Quantfury Gazette


A lesson on market randomness

Joseph Viele
Quantfury Product Communication Team
lesson on randomness and discipline

Investors and market participants are unique in the sense that they know without a shadow of a doubt whether their returns are better than the market portfolio or subpar. In other disciplines, performance can be very subjective, but investors have the market indices including S&P 500, Nasdaq-100 and Dow Jones Industrial Average that are updating constantly to give market participants a sense of how they compare. However, it is not as simple as that; greater than market returns does not infer anything about risk, strategy, or ability to replicate results. This is certainly the case when we look at the crypto trading hamster named Mr. Goxx.

The German-born hamster Mr. Goxx makes trades inside his hamster box and is taking a run at beating the market as well as all the market gurus. The process of picking trades for Mr. Goxx is quite simple: he runs on a spinning wheel to choose his crypto asset and then walks through either a Buy or a Sell tunnel to lock in his decision and make a 20 Euro sized trade based on his decision. This decision-making process is completely random, but since he started trading on June 12, 2021, his portfolio is up 24% as of September 24th, 2021. You can watch his entire process every day and in real time by joining his twitch stream to see the magic. Some of the cryptos that Mr. Goxx trades include BTC, ETH, EOS, LTC, and XRP but there are quite a few more crypto pairs, many of which can be traded in Quantfury at the real-time exchange spot prices of Binance and/or Coinbase with no fees or commissions.

What conclusion can be made here? People work their entire life to earn 20% in a year but somehow a random crypto trading hamster was able to do it in 3 months. When you consider that Mr. Goxx is outperforming everything and everyone from the market indices all the way to Warren Buffet, you really need to take a step back and ask about the implications of these results. The results of Mr. Goxx can be explained by the concept of true randomness, which is something that most traders think they understand but don’t fully grasp. Humans are much too susceptible to emotions, which usually results in bad decisions and a deviation from a plan, whether or not that plan is to be random or to follow a strict trading strategy. True randomness is throwing a die 10 times and getting surprised by seeing all 4’s. You wouldn’t bet on this result but in the short term, literally anything can happen. Assuming the die is fair and unweighted, this result would demonstrate one of the infinite string of results that would eventually happen if you threw a die enough times, and this is where Mr. Goxx is in his string of trading results. Over time, you would throw the die millions of times and the amount of 4’s will approach approximately 1/6 or 16.67% of all the numbers that are thrown much like how Mr. Goxx will, over many more trades, eventually have his results approach $0 PNL. This is of course assuming no fees, commissions, or spreads on his trades, all of which would inevitably result in a negative PNL value.

Long run winners in the market must count on much more than a string of positive results. Profitable traders need to manage emotions, stick to a strategy, and manage losses with strict rules to stay in the game. You can’t get distracted and detour away from your trading rules just because it looks like other participants are making outsized returns. Many market participants might look at this story and get depressed or discouraged, however I think this would be the complete wrong conclusion. The long-term profitable trader is not the one that always has a trade on and always has a strong opinion about something, it is the trader who can wait for their best opportunity and to capitalize on it based on their own strategy and core beliefs. The story of Mr. Goxx demonstrates how easily misguided people can become once they start making money in their trading. Making money doesn’t infer anything more than what it is. Long-term success is much more defined by your losses, which is directly related to overall trading strategy. Successful traders know this, and they will be the ones that are here long after Mr. Goxx experiences his string of losing trades.


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