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"every single trader out there seems to make the same mistake over and over again. their position size is probably two to ten times more than it should be." martin shkreli built a kelly criterion simulator to test exactly this. "most folks don't actually have an edge when they...

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Goshawk Trades

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341,984 Aufrufe • vor 2 Monaten •via X (Twitter)

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33 Kommentare

Profilbild von Lakota Ma'am
Lakota Ma'amvor 2 Monaten

This is called the Gambler's ruin. You can have an edge against the casino, but with large enough bet sizes you are almost guaranteed to lose it all due to random chance.

Profilbild von The Cat Flaneur
The Cat Flaneurvor 2 Monaten

Interesting how this kind of content surfaces when its time to increase longs size

Profilbild von Allen, Allen, Allen, & Allen
Allen, Allen, Allen, & Allenvor 2 Monaten

And people always make a big deal about how much cash Berkshire/Buffet always have. Good trades or investments don't come around that often. Sitting in a ton of cash equivalent is usually the right thing.

Profilbild von Yishai Cohen
Yishai Cohenvor 2 Monaten

The issue wasn’t position size. Once all the shorts and longs are correlated (as part of the AI trade), all the small positions compound to one large oversized position

Profilbild von black cat
black catvor 2 Monaten

People still listen to him it’s actually peak stupidity

Profilbild von VESKALD
VESKALDvor 2 Monaten

True. And the trap is even deeper - you cant size right before you validated the edge. Kelly needs your real win rate and payoff, and people like to plug in numbers from broken backtest or from imagination. Overbetting is just downstream of overestimating the edge.

Profilbild von Robin Dods : Fenton Capital
Robin Dods : Fenton Capitalvor 2 Monaten

Not sure why we would listen to Martin Shkreli. Probably better to talk to a Quant or someone who understands the (not very complicated) maths. The problem with this entire analysis is that to assess your likelihood of win you have to have a very clear idea of the probability of your win or your loss. Now you can do that in poker much like Edward Thorpe did but it's a damn lot harder to do with equities when the probability is a far less certain. And because the result is quite sensitive to these small changes in probability estimates you can come to what I call the "Kelly Cliff" which gives vastly different answers from not entering at all through to leveraging up. I did some modeling on this a year or two ago. I think it's still useful within the confines of recognizing its inherent problems with equities. But let's not to get too carried away

Profilbild von Stealth Chief Investment Officer
Stealth Chief Investment Officervor 2 Monaten

Gamblers ruin is an easier concept to understand and is related to Kelly. The house (or market) with infinite resources can withstand tail events you cannot

Profilbild von Chuck ʎǝʞuoɯ
Chuck ʎǝʞuoɯvor 2 Monaten

Traders are degenerate gamblers. When they're on the losing side of a trade, they think doubling down is the best bet. If they win, they get a bonus and think they are geniuses.

Profilbild von ShortSniper
ShortSnipervor 2 Monaten

Kelly criterion suggests that you are not risking enough. For a system with a 2:1 reward-to-risk ratio and a 50% win rate, the full-Kelly is 25% of your account per trade. A losing trade reduces the account by 25%, while a winning trade increases it by 50%.

Profilbild von Scott Novitsky
Scott Novitskyvor 2 Monaten

Bonsai

Profilbild von Undercomplicate
Undercomplicatevor 2 Monaten

I fell victim to this so many times within the past ten years. I 100% agree this is the problem every time. Had I been disciplined to size just enough I would have 10xed my initial bag. But I always got greedy.

Profilbild von Darren r-σ²/2
Darren r-σ²/2vor 2 Monaten

This is the formula if you have an estimate of your expected Sharpe ratio:

Profilbild von Billhelm
Billhelmvor 2 Monaten

Wasn’t this the guy who went to jail for securities fraud and pumped up the price of some drug causing misery to millions? And you're gonna listen to him? Good luck

Profilbild von jay
jayvor 2 Monaten

he is somehow humble and relatable. his comment would have been perfect had he said assuming 1:1. is TBPN a reliable source in general? I did watch before thanks to a good friend.

Profilbild von PTW
PTWvor 2 Monaten

Sizing for me is #1

Profilbild von shakermaker.eth
shakermaker.ethvor 2 Monaten

Sizing and risk are skills that typically develop after you’ve blown up once or twice…if you have the drive, mental fortitude, and learn to approach Mr. Market with humility

Profilbild von GalacticSurfer
GalacticSurfervor 2 Monaten

That does not compute. That is equal to saying if a whale trades x amount he will win but a shrimp trading that same amount will lose.

Profilbild von The Great Gazoo
The Great Gazoovor 2 Monaten

It is rather amazing some people go busto with a huge 60:40 edge. Albeit, they don't necessarily trust that they have the edge that experiments tell them they have -- which is a good thing.

Profilbild von Markus N. Reitan
Markus N. Reitanvor 2 Monaten

@Coolbreez016

Profilbild von MindOfMyers
MindOfMyersvor 1 Monat

@MartinShkreli built a Kelly criterion simulator, co-founded a drug company, rewrote pharmaceutical pricing theory, and livestreamed his work with more transparency than any Wall Street exec alive. Then they put him in prison. A man this brilliant deserves a pardon — not a conviction. #PardonShkreli #TeamSHKRELI

Profilbild von gr8statsbatman
gr8statsbatmanvor 2 Monaten

Wow! Shkreli says something really smart! What's the world coming to?

Profilbild von Michael Testarossa
Michael Testarossavor 2 Monaten

Hate em, but so right CC: @jord_ant

Profilbild von J.J. Jejeebhoy
J.J. Jejeebhoyvor 2 Monaten

Use ATR to size with a defined $ risk....

Profilbild von Chloe
Chloevor 2 Monaten

betting like you're the main character is a bold strategy.

Profilbild von Sir Vee
Sir Veevor 2 Monaten

Kelly fraction is: f = p-q f = 0.60-0.40 = 0.20 Plain English: Kelly says invest 20% of your total capital each time.

Profilbild von enterrateucristo
enterrateucristovor 2 Monaten

Where can I use the simulator?

Profilbild von Ginkgo
Ginkgovor 2 Monaten

You don’t really need a simulator to figure out what size you should put on. No one actually tracks their ideas / returns by idea No one actually confirms thesis No one cuts when they are loosing Simple 3 things improves drastically - then use 10% -20% of Kelly max

Profilbild von Onur
Onurvor 2 Monaten

real life scammer is getting on @tbpn incredible work guys.

Profilbild von Larry Panozzo
Larry Panozzovor 2 Monaten

Never go full Kelly

Profilbild von MarloPainter
MarloPaintervor 2 Monaten

Yup.

Profilbild von Nik Zalokar
Nik Zalokarvor 2 Monaten

Position sizing is one of the few levers you fully control. You don’t control tomorrow’s market, but you do control whether one bad sequence ends your trading career.

Profilbild von M. Akuffo
M. Akuffovor 2 Monaten

Sizing discipline matters more than thesis selection in most cycles I've covered. A weaker thesis sized conservatively outperforms a strong one sized aggressively when the drawdown comes.

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No Significant Edge Everyone with the same tools, same rivers dredged Now it's a precipice, we're all on a ledge If you don't go viral then you're not full fledged Because no-one's actually having fun Looking for that soft drink commercial so they can be done Not willing to tread water with a couple of puns No Years of the small leagues, a couple of months and they're done No Significant Edge But your clients are sticky glue, they're actually a curse No weight for the experiment no room to research You're kidding yourself if you think a billionaire cares They didn't get to where they are by playing fair No Significant Edge If you can weather the storm then you're the undead I'm like a zombie with beats for brains If you look really close you'll see the paint stains No Significant Edge When it's gone I'm still on I still float a pattern, song If it's wrong I go long I don't care for happen stance No Significant Edge Your Arts a weapon it's not a way to trim a hedge You can ride the wave and you're just the froth Be the ocean the water then there's nothing to top Times your friend if you enjoy the walk Else it's all filler all just talk No Significant Edge
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every trader believes the stock market is skill and sports betting is luck. the greatest gambler who ever lived is proof it runs the other way. Billy Walters - the most successful sports bettor alive. 36 years without a losing year, all of them spent trying not to be seen. "you have to find things that no one else finds. you have to be able to see angles that no one else can see." his reason: a company reports four times a year, a team has to report every injury before kickoff - so the information in sports is far more even. then he pressed that edge with size, putting a million or two on one game, disguised across 1,700 accounts run out of an office in Panama. the transparent game never touched him. the stock market did - an insider-trading case he denies, 31 months in federal prison. it is all in one 40-minute interview, free. most people never reach the part where he explains how. the edge was never the game that looks respectable. it is knowing which one you can actually measure. watch it, and don't forget this.
42:46

every trader believes the stock market is skill and sports betting is luck. the greatest gambler who ever lived is proof it runs the other way. Billy Walters - the most successful sports bettor alive. 36 years without a losing year, all of them spent trying not to be seen. "you have to find things that no one else finds. you have to be able to see angles that no one else can see." his reason: a company reports four times a year, a team has to report every injury before kickoff - so the information in sports is far more even. then he pressed that edge with size, putting a million or two on one game, disguised across 1,700 accounts run out of an office in Panama. the transparent game never touched him. the stock market did - an insider-trading case he denies, 31 months in federal prison. it is all in one 40-minute interview, free. most people never reach the part where he explains how. the edge was never the game that looks respectable. it is knowing which one you can actually measure. watch it, and don't forget this.

Di Krass

79,935 Aufrufe • vor 1 Monat

Every VC in the market is now reading the same customer call transcripts. That is not an edge. That is a commodity. The moment diligence becomes something you read instead of something you do in person, it stops being diligence. Michael B. Gilroy , co-founder of Marathon Management Partners, which runs $400 million across software and fintech. "If all my competitors are reading the same transcript, who cares? What am I going to learn from that that's differentiated from the market?" he told me. "You will know if I'm lying, if my eyes are darting around the room, the classic touching your nose." AI gave every investor the same call notes. It did not give anyone an edge, because an edge that everyone has is not an edge. The firms still doing customer back channels, still getting on Zoom, still watching a founder's eyes when they answer a hard question, are the ones who will actually know something the market does not. The humans who stayed in the room are about to get paid for it.
1:27

Every VC in the market is now reading the same customer call transcripts. That is not an edge. That is a commodity. The moment diligence becomes something you read instead of something you do in person, it stops being diligence. Michael B. Gilroy , co-founder of Marathon Management Partners, which runs $400 million across software and fintech. "If all my competitors are reading the same transcript, who cares? What am I going to learn from that that's differentiated from the market?" he told me. "You will know if I'm lying, if my eyes are darting around the room, the classic touching your nose." AI gave every investor the same call notes. It did not give anyone an edge, because an edge that everyone has is not an edge. The firms still doing customer back channels, still getting on Zoom, still watching a founder's eyes when they answer a hard question, are the ones who will actually know something the market does not. The humans who stayed in the room are about to get paid for it.

David Weisburd 🚀

10,599 Aufrufe • vor 2 Monaten

You have 100 dollars and you want 200. Betting red one dollar at a time, your chance is one in 33,171. Betting the whole 100 on a single spin, it is 47.4 percent. The careful version is fifteen thousand times worse. This is also the arithmetic of your trading account, and it means almost everything you have been taught about managing risk is, in the strict mathematical sense, a method for losing more reliably. An MIT professor works this out on a blackboard in a lecture on random walks. The result is called gambler's ruin. Two and a half points of disadvantage is nothing on one spin. But a dollar at a time you are not making one spin, you are making hundreds, and the edge gets a fresh attempt at you on every one of them. It was never the size of the disadvantage. It is the number of times you agree to face it. One hundred on red, once: 47.4 percent. Twenty dollar bets: 37.3 percent. Five dollar bets: 11.1 percent. One dollar bets: 0.003 percent. Mathematicians call the right answer bold play. It was proved optimal for unfavourable games in 1965. It is not a strategy for winning. It is the least ruinous way to play a game you should not be in. If your edge after spread and fees is negative, and for most active retail accounts it is, then your position sizing rule is not protecting you. Risking one percent per trade is the one dollar bet. It arrives at zero with near certainty, just politely, over a longer period, with a spreadsheet. Discipline does not beat a negative edge. It schedules it. All of this reverses if you have a real edge. Then small and frequent is correct and bold play is madness. So the only question that has ever mattered is whether you have one, and the number of people certain they do has never resembled the number who do. Your broker does not need you to be wrong. It needs you to be frequent.
1:16:13

You have 100 dollars and you want 200. Betting red one dollar at a time, your chance is one in 33,171. Betting the whole 100 on a single spin, it is 47.4 percent. The careful version is fifteen thousand times worse. This is also the arithmetic of your trading account, and it means almost everything you have been taught about managing risk is, in the strict mathematical sense, a method for losing more reliably. An MIT professor works this out on a blackboard in a lecture on random walks. The result is called gambler's ruin. Two and a half points of disadvantage is nothing on one spin. But a dollar at a time you are not making one spin, you are making hundreds, and the edge gets a fresh attempt at you on every one of them. It was never the size of the disadvantage. It is the number of times you agree to face it. One hundred on red, once: 47.4 percent. Twenty dollar bets: 37.3 percent. Five dollar bets: 11.1 percent. One dollar bets: 0.003 percent. Mathematicians call the right answer bold play. It was proved optimal for unfavourable games in 1965. It is not a strategy for winning. It is the least ruinous way to play a game you should not be in. If your edge after spread and fees is negative, and for most active retail accounts it is, then your position sizing rule is not protecting you. Risking one percent per trade is the one dollar bet. It arrives at zero with near certainty, just politely, over a longer period, with a spreadsheet. Discipline does not beat a negative edge. It schedules it. All of this reverses if you have a real edge. Then small and frequent is correct and bold play is madness. So the only question that has ever mattered is whether you have one, and the number of people certain they do has never resembled the number who do. Your broker does not need you to be wrong. It needs you to be frequent.

Verax

85,472 Aufrufe • vor 1 Monat

THIS KNOWLEDGE MUST BE FORBIDDEN an ex-Jane Street guy told me your "edge" has an expiration date and you don't know it "retail finds a strategy. we find the retail finding it. then we eat it" every pattern you learn on YouTube was profitable until it wasn't the moment 10,000 people trade the same breakout, the desk models it and inverts it > a strategy goes from +edge to -edge in ~6 to 9 months once it hits retail > by the time a guru sells you the course, the desk has already priced your entry as their exit > he said 80% of "profitable strategies" shared publicly are dead or inverted within a year > the course isn't teaching you to win. it's herding you into the trade they're about to take against you he said the real edge isn't a pattern it's being early and leaving before the crowd arrives you bought the strategy at the top of its lifecycle. they sold it to you there on purpose the guru isn't smarter than you. he's just standing where the liquidity collects you're not late to the strategy. you're the liquidity the strategy was built to collect bookmark this before you buy another $997 course they don't sell you an edge. they sell you to the e
0:30

THIS KNOWLEDGE MUST BE FORBIDDEN an ex-Jane Street guy told me your "edge" has an expiration date and you don't know it "retail finds a strategy. we find the retail finding it. then we eat it" every pattern you learn on YouTube was profitable until it wasn't the moment 10,000 people trade the same breakout, the desk models it and inverts it > a strategy goes from +edge to -edge in ~6 to 9 months once it hits retail > by the time a guru sells you the course, the desk has already priced your entry as their exit > he said 80% of "profitable strategies" shared publicly are dead or inverted within a year > the course isn't teaching you to win. it's herding you into the trade they're about to take against you he said the real edge isn't a pattern it's being early and leaving before the crowd arrives you bought the strategy at the top of its lifecycle. they sold it to you there on purpose the guru isn't smarter than you. he's just standing where the liquidity collects you're not late to the strategy. you're the liquidity the strategy was built to collect bookmark this before you buy another $997 course they don't sell you an edge. they sell you to the e

Livsun

11,244 Aufrufe • vor 2 Monaten

Warren Buffett and Charlie Munger were asked about Jim Simons' Medallion fund, ~39% a year, net of fees, for three decades, and whether Berkshire would ever hire a quant to trade like that. Their answer is a masterclass: "we're not trying to make money trading stocks. we don't think we know how to do it. if we knew how, we'd probably be trading stocks too. but we don't, and we really don't trust anybody else to do it for us." two of the greatest investors, plainly saying: that's not our edge, so we don't play there. then Munger explained why even Renaissance had a ceiling: "if they tried to do it too much, they destroyed their own advantage. there was a limit on the amount they could make." the better the edge, the smaller it often is. the most inefficient, hardest-to-find opportunities pay the most per dollar, which is exactly why most edges of those kinda can't scale that aggressively. capacity and edge trade off against each other. none of which takes away from what Simons built. it just explains why it didn't scale to manage $1 trillion.
1:26

Warren Buffett and Charlie Munger were asked about Jim Simons' Medallion fund, ~39% a year, net of fees, for three decades, and whether Berkshire would ever hire a quant to trade like that. Their answer is a masterclass: "we're not trying to make money trading stocks. we don't think we know how to do it. if we knew how, we'd probably be trading stocks too. but we don't, and we really don't trust anybody else to do it for us." two of the greatest investors, plainly saying: that's not our edge, so we don't play there. then Munger explained why even Renaissance had a ceiling: "if they tried to do it too much, they destroyed their own advantage. there was a limit on the amount they could make." the better the edge, the smaller it often is. the most inefficient, hardest-to-find opportunities pay the most per dollar, which is exactly why most edges of those kinda can't scale that aggressively. capacity and edge trade off against each other. none of which takes away from what Simons built. it just explains why it didn't scale to manage $1 trillion.

Goshawk Trades

81,958 Aufrufe • vor 2 Monaten