John Henry--The Next Blow Up ??

Maverick,

I do not disrespect john henry or his accomplishments. He is a fine and nervy trader. I am merely questioning--- will he come back once again this time after extensive drawdowns?? Happy you like the "name".

It just needs to made very very clear the fact that one can not point at the personal success of john henry and the other big name supposed trend followers extrapolating that every trader can trade in this manner--it takes tremendous capital, wide diversification and the nerve to hope thru fat drawdowns.

Market Luther
 
Quote from Maverick1:



As per my previous posts, it is more likely that VN lost 100m+ in the first blow up. Further, he was also caught in the twin tower attacks with unwarranted risky trades on as per his own confessions. Any thoughts on this?
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No idea about the first assertation. However, I highly doubt it was near that amount. Secondly, he survived the twin tower debacle with an excellent risk management program-- put in place after the 1997 situation. Many many traders took baths the day of 9.11. That was a very dark dark day, its not something to make light of.

Respect,

Market Luther
 
Looks like Marketspammer scaled the barbed wire fence to gain entrance back into the circus. Only a matter of time before the bouncers toss him to the curb for the fourth time.

Senor Zen
 
Quote from marketlutherzen:

Maverick,

I do not disrespect john henry or his accomplishments. He is a fine and nervy trader. I am merely questioning--- will he come back once again this time after extensive drawdowns?? Happy you like the "name".

It just needs to made very very clear the fact that one can not point at the personal success of john henry and the other big name supposed trend followers extrapolating that every trader can trade in this manner--it takes tremendous capital, wide diversification and the nerve to hope thru fat drawdowns.

Market Luther
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Agreed on the second part, while I honestly have no clue as to how many small traders blindly get into trend following methods without understanding the fundamentals of the strategy (which includes the ever important capitalization issue), I can see how it could be possible for a small trader to destroy his stake easily. As far as ET is concerned, I would argue that people are well aware of the requirements of trend trading on this board.

As for the extensive drawdowns of JHenry, only time will tell. Does it really serve any purpose to focus on any one year's drawdowns if they are not in the 'blow up' zone? It seems a lost art on journalists nowadays to portray both sides to the story, no matter what the story is. In trading for ex, you have people like yourself selectively focusing on the current drawdown of John Henry without recognizing that quant heads and semi/pseudo quants who have blown up before completely and now are but a shadow of their former selves, struggling to regain some sense of lost glory, ex, VN, Meriwether from LTCM, Richard Dennis. So if you want to exercise your right to free commentary on people's performance, you would gain a lot more respect if you cross referenced the dangers of naivete in not only trend following, but semi quant trading, full blown nobel prize quant trading etc. Keep it real.

Maverick
 
Quote from marketlutherzen:

that makes some sense. however, think about this, how many individual losing trades in a diversified "trend following" portfolio would it take to equal 35% plus drawdowns in 5 months??

market luther
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Probably about 35 with out any winners. You can't get away from drawdowns because who knows when the next trend is going to come. They don't claim to be able to forecast the market, they just trade on the information currently available to them.
 
Just my additional 2 cents... depends on how much per trade risked. If 1% was risked and all trades were losers then I would say less than 35 due to the effect of compounding.
 
Quote from Visaria:

Just my additional 2 cents... depends on how much per trade risked. If 1% was risked and all trades were losers then I would say less than 35 due to the effect of compounding.
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Your right it does depend how much was risked, but if you risk a constant 1% of equity and the trades happen one after the other (get in, lose 1%, then place the next trade) it will take more than 35 trades, due to compounding. If all the trades are entered on the same equity level then it will take 35 losers in a row with no winners, which isn't very likely.

The problem with looking at drawdowns when judging trend followers, is they wait for a market to go down before getting out.

Example: Buy a stock at 100 it runs up to 200 it trades down to 180 before you get out, then you have a 10% drawdown, but do most traders consider this a drawdown? If several markets pull back from theirs highs all at once, one can easily see how 35% drawdowns are achieved, but that doesn't mean that trendfollowing is dead.
 
Quote from 5yrtrader:

Your right it does depend how much was risked, but if you risk a constant 1% of equity and the trades happen one after the other (get in, lose 1%, then place the next trade) it will take more than 35 trades, due to compounding. If all the trades are entered on the same equity level then it will take 35 losers in a row with no winners, which isn't very likely.

The problem with looking at drawdowns when judging trend followers, is they wait for a market to go down before getting out.

Example: Buy a stock at 100 it runs up to 200 it trades down to 180 before you get out, then you have a 10% drawdown, but do most traders consider this a drawdown? If several markets pull back from theirs highs all at once, one can easily see how 35% drawdowns are achieved, but that doesn't mean that trendfollowing is dead.
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Yes, my mistake, it would take more than 35 trades.

Re your example, this is the difference between open equity drawdown (i.e. you are still in the trade) and closed equity drawdown (i.e. when you actually exit the trade).
 
From Originalturtles.org

"An example of an extraordinary price movement was the day after the October 1987 stock market crash. The U.S. Federal Reserve lowered interest rates by several percentage points overnight to boost the confidence of the stock market and the country. The Turtles were loaded long in interest rate futures: Eurodollars, TBills and Bonds. The losses the following day were enormous. In some cases, 20% to 40% of account equity was lost in a single day. But these losses would have been correspondingly higher without the maximum position limits (of the system)."

As a number of people have already said, if you are a big time trend trader, then these kind of drawdowns come with the territory ...
 
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