Topic: How to profit from the stock market, no matter what! Updated 02/16/12 (Read 7209 times)

if only it were that easy

Options:

http://en.wikipedia.org/wiki/Options_strategy

added more info to reflect performance up to 02/16/2012

Sure. But if you have that kind of money, I am sure you should be trading something else.

Does it work with moderately large sums of money ($500K for instance)?

Great, as I never said you can make millions.
From the first post, I clearly stated that this is not a get rich quick scheme.

I agree... And I think we actually agree on things, we're just defining terms here. 100% accuracy is impossible, but an effective trading system does not require this, all it needs is a tiny edge, and that's enough to consistently make money, until the underling market conditions that create the edge change.

So I think we're in agreement really. It's just a red button for me whenever people say things like "make money no matter what the market does" and "you will make millions" because people can easily overload if they believe this and blowup when their assumptions about drawdowns etc are forced to change with the market. Or they stop using the system during a bad DD, and thus lose money despite the contiuing profitabilty of the system. LTCM is a good example, or perhap an even better example is that fact the individual invstors tend to underperform the funds they invest in. There are many psychological traps that cause novice investors to lose money even in good systems, and unrealistic expectations are like gasoline on the fire.

That said, building trading systems is a great and rewarding enterprise but if you've been around the block long enough you develop a healthy sense of realism about it, and realize that effective money management is key. It's one thing thing to theorize and backtest but another to continue to have success applying a method into the unknown future. That's really my only point here. Honestly though I believe your system probably has a nice edge, or else you wouldn't be so excited about it, and I wish you the best applying it into the future. And yes, I am curious of course

This is actually a really good point, since although philisophically the answer is the same, in practicality you're right this is basically free money. So my above answer really is applicable to the larger markets where this type of oportunity is already arbitraged out of the market, or in the arena of a single exchange treated as a closed system.

Problem is.... no one can accurately forecast the future, that is.... if you are not an insider or member of congress.

What about arbitrage? Having money in 2 exchanges, and doing a market transfer on both at the same time, does not incur a lot of risk.

Sorry to disappoint but I am Burt Wagner, no relation to the other Wagner.

Btw totally unrelated, but I'm a real fan of your show. That's where I learned about The Real Plato, and eventually I met up with him in Las Vegas . Good times... We introduced Bitcoins to Penn and Teller

If the underlying stock falls more than your premium, you lose money, so the forecast is that the premiums will make up for the drawdowns over time. ( In reality though you would need to be more specific with the forecast if you wanted to actually use the system. )

I've heard many money managers adamantly state that they don't predict the future, they just "manage the proccess" or "react" to the market, but the plain reality is that all trading involves prediction of some aspect of the market. Understanding this and knowing the exact nature of your forecast in a statistical sense is the real key to successful trading, because once you understand this then trading system design becomes merely a way to exploit that particlar market tendency, along with managing money based on the distribution of the individual trades, and rules for determining system burnout.

I think people are often so hopeful for "the perfect system" that they overlook the underlying forecast and thus don't clearly identify the risk. A strategy could be forecasting a spread or any number of future things without directly forecasting price targets, but it is still a prediction.

True but not "as true" for some things.  Let's say you sell a covered call.  Then you take your profits + premium and you are done.  True - you are guessing/hoping the stock stays put or goes down so you do not have to cover the call.  But, worst case you make your money and then have to cover the call and you don't make as much "as you could have".  So it could be said that you don't really care what happens in the future once you sell the call.

Basically the same thing as just selling the stock.  Once you sell it you have taken your profit and can only kick yourself for not having kept it longer.

All trading requires probabilistic forecasting.

I will just let you guys keep guessing. I won't say if you are right or wrong, because doing either one would lead to more guessing, or give out part of the secret.
Like you said, there is no free lunch, another reason why I wouldn't reveal too much info.
BTW, if it was that easy, I doubt it takes 90 minutes to explain to someone who have traded stocks before.
No, I did not figure in the tax consequences. Everyone's tax situation is different, even just within the US.

The examples he gave made it look like dividend stripping. If so, there is no free lunch, if you believe the market to be generally efficient (which is often, but not always, is). Plus there may be tax consequences to consider when calculating your net profits from any such scheme.

Hmmm... sounds like a dividend strategy.

This strategy does NOT rely on being able to predict the future. If I tell you what actions to take, I would have given away part if not all of the secret.

Predict 5 moves, or state 5 actions that someone should take, sufficient time beforehand. If you can do that consistently, then you show people that you can profit. This way you don't have to give away your scheme, but you can still show people that it works.