Just small correction - the system he is renting has total gain 84,8% over 2 years (not 100 per year) with drawdown 40 % (based on your screenshot). Just be carefull. Yes, he has currenctly good results in the competition, but beleive me - it is pure luck based on very high risk taken.
Diversified Algo Portfolio Allocation vs SP500 Index
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Just small correction - the system he is renting has total gain 84,8% over 2 years (not 100 per year) with drawdown 40 % (based on your screenshot). Just be carefull. Yes, he has currenctly good results in the competition, but beleive me - it is pure luck based on very high risk taken.
Hello quiper,
I will take 84% return in the next 2 years for sure.
What other options do I have to invest in for algo trading systems and make money? Please show me another algo trader who can beat his 84% return in two years and rank in top 5 in algo trading competition the past 2 years?
Paying this man monthly is money in the bank now.
There is no risk without reward. I will bet on that guy any day of the week! He has a proven trading edge, I do not. And too much work looking for one.
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Remember there's NO guaranty of him making 84% in the next 2 years. If anything, trading systems tend to mean revert--meaning really strong periods are followed by drawdowns and vice versa. Imagine following this trader after he made 186% in 2018 with only a 23% drawdown.
BTW, this is on the Autumn Gold site for CTAs. Most of the CTAs require $100K+ accounts (some only take accredited investors with $1 million or more in the account). However, it has a list of World Cup advisors whose minimums are mostly in the $10-20K. If you have the capital and really want to try this, I'd suggest using several of them to diversify your risk.
Good Morning MKTrader,
I really appreciate this discussion. You provided a very good document for my knowledge and I will review it.
I will respond below:
Good point. There is no guarantee of any profit return of 84% or any return over the next 2 years.
@TrAndy2022 and @quiper and @MKTrader this is important for us to know and I would appreciate your response/opinion/challenge on this thinking. We need retail traders need each other to make good wise decisions that fit or capital.
There is something as investors/traders that we must/imperatively remember of who we really are. We are calculated risk takers that measure the probability of reward (win) against the probability of risk (loss). We compare risk vs reward against ALOT of investment/opportunity to give a +50% chance of making money in X-XXX amount of months.
We are risk takers and opportunists.
Us retail traders do not have a lot of money to take advantage of all opportunities. Well atleast I do not. My risk capital for trading (my own or someone else algo trading systems) is in the $30K range. But that does not mean, I should not review trading opportunist above my captial just for learning.
I want you to understand the Edge, I now have. And the Edge is below.
Do I have an opportunity to make money that fits my trading goals?
Let me see.
If I take $18,000 and invest in this system below there is a probability that $18K will return me +50% in about 2 years. So that is a probability of +$9000 in 2 years. Yes the subscription fee is a bit high of $300 a month
So reward is +$9000 (assuming 50% returns) minus the $300 a month for 24 months of $7200, so reward is actually $1800. The reward is pretty low to tie up $18,000 for 2 years for $1800.
This means the returns need to exceed 80% to make this investment sensible and rewarding.
The potential loss is assuming I stop the system at 50% drawdown is $9000 + whatever monthly cost, so about -$12,000. My once $18000 capital turns into $6000.
From this cost-reward-risk analysis, it does not fit my investment goals, and I will reject this investment opportunity. Mainly because the month to month cost is too high. I will look into it to see year to year ROR with respect to year to year drawdown%.
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Hello MKTrader,
Very great comment.
Would I have invested in this trader Edge? 1. YES, if and only if I was unable to find an edge myself that can produce such returns with possible 23% drawdown. 2. YES, if and only if I was unable to find another trader edge that can produce better returns with respect to drawdown
I would have invested in this trader Edge in 2019, and loss 50% of my money. So if the trader Edge required a capital of $50,000, I would have loss $25,000. Claim the loss on my taxes and move on and be happy I took a decent calculated risk.
That is fair business opportunity for me in this trading business.
In this trading business, there comes a point when you can only do the best you can do.
That's fine and understandable if you have the risk capital. Just remember that 1 year is a very short time frame to evaluate a system. In this case, they only had a 23% drawdown in a great year, but lost over 90% this year...which would have given you a sure margin call. Even if you use the "expect to double the drawdown" rule, I wouldn't trust a drawdown number unless there's at least 5-10 years of REAL TIME data.
Hello MKTrader,
Thank you for the input and very good discussion.
Where can I research and review 2-10 year real time, real money data of a trader performance?
Hello MKTrader,
Good point.
Since a back test can be curve fitted, it can not be trusted. I still would like to see it for analysis.
But I agree with you 1 year of real time real money trading performance is not enough, 5 years is good or even awesome.
The link is on my comment. See the highlighted part.