. A risk-to-reward ratio as enormous as puny 1-to-1.8? That's like 1% of retail. Never!
What they do is have super distant stops, or no stops. And quickly by looking at USDCNY you understand how they can win.
Shorts at a loss are all in a pullback, and the price never goes very far, so by just waiting they will turn into winners at some point.

In my example which wasn't the best part of the USDCNY trend, there are 6 short signals, and 3 longs.
The longs that are not winners quickly, will "never" recover so they'll take a loss on a far away stop here.
But some longs are winners, and most to all shorts are winners, the smaller the reward and bigger distance the stop is, the close to 100% winrate it gets on shorts.

To sum up, with their ridiculous high winrate strategies applied in the right conditions:
- The vast majority of trades are going to be winners no matter what
- Maybe 1/3 of the losers are in the wrong direction and will be big bags
- Maybe 2/3 of the "losers" are in the correct direction and eventually will recover

These troll retail gamblers are zooming in a flower to the molecule level and wondering why it suddenly went invisible. Must be magic!
They have no clue. There is an insect on the flower, that's why you can't see the flower molecule anymore you numbskull.

This indicator strategy I mentioned works on a trend, how about a nice thick really gross sideways?


Constantly stopped! But have no worries for the retail gamblers have a trick up their sleeve!
With a very wide stop such as the risk is 20 times the size of the reward you will keep winning! Hurrah! Martingale!
And then it will start trending in the wrong direction and the clowns will get wiped out.
And I can assure you, this happens more often than 1 in 20 times πŸ™‚

Now we are getting to my favorite part: The holy grail in the title.
I went to myfxbook take a look at system. By default they show you only the ones with positive returns, and many of those are very recent.
No no no no no. let me change that filter to at least 1 year of activity, and any returns.
What's this? More than half show red returns? Oh my that's a lot of -99% πŸ™‚
Most people quit before getting to -99.

How about I pick one of the "winners"? Weird, why are their open trades private?
Another one. Private. Another. Private. And another, private again!
Oh I found one! TrumpBot. Interesting, that's a lot of red sir.
70 open trades, almost all in the red. USDCAD , EURUSD , USDJPY .
All EURUSD are sells, and all the ones ones are buys.

He took plenty of short term trades (well long term now as he's been holding the bag for a while) LONG on the USDOLLAR . Oh no!
Remember USDCNH? Well these bags go back to early in the USD downtrend. He's been holding for nearly a year πŸ™‚
L - O - S - E - R


Just takes 1 L to wipe out these clowns. They can hack some site to make losses vanish, and obviously the dum dums that buy these kinds of systems are too lazy to really do their research so they never notice it, but if it's real money IT'S REALLY GONE.
There are some guys that have been struggling to make money for 20 years and have sold robots for 10.
Is it cruel if I... roll myself on the floor while I laugh to tears? 🀣

What about all these "private" systems? They're holding bags too?
There is a name for this. It starts with an F. And ends with raud.
It is the rogue traders specialty.
They do a bit more (pros), call them "hedges", manipulate accounting for example,
take opposite positions to cut their losses while keeping them secret (unrealized)...

Here is a regulator release on famous Karen Bruton, known as "the supertrader".
She was made famous by Tom Sosnoff that had her appear on his show.
The SEC fined her and a partner to over a million dollar. She lost way more than that. No jail.

Tom Sosnoff is a market maker from the 80s that created a popular trading platform that he sold,
and now teaches people to sell option spreads. With no edge or risk it will return little money, like 1%.
Karen the Supertrader got superresults by leveraging that strat. Which causes it to LOSE money.
Looks like Karen couldn't figure out high school level maths, nowadays this got to be 2nd uni year,
the levels has collapsed it's amazing, my sister aiming for med school doesn't even HAVE math classes
since 16 year old, science with no maths, genius government.
"But kids don't like it", ye so let's make them even dumber than they already are!

Yes but Karen convinced investors, and even Tom Sosnoff and his colleagues, that she made money!
Ye, just like all the myfxbook trolls. She never closed the losers.
Plenty of realized gains, and much larger unrealized losses. Pathetic.

And the flip side?
Warren Buffett has held unrealized gains on Coca-Cola since 1987.
Never held losses very long. Ever. Some uni nerd looked at it.
We know because he has to report all positions.
Losers (and crooks) hold losers. Winners hold winners. That simple.

from TradingView Ideas
via gqrds

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