Show HN: Duedilly.io – Accuracy of Reddit Trading Ideas
duedilly.io
duedilly.io
Not much of a developer but I've got several years of experience in the quant finance industry. Seeing people talk about plowing their rent money into an idea when the ideas are hardly financially sound was really frustrating. At the end of the day, it was my non-technical friends and people like them being sucked into these pump and dump schemes.
Happy to get any feedback. Here's an example page if you're not sure what to click:
It's interesting to crawl through some of the entries from leaderboard people. It seems like most of their bets are neutral or slightly random, but then they'll be propped up with a lucky call on GME from January or some other single-stock pick.
For example, this poster apparently just spammed GME posts during the run-up and got lucky, but if you followed their other calls (REAL and AI) you'd be deep in the red. Their GME spam puts them in the top 3 medium traders with a 236% 1-month return, but everything else they've posted has performed terribly: https://duedilly.io/trader/r.Ottikarottiii/
It would almost be more helpful if there was an option to subtract out the well-known meme stocks like GME. Some of these leaderboard entries have not so great results for their own calls, but they happened to post about GME at just the right time to dominate their average.
The mistaken idea behind that is that people think risk and reward covaries. It does for single wagers, but when assessing profitability of investments, we must look at long term growth. When we do that, there's a risk level that maximises growth.
Lower risk than that gives you slower growth but with less variability. Higher risk is just stupid because it gives you slower growth and increases your risk of ruin (by getting variability over levels supported by your capital.)
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People who actually make money on this are good at inventing their own insurance in ways that lowers their risk significantly. They make very specific, relatively independent bets that aren't just proxies for "exposure to the market".
I usually have been playing low-risk investments and want to change that, any articles or advice to make independent high risk bets that actually end up lowering overall risk?
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I don't have much advice on that, specifically, other than
1. Be very careful. When shit hits the fan and you need that independence most, all correlations go to 1.
Related to the above, understand the cut-throat nature of the business. Actually, reading The Poker Face of Wall Street by Aaron Brown might help with this. The difficult part is not winning big; the difficult part comes after that, when you need to convert people's promises into money and successfully walk out with it.
Nobody is looking out for you. It's nobody's job to make sure you get what you are supposed to. I bring this up because I see people spend lots of time concocting advanced technical strategies but then forget the people skills required to get away with it.
2. Learn and play around with as much statistics as you can find the time to. I like reading actuarial textbooks because many of them work in insurance which means they do specifically that.
3. I'm a big fan of Aaron Brown for putting into simple words many of the most important concepts. Read Risk Management for Dummies (honestly!)
In particular, once you start making specific bets, you don't want to have stop losses that prevent you from losing too much money. That's a sure way to lose money. Instead, think like a scientist. Do hypothesis-based trading. "I think that X, because Y. If I see signal Z from the market, one of my assumptions are invalidated and I will reject my hypothesis and exit the trade."
4. Set aside a small amount of money to practise with. Try to invest in ways that expose you to specific spreads, like big vs small market cap narrowing, or service vs product sectors widening.
Try to make these actual bets you believe in. The point of this exercise is that you will, at a low cost, see how often you're wrong and go back to a plain constant fraction rebalanced portfolio, with a small but solid mix of high and low volatility assets.
It's really hard to do much better than that.
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Edit: upon re-reading your question, I think I misinterpreted it. Maybe you're just asking about how to find a small but solid mix of high and low volatility assets to have in your constant fraction rebalanced portfolio.
One start is reading Thomas Cover's 1991 paper on the Universal Portfolio. In order to understand that, however, you might need to back up a bit more into the history of E log X optimisation. The book "Kelly Investment Criterion for Capital Growth" is a collection of historic and modern papers on E log X, including Cover's. It's a very good book. Though it takes a bit of working through results practically to understand.
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That will help you find a decent mix of high and low volatility. Specific numbers are no big deal, though. I would recommend at least 50 % low volatility, but some people (like Taleb) suggest up to 90 %.
The mix of high volatility is also not that sensitive to specific numbers. To avoid having to do difficult optimisation, just split evenly between whatever assets you want in there.
To avoid correlations, just look for things that seem like they're not cointegrated. There's no point in optimising this too hard either, because as I started out saying, when you need uncorrelated returns, they will be correlated.
You're talking about the efficient frontier from Modern Portfolio Theory, no?
The efficient frontier based on Markowitz' mean--variance optimisation does not help you find a risk level that maximises growth, because it looks at one investment in isolation, not sequential reinvestment over a long period.
The analogous concept I'm referring to is the set of portfolios that are linear combinations of risk-free assets and the E log X optimal portfolio. These are all Kelly optimal under more and more restrictive constraints on allowed variation, but come with slower growth as a trade-off.
To reiterate, the E log X "efficient frontier" talks about how fast your portfolio will grow over time as you reinvest your gains. The Markowitz efficient frontier tells you something about the statistical nature of a single investment opportunit.
In many practical cases, the joint distribution of outcomes is easier to estimate safely than the variance. The joint distribution of outcomes can be approximated by something very close to the actual observed distribution of outcomes. However, the variance has, in a sense, to be derived from a fitted model. This is one step further removed from reality which risks introducing more incorrect assumptions.
Other reasons are that the variance doesn't even exist for some assets (too heavy tailed distributions) and that errors in estimating the joint distribution can be smaller thanks to at least some level of central limit theorem.
Currently, it's pretty difficult to crack the top without something like that. At the same time, I think (as another commenter pointed out) the distribution of returns for the way these traders pick stocks is pretty skewed/lottery-like. One hesitation I have about the median is that although it's more robust to outliers its less reflective of the true performance achieved.
Maybe putting some stocks in a "meme tier" and then excluding those might capture what your describing, thanks for the feedback!
Regardless of whether you end up doing this, great work and thank you!
For example, CLOV is a wsb matador.
[1] https://www.forbes.com/billionaires/ [2] https://en.wikipedia.org/wiki/Infinite_monkey_theorem
Read reviews
Noise
Colour
Price
The list goes on and on!
Perhaps consider going further back in time, before GME. GME-like events have occurred, but to a smaller extent, prior to GME.
Perhaps consider including posts of people who lost money buying at the top. Few posts are of this nature, but they occur when previously popular tickers dip.
Perhaps include past trader performance. Having been on r/WSB years prior to GME, I've noticed that the _active_ community tends to be made of newly joined users. r/WSB has a huge subscriber base (reddit accounts who have "joined" the subreddit) but far fewer daily active users. Pulled these numbers in the past in an attempt to see if mentions of a stock ticker could fortell a stock's rise (effectively a forward indicator of a pump). Unfortunately, mentions lag the movement. Mentions also lag the eventual rapid dip (so you can't rely on the dip in the mentioned popularity of the stock to sell prior to the dip).
There's several stocks you can see now where tons of people have bought after the top and lost a lot. Here's an example:
https://duedilly.io/asset/BABA/
I've noticed something similar with mentions being a poor leading indicator. Anyone can submit any reddit post to the site so hoping with exposure these older traders can submit those older posts as well, as it helps corroborate their track record.
This is cool. If you follow /r/wsb, you know half the damn sub has the idea to create this site once a week. But you actually did it. Great work.
Thanks! I'm unable to post it there unfortunately (or really anywhere on stocks subreddits) due to moderation rules around promoting webapps but I've seen a lot of those posts.
example: https://duedilly.io/asset/SAVA/
Awesome "About" section, it answered all my other questions.
For that reason I auto-classify as bullish but there's a report page that anyone can click to report mis-classified posts.
Thank you!
A couple of nits:
Looking at the recommended page duedilly.io/asset/ZOM "Posts that are not bold have been removed/deleted on Reddit" -> "Posts that are bold have been removed/deleted on Reddit"
DD is not defined (one would have to go to the main page) and it is not a well known acronym.
Worst, in the industry its often an acronym for "drawdown". I was quite confused until I saw the definition DD=due diligence on the homepage.
Since my target demographic in this case was people on Reddit following trading advice I wanted to keep things straightforward first and slowly over time introduce those educational components to get it closer to how the industry thinks about it.
If you have that data too: it would be great to also display the losing trades and portfolio + include it on leaderboard.
Also, winning vs losing trades.
For sake of soul (and wallet) of Average Trader Joe
The big issue for me is accountability. People make public claims and delete the things that didn't work out, so a lot of platforms can be gamed. On Reddit, the titles of posts can never be deleted so that provides one way to verify it. I think that's valuable if you can start auto-adding tweets/blog posts/reddit so people don't mess with their records.
1. I would like to know exactly how long a user has been on Twitter. I would like to filter out all users that joined after GME rebellion. It might help identify the hedge fund guys whom are their just to pump, and dump? I am not that familiar with Twitter's api, but felt after the publicity, most professionals would ruin the group.
> Okay Retards, I will make this long because apparently you Apes seem to like long posts, even when a YOLO opportunity like this
But what do I know, I'm just a triggered liberal.
Edit: I understand how they use the "r" word on WSB as it's been in the mainstream news for a year. I'm saying that it reflects poorly on a business, signaling that it failed due diligence, on there homepage of all places.
(fellow gambling degenerate)
I mean it's basically the same kind of people that turned a word that simply meant 'delayed' into a slur.
This is not an example of that though, since "retarded" is not a slur in WSB, it's the opposite.
If you're just memeing then carry on. It doesn't really bother me, I just never really understand the call-to-political-arms mentality for this kinda stuff, because it doesn't really change how people talk in my experience - it only changes who they talk to, which I think is counter-productive for society. A society built on private chatrooms is just putting everyone deeper into their own echo chamber.
I think the triggered liberal comment was an attempt at levity to make the feedback less harsh so that people might have a less visceral reaction.
Indeed.
The Ape stuff is cringe, because that moniker is adopted for those who can't read/can only buy and hold stock and is purely focused on GME anyway.
This could be a great resource and it doesn't need to be directed to people playing up ridiculous persona's on reddit when the reality is those who will read this are intelligent investors.
So long as you only use money to loose, never use margin...
Trading stocks is not a way to make money. Want to make money? Invest in yourself and work for it.
Stocks can be a part of your portfolio - but do not take investment advice from Hacker News commenters!