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Are instutional *on average* or retail traders better?
- Thread starter mahram
- Start date
Quote from moneymoneymoney:
I've been asked this before. The correct answer is to increase the risk per-trade and reduce the notional account size.
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MMM, that answer is incorrect. Doing so -- as you've outlined it -- will have no impact on Calmar Ratio (Annual Return / Max Drawdown) of the account.
The way I see it, the two are completely different games -- what one does with one's own capital as opposed to opm involve completely different risk profiles. As for methodology, sure there are individuals whose methods are far more scalable than others, but for the most part the vast majority of retail traders would be clueless if given 100MM to trade with, while conversely many if not most "institutional" traders would struggle to profit trading their own "hard-earned" bank accounts with nothing but a cable broadband connection and CNBC. "Average" on either side would not cut it at all if they had to cross over.
Quote from steve46:
Sorry boys, that answer is a non-starter. Close though
You add another strategy to capture the failure trades from the first strat.
Trading a specific strategy, then adding another is a form of diversification. Properly executed the additional strategy lowers drawdown and increases profits.
If increases profits it won't have a return of 50% as acary problem outlined, one answer would be to use that same strategy on uncorrelated markets, however its dubious that strategy would work or that would generate similar returns. But you could design new similar strategies
Quote from Daal:
How can moving closer to the optimal f lower your drawdowns and maintain the same returns?If anything it would increase both
I guess you guys really are clueless. You're increasing the risk per-trade and reducing the account size. You move closer to optimal f by increasing risk per-trade. If the account size you applied it to was 1 mill. then yes, drawdown would go up as a % of account. By reducing the size of the account to apply it to you reduce the overall drawdown because the balance of the account is in risk free securities. So, a 33% drawdown on part of the account ends up being 10% of the overall account. You'll end up with a larger return on the smaller size because of more risk per-trade. That's how you get the same return with a lower dd.
Pull up a monte carlo sim and you can figure it out in about 5 min.
Quote from moneymoneymoney:
I guess you guys really are clueless. You're increasing the risk per-trade and reducing the account size. You move closer to optimal f by increasing risk per-trade. If the account size you applied it to was 1 mill. then yes, drawdown would go up as a % of account. By reducing the size of the account to apply it to you reduce the overall drawdown because the balance of the account is in risk free securities. So, a 33% drawdown on part of the account ends up being 10% of the overall account. You'll end up with a larger return on the smaller size because of more risk per-trade. That's how you get the same return with a lower dd.
Pull up a monte carlo sim and you can figure it out in about 5 min.
Before insulting people who just might do this professionally for a very long time, you may want to go over your basic math. No need to fire up an MC engine, either. 33% max DD on the $300K sub-account? That would be nice, but it's actually $180K, or 60% (not 33%), or 18% expected max DD on the $1M account.
Expected return is approx. 150% on the sub, or 45% on the account.
Of course, both of the above ignore compounding of returns, positive and negative.
50% / 20% = 45% / 18% = 2.50 Calmar Ratio. No progress toward the stated targets of 5.00 or 10.00. You're still going down the wrong path.
Quote from mahram:
Are instutional or retail traders better? On a trader basis. If you force instutional traders to risk their own money, take away their instutional resources, and force them to trade by themselves. Would on average institional traders still be as good and are they better then retail traders.
My first reaction is to LAUGH, because I have seen quite a few of these guys blow out and raise their hands up in the air cause they have no idea what real trading is. Actually, sales & execution at top tier IBs is mostly client relations.
But you are not being specific enough, are you asking about sales/execution traders or those prop desks from the top tier IBs? If you are talking about "traders" at mutual & pension funds, then it is a total "apples & oranges" comparison.
How does one become an institutional trader?
Will Goldman Sachs or some other large firm hire someone with a finance degree and/ or math degree with no prior trading experiance, and show them the ropes?
How is their salary calculated?...The trader for Amaranth made like 74MM this year didn't he?
Will Goldman Sachs or some other large firm hire someone with a finance degree and/ or math degree with no prior trading experiance, and show them the ropes?
How is their salary calculated?...The trader for Amaranth made like 74MM this year didn't he?