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Complicated Active Trading Strategies
Active trading strategies can become incredibly complex. They remind me a bit of astrology: the inner workings of the system are so complex that you quickly get lost inside. With each failure to predict the future, you figure you just need to learn more, and there is an endless variety of active trading strategies to learn. It’s all too easy to forget that underneath all of the terminology and tactics are some basic assumptions that don’t prove out - namely that active strategies don’t beat index strategies in any study I’ve ever seen (see Efficient Markets).
Seeking Alpha has huge content depth on active trading. I found this thread interesting because it shows how complicated active strategies can be. In theory you’re supposed to do all of this complicated stuff before you go on vacation. What about when you go to sleep at night?
Check out the 3rd comment down, by BSchecker. Clearly someone that got burned by active trading and is trying to get the word out. His voice is totally drowned by those selling advice.
Although I don’t find it so, the problem for most people is that index investing is kind of dull. It’s not compatible with thinking that you’re going to win the lottery by discovering a “secret” trading strategy (that is sold on the internet for $200/year).
It’s also much easier to write endless articles about active trading than it is about indexing. New active trading strategies require little more than some complicated options wrinkle plus a few claimed anecdotes of success. To actually push the boundaries within indexing you have to do academic-caliber work. Even then you’re mostly just proving that this or that active strategy fails relative to indexing.
