We're two weeks in and some interesting data is being kicked up. Players like to call tops even though stonks go up- 60% of the 70 charts so far resolve higher, players' down calls have only been right 31% of the time. There's a full stats dive at https://readthetape.cc/notes/tape-report-1
Your feedback and thoughts is most welcome.
That said, if it's possible to do better than random guessing, then does this reflect the fact that the five charts are presumably hand-selected to be "interesting"?
My naive guess, and I'd be very curious to learn if this were wrong, is that something very close to the efficient market hypothesis is true; that, if it were possible to beat the monkeys on randomly chosen stocks on random dates, then someone would have figured this out already and deployed bots to capture whatever profits are available.
Yes - by always picking Up.
Random stock on a random day has 53-55% chance of closing higher. Over 5 days, you will be right ~60%
1996–2016: 53.3% of days were positive. 2016–2021: 54.9% of days saw gains.
Your instinct is pretty spot on. 6,000+ calls in: players state ~74% average confidence but hit ~54%, and accuracy is basically flat across confidence brackets. Up only strategy quietly beats the coin flipping monkeys but players call down 43% of the time.
You mentioned stocks are "seeded random draw", but professionals don't trade random stocks - there is no edge there, price movements are mostly noise. You want stocks-in-play, stocks with heightened interest from investors on that day.
My suggestion is to manually pick interesting stocks each day and ask players what happens next. Don't hide names, so that players can asses market strength and group strength - 75% of success comes from these factors, and only 25% from individual stock selection.
Your description here and on the website is not clear to me about what I am predicting. Am I predicting whether the stock is going to continue to go up the same day? Is the chart of one day and I am predicting whether it will go up or down the next day? In my opinion, you need to get the explanation of what I'm looking at and the directions of what I am predicting down to one clear sentence.
- “up” and “down” was explained. If I bet “down” I’m betting my stock will underperform the monkey index? And if I am correct, I will make money (short the asset) or simply loose less than if I’d invested in monkey?
- loosing less money was green (win) when monkey is down even more.
So you can lose money on the trade and still go green because the monkeys lost more, or make money and go red because a monkey made more. The idea is it's your edge over random. Hope that makes sense and thanks for raising, will strive to make it clearer in-game.
Edit- to clarify Up/Down are a plain long or short, no options and no leverage. Low, medium and high are position sizing.
Seriously though, this is a clever idea and I'm interested to see if I can consistently beat the monkeys. Time will tell! Thank you for sharing!
In reality I don't think a big enough proportion of investors are reading tea leaves for this to be true.
“They have different goals”, I hear. Literally nobody’s investment strategy involves passing up above-average returns for low risk.
Holding overnight risk yields superior risk-adjusted returns. Buying end of month and dumping few days into new month. There are dozens of such effects
These have mechanical reasons for their outperformance - overnight risk has to do with how borrow interest rates for equity markets are calculated and firms unwilling to hold unhedged exposure overnight. Longing EOM has to do with people getting their paycheck EOM and auto buying index funds, and so on and so forth.
Systematic trading isn't magical, it's identifying these kinds of (often simple) effects and building a portfolio of them.
As an individual investor you actually have a huge advantage over large institutions in that your portfolio is nimble and easy to get out of.
As a relatively simple exercise - consider a hypothetical portfolio that's simply long SPY for the year. Could you identify _one_ day in which you'd rather be flat? The answer is probably yes, and the reason you can do this (and not a billion $ AUM fund) is that rotating in and out of positions is cheap for you.
When news about Iran hits the tape, who do you think can exit their positions faster? Joe Schmoe with $30k in his brokerage account, or Citadel with a $100bn position?
There are more actors in the market than just Citadel. For starters there are day traders at virtually every wealth level and with every level of risk tolerance. Someone—or more accurately, many someones—with more money, better information, and better market access is going to claim that free alpha until there’s none left. The notion that there’s so much free, obvious, and reliable market edge simply lying there for the taking by any shmuck with $100 to put into Robinhood is farcical and flies in the face of quite literally all empirical data we’ve collected on the performance of active market participants.
Every single time this kind of discussion happens on the Internet, people inevitably rush to the comments to say that they know the magic strategy that beats the passive indexes. And yet every single study to date has shown that active market participants perform worse than chance and there is zero correlation between those who beat the indexes one year and those who do so the next.
> As an individual investor you actually have a huge advantage over large institutions in that your portfolio is nimble and easy to get out of.
This is a joke. By the time you or I can act on market information, those same big players have known for a comparative eon; more than long enough to change the price of those investments enough to remove any edge.
Maybe Volume would be useful though.