Published September 16th 2023

Daily Brief - ☀️ Negative alpha

TLDR: Market makers don’t really need to do much to make money. They just take the other side of the trade against retail punters. There are 2 ways you can learn from this.

reddit meme

Retail traders have amazing alpha. Only, it’s negative.

If you look at the chart above, the sharpe ratio is astounding. If flipped around, it would be the dream of any hedge fund manager. In reality, that money is steadily flowing into Citadel Securities’ pockets.

For the longest time market makers and brokers have known that a large portion of retail traders are loss-making by default. And so they simply take the other side of the trade, no hedging required.

So is there a way for you to learn from this and make money out of it? There are at least two points to make here.

Look at the crowd

Aggregator websites like this one will give you a sense of where the crowd is flocking.

It was ok to jump on the bandwagon when QE was strong and the market flying - but we’re not in 2021 anymore. It’s likely you want to avoid crowded positions in popular stocks.

Look at yourself

Look at your trade record. You will likely discover most of your losses concentrate on certain specific styles.

Beyond the two most common biases (selling early on a gain, holding long on a loss) you might discover your worst trades are associated with specific moments in the market - like buying in an uptrend.

Whatever it is that loses you money, if you know it you can avoid it.

What's happening in the markets?

This section is powered by Open AI connected to TOGGLE AI

In the rapidly growing AI-driven market, expectations run high, and Adobe recently experienced a situation that exemplified this trend.

Despite delivering earnings and guidance that exceeded expectations, Adobe's stock price declined by 2% in after-hours trading following its earnings report. The company reported a 10% increase in revenue compared to the previous year, surpassing estimates of $4.87 billion, while also exceeding earnings per share (EPS) estimates with $4.09/share compared to the expected $3.98.

Typically, after an earnings beat of such magnitude, ADBE stock experiences the most significant gains in the month following earnings, averaging an impressive 4.87% increase.

Adobe has been actively integrating generative AI capabilities into its extensive suite of content creation and marketing tools. Since introducing its text-to-image feature, Adobe customers have harnessed AI tools to generate an astonishing two billion images, and the company has plans to further expand its AI software offerings.

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Earnings Update: Autozone reports on Tuesday


Autozone has managed to beat earnings expectations over the last 15 quarters - will it sustain its beat streak in Q4 earnings?

Discover how other companies could react post earnings with the help of TOGGLE's WhatIF Earnings tool.

Asset Spotlight: Qualcomm's Forward P/B at a recent high

Qualcomm price graph

Toggle analyzed 7 similar occasions in the past where valuation indicators for Qualcomm were at a recent high and historically this led to a median increase in the stock's price over the following 1M. Read full insight!

General Interest: Eternal life

Picture Bryan Johnson

This tech entrepreneur is waging a one-man war against ageing.

But is taking 100 pills a day, finishing your meals by 11am, giving up both alcohol and a social life, really worth it?

Read more here.

Daily Brief - ☀️ Negative alpha

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