Market Cap Method Fails: 1-for-6; Day 4 Up Next
The market cap method failed to deliver, logging a 1-for-6 record and forcing a quick rethink. The experimenter framed the effort as a free-roll trial and plans to iterate rapidly, with Day 4 strategy ideas already in the queue.
The Rundown
After six attempts guided by market capitalization criteria, only one trade worked. The lackluster hit rate underscores weak signal quality and potential overfitting to a simple size-based screen.
Rather than pause, the project will continue with daily tests and tighter evaluation. The goal is to identify a repeatable edge, not to chase one-off outcomes.
The Background
The experiment is a day-by-day exploration of lightweight trading frameworks. Each day introduces a fresh rule set, applied consistently across a small basket to gauge real-time performance.
The market cap method prioritized larger names as a proxy for stability and liquidity. Early results suggest size alone is an unreliable driver of short-term alpha.
Why It Matters
Strategy testing often stalls when early results disappoint. By treating the effort as a free-roll trial, the experimenter protects risk appetite and learning velocity.
Investors can draw a broader lesson: simple factors need context, validation, and risk controls before capital scales. Iteration, not conviction, is the edge at this stage.
Key Takeaways
- The market cap method posted a 1-for-6 performance, signaling low predictive power.
- Daily iteration continues, with Day 4 set to test a new approach.
- Framing the project as a free-roll encourages fast experimentation and measured risk.
- Size as a standalone factor was insufficient for short-term signals.
- The focus shifts to refining entry rules, risk limits, and validation metrics.
What’s Next?
Day 4 will pivot away from pure market cap screens toward more targeted rules. Candidates include volatility-adjusted entries, equal-weight baskets, and simple momentum or mean-reversion triggers.
Expect tighter stop-losses, clearer exit timing, and a scorecard that tracks win rate, payoff ratio, and drawdown. The project’s north star remains the same: build a small, testable edge, then scale only what survives the data.
