I'm trying to experiment with a simulated simple arbitrage strategy.
I'm not doing this to actually invest, I'm just curious if the market is inefficient enough for this to be feasible.
Every morning, I take the top 5 gainers and losers as per Google Finance, then record in excel what my balance would be if I shorted the gainers and bought the losers. My "trades" are each for $200,000 worth of stock.
Because I am going both long and short 1 million dollars, on paper It looks like my shorts pay for my longs and I only have to pay for trade fees and whatever the loss might be at the end of the day.
How much capital would you actually need to do this? Nobody would just let you start shorting stocks to raise money (I think), so how much would you need to run this strategy? If you start with 0 dollars, any returns would leave you with an infinite growth rate. How else could you calculate return?