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Comment by dachworker | Hacker News Reader

I'm not at all familiar with this whole field, but why would you publish a trading strategy if it has potential? Why not sell it to a hedgefund, at least? Or is this research formally publishing what industry is already doing?

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Seemingly profitable strategies are actually published all the time in finance literature.

Some also work (usually only for a short amount of time if profitable), most don’t really work at all for various technical reasons (lookahead bias, model doesn’t account for slip/trading costs or assume infinite liquidity or a portfolio too large to realistically rebalance etc.) and some again work, but have unfavorable risk-adjusted return profiles compared to simpler strategies.

Or in the case of batteries: Requires a whole lot of hardware to be bought to get a reasonable economy of scale.

True and batteries have their own characteristics.

They do not last forever, have inefficiency/loss (order(s) of magnitude larger than slippage/fees) etc.

It can seem like the Wild West with many opportunities for arbitrage, but there are practical challenges.

Many countries prefer to improve energy infrastructure through private initiatives, and this is one of the incentives as I see it:

If you get a foothold, profitable trades can be made with only limited competition.

This should also help decrease volatility of electricity-prices, as predictable fluctuations gets evened out from arbitrageurs.

Most real-world optimizations for flexible storage assets currently work across multiple markets, sometimes also with more sophisticated boundary conditions. What we show is that high-frequency trading on the continuous intraday market is relevant, especially when training for more optimal parametrized strategies.

It also seems like a sensible idea to publish details and theories about an idea, not necessarily a finished trading product though ;)

The authors are from universities. Publicly funded.

And its not like they can just do that and get rich. Its particular for/with battery storage systems.

Basically making battery storage systems more interesting for investors to invest into.

Is the trading strategy making substantial returns (at least a few percent) on the full investment (batteries, electronics, subscriptions)? Otherwise this is only relevant for battery owners that benefit already by other means (using the battery at night for home owners, for example).

There‘s still a lot of work left to do to go from an academic prototype to live trading: real-time data, market access, SCADA, compliance & legal, security, … Also you must be a physical player that owns the battery and/or right to use it and not just do paper trading.

There is "virtual" (paper) trading in the day ahead markets in the US, but it's just for amounts of energy. You can't make a fake battery for the grid operator to optimize.

This isn't a trade "just on paper". You need real hardware integrated into the grid.

On top of what others have mentioned, this paper also sidesteps forecasting electricity prices, which is already a very complicated problem (particularly in U.S markets where we have zonal pricing) needed to build profitable battery systems that actually operate on the grid.

I've had a few chats with some folks working on battery startups, and I think the more conventional approach is to forecast prices + run an optimization to find optimal storage decisions. You could measure the system's performance by looking at how well the algorithm does when it has perfect information about prices (obviously, when you have perfect information about prices it is trivial to optimize the battery).

Our two follow-up papers are addressing exactly this (for Europe)! We are extending our high-frequency continuous intraday approach (CID) with a forecast-based day-ahead bidding stage, and subsequent CID forecast updates.

I'd also be quite interested in strategies for grid-scale BESS trading in the US' real-time markets. Do you know more about it, or could forward me to someone who would be willing to talk about it? ;)

I'm afraid I'm not too familiar with BESS in particular, and the people I spoke to are probably not too keen on sharing much (which is generally true of those who work in U.S markets). Unfortunately it's all very opaque.

I'd be happy to provide you the names of the firms I spoke to over email, if that would be of use!

Yes thank you, that would be at least slightly more refined than me just randomly writing companies which might be relevant! My email is dschaurecker(at)gmail.com, thanks again :)

1) It doesn't actually work

2) It's worth more to your career

3) Selling a strategy to a hedge fund as a stranger is, unless they hire you, probably a good few months of umming and ahhing and paperwork.

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