Investing community where people focus on determining tops and bottoms

2020 *Feb, Mar

I am basically talking about a group of investors who are NOT day traders and who are NOT boglehead-style investors.

People in this group would focus on things like reading Fed's actions e.g 2020 Mar backstop, 2022 Jan Fed Minutes, 2023 Mar backstop

and many of these people would buy leaps or leveraged index funds during bottoms and get out at tops

you can also maybe call this a group of liquidity cycle investors
 
I'll bite @FATCA. Due to the many links, I suspect this might get flagged. @Sols please unban.

There is no such community. 99.99% out there who you might think they are, are only outlets for false prophets who are after subscription fees for a worthless service. Trying to trade their advice will lead to serious underperformance or even disaster with blown up accounts. There ARE "communities" but those are call hedge funds or prop trading or pod shops like Citadel, Point72, Millenium etc. The closest of what you describe might be loose groups on Twitter who would group themselves into what is known as "FinTwit" ("financial twitter"). But you will rarely find actionable advice, and without estimating each persons background you will have a really hard time to distinguish sales pitches from little nuggets of wisdom.

You can succeed, but you will have to put in serious work, like in a business. Let me offer a few shortcuts anyway.

The way you envision it, it is impossible to call tops and bottoms. Read "The man who solved the market" by Zuckerman for an introduction to the most successful fund there is. While markets are not efficient, they do have traits of a random walk. It is like trying to predict where that one CO2 molecule will be in 24 hours that you just exhaled. In your house? Maybe. Carried away 500 km by a storm? Possible. You see where this is going. Market price movements are similar.

Listen to the four points in There are maybe a handful more fringe cases to make money (some legal, some not) but for the purposes of calling tops and bottoms he sums up the possibilities. You will realize only #1 is an option for you in all likelihood.

The first innovation away from an analog to putting everything on black in roulette, i.e. a bet on single stocks or even a broad equity ETF, will be examining the working of model portfolios like the Golden Butterfly by Tyler. Check out https://portfoliocharts.com/charts/portfolio-matrix/ for some portfolios and what they contain. You should also watch to understand why different asset classes are mixed the way they are. Why is this useful for you? By mixing, single assets will still swing about madly. Like US stocks seeing -50% draw downs every decade or two. But with uncorrelated assets put together, the volatility of your portfolio in total (!) will be much reduced. You might then not even want to call tops or bottoms anymore, because the portfolio will never stray from a +20% to -20% corridor. You can visualize this nicely on a site called testfol.io. Compare pure US stock market with Golden Butterfly from Presets.

If you still think a little more oomph might be desirable, you'd have to get into trend following and momentum strategies. For an introduction, read all free articles about "Hybrid Asset Allocation" on allocatesmartly.com. There are a few principles like absolute, relative or even cross-asset momentum that have stood the test of time and importantly markets have not arbitraged them away. I will not go into why. You will still not be able to call tops or bottoms, but through some math you can follow the market up and down, thereby lowering draw downs and pushing compound annual growth way beyond what is possible with a diversified portfolio as describe above.

I estimate it will take you a minimum of 1 year of unpaid full time work to get something off the ground. You will need a bunch of math especially statistics, Python, Pandas, ib_async, IBKR API etc. By the second year you will have produced a nice heap of failed ideas. And you will have fooled yourself 5-10 times with systems that look good on paper, but are in one way or another flawed. Like leaking data from the future, using not survivorship bias free data, slippage and trading costs killing any profits, horrendous draw downs etc. Final advice here is that less is more, trade less not more. For some more ideas, read the Jack Schwager Market Wizard books. He interviewed practitioners who actually succeeded.
 
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You can call the bottom in Mar 2020 because fed's actions told you they are going to backstop the market
You can call the top in Jan 2022 because Jan 5 fed minutes were extremely hawkish.
You can call the bottom in Mar 2023 because of how fed reacted to failed banks

That was enough to 25x your portfolio in 5 years with 3x NQ
 
@FATCA I'd caution to put this much weight into Fed and FOMC. If you are into math, a sample size of 3 or 10 is really just random. Only at a 1000 samples or more, results start to solidify.

Counter example: Recent politics and policies of US White House have arguably led to a market correction in US equity markets. Fed under Powell meanwhile has done nothing. You just ignored -10% market movement. Fed is powerful but pressers have been light on entropy in recent years, same with speeches by governors like Waller. And then there are the dot plots.

You also have hindsight bias with regard to NQ. You just don't know ex-ante. In 2002 or 2015 nobody could imagine US and now Chinese tech companies develop AI at this rate.

And you seem to have a recency bias, citing only very recent events. How about 1980? Or at least the mid 1990s?

Do not mis-understand my arguments, our monkey brains are wired to produce these biases. But they will be detrimental to make progress in markets. Dude who researched loss avoidance, yet another bias you might have, even won the Nobel Prize for it: https://en.wikipedia.org/wiki/Loss_aversion
 
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