ETD
Ethan Allen Interiors Inc
stock NYSE

It's interesting to see the shift in tone as of late with algorithmic trading. 5 or 10 years ago you posted a Lamborghini in the thumbnail and everyone thought you were a genius. Now people are a little wiser and realize that the Lamborghini was rented, and that trader was trading in a sim account.

Now it seems like vibe coders are coming out of the woodworks (and with the help of AI) they are 'exposing' these other YouTube guru's fake strategies. Don't get me wrong, there are a great many frauds out there. I even make light of it myself in my satire suno songs. [https://suno.com/s/T9mxUN3or6KNjk31](https://suno.com/s/T9mxUN3or6KNjk31)
But I fear the pendulum will swing too far the other way. As someone who has spend 1000's of hours back testing strategies and literally developing my own personal Orthogonal Quant fund. [https://suno.com/s/O4WlJks6mUeHVzkW](https://suno.com/s/O4WlJks6mUeHVzkW) (FYI, I don't think YouTube has figured out what that is quite yet) I know quite well how incredibly difficult it is to find a profitable intraday edge that isn't susceptible to curve fitting. That doesn't mean however that discretionary day trading is all hogwash and complete nonsense.
There are things that I think people are missing....

1) The implication that the human is consciously aware of the reason they have an edge. There are more than a few ways to make a trading strategy based exclusively on indicators profitable, such as: inventory-based mean reversion, reverse pyramiding, anti-martingale sizing, or a target ladder. What appears irrational or inconsistent may contain the very edge the simplified algorithm leaves out. The first chapter in the book, 'Blink' by Malcom Gladwell does an incredible job of describing this. He references the experiment where 2 decks of cards are given to the test subjects and before the subjects are consciously aware they have decided to shift their card drawing over to the deck that wasn't rigged against them. This is only one example, sexing chickens is another.

2) Just because an edge is fleeting doesn't mean it can't be exploited now. Assume you were trading during the dot com bubble... which Timothy Stykes was. For a time his entire trading strategy was, 'If a company adds '.com' to their earnings report, buy the stock! It worked flawlessly and he walked away with millions for executing it. All the standard trading advice of "never have your stop loss exceed 1%" or whatever would have actually prevented him from earning more. I suspect a great many of the temporary edges people find - that only persist a month or two - can be attributed to temporary fleeting but explainable phenomenon. For example, in the early part of this year I discovered a pattern on the 1 minute chart (via a backtest) where price was respecting AVWAP. I don't know why exactly it works, but it doesn't matter. My guess is that some giant fund is off loading 50K ES futures contracts, and in order to not move the market by dumping all 50,000 contracts at once, they did it systematically in degrees.
So why do I bring this up? A) to bring forward the fact that there actually are verified traders who have made 10,000% returns on their accounts while using indicators/strategies that an algo would say has no expected value, and B) Just because a strategy doesn't always work, doesnt mean it should be thrown out. It is very likely that the current market regime just isn't suitable to that type of trading, and again in the future it can, and should be used.
Here are a few things to considered with algorithmic trading, that I think may help you.
1) There are differences between efficient and inefficient markets. Just because something didn't work on NQ doesn't mean it won't apply on Low Cap.
2) You probably don't have high enough quality data. For example, if you did test the overall market, did your data account for news events? If you were backtesting ES futures did you account for the maintenance period from 5-6 PM Eastern time that happens everyday? If you tested on equities did you account for halts? Have you tested your algo on all previously (not just currently) listed stocks, accounting for survivorship bias? Have you double checked that your code isn't using look forward or look back bias? Is your backtesting platform using actual tick data or does it randomly assign values intra-minute while only actually having accurate HLOC minute data?
Algorithmic trading opens an entirely new box of worms that people haven't considered, beyond just applying commissions and slippage. Like for example, if you are in a position and your internet cuts out? Has your code been programmed to start from being flat? Have you programmed in a pulse to have your execution software recognize the current broker position upon a restart? Are you using a coding language that might have garbage collection latency, why do you think C++ is used? Does the software you are using log you out in middle of the night when you may have needed to enter a position? Does the broker and/or trading software allow your stop loss/profit target you laid out in your backtest to even be submitted as a working order, or is it beyond the threshold permitted for that financial instrument i.e. too far away from current price?
If you have gotten to the point where you understand and apply MAE, MFE, and ETD are further than most, but never assume that your backtest is a prefect representation of actual live executions.

It's interesting to see the shift in tone as of late with algorithmic trading. 5 or 10 years ago you posted a Lamborghini in the thumbnail and everyone thought you were a genius. Now people are a little wiser and realize that the Lamborghini was rented, and that trader was trading in a sim account.

Now it seems like vibe coders are coming out of the woodworks (and with the help of AI) they are 'exposing' these other YouTube guru's fake strategies. Don't get me wrong, there are a great many frauds out there. I even make light of it myself in my satire suno songs. [https://suno.com/s/T9mxUN3or6KNjk31](https://suno.com/s/T9mxUN3or6KNjk31)
But I fear the pendulum will swing too far the other way. As someone who has spend 1000's of hours back testing strategies and literally developing my own personal Orthogonal Quant fund. [https://suno.com/s/O4WlJks6mUeHVzkW](https://suno.com/s/O4WlJks6mUeHVzkW) (FYI, I don't think YouTube has figured out what that is quite yet) I know quite well how incredibly difficult it is to find a profitable intraday edge that isn't susceptible to curve fitting. That doesn't mean however that discretionary day trading is all hogwash and complete nonsense.
There are things that I think people are missing....

1) The implication that the human is consciously aware of the reason they have an edge. There are more than a few ways to make a trading strategy based exclusively on indicators profitable, such as: inventory-based mean reversion, reverse pyramiding, anti-martingale sizing, or a target ladder. What appears irrational or inconsistent may contain the very edge the simplified algorithm leaves out. The first chapter in the book, 'Blink' by Malcom Gladwell does an incredible job of describing this. He references the experiment where 2 decks of cards are given to the test subjects and before the subjects are consciously aware they have decided to shift their card drawing over to the deck that wasn't rigged against them. This is only one example, sexing chickens is another.

2) Just because an edge is fleeting doesn't mean it can't be exploited now. Assume you were trading during the dot com bubble... which Timothy Stykes was. For a time his entire trading strategy was, 'If a company adds '.com' to their earnings report, buy the stock! It worked flawlessly and he walked away with millions for executing it. All the standard trading advice of "never have your stop loss exceed 1%" or whatever would have actually prevented him from earning more. I suspect a great many of the temporary edges people find - that only persist a month or two - can be attributed to temporary fleeting but explainable phenomenon. For example, in the early part of this year I discovered a pattern on the 1 minute chart (via a backtest) where price was respecting AVWAP. I don't know why exactly it works, but it doesn't matter. My guess is that some giant fund is off loading 50K ES futures contracts, and in order to not move the market by dumping all 50,000 contracts at once, they did it systematically in degrees.
So why do I bring this up? A) to bring forward the fact that there actually are verified traders who have made 10,000% returns on their accounts while using indicators/strategies that an algo would say has no expected value, and B) Just because a strategy doesn't always work, doesnt mean it should be thrown out. It is very likely that the current market regime just isn't suitable to that type of trading, and again in the future it can, and should be used.
Here are a few things to considered with algorithmic trading, that I think may help you.
1) There are differences between efficient and inefficient markets. Just because something didn't work on NQ doesn't mean it won't apply on Low Cap.
2) You probably don't have high enough quality data. For example, if you did test the overall market, did your data account for news events? If you were backtesting ES futures did you account for the maintenance period from 5-6 PM Eastern time that happens everyday? If you tested on equities did you account for halts? Have you tested your algo on all previously (not just currently) listed stocks, accounting for survivorship bias? Have you double checked that your code isn't using look forward or look back bias? Is your backtesting platform using actual tick data or does it randomly assign values intra-minute while only actually having accurate HLOC minute data?
Algorithmic trading opens an entirely new box of worms that people haven't considered, beyond just applying commissions and slippage. Like for example, if you are in a position and your internet cuts out? Has your code been programmed to start from being flat? Have you programmed in a pulse to have your execution software recognize the current broker position upon a restart? Are you using a coding language that might have garbage collection latency, why do you think C++ is used? Does the software you are using log you out in middle of the night when you may have needed to enter a position? Does the broker and/or trading software allow your stop loss/profit target you laid out in your backtest to even be submitted as a working order, or is it beyond the threshold permitted for that financial instrument i.e. too far away from current price?
If you have gotten to the point where you understand and apply MAE, MFE, and ETD are further than most, but never assume that your backtest is a prefect representation of actual live executions.