- Public/sold strategies have no edge - alpha decay: once an edge becomes public and capital flows in, the market arbitrages it away (pairs trading 1987 -> gone within years; published edges -25%; real edges legally protected, FBI case Jan 2025).
- Concrete guru setups don't hold up to the test: Justin Werlein's ICT model +107% vs +311% buy&hold (Sharpe 0.165, 3,500 trades); FVGs are eaten by transaction costs (break-even ~1.96 ticks < NQ costs 2-4); 8AM ORB ~12% prop pass, poor risk-adjusted return.
- Stop hunts are a myth: market makers are delta-neutral; the real wicks come from overcrowded strategies with clustered stops. 'There is no algorithm' - prices = supply/demand (axiom).
- Win rate and average RR are the wrong metrics; a single backtest proves nothing (path dependence); 'discretion' is not a hidden edge but unquantified feature engineering.
- Overfitting is pervasive: looking at a holdout repeatedly + re-tuning turns it into a training set; then even Sharpe 3 and tight MC CIs are meaningless (garbage in, garbage out).
- 'Psychology/discipline = 80% of trading' is a scapegoat narrative; sampling on every candle forecasts noise; social-proof testimonials are a survivorship/variance illusion.
- Positive counterpart (what counts instead): expected value + confidence intervals, Monte Carlo for drawdown/path dependence, event-based sampling, regime awareness, real out-of-sample testing - exactly Botty's live_readiness pipeline.
- SCALPING (measured by Botty itself, not just the literature): splits into two variants with two causes of death. TAKER scalping dies at the fee floor (~7bps round-trip; liquidation_mr_scout: 56% hit rate, yet net -7..-10bps, 0/7 years). MAKER market-making dies at adverse selection (spread_capture_scout, BTC/ETH/SOL 6+ yrs: 0/7 years at the HL base maker fee, only marginally & unstably positive with a guaranteed rebate + ultra-wide quote). Full derivation + visualization: [[scalping_market_making]].
- PREDICTION-MARKET MICROSTRUCTURE does not transplant to perps. The vivid Polymarket 'late-flip' (a binary market trends ~80% of its life, then flips hard in the last 10-15min as the book thins and large orders hit, 0.75 YES -> 0.35 YES) is driven by RESOLUTION: deadline convergence + a liquidity vacuum + late info forcing truth. Perps have no resolution, so the driver is absent. Every transferable cousin is dead on our BTC perps: deadline-pinning (OPEX/max-pain, live-debunked), 'large orders hit a level -> reversal' (sweep-reversal sfp), and 'fade the liquidity vacuum' (liquidation_mr_scout: gross ~0, net -7..-10bps, 0/7 years, bigger shocks worse). The forced flow CONTINUES (momentum), it does not revert. The pattern's real home is Polymarket itself (a new-venue question), not a perp signal.
What this is about
This page bundles what, per the quant research of Thomas Skinner (Delta Trend Trading), provably does not work - and why (the mechanistic reason, not just 'it's bad'). Much of it is backed by programmatic backtests over thousands of trades. It is the negative flip side of Live Readiness: how to recognize early an idea you should discard. Full source base in the trader profile Delta Trend Trading.
1. Public or sold strategies (gurus, courses, signals, ICT/TJR)
Why not: Alpha decay is axiomatic - once an edge becomes public and capital flows in, traders crowd into the same trade until the inefficiency vanishes and the price converges to efficiency.
Evidence: Pairs trading (Morgan Stanley 1987, ~$50M) -> arbitraged away within a few years. Published edges lose ~25% after publication. Real edges are protected with hard legal means (unsealed FBI indictment Jan 2025 against a quant who stole trade secrets). Rule of thumb: 'If you can find it published, it doesn't work. If somebody's selling it, it doesn't work.'
2. Concrete guru setups (tested programmatically)
- Justin Werlein's ICT model (liquidity sweep -> manipulation leg -> FVG inversion): 2018-2025, 3,500 trades -> +107%, but buy&hold NASDAQ +311% (3x more by doing nothing), Sharpe 0.165 (below 0.5 = uninvestable). Werlein himself is net break-even.
- Fair Value Gaps (FVGs): the proximal gap tap is only profitable above ~1.96 ticks - the NQ all-in costs are 2-4 ticks -> eaten by costs (RTH/overnight/best hour all dead). Only a deeper entry (displacement open) barely survives (+0.13R). And that is only a feature test, not a strategy.
- 8AM opening-range breakout (RP Profits): ~415 trades, 16% win rate, profit factor 0.87, miserable risk-adjusted return; ~12% prop pass.
3. Smart-money myths
- Stop hunts are not real. Market makers are exchange-mandated, delta-neutral spread earners with no directional interest. Moving the most liquid assets in the world by a few pips just to clear out retail stops would be absurdly expensive. The 'stop hunt' wicks arise because an overcrowded strategy clusters all stops at the same level -> cascade. An overcrowded strategy is not an edge but a signal that smarter players fade.
- 'There is no algorithm.' Prices are driven by supply/demand (axiom). The ICT 'algorithm' narrative is cult/scam.
4. False validation
- Win rate & average RR answer neither 'am I making money?' (that is what expected value does) nor path dependence/drawdown (that is what Monte Carlo does).
- A single backtest is just ONE realization of a stochastic process; the trade ordering produces completely different equity paths from the same distribution. Often the 90% CI of the per-trade EV spans zero -> indistinguishable from an edgeless strategy.
- Overfitting: looking at a holdout repeatedly and adjusting parameters turns it into a training set. Then even Sharpe 3 + tight MC CIs + a smooth equity curve are meaningless. Required: a real one-time holdout + forward/live test + a falsifiable idea with an economic rationale.
- 'Discretion' is not a hidden edge - just unquantified feature engineering. The strategy IS the edge.
5. Narratives & psychology
- 'Psychology/discipline = 80-90% of trading' is a scapegoat: if it were true, quant firms wouldn't need PhDs for strategies executed by disciplineless machines. Long, inexplicable losing = you are trading something unvalidated.
- Social proof/testimonials are a survivorship/variance illusion: variance produces short-term winners who post and get upvoted, then converge to baseline and disappear.
- Sampling on every candle forecasts noise (no catalyst). You have to define real events.
- Prediction markets (Polymarket/Kalshi) are not easy money: ~70% lose, 0.1% collect 67% of the winnings; the same quant/HFT firms trade there.
6. Scalping & market-making (measured by Botty itself)
Not from the literature but from our own scouts - and cleanly symmetric. Scalping (many micro-trades, each a few basis points) splits into two variants with two causes of death:
- Taker scalping (market order, you take liquidity) dies at the fee floor: ~7bps round-trip (HL taker 3.5bps x 2). The
liquidation_mr_scout(5,300 cascades, 7 years, fading liquidations) had a 56% hit rate - and still net -7 to -10bps in 0/7 years. The fee eats exactly the micro-edge. - Maker market-making (limit quotes, you provide liquidity, paying only ~1bp maker fee/rebate) is the only conceivable way out - but dies at the adverse-selection floor: the
spread_capture_scout(BTC/ETH/SOL, 6+ yrs, mark-to-close) is negative everywhere at the HL base fee (0/7 years), and even with a rebate only crosses zero marginally & unstably. Mechanism: the clean 'both filled' bucket pays well (+2..+43bps) but is rare; the one-sided 'adverse selection' bucket (-1..-10bps) is 3-10x more frequent and dominates. Nice twist: the illiquid SOL is worse, not better - more spread, but exactly that much more adverse selection.
Lesson as a negative gate: every 'many small trades' idea must clear both floors BEFORE infrastructure - the fee floor and the adverse-selection floor. High hit rate != edge. Full derivation + ASCII visualization: scalping_market_making. The structurally clean 'scalping cousin' that passes our gates is the delta-neutral funding carry (live).
7. Prediction-market microstructure does not transplant to perps
A seductive anecdote makes the rounds: a Polymarket crypto binary market spends ~80% of its life trending one way, then flips sharply in the last 10-15 minutes - the order book thins, a few large orders hit, and 0.75 YES becomes 0.35 YES. Tempting to hunt the same 'late reversal' on BTC.
Why it does not transfer: the flip is a resolution artifact. A binary market has a hard deadline; as it approaches, price is dragged to the true outcome, thin near-expiry books create a liquidity vacuum, and late information forces the crowd to reprice. A perpetual has no resolution - the entire driver is missing. Transplanting the pattern is the classic category error: copy the signal, lose the reason it exists.
Every transferable cousin is already dead on our perps:
- Deadline-pinning -> OPEX / max-pain: folklore, live-debunked, nothing at p<0.05.
- 'Large orders hit a level -> reversal' -> sweep-reversal sfp: dead raw and regime-filtered.
- 'Fade the liquidity vacuum / forced flow' -> liquidation_mr_scout (5,300 cascades, BTC 1m 2020-2026): gross edge ~0 (no reversion even before fees), net -7..-10bps in 0/7 years at every threshold x horizon x direction; bigger shocks are worse, not better. The structural 'get paid to provide liquidity into forced selling' thesis does not hold intraday on BTC - the flow continues (momentum), it does not revert.
Where the edge actually lives: in Polymarket's own thin books near resolution - a new-venue decision (trade / provide liquidity ON Polymarket), not a BTC-perp signal. Separate track, own infra, own caveat (section 5: ~70% of prediction-market traders lose; the same HFT firms are already there).
What this means for Botty
This list is the external validation of Botty's own discipline. Every 'doesn't work' has its counterpart in Botty's tools: alpha decay -> don't copy public setups; false validation -> the live_readiness pipeline (walk-forward, PBO, Monte Carlo); noise sampling -> event-based ml experiments; the stop-hunt myth -> focus on statistical instead of narrative explanations. Botty's own graveyards (divergences 3x debunked, vol_regime_transitions DEAD, macd_crossover) are lived examples of the same principles.