How many of the 'Market Wizards' blew up?

William Eckhardt

The c-Test by William Eckhardt

We all know that thorough testing is the only way to determine whether a particular trading system or indicator is viable. William Eckhardt, the mathematician whose conversation with Richard Dennis helped bring about the Turtles, points out that before you spend time testing a method, you should first use a methodological test for dimensional coherency called the c-test.

In most cases, the only way to evaluate trading indicators or systems is through diligent and rigorous testing. However, there are cases in which indicators, systems or even entire approaches can be rejected on principle. A good way to root out the unworkable indicators, systems or approaches is to apply a c-test, which is a methodological test for dimensional coherency. A system can be said to be dimensionally coherent if its results do not change even though the units of measure do. The test is applied directly to the formulas or rules that define a system or indicator. If the system or indicator fails the c-test, then it will give incoherent results that cannot be trusted; however, a formula determined to be incoherent can often be modified to pass the c-test.

To determine why a coherency test is necessary, first we look at some charting procedures that we suspect may be incoherent — for example, the fallacy of attaching significance to the sizes of angles on a bar chart or similar price graph. It is not that trading systems making use of angles are inferior — there is such a glut of bad systems in general that it would hardly be worthwhile to identify only a few — but rather, these angle-dependent trading systems are pseudo-systems, incoherent procedures disguised as algorithms.

What holds true in a particular system should hold true no matter what the measurement. Now, a change in one unit may necessitate a change in others; if you change the unit of distance, then you must make corresponding changes to the unit of area or volume. However, in price analysis, the overriding variables of price and time are so heterogeneous that a change in the scale of one may occasion no need for a change in the scale of the other. (Chart services frequently rescale the price axes of their charts while leaving the time scales the same year after year.) Clearly, then, it should be possible to change the units



Famous for losing the Turtle bet but a switched-on guy otherwise
 
Monroe Trout




Monroe Trout

Monroe Trout is an interesting short-term trader. He is a major supporter of the philosophical tenets of Ayn Rand. Many top traders believe deeply in Rand's teachings for good reason. We recommend a visit to Rand's site for solid insight.

Q. When did you first get interested in the markets?
A. When I was 17 yrs. old, I got a job for a futures trader named Vilar Kelly who lived in my hometown of New Canaan, Connecticut. He had an Apple computer, and at the time (1978), you couldn't buy data on diskette--or at least he didn't know where to buy it if it was available. He had reams of price data that he had collected from newspapers and wanted typed into his computer. He hired me and paid me a couple of bucks an hour to type in this data. That summer job sparked my interest in the markets. By my sophomore year at Harvard, I knew that I wanted to be a trader. I took whatever courses they had on the markets. I did my senior thesis on the stock index futures market.

The New Market Wizards by Jack Schwager

“Monroe Trout, Jr., born January 22, 1962, is the sole principal of Trout Trading Company. He has traded futures and other contracts as a full-time profession since September 1984, and has been involved in futures market research since 1978. Mr. Trout graduated magna cum laude from Harvard College in 1984 with a B.A. in Economics. While at Harvard, Mr. Trout wrote six major papers about the forecasting of futures and options prices, culminated by his senior honors thesis titled Price movements in a Stock Index Futures Market. From September 1984 until June 1986, Mr. Trout was employed as a futures and options trader by NCZ Commodities, Inc. (NCZ), A Futures Trading Firm run by Victor Niederhoffer. While with NCA, Mr. Trout traded futures for both the house and his own personal accounts. In addition to extensive off-the-floor trading experience, Mr. Trout also has a certain amount of on-the-floor trading experience, having the-floor trading experience, Mr. Trout also has a certain amount of on-the-floor trading experience, having been a member of the Commodity Exchange, Inc. (COMEX), the New York Futures Exchange, and the American Stock Exchange. In July 1986, Mr. Trout left NCZ to establish Trout Trading Company.”


Got off to a good start !
 
A little follow up on Mr. Trout:-

HAMILTON, Bermuda (HedgeWorld.com) - Monroe Trout, the 39-year- old principal of Trout Trading Management Co. Ltd., plans to retire and sell the firm to CEO Matthew Tewksbury.

The announcement, which was a surprise to many in the industry, came in the form of a letter sent to investors this week. Investors were told that Mr. Trout was leaving to spend time with his family and to follow other pursuits.

Although leaving, Mr. Trout will not take his money out of firm's $3 billion fund, which gained double digits in 2001, swimming upstream against a very challenging investment environment.

Trout's global macro strategy is even bigger than George Soros' $2.9 billion Quantum Endowment Fund

Did OK it seems
 
Quote from Cutten:

what drawdown did his fund have?

I have to say, I'm suspicious when veteran traders have big drawdowns. Their experience means they know the risks and can't blame it on 'unprecedented market conditions'. I wonder how many such drawdowns occur because the trader knows his edge was small or non-existent, and knowingly used way too much leverage, taking advantage of the trader's option when managing client funds (to the great risk of the latter).
More...


The trader has no money of his own in the fund?
 
Quote from trendlover:

The trader has no money of his own in the fund?
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Or a small % of his net worth. Obviously if most of the manager's wealth goes down with the ship, that's a pretty good sign he was honest, and just screwed up. It's more the guys who don't have much skin in the game that are suspicious.
 
market wizard blow up because it no have money, and lie to the schager. wizard then go and take the money from people. it is deceive the naive trader, who pay wizard, and wizards is go and take naive trader salary, and spend on the marketing with the color brochure, and then go to roadshow and fool endowment
 
Quote from Cutten:

Or a small % of his net worth. Obviously if most of the manager's wealth goes down with the ship, that's a pretty good sign he was honest, and just screwed up. It's more the guys who don't have much skin in the game that are suspicious.
More...

Ok. And temptation to take the big risk is more for someone who can not lose their own money.
 
This is a stupid thread. Who cares how many traders from XYZ blew up. Fact is, good traders are born, they are not made. So in that sense, some of the MW books is nonsense.

If it is inside you, you will find out. Otherwise, keep your stupid mouth shut. It is a big world out there. Everybody can do something well. Find out what you do well and do it. Ignore everything else.
 
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