That code is a recipe for getting hurt. Here are a few points:
- Return is not everything. More informative performance metrics are Sharpe ratio (a sort of reward/risk measure) and information ratio. Both of the above have ridiculously low values in this case.
- Another thing that matters is the distribution of returns. If you have plotted this and still see nothing wrong, you are really better off doing something else. With numbers like these, chances are will be out of cash much sooner than you will hit a good month. And even after you have hit a good month, what happens when you hit a bad one?
- Beta: essentially, when the algo does well, it is mostly because of significant overexposure to the market. At this point, I would much rather lever up and buy SPY than trade using this thing.
- Predictability and risk management: ok, so you have tested this on historical data. What are the cases in which this would misbehave? After all, it is optimization, so there may be inputs for which this gives very undesirable results. How would you notice? (hint: you have no risk management in your code!)
The bottom line is that, if you ever want to put some money where your mouth is, you would have way better chances at doing well if you learned some basic finance rather than treating the markets as a black box (no matter how creative you can be). At least, you will be able to evaluate appropriately whether you are doing well or not.
- Return is not everything. More informative performance metrics are Sharpe ratio (a sort of reward/risk measure) and information ratio. Both of the above have ridiculously low values in this case.
- Another thing that matters is the distribution of returns. If you have plotted this and still see nothing wrong, you are really better off doing something else. With numbers like these, chances are will be out of cash much sooner than you will hit a good month. And even after you have hit a good month, what happens when you hit a bad one?
- Beta: essentially, when the algo does well, it is mostly because of significant overexposure to the market. At this point, I would much rather lever up and buy SPY than trade using this thing.
- Predictability and risk management: ok, so you have tested this on historical data. What are the cases in which this would misbehave? After all, it is optimization, so there may be inputs for which this gives very undesirable results. How would you notice? (hint: you have no risk management in your code!)
The bottom line is that, if you ever want to put some money where your mouth is, you would have way better chances at doing well if you learned some basic finance rather than treating the markets as a black box (no matter how creative you can be). At least, you will be able to evaluate appropriately whether you are doing well or not.