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Nah. There's no trade secret. If I'm reading his strategy correctly, he's talking about positioning yourself so that the asymmetry of return is in your favor. The tools to that can be easy (ie, buy options - but you gotta pay for 'em) or very very difficult (capital structure arbs, structured...

Ohhh... I see what you mean. I misunderstood. I've done some work on this. It's very interesting stuff. Good luck with it - too bad you can't trade OTC using a retail account - there are some institutional level stuff where this kind of analysis leads to real profitable trading opportunities.

This is a pretty classic strategy: http://en.wikipedia.org/wiki/Constant_proportion_portfolio_insurance works great in trending markets. Will murder you when the trend reverses.

... be careful there; It's great that you've been doing well with your purely dynamic sizing based strategy; Just want to offer the observation that CPDO type of dynamic strategies did GREAT for a year or two until Dec of 2007, where they lost billions. CPPI type and a bunch of other such...

A little bit more robustness at the cost of losing a very important piece of information: severity of change in addition to the joint probability of change. That makes it very tricky to use. Will require some sort of additional model for getting the magnitude-of-change measure. All these...

Eh. there are several problems. for one, an explicit table of joint probabilities does not generalize well. You don't know the joint probabilities of anything that hasn't been observed yet. If you want something more generlized, you'll need to make distributional assumptions - by which point...

Well, yes - mean-variance (and its derivatives, like Black-Litterman) uses correlation in the sense that it uses covariance, which is just correlation multiplied by the standard deviation of the two components. And to another poster, even if we go Taleb's extreme, we can still do asset...

Why in the world would you use correlation for asset allocation? or do you mean it in the sense of using mean-variance type of optimization?

I second this. I went to a "first tier" business school. The education wasn't impressive. "Networking" meant a lot of late night boozing and getting undergrads to do your work; The value is that you will never not get an interview because you didn't have the right stamp on your resume. So...

So this guy scammed his way into getting some charitable career advice from a bunch of these guys... if he went in there with a hard sell, it's going to the phone hung up on him in very short order. It's deceptive, insulting, and frankly - stupid.

Great. Go for it. Like I said, if the whole personal freedom thing is so important for you to override the crappy risk/reward problem, then at least you are informed. (personally, I think there are far more interesting and potentially enriching things to do for a self-starter than day trading...

Other than I think some of your disadvantages are either just matters of personal taste (I, for one, like expensive shirts and suits - always have, so that's not a minus for me), or just organization issues that exist in any human endeavor that require more than three people to work together...

... There's no reason for Citadel or DE Shaw or any of these shops to be "aware" of kelly's. Kelly's ratio is basically a particular case of a general class of problems called optimal stochastic control. It's in fact a solution only when you throw in tons of assumptions. Some of these, like...

If I may substitute the word "finance" for "trading", I agree with you in general. I'm in this business for the money. But, it's one thing to look at the magnitude of success. But it's also important to look at the probability of success. Can't have expectation without both, right? My point...

Agreed. Diversification of skills, like revenues, like assets, is key. But it's easier said than done. Diversification is also very very costly. A world class options dealer, for example, probably will have a very tough time retooling into a macro manager; We all take on systematic risk. By...

well, we had a good run. figured people were far too civilized in this thread than ET in general. Okay ModhSalleh, given what you said - what in hell are you doing in a trading forum? don't you have a revolution to conduct somewhere?

I agree with you on this. Having decent personal trading performance is a good signal that you are interested in the market, but it in itself doesn't help. Certainly, no one in a respectable buyside or sell side shop will hire a trader/analyst/pm because he made a living trading his own account...

I can't agree with this statement. Unless you trade every asset in the world, you certainly face systematic risk. If you trade swaps, for example, and the equity market drops 50%, swaps liquidity will dry up and all of a sudden you experience a shift in your market that may very well be the end...

Anyone who's still doing that needs to fire their quant/portfolio construction team. This has been known problem for decades. VaR, in generally, isn't used much in the front office. It's usually reserved for regulatory reporting. If you are using VaR is actual portfolio management, you suck...

My point exactly. You wouldn't start a grocery business unless you know how to. Yet, judging from the usual thread around here, people seem to jump into "trading" without any idea of what trading or finance is. Now, I'm a big fan of self-teaching and continued education, but to jump into a...