Why traders with legit strategies that work don't share their strategies freely or publicly or even for few lakh rupees:
A thread.

1. Some strategies are scalable, and some are not. When I say scalable, I mean you can trade it at 10L capital also and 50C capital also.
2. Those that are unscalable are usually stocks related strategies, or those that work only with one instrument. Stocks related strategies that become unscalable do so because of liquidity constraints and fills at a desired price. Order splits and slippages eat into profits.
3. The scalable ones are truly scalable, tradeable in multiple instruments or on the most liquid instruments, and since you can scale them very well, you'll want to keep the strategy to yourself as you can scale your capital well.
4. Either way, when you sell/share a system, here's what happens. A lot of people who take that system, start trading that system. They place the orders at the same timeframe, at the same time. Their SL is at the same place as others. Their target orders are also at same place.
5. What this leads to is CROWDING. What is crowding here? When you're trading a system most people don't know, on an instrument, placing trades, you aren't competing for fills. But when the trades get crowded because other people are aware of the system, you compete.
6. Who do you compete with? All the others who have now started trading your system. Your buy and sell orders, stop loss orders, all compete for fills along with similar orders. What does this lead to? Sometimes you win the competition, get filled first. Most times you don't.
7. Because many people's orders are crowding at that price point, the price goes up or down depending on what the competition is for. The crowding moves the price and moves the market. Even if it is just 1 or 2 points per trade.
8. Let's say you have a system that makes 200 trades per year average, and makes 6 points per trade on average after slippages. You share your system. Crowding causes 2 points per trade slippage (roundtrip of 4 points). What happens here? This renders your system useless.
9. You end up sharing the system, crowding the trades that the system would take, leading to worse fills, more people discover your system, and your system's actual results get worse and worse over time.
10. Institutions then sniff out these stop losses of your system since your sharing of system led to crowding of the trades at certain price points, which gives institutions certain liquidity pools in the market to take out by stop loss hunting.
11. Eventually, you have now lost your edge, and your system's edge is gone, trades gotten crowded, the system doesn't work anymore.
This is predominantly why I keep saying anyone selling systems is either selling a sub-par shitty system without optimization to put money in their pockets, or is just going to eventually render that system useless, and should be a fool to be selling that system.
No sane person is that stupid to share a damn good working system in the market. Not even for 1-2L rupees. If something isn't scalable, all the more reason to keep it secretive. If something is scalable, all the more reason to keep it a secret and scale as much as possible.
This effect is more pronounced in intraday systems. If everyone takes their entry on 5min open on a particular condition, what happens when everyone you shared it with puts their buy order at that limit price or market order? Only few get filled, others get worse fills.
Let me illustrate this with a simple system that doesn't work on NIFTY anymore coz it's crowded. 15-min ORB.

1. You go long on 15m ORB high breakout and vice versa.
2. Keep 0.3% stop loss and trail on every 5 min close.
No target.
Nifty Opening range high is 11415. Opening range low is 11390.

Where's everyone's market long order? 11416.

Where's everyone's market short order? 11389.
Where's everyone's long SL? 11381.
Where's everyone's short SL? 11424.

What happens now? Market orders get triggered if ORH is broken, and since a lot of people are competing for fills, only few get filled at exactly 11381 if liquidity is there.
The rest will get filled at 11381.5 or 11382.5 and so on. Since this is breakout, action is swift, and fills are usually worse, and depends highly on speed. This is why institutions compete on speed and buy before you, and sell to you, make money on that speed arbitrage.
Now you have lost 1.5 points in that slippage.
Market moves up, you're in profit, your TSL is now at 11450. Everyone's TSL is also there only. So when market breaks 11450, your stop market order is hit. You get filled at 11449 or 11448.
The more and more the number of people who enter this trading strategy, the worse and worse the fill gets. The only way to ensure the best fill is to be the first order to get placed in the exchange upon breakout. You need colocation and better than institutional speed.
Since you're trading with a kachra broker who doesn't offer such speed advantage and all, and lags by 500 or 600ms or even 1s, you get worse and worse fills, until the strategy stops working and you're bleeding money.
Even otherwise, a lot of people open their orders on 5m open, 15m open, 5m close, 15m close, etc. You have to optimise for timeframe + crowding disadvantage too. Whatever i have explained here is a gross oversimplification of things, but I hope this suffices.
This is also why legit traders don't share their trade logs. Even if one smartass reverse engineers their strategies using the timestamps and trades, their strategy is out. And it's possible to do so. This is also why I don't trust people putting up mtm screenshots with trades.

• • •

Missing some Tweet in this thread? You can try to force a refresh

Keep Current with Shravan Venkataraman 🎡

Shravan Venkataraman 🎡 Profile picture

Stay in touch and get notified when new unrolls are available from this author!

Read all threads

This Thread may be Removed Anytime!


Twitter may remove this content at anytime! Save it as PDF for later use!

Try unrolling a thread yourself!

how to unroll video
  1. Follow @ThreadReaderApp to mention us!

  2. From a Twitter thread mention us with a keyword "unroll"
@threadreaderapp unroll

Practice here first or read more on our help page!

More from @theBuoyantMan

19 Sep
Learn to listen to the markets and do not impose your own will upon them.

- Linda Raschke.
Every successful trading strategy has the same essential starting point: minimizing risk first, looking to maximize gains only after risk has been defined and controlled.
It is important to initially trade a new concept or strategy on paper. Only by seeing a pattern over and over again will you truly feel comfortable with it. You must believe in its ability to repeat itself.
Read 16 tweets
18 Sep
Bill Gates, Mark Zuckerberg, and all those you think dropped out of college, DID NOT DROP OUT OF COLLEGE. Get the facts right next time someone quotes that.
There's a concept called "LEAVE OF ABSENCE". Zuckerberg wasn't sure Facebook would work out. He took a leave of absence one fall, hoping to return to college for Spring if things didn't work out.
Bill Gates actually took a Leave of Absence, things didn't go as he wished, he came back for a semester, then took a semester off, and then another semester off, and things picked up and he didn't go back to college to complete the degree.
Read 6 tweets
12 Sep
A high maintenance, financially profligate and prodigal spouse will destroy your chances at a financially independent and free life, one without worries on finances. Choose your spouse carefully. That one person will decide the fate of your financial life.
You won't notice it at first. But your spouse will influence your spending habits a lot, at a subliminal level. It will be like getting fat. From one day to next, you won't notice much. A year later, you have totally changed appearance wise and you've gone from fit to fat.
It could be for keeping up with the joneses, it could be for keeping up face within family or in front of friends, or it could just be plain superficial materialistic desires. But it happens ever so subtly, initially you resist, but you will start relaxing and giving some leeway.
Read 6 tweets
11 Sep
1. Almost everybody sucks at money. This includes the middle class, the poor, the financial advisors, most of our stock market traders, gurus, and those we consider rich people.

2. Getting rich enough to retire takes only 10 years of proper planned hard and smart work.
3. Work is better when you don't need the money. It's great to get rich enough to retire. But what if you don't wanna retire coz you can't imagine yourself sitting around all day?

You're probably going to keep working, and love doing it, coz it's fun when you don't need money.
4. Usually people graduate with student loans, get their first job. They buy their first car brand new, on a loan. They get married, spend most of their savings on their wedding. They buy their first house on a loan, they upgrade their car to a bigger one with a bigger loan.
Read 21 tweets
7 Sep
As I had mentioned before in comments of a post discussing my IF eating a couple days back, eating a vegetarian diet and getting required protein is straight forward.

-Reduce carbs intake via Rice/Rotis.
-Focus on calorie dense foods - paneer, nut butters (Peanut/almonds),etc.
Excellent sources of vegetarian protein: Cheese, Paneer, Roasted Peanuts, Peanut Butter, Roasted Almonds, Almond Butter, sesame seeds, flax seeds, etc. Don't overload so much on beans varieties as they cause flatulence and bloating.
In addition to these, for significant results, add vegetables like broccoli, cauliflower, etc., and limit carbsy vegetables like Potatoes (unless you're filling your carb quota). Eat good amount of Keerais (leafy greens - ara keerai, siru keerai, moringa leaves, mulaikkeerai,etc)
Read 9 tweets
5 Sep
The traders who make the most money are discretionary + rule based traders.

Discretionary and gut-feel based/instinct based traders blow up someday.

Purely 100% systematic traders make money, but also must adhere to drawdown periods, so the equity curve will be jagged.
The best path for someone coming into the market to trade and make good money is the following.

1. Start off as a systematic trader.
2. Collect ideas from everyone you come across. You can also reverse engineer strategies based on what popular traders on Twitter put up.
I once spent entire weekend decoding @bhatiamanu's initial strategies for how he took 10L to 30L and then 30L to 1C. He used leverage, he did cash buying in stocks, he was long only for most part initially, traded in stocks that were highly volatile, high beta, mostly an ORB.
Read 16 tweets

Did Thread Reader help you today?

Support us! We are indie developers!

This site is made by just two indie developers on a laptop doing marketing, support and development! Read more about the story.

Become a Premium Member ($3/month or $30/year) and get exclusive features!

Become Premium

Too expensive? Make a small donation by buying us coffee ($5) or help with server cost ($10)

Donate via Paypal Become our Patreon

Thank you for your support!

Follow Us on Twitter!