34 karma · joined March 27, 2013
The notion that human life is precious is a remnant of times when child bearing was risky, life expectancy was short, agriculture was a bunch of mules and a bunch of peasants and medicine was not scientific and we had massive shortages for manual workers.
These days, if we start to lighten up a bit in the lower half of IQ distribution it might be much more of a blessing than a curse.
Nobody should expect that AI can be relied upon for anything where the cost of an error is catastrophic. This should be obvious, but if it's not, it should be stated ONCE before one gains access to an interface. After that, losing anyone who fails to take notice and suffers as a result is no longer a catastrophe.
Many liquidity provision strategies are also infeasible given the unreliability of the APIs available and the high fees, and in general many intraday strategies that work in other markets and would work with lower commission for bitcoins are devastated by such high fees.
As for stocks, if your volumes are decent, trading costs are negligible. With bitcoin exchanges, that does not seem to be the case...
- Return is not everything. More informative performance metrics are Sharpe ratio (a sort of reward/risk measure) and information ratio. Both of the above have ridiculously low values in this case.
- Another thing that matters is the distribution of returns. If you have plotted this and still see nothing wrong, you are really better off doing something else. With numbers like these, chances are will be out of cash much sooner than you will hit a good month. And even after you have hit a good month, what happens when you hit a bad one?
- Beta: essentially, when the algo does well, it is mostly because of significant overexposure to the market. At this point, I would much rather lever up and buy SPY than trade using this thing.
- Predictability and risk management: ok, so you have tested this on historical data. What are the cases in which this would misbehave? After all, it is optimization, so there may be inputs for which this gives very undesirable results. How would you notice? (hint: you have no risk management in your code!)
The bottom line is that, if you ever want to put some money where your mouth is, you would have way better chances at doing well if you learned some basic finance rather than treating the markets as a black box (no matter how creative you can be). At least, you will be able to evaluate appropriately whether you are doing well or not.