I used to trade options and had about 99.5% success on all my trades

The problem is the 0.5% of the time, it erases all the gains made on the successful ones.

I'm convinced without information edge or some capital sunk cost edge (for HFT) you are literally just flipping coins when it comes to trading.

What's dangerous is fixation on strategies that form after a period of success.

All in all, I think just buying stock and holding is the best and most successful approach to making money.

Maybe when AI becomes sentient it will know on which days it make sense to buy and sell iron condors with huge ass wings....

That's a common pattern in trading strategies with negative skews or tail risks. Even large hedge funds, like LTCM, can fall into this same pitfall.

For anyone interested, I can recommend the book "Systematic Trading" by Robert Carver. You don't have to be into algorithmic trading, the sections on risk management and positive vs negative skews are already worth the read.

Have exactly the same experience as you.

Had a period in my college days where I had a neural network running that could successfully trade on patterns of periodicity of non-chaotic windows of the asset. But as soon as the system would go back to being chaotic, and there was no way to identify WHEN the system was chaotic and when it wasn't, the trades would go to shit and I would lose all gains. I was up about 400-450% at an end of a successful cycle, which was 2-4 months, and then it could be a year of decline with gains being eaten up by the option issuers.

Now I only do long-term funds/stocks and have:

a) much less anxiety about losses b) more money.

Option trading is notoriously difficult. HFTs simply don't take a position at all: they build portfolios that are as neutral as possible in every measure (not only delta, but in vol, its higher order terms, higher order delta terms, etc). This is very difficult to do unless you have substantial capital to absorb short term fluctuations, but if you do you can capture a consistent and very low risk profit.

The best is just buying the whole market via a index fund. Much lower management and overhead costs. Trying to trade without being online all the time is a battle against time delays and costs. To buy stocks, and especially options you are always against the bid/ask spread. The basic math problem for a statistics major is the Gambler's ruin problem. And basically your chances are your money over the whole table's money in total. Even worse if you don't have an exit strategy your chance of going bankrupt is near certain if the odds are even slightly below 50/50. That bid ask spread and incomplete order completion drive your odds down, and for short term trading it is basically a zero sum scenario.

I would highly recommend that you read Mandelbrot's books and Nassim Taleb's books.

For Mandelbrot, I'd recommend starting with The (Mis)Behavior of Markets. For Taleb, maybe start with The Black Swan.

With those books you'll be able to fully understand why even if/when AI becomes sentient, it will still not help avoid blow ups.

(One reason among many others is, for example, that there are things that cannot be properly forecasted, no matter how hard you try or how advanced your model is, doesn't matter, there's a limit to what we can know and what we can't know about the future...)

Extra: Check out also Thorp's A Man for All Markets.

Fundamentally yes you are. Making money comes down to managing your risk. Cutting your losses quickly and riding your winners.

Other people I've worked with on complicated trading strategies seem to be of the mindset that at best all you can ever hope for is basically breaking even... but my boss is convinced his spaghetti strategies with 500 variables can somehow win more often than anyone else has ever figured out.

>I used to trade options and had about 99.5% success on all my trades

Do you mean this literally or is that an exaggeration for effect?

I'm not sure how you'd do that unless all your trades are like selling a put with a $50 strike price expiring in a month when the stock is trading at $100.

> I used to trade options and had about 99.5% success on all my trades.

> The problem is the 0.5% of the time, it erases all the gains made on the successful ones.

Nassim Taleb calls this "eating like chicken and shitting like elephants"

I agree with your suggestion of just buying a stock and holding it, but if AI ever becomes sentient, we may well end up being the commodities in their trading exchange

Held stocks provide minimal gains. Perhaps a bot to sell calls. Then your main risk is wiping out potential upside as you cry into your pile of realized gains.

This is 100% accurate.

The only way to make money for 99.999% of traders is to trade with a firm. You should not trade on your own. You will lose in the long term.

this sounds like you had poor risk management...or didn't have any. I have a strike rate around 55% but all my trades are 3:1 reward:risk and i don't risk more than 1% on any one trade

This doesn't make sense. If you had a 99.5% success rate, you could simply use a fixed $ stop and clean up. I agree you need an information edge, but the difficulty of finding one inversely correlates with your scale. Buying and holding is the best strategy for almost everybody - but that is orthogonal to whether trading is a "coin flip" vs mining an edge.

Try IWM brother.

> I'm convinced without information edge or some capital sunk cost edge (for HFT) you are literally just flipping coins when it comes to trading.

This applies to everything in life.