Can I keep my Sharpe ratio higher then 4 for the rest of the year?
- Thread starter macintash
- Start date
Just my 2 cents... Sharpe ratio is meaningless from a manager evaluation point of view, (especially on a short time frame) without a deep understanding of how/what you're trading.
Simple example: if you're doing some kind of mean reversion / martingale / doubling down on losses... every single closed trade will be profitable until the one that puts you out of business. Same is certainly true for naive option writing strategies.
So, if the intent of this journal is to impress potential investors with your performance, you need to get a lot more specific about what you're trading and how you're trading it.
Simple example: if you're doing some kind of mean reversion / martingale / doubling down on losses... every single closed trade will be profitable until the one that puts you out of business. Same is certainly true for naive option writing strategies.
So, if the intent of this journal is to impress potential investors with your performance, you need to get a lot more specific about what you're trading and how you're trading it.
I don't think you can blame the rest of us for not being aware of your performance.
What I think is amazing, is that the people who can achieve a Sharpe of 4+ for the past 5 years are always anonymous online posters, and never managers with publicly audited performance records.
Feel free to scope out the performance of professional managers over the past 5 years:
http://www.iasg.com
http://www.barclayhedge.com
You can also visit http://www.autumngold.com and http://starkresearch.com sharpe ratios less than 3 years are irrelevant. A month to date at this time of year is also meaningless, too.
I don't think i was responding to a post of yours. If you are implying malicious intent you are mistaken. What's actually worth discussing is whether a 4+ sharpe over long periods can be scaled up to the amounts your beloved CTAs manage. The post i responded to didn't list AUM as a condition. There are traders out there who have no desire to manage OPM or be scrutinized in any way by performing audits and publishing results, are you saying their input is irrelevant?
I'm not going to debate your "intent", as the time and effort needed to audit your records isnt worth the ego boost I get from winning an Internet debate. I have no idea what your performance is.
As far as capacity, CTAs listed on those sites range from the tens of thousands to the tens of billions in AUM. I find it rather striking that none, not a single professional manager, has a Sharpe that's remotely in the league of of what you're quoting over the past 5 years. I guess we will just have to leave open the question why no one able to achieve a Sharpe even half of yours is willing to "put up" with having their numbers publicly scrutinized.... even when the financial rewards of managing OPM is obvious.
I disagree about OPM being always the preferred choice. Many people can't scale up to $10-20 million (which I would consider OPM minimum taking into account all the additional costs).
Let's be honest though, in the big picture a Sharpe of 2 vs 4 isn't the most important thing. Scalability is always the priority.
The same goes for looking at profit factor or any other metric exclusively.
Being a private trader guarantees a higher sense of privacy and keeps things simple(r).
Rallymode has come across as honest as far as I've seen. Of course the only real verification can be done by looking at the report screens.
The financial rewards of managing OPM is obvious (it's free upside leverage: increase your gains without affecting downside), which is not to say choosing to manage OPM is the choice for everyone, for any number of reasons.
Again, I have no idea what rallymode's performance is. I will just repeat myself: his Sharpe is apparently double the highest Sharpe of ANY professional manager, of any scale. It's not interesting that HE doesn't want other OPM, but what's interesting is that literally zero others professionals who we know want to trade OPM can achieve half of what he has.
By the way, his daily P&L shows daily gains of $100-300k... That suggests his strategy is at least $5-10mm in capacity.
Again, I have no idea what rallymode's performance is. I will just repeat myself: his Sharpe is apparently double the highest Sharpe of ANY professional manager, of any scale. It's not interesting that HE doesn't want other OPM, but what's interesting is that literally zero others professionals who we know want to trade OPM can achieve half of what he has.
By the way, his daily P&L shows daily gains of $100-300k... That suggests his strategy is at least $5-10mm in capacity.