Do you compare your trading results to just buying and holding the S&P500? Why or Why Not?

[Nine_Ender]

S&P buy & hold risk to reward stats are pretty poor:

Average Return 9%
Drawdowns between 30% and 80%
Sharpe Ratio around 0.85

Any trader with less than $10 million, should be able to beat that risk profile easily.

eg. 20% a year with max 20% drawdowns. Sharpe ratio over 1.

The burning question is do you even exceed those benchmarks. Your opinions about markets are often more conspiracy based or overly negative. That has to hurt longer term but certainly on any corrective year a lot of you guys get (over)confident in your views. My guess is no you don't do all that well longer term investing or trading, but have very high standards for others anyways. Like any guess could be wrong maybe you've found ways to overcome your bias and have some modicum of success. Seems somewhat doubtful though given your posted opinions. Or maybe you just don't really trade much.

 

[deaddog]

Some of the most vocal, confidant guys on here are likely mediocre to horrible traders. Those of us who have been around the block long enough can sniff out most of the legit guys versus the bs. The clues are there anyways; guys who talk about consistent high performance aren't realistic about trading and are either full of it or haven't traded long enough or hard enough to know. Those who deliver food or train traders full time they aren't meaningful successful traders. Those who make horrible calls about markets repetitively the same. Newer traders really need to beware of these characters listening to them leads to bad habits.

You are legit. I may not agree 100% with your approach but many trading styles work. Specifically the tight stop losses wouldn't work in commodity stocks imo.

The ones who train traders and deliver food are on my ignore list. I don't see the value in posting how much you make on your good days.

I agree that commodity stocks are hard to trade. For the most part I missed a hell of a run a couple years back.

 

[Nine_Ender]

The ones who train traders and deliver food are on my ignore list. I don't see the value in posting how much you make on your good days.

I agree that commodity stocks are hard to trade. For the most part I missed a hell of a run a couple years back.

The difficulty is most of the really good runs in TSX commodity stocks are often preceded by hard sell offs in individual names and often not even for rational reasons. Particularly in energy which trades like a thin market dominated by sporadic big purchases. Gold/Silver mining I think harder stop losses makes sense. TSX energy right now is great value in Oil one year out and Nat Gas two years out imo. However, you have to plug your nose and hold to get there unless you catch some really good entry points then let the positions ride. Most miners I took a quick loss on I never regretted doing so. Energy however it's often cost me money; Surge Energy in particular I took a loss a year or two ago and then it pretty much tripled within months afterwards.

 

[Businessman]

The burning question is do you even exceed those benchmarks.

Why is being able to beat 9% a year with 50%+ drawdowns, on a small account, even a burning question?

I would expect every trader on ET, anyone who has really found a positive edge in the markets, to be able to handsomely beat the S&P. But only up to the capacity limit of their method.

I am not doing anything special. The main reason why i can beat the S&P, is because as a trader I control of my downside risk. I don't ever need to have anything like a 50% drawdown in order to average just 9% a year.

This is not to say i can beat the S&P every year, there are years where the S&P beats me. I am talking about long term results.

 

[Handle123]

I check twice a year, September and end of December. If S&P is negative, I want to end up positive, if short of positive year in S&P, will add size. For Me it's more of challenge of self vs self.

 

[newwurldmn]

It's a decent benchmark to compare to.
If you can't outperform a buy & hold startegy, why are you trading?
Granted it is an interesting hobby if your goal is to keep busy, but like all hobbys it will probably cost you money. If trading is how you entertain yourself instead of say golfing, hunting or RVing, then I wouldn't worry about beating a benchmark.
If you are looking for the most efficient method of employing your capital then you should probably have a benchmark.

because you can produce a positive return every month.

 

[deaddog]

because you can produce a positive return every month.

I take that is your reason for trading, although you cannot outperform a buy and hold strategy.

Is that the same as having a strategy with a 90% win rate that loses money.

I don't like the term "Long Run", but shouldn't your goal be to employ your capital for the best return in the long run?

 

[Tall Mike]

I don't like the term "Long Run", but shouldn't your goal be to employ your capital for the best return in the long run?

TBH this is what's holding me back.

I fail to see any viable method that noticeably outperforms buy-and-hold SPY.

Yeah, I've seen methods that make money, but it doesn't hold water once you compare to buy and hold.

I guess there are inefficiencies out there that do, but I've not been smart enough to find them.

 

[deaddog]

TBH this is what's holding me back.

I fail to see any viable method that noticeably outperforms buy-and-hold SPY.

Yeah, I've seen methods that make money, but it doesn't hold water once you compare to buy and hold.

I guess there are inefficiencies out there that do, but I've not been smart enough to find them.

My problem with buy and hold is I didn't like the rollercoaster ride or the years that showed negative returns.

A simple trend following system where you exit when a trend starts down and re-enter when the trend is up, will outperform buy and hold. It's a system that has kept me out of the market during major corrections. You take some whipsaws but your drawdown is never significant.

 

[Tall Mike]

My problem with buy and hold is I didn't like the rollercoaster ride or the years that showed negative returns.

A simple trend following system where you exit when a trend starts down and re-enter when the trend is up, will outperform buy and hold. It's a system that has kept me out of the market during major corrections. You take some whipsaws but your drawdown is never significant.

Even though these sound good on paper, and backtesting they look great, when I forward tested some with out of sample data, they don't hold up.

Is there a secret sauce I'm missing?