High Risk High Reward Trading

[Scataphagos]

The S&P makes what 10% a year on average? but you have to suffer circa 50% drawdowns sometimes, twice in recent memory.

And millions of people investing in the S&P 500 over the long run where such drawdowns are likely to happen again.

The OP reckons he can do 100+% returns with same sort of drawdown risk as the S&P 500 and you guys want to run for the hills.

If a trader isn't smart enough to avoid a "50% drawdown", how likely is it that he's smart enough to make a "+100%" gain?

OP is inferring, "I'll take 50% drawdowns as common, cost of doing business"... but I'll "make 100% just as easily and make up for it".

I'll take the under.

 

[southall]

Please excuse my mentioning that I think that's a terribly misleading characterisation of what's been described in this thread. The OP has those huge drawdowns all the time, whereas with the S&P they're rare. That's really a hugely different proposition.

It is the same risk, just time compressed.

In the S&P you hold for 15 years and earn 150% then you get wacked with a large drawdown and you then have to wait 5 years to recover back to the highs.

The OP is earning 150% in six months and then he gets wacked by a large drawdown and it takes 5 months to recover.

For some reason you guys think the S&P is much lower risk because the same sort of scenario plays out over a longer time period.

 

[comagnum]

A 50% loss will requires a 100% gain to recover from, even the best traders would be lucky to dig out of draw downs like that inside of a few years. It always looks easy on a back-test, not many have the conviction, discipline, patience, guts, etc. to stay with a bleeding system very long.

Bill Dunn is one of the best trend traders of all times - he has always recovered from his draw-downs on his way to new equity highs. His investors are high net-worth and are chosen carefully.

 

[Millionaire]

A 50% loss will requires a 100% gain to recover from, even the best traders would be lucky to dig out of draw downs like that inside of a few years.

It took me just 9 trades to recover from the bottom of my most recent 47% drawdown (live trading not backtesting). And 3 of those 9 trades were losing trades.

When risking 4% per trade, it doesn't take long to make 100%. When the markets are in synch with my method i can make 20+% on a single trade. And those trades are often like buses, you can wait five months for one to appear but then all of a sudden you get 5 in a month.

According to your chart:
Dunn averages 17% p/a and has >50% drawdowns
S&P averages 12% p/a and has >50% drawodowns.

I make over 100% p/a and have >50 drawdowns.

Big difference is my system doesn't scale to 1,000 contracts or more, and that is probably why i can out trade Dunn by a large margin.

Dunns numbers aren't that hard to beat anyway, 17% p/a with 63% drawdowns. I would be embarrassed by those numbers.
But on the other hand 17% on 1billion is $170 million profits a year, is always impressive.
If not even sure my system could scale to making just 1.7 million without a drop in performance due to extra slippage

 

[southall]

Bill Dunn is one of the best trend traders of all times - he has always recovered from his draw-downs

Reading the DUNN capital website:

DUNN Capital has been led since 2007 by Martin Bergin.. the President and Owner of the firm

So did Bill Dunn give up and sell out near the bottom of his longest drawdown?

 

[comagnum]

Dunn is at all time highs - of course they survive draw-downs, they chart makes that loud & clear. Most traders that take on large draw downs & survive are few & far between over the long haul. Dunn C. has been in the top 2 CTA's world wide. Dunn is old, he is semi retired. Bergin has added in short term trading to smooth out the equity curve which have been doing good while their trend following strategy remains unchanged.

98% of day traders will not be able to make a living from their trading for 2 years. Yet many have delusions of grandiosity thinking they will be the best traders the world has ever seen. Those without strong $ mgmt would be better off in a casino where their odds are better.



Dunns shorter term funds.

 

[southall]

Yet many have delusions of grandiosity thinking they will be the best traders the world has ever seen.

It think it was Buffet who said he could make much higher returns if all he had was a $1million account.
Someone with $1million or less account can beat the best traders because those guys have a $10 billion millstone they need to put to work.

 

[Millionaire]

The reality is most retail active traders are under capitalized, take on way to much leverage, and have insane trading costs to overcome.

Yes this is in general true and we all know it. But ofcourse doesn't apply to every retail trader out there.

Personally i am well capitalised and have a detailed trading plan written in software which is extensively backtested and carefully designed to avoid as much overfitting as possible.

I am not the best trader in the world, no where near it, i am just pushing my leverage to the limits of what i can handle.

 

[schweiz]

as you are day trading your trade frequency will be high which will help

Wrong.
He posted this:
System stats for the period (2013-2015)
Number of trades: 532

Period of 3 years means 3*52 weeks= 156 weeks.
532/156 is only 3.4 trades a week average. Tat's less then1 trade a day.

 

[schweiz]

I can optimize and add more filters to get much better stats.
I try not to do that as i have learnt the hard way that this leads to systems that don't work so well in real trading.

Very smart remark.