How To Price Boots On The Ground
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Market On Open, Friday 27 March
by Alex King, CEO, Cestrian Capital Research, Inc.
What price should oil be if the 82nd Airborne lands on Kharg Island? Do you know? Can you work it out? Me either.
What is the correct price for Taiwan Semiconductor (TSM) stock if helium supplies dry up? Any idea? Nor I.
If US military spending continues to rise, should gold be worth more, or less? No, I don’t know either.
You can always find various maxims regarding securities prices and how they should behave in various conditions. If global risks are rising, gold is supposed to go up. Except if gold has already gone up, and people decide to take profits to plug holes elsewhere in their portfolio, gold will go down. Crypto is supposed to be a pure risk asset, except it has been rising since its February lows in the face of risk-off in equities. Bonds are supposed to be a safe haven when equities sell off, except bonds are down because inflation risks are rising.
There Is No Fixed Formula For Success
The only way to invest or trade a security is to analyze its own price behavior in the past and make decisions as to where it may go in the future based on that. There are two ways to do this, and I make no apology for not stopping going on and on about this. One, use the stock chart to make your own decisions, trying all the time to ignore everything you thought you knew about what “should” happen to that security, focusing solely on the job of pattern recognition and forward projection. Or two, get an algorithm to do this for you. One tremendous advantage of an even modestly good algorithm is that it runs much colder than do you. Doesn’t matter how rational you think you are, pure numbers are more rational.
Algorithms Are Essential Tools
If you are investing or trading with no algorithmic help, I don’t know what to tell you. You are underperforming what you could be achieving. When the ink pen was invented, people stopped using quills alone. When the electronic calculator came along, people stopped using slide rules. Handwritten documents were tossed once typewriters and, later, word processors arrived.
In only-up markets, all you need to do is pick some names and hold them. Easy. In a volatile market like this, we all need all the help we can get. When is the right time to be short the S&P? Now? What if there is a cessation of hostilities? Two months ago? What if the S&P mooned from there?
This is a perfect example of where algorithms can help. Our SignalFlow Long/Short Algo service has achieved the following:
- Live Trading Since 1 January 2025: CAGR 14.0% vs. SPY CAGR 10.2%
- Backtesting Over A 6 Yr Period: 31.8% CAGR vs. SPY 13.8% CAGR
- Sharpe Ratio: 1.8 vs. 0.53 for SPY
- Sortino Ratio: 2.5 vs. 0.7 for SPY
This algo is, needless to say, doing very well at present when the S&P is down-only. When the algo thinks the selling is done, it will flip to cash or to long SPY. It won’t be thinking about the 82nd Airborne or helium supply. It will be just learning from past price patterns and asking itself whether the conditions in front of it mean that the S&P is likely to turn up or not.
Cold as ice.
You can join SignalFlow AI Long/Short here.
And you can read about all other other algorithmic services here.
Alex King
We’re Here To Help
If you have any questions whatsoever about our algo services, how they work, how they’ve performed, how to use them, please reach out anytime. You can contact us at minerva@cestriancapital.com or by using this contact form.
What On Earth Is Happening In The Market?
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