John Henry--The Next Blow Up ??

jay gould · May 31, 2005

John HENRY, FAMED trend Trader and Guru to the trend cult is continuing his losing ways--down 11.28% in April and down 32.35% for the year. His fund is currently ranked the WORST performer in 2005 of public funds.

Is this the next disaster in the making??

Stay Tuned......

J. Gould, financier

GetWhatUDeserve · May 31, 2005

UH....well 35% is part of the volatility in his system. If you can't hold through 35% drawdown, you can never reap the extraordinary returns he has posted in his career. You then don't get to buy the Boston Red Sox, and run the team the way you run your trading, with statistcally programmed strategies and by using that to pick your players.

Its all about Risk/Reward BABY!!!...and how much heat do you know you can take.

Do you know the max drawdown of your method of trading? Do you think you can still trade your system if you ever reach that mark? Those are pretty good and worthwhile questions to answer.

trend_guy · May 31, 2005

he has experienced drawdowns of greater than 50% in the past on various programs, 30% is a walk in the park for him!

jay gould · May 31, 2005

Quote from GetWhatUDeserve:

UH....well 35% is part of the volatility in his system. If you can't hold through ......

Its all about Risk/Reward BABY!!!...and how much heat do you know you can take.

Do you know the max drawdown of your method of trading? Do you think you can still trade your system if you ever reach that mark? Those are pretty good and worthwhile questions to answer.

1. are you sure about this??

2. yes. what does JWH do when the heat gets too high?? It seems that he will go down with the ship..... next month another 10% down?? We will see/

3. I would be fired @ 20% yearly drawdowns.

jay g, financier

GetWhatUDeserve · May 31, 2005

Quote from trend_guy:

he has experienced drawdowns of greater than 50% in the past on various programs, 30% is a walk in the park for him!

Thats really my point. He KNOWS to expect these drawdowns, and he can still operate WHEN they occur. That is the key to trading...or one of the ones most salient to me. Each of us here benefits from knowing that we can handle the volatility of our own trading methods (assuming a positive expectation). The reason is so each of us can continue to trade in a systematic fashion, following our plan, when those big drawdowns occur.

If you like big returns, you gotta be able to stomach the big heat. If you don't like the heat, you can design trading that doesn't have those huge monster drawdowns, but be happy with smaller returns. But whatever we do as traders, if our plan over the long haul makes money, we gotta be able to stick to the system.

jay gould · May 31, 2005

Quote from trend_guy:

he has experienced drawdowns of greater than 50% in the past on various programs, 30% is a walk in the park for him!

It may just not come back this time, as his luck runs out in a big way......

We will see.....

jay gould · May 31, 2005

Quote from GetWhatUDeserve:

Thats really my point. He KNOWS to expect these drawdowns, and he can still operate WHEN they occur. That is the key to trading...or one of the ones most salient to me. Each of us here benefits from knowing that we can handle the volatility of our own trading methods (assuming a positive expectation). The reason is so each of us can continue to trade in a systematic fashion, following our plan, when those big drawdowns occur.

If you like big returns, you gotta be able to stomach the big heat. If you don't like the heat, you can design trading that doesn't have those huge monster drawdowns, but be happy with smaller returns. But whatever we do as traders, if our plan over the long haul makes money, we gotta be able to stick to the system.

I agree with you to a point. However, Just when does JWH cover?? Does he ever, or does he just use his substantial capital to ride the drawdowns??

JG

trend_guy · May 31, 2005

smart trend followers (or traders for that matter) take money out after good periods and rarely speculate with more than 20% of their net worth.

trend_guy · May 31, 2005

to be honest I still can't figure out why someone would risk a 50% DD to achieve a long-term return not much better than the SP500

GetWhatUDeserve · May 31, 2005

Quote from jay gould:

1. are you sure about this??

2. yes. what does JWH do when the heat gets too high?? It seems that he will go down with the ship..... next month another 10% down?? We will see/

3. I would be fired @ 20% yearly drawdowns.

jay g, financier

Yes I am pretty sure. You can read books that clearly show this. I know some of his peers and competitors personally, and the characteristics I mention are very accurate. I hope this information enlightens you and you don't choose to argue about it.

Your rationale that you would be fired for 20% drawdown has no bearing on how John Henry or others operate. That is your firm's system, and since apparently they employ you, they make the rules.

Maybe you could stomach a bigger drawdown, maybe you would benefit from a system with larger swings and perhaps alarger reward. Food for thought. If you plan to make a career of trading, then its worth considering.

Again, I see the makings of confrontation in your posts. I don't intend to argue, but share with you what I know. Your experience is quite different from some of these larger money managers it seems.