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.
Are instutional *on average* or retail traders better?
- Thread starter mahram
- Start date
Haven't met a retail trader yet that has much trading depth. I've asked this question to many people. Only ones that knew the answer were experienced IB traders.
Q: You're given strategy A to trade. It requires a minimum of $50,000 to put on its trades. You have $1 mill. in your trading account. If you risk 1/2% per-trade your returns are 50% and the maximum drawdown is 20%.
Describe the process to achieve the 50% return with only a 10% maximum drawdown? Is it possible in this scenario to achieve a 50% return with a 5% maximum drawdown? If so, what is the tradeoff?
Q: You're given strategy A to trade. It requires a minimum of $50,000 to put on its trades. You have $1 mill. in your trading account. If you risk 1/2% per-trade your returns are 50% and the maximum drawdown is 20%.
Describe the process to achieve the 50% return with only a 10% maximum drawdown? Is it possible in this scenario to achieve a 50% return with a 5% maximum drawdown? If so, what is the tradeoff?
Quote from fhl:
Think it has a lot more to do with retail guys being discretionary vs institutional being systematic. Discretionary guys don't feel the need to go through all these gymnastics. Doesn't mean they aren't as much or more profitable.Check out p&l 2006 for some numbers.
that is a misnomer....theres QUITE a bit of discretionary institutional trading....
Interesting question...most "Institutional Traders" are not fully discretionary, so it's hard to make a fair comparison. And, of course, institutional traders are using OPM, and that can certainly make a difference in the strategies attempted. Institutional traders look for some ROI of 10% or so, where retail traders probably would rather try to make a living (or do better than their funds can do for them).
A bit "apples and oranges" I think. Would need to define 'retail trader"...a PDT with only $25K, or a hedge fund (retail) with $100 million.
As in most things, the people with the most money seem to have the ability to participate in the things that work better.
Don
A bit "apples and oranges" I think. Would need to define 'retail trader"...a PDT with only $25K, or a hedge fund (retail) with $100 million.
As in most things, the people with the most money seem to have the ability to participate in the things that work better.
Don
Perhaps i am stating the obvious as I am in no way an expert on risk adjustments but i will take a stab at this. The only way to reduce the max drawdown while still maintaining the same return would be to vary the position size. Now you still have to figure out when to throw more size at a trade and when not to.
Yes!
you figure it out
you figure it out
