What They Still Teach You, but No Longer Works on Wall Street
Wall Street's Outdated Lessons: What You Learn vs. What Really Works
A warm hello to all new readers! I’m glad you are on board.
New here? I’m Michael and on a mission to make beating the stock market as easy for you as choosing your favorite ice cream. I write an algorithm that does exactly that.
How it all started. The journey so far.
Uncertainty comes from a lack of knowledge.
Let’s gain some knowledge to reduce uncertainty.
Over the past two years, I’ve tested numerous investing formulas and strategies. Many, despite being widely revered, have stopped performing well. This article kicks off a series titled:
“What They Still Teach You, but No Longer Works on Wall Street”
Why am I writing this?
Frankly, there’s an overwhelming amount of vague bs about stock investing out there. Many writers and authors repeat the same advice over and over without knowing if it still holds true. They share what they’ve read elsewhere, often without any real back-testing. These outdated teachings create false hope because they sound convincing with lines like, “Just do this and that...”
The unfortunate result? You end up losing your hard-earned money.
I’ve fallen into this trap myself and I’m sick of it.
These “simple” frameworks and checklists they promote are often unrealistic for a person with a full-time job and a busy life. Please get me right. I’m not here to criticize fellow writers—that’s not my style. You won’t see any finger-pointing in this series. Rather, it is about getting serious without sugar-coating it.
I’ll focus on the formulas and the key question I will address is:
Do they still work?
And if they don’t, you’ll find out here.
Analyzing stocks by hand is incredibly demanding, and I have immense respect for those who still put in the effort, despite knowing that many uncertainties remain.
I have been working full-time on this project for almost two years. I am far from being an expert but I practice what I preach. I verify the hypotheses with backtesting. My goal is straightforward: develop an algorithm that can outperform human stock pickers. The goal is simple and ambitious—beat the market. Period. I aim to achieve more net gains than losses over the long term, and so far, things are promising.
But my algorithm is far from perfect.
Beating the market sounds simple, but it’s not. Even with the use of mathematics, I still pick losing stocks. The constant challenge is understanding why this happens and how to avoid these miss-picks with a formula based on fundamental numbers. Finding the right mathematical lens that understands the market upfront is the true challenge. Not being smart about the miss-picks in hindsight.
Math helps eliminate one, no, I would even say the major uncertainty—our human brain and its biases fueled by our guesses.
So the bar is high.
If a strategy doesn’t improve the algorithm, it doesn’t make it into the final code. Period.
What to expect
These articles will always follow the same structure.
We’ll explore the theory to gain background knowledge, then test if it still holds true to get certainty.
This isn’t about criticism; it’s about the Edison Way—finding and excluding what doesn’t work and discussing it openly with respect. Here is why. Coming up with a hypothesis is already hard enough.
In one of my recent articles, I mentioned my mission to identify value traps reliably—stocks that appear cheap but continue to decline. Over the past weeks, I’ve read widely and come across a promising paper.
But before we dive in, a quick note.
These articles are exclusively for paid subscribers, and here are two main reasons:
I appreciate their extra support, and this is my way of giving back. I’ve promised them special content from time to time, and here it is.
Additionally, the internet is a gigantic copying machine. Nobody can control it anyway, so I accept it as a given. They say, “You can steal like an artist.” I’ve invested my money and time to read, write code, and test this information so you don’t have to. This has value.
If you're a fellow writer, by all means, spread the word about concepts you like, but test them to find out if they still work. Even better, I encourage you to do your own research, try things out, and backtest. Here is the kicker. With a high chance, you will still be wrong most of the time, or at least surprised. Either way, you will learn a lot. Don't just repeat what has already been said a thousand times. Because that doesn't mean it's true.
Now, let’s dive back into the main topic.