August 1, 2017 NEW BOOK RELEASED
Just released my new book, From Zero-Beta to Alpha Generation, Reshaping a Stock Trading Strategy.
It chronicles the remodeling phases of a stock trading strategy found on the web.
From its beginnings, where it could not really outperform market averages, to making it the most powerful trading strategy to have in a portfolio of strategies. So powerful, in fact, that over the long term, it could carry the day for the entire group.
I explain the different steps I have taken in the development process to make the initial trading strategy go from its zero-beta design to a much more productive alpha generator. To such a point that in a portfolio of strategies, it became the elephant in the room.
The strategy might start with the notion of an also-ran, meaning not that interesting. Except if that was what you absolutely wanted. A zero-beta trading strategy that almost by design would tend to market averages.
The successive transformations being applied reshaped the strategy's approach, philosophy, and trading procedures right down to its core. Thus, making it a totally different program than the original version.
It is easy to see if a trading strategy has merit. And it is a simple math problem too. A stock trading strategy has to have an impact on the portfolio's final results. The equation for this is: F(t) = F0 + (1+g(t))∙Σ(H.*ΔP). Therefore, you have to concentrate all the efforts on Σ(H.*ΔP), the strategy's payoff matrix.
You have to organize your trading methods to achieve: (1+g(t))∙Σ(H.*ΔP) > Σ(Ha.*ΔP) > Σ(Hm.*ΔP). This means that what you bring to this problem (your skills, investment functions, and trading procedures) is greater than the average guy's input, which also needs to be better than what the market had to offer almost for free (low-cost index funds).
Your strategy fails at any of these levels, and you have nothing in hand.
If it fails against your peers, they win.
If it fails against market averages, your peers again win. Technically, no one is interested in your trading strategy. The reason there, too, is rather simple: why in the world would anyone deliberately choose to underperform?
The book also shows that not seeking the limits of our trading strategies can make us greatly underestimate what they can really do.
Also, From Zero-Beta to Alpha Generation, Reshaping a Stock Trading Strategy can serve as a blueprint for structuring your own trading strategies to make them high alpha performers. It reiterates what I often say: if you want more, you have to do more.
 |
Related article: Post-Strategy Portfolio Analysis
Created... August 1, 2017, © Guy R. Fleury. All rights reserved