The coward agrau has erased his post: good he felt ashamed 
backtesting the original turtles
- Thread starter mind
- Start date
i only care about sharpe ratios. the more different components i can trade the higher the chance that i really diversify among effects in the market place. the turtle approach in essence tackles the fat tails in our markets - and that would diversify other approaches. we balance the whole portfolio of strategies in order to optimise overall sharpes. thus i would lever a trend following approach down to make fit with the rest.
in essence i totally agree with you. you cannot drive a different road than your passengers expect you to ...
peace
Investment managers have long sought to integrate a common framework for evaluating the performance of investments with diverse risk and reward characteristics. An important research paper by Nobel Laureate William Sharpe in 1966 has led to the adoption of the measure known as âThe Sharpe ratioâ by the majority of the global investment community. Accordingly, investments are ranked by a ratio which purports to weight their absolute returns by a standard measure of the risks involved. Individuals and institutions in the financial world have come to rely on the ratio for important information regarding investment decisions; the higher the Sharpe ratio, the more likely it is that a particular investment will âmake the cutâ for serious consideration.
âProfessional and savvy amateur investors alike rely on Sharpe ratios as an essential tool in making portfolio decisions. Pension plans and consultants use them to pick money managers,â reports Hal Lux in the October 2002 edition of Institutional Investor.
On the other hand, many eminent detractors have long argued against the blind acceptance of the ratio. âA growing group of academics and some sophisticated investment professionals have reached startlingly negative conclusions about the reliability of this cornerstone of modern financeâ, adds Lux. Most startling of all is the addition of William Sharpe himself to this group.
âThe Sharpe ratio is oversoldâ, agrees the Nobel Laureate, in an interview with Institutional Investor, âI take the point that Sharpe ratios can give a false sense of precision and lead people to make predictions unwiselyâ, adds the former Stanford finance professor. Indeed, Sharpe further confides that the ratio is not actually used by his own firm of investment professionals.
âProfessional and savvy amateur investors alike rely on Sharpe ratios as an essential tool in making portfolio decisions. Pension plans and consultants use them to pick money managers,â reports Hal Lux in the October 2002 edition of Institutional Investor.
On the other hand, many eminent detractors have long argued against the blind acceptance of the ratio. âA growing group of academics and some sophisticated investment professionals have reached startlingly negative conclusions about the reliability of this cornerstone of modern financeâ, adds Lux. Most startling of all is the addition of William Sharpe himself to this group.
âThe Sharpe ratio is oversoldâ, agrees the Nobel Laureate, in an interview with Institutional Investor, âI take the point that Sharpe ratios can give a false sense of precision and lead people to make predictions unwiselyâ, adds the former Stanford finance professor. Indeed, Sharpe further confides that the ratio is not actually used by his own firm of investment professionals.
oh for gods sake fuck off harry - you constant harping is such a bore
What is the difference, in monetary terms, between a $100k loss from open equity, and a $100k loss from closed equity? Isn't a 500k account the same size, regardless of whether the equity is all open or all closed? A 5 lot of Soybeans has the same risk/reward and probability of profit, regardless of whether you have been holding them from 500 or have just got in at 950.
So I guess my question is, why should open equity alter the position size, and thus the risk/reward, that you take on? Shouldn't size be determined purely by the prospects for your current positions, on a forward-looking basis?
Ignoring open equity profits basically has the same effect as ignoring risk on part of your portfolio i.e. it leads you to take on more size than normal, and thus increases risk and return. Now if you have a profitable system, increasing risk and return is good, as long as your blowup risk does not rise to unacceptable levels. But in that case, why only do it with open equity? Why not increase your risk and return on every trade which has similar expectation?
Sorry but there was a guy - I won't name him - that was constantly harping my post also with his snob sharpe ratio whereas I answered him why as statistical process engineer I know perfectly how useless it is as to control risk operationally in my methodology so for God sake fuck yourself if you want.
Harrytrader;
Larry Williams may have given that Active Trader interview several years back for ad or seminar sales purposes.
Do like the principle some what related
of marking like David Markstein '' using a soft lead pencil to draw a wider line''
[Context of trendlines, Williams interview , Active Trader DEC-2002 magazine.]
I am getting back to my wider lines now;
but sure had a meeting of the minds on that.
Larry Williams may have given that Active Trader interview several years back for ad or seminar sales purposes.
Do like the principle some what related
of marking like David Markstein '' using a soft lead pencil to draw a wider line''
[Context of trendlines, Williams interview , Active Trader DEC-2002 magazine.]
I am getting back to my wider lines now;
but sure had a meeting of the minds on that.
I think what you describe is actually a drawback to the monthly / quarterly method of risk measurement.
If you take a YTD perspective, your equity curve perception is very different, allowing you to employ more aggressive money management techniques when appropriate and ehancing absolute profits in the long run.
For example: let's say you start the year off at 100, and halfway through you are up to 150.
If you decided to go for the gusto, risk 30 units (in open equity or otherwise) and got knocked back to 120, that would be viewed as a 20% drawdown from a DD perspective.
However, if you take into account your YTD point, and you further take into account an ability to scale your aggressiveness in proportion to your absolute YTD profits, then it's a whole different ballgame.
Such risk may have been wholly appropriate in proportion to reward; you weren't in danger of going negative on the year, and every third year or so that outsized aggressiveness could double or triple your total profits, taking you well above 200 or more. So you have increased exposure to profit opportunity without increased risk of ruin over the long run.
In pursuit of superior profits, a good trader may take outsized risks when he is ahead that he would never take when he is behind. The freedom of a YTD perspective, rather than a monthly one, is that better absolute returns can be achieved this way, if you can put the "pedal to the metal" under appropriate circumstances and explain to your clients that you operate from a YTD basis (and that it is best if they only add to their accounts in January, or consider the current dynamic risk level at their point of addition).