Market Wizards
- Thread starter OneHipCat
- Start date
Yes...and an equity curve that goes straight down with
commission and slippage added into the equation
Just like Mr Market with no stops. Your win rate is incredibly high,
but you dont make any real money.
Cutten nailed it. The statistical probability of these
guys producing these kinds of returns approaches zero.
If someone actually crunched the statistics, I would GUESS there
are not enough traders in the world to reasonably expect
these kinds of returns across multi-year trading periods based
purely on luck, especially when dealing with a high number of
trades.
Kinda like betting money on coin flipping, and becoming
a billionaire because you got heads 500 times in a row.
And then finding 10 people who had done just that
peace
axeman
commission and slippage added into the equation
Just like Mr Market with no stops. Your win rate is incredibly high,
but you dont make any real money.
Cutten nailed it. The statistical probability of these
guys producing these kinds of returns approaches zero.
If someone actually crunched the statistics, I would GUESS there
are not enough traders in the world to reasonably expect
these kinds of returns across multi-year trading periods based
purely on luck, especially when dealing with a high number of
trades.
Kinda like betting money on coin flipping, and becoming
a billionaire because you got heads 500 times in a row.
And then finding 10 people who had done just that
peace
axeman
Just a slight correction, I made $31.5 million, that was the profit. This figure did not include the $2 million starting account size. We started each year with a notionally funded account at $0.00. Our account size was just the notional amount that Rich wanted us to base our trading unit sizes on.
I get asked alot why I quit.
I know it might sound a bit strange but I was bored to tears. Sitting around waiting for something to happen was not interesting to me. This boredom made me sloppy since I didn't watch the markets as much as I should have. Being sloppy (things like not looking at the prices for 5 or 6 hours short 1,200 contracts of Crude Oil, 1,100 Sugar, etc) probably cost me $3 million in my take and perhaps $10 million in account equity that was left on the table the last year due to a couple of days in a Silver trade I would have got out of earlier had I been paying reasonable attention.
I have a very unusual personality in that it really doesn't affect me to win or lose millions, even in a single day. It's all just numbers.
When I quit, I was 24, had already made a lot of money and had accomplished what I set out to do when I first learned about trading at 17. My senior year in high school, I told my friends that I was going to be a millionaire by 21 and I just made it. I made my first million 16 days before my 22nd birthday.
When Rich shut the program down, there was no warning at all. So I was left with a decision to start a new trading business or start another business. Since I was programming before trading and had learned programming in High School by programming commodities trading systems into the Apple II, I thought there were good opportunities in software. I think I was pretty correct in this assessment
I suppose the biggest factor was that I needed a new challenge. With trading it was a bit like: "Okay, I'm among the best in the world at this right now, where do I go from here?"
If I had to do it over again, I would hire a few people to just watch my positions so I could have a life outside the price screen, and would keep trading using my own money while I pursued my entrepreneurial interests.
I found having to raise money from others to be a huge source of problems in high-tech because the people giving you the money don't generally have a clue, but they sure think they do. So you end up making all these stupid compromises because some idiot venture capitalist says you need to. Most of these guys have never run a company or even been inside one.
I've done a lot of different things over the years and don't regret any of it.
- Curtis
Curtis, thanks for the candid reply, in a way your decision back then is very understandable, particularly when adding the really great 70's value money you had already earned at such a young age back then into the equation.
But from your presence here I suppose that you've decided to re-enter the fray, are you still into trend following or have you dropped that for other pastures ?
In any case, if you're really starting trading again I'll certainly wish you all the best, must be somewhat scary if you've been there once already and excelled, and are now for probably quite a while going to be measuring your future performance against your illustrious past, when you were however younger and probably less risk averse than now where you're a bit older and basically settled.
Anyway, regards and good luck !
Tiger
But from your presence here I suppose that you've decided to re-enter the fray, are you still into trend following or have you dropped that for other pastures ?
In any case, if you're really starting trading again I'll certainly wish you all the best, must be somewhat scary if you've been there once already and excelled, and are now for probably quite a while going to be measuring your future performance against your illustrious past, when you were however younger and probably less risk averse than now where you're a bit older and basically settled.
Anyway, regards and good luck !
Tiger
Yes, I've rejoined the fray.
I don't find it scary at all. I suppose being successful early on with a risky but profitable venture has kept me from developing the typical risk aversion that comes with age. Not having kids also helps I'm sure. I'm actually now about the same age as most of the Turtles were when the program ended.
I'm the same person I was at 24, just quite a bit wiser and with a bit more gray hair.
I also intend to beat my previous results by a considerable margin on a risk-adjusted basis. The experience I've gained over the years gives me more confidence, not less, that I'll be successful.
The challenge for me now, as distinct from when I quit, is that there is now an industry that has evolved. Managed Futures and Hedge Funds are exploding so building a business and in a sense coming from behind with many of my former peers having a considerable lead makes it a pretty good challenge.
Like many on ET, I suppose, I intend to be the best trader/money manager when measured looking back 10 years or so from now.
- Curtis
Richard Dennis was an extreme talent before he exploded his account also no
Remember this before investing in any usual trading system or hedge fund - especially I foresee they will be the next hecatomb (see http://www.elitetrader.com/vb/showthread.php?s=&threadid=30656&highlight=Hecatomb):
http://www.elitetrader.com/vb/showthread.php?s=&postid=472506&highlight=martingale#post472506
5. In general one track record doesn't prove statistically speaking nothing about the future as it is ONE SAMPLE only. I'm laughing when people chose a system based on that: they are like the public who chose the hottest hedge fund or mutual because it was the hottest of the year. And the following one or two year it often perform very badly.
6. Most system is hugely based on martingale rules which marketing disguises under the term "money management" whereas money management without true forecast is a martingale. A martingale amplifies chance (including bad luck) but it stays chance. And that is seen when the martingale is continued to be applied in same proportion there is nothing astonishing that the system reloses everything. People are impressed by an illusion.
7. Nevertheless it doesn't mean that it is not worth: it is a strategy. The strategy is more or less futile at long term if the edge of the casino is against you. In stock market it is more controversial see http://www.elitetrader.com/vb/showt...mp;pagenumber=4
When you say "few walk with their winnings" do you mean just for the day or forever ? . Because if they don't go away forever, it doesn't change much as each party of black jack is independant from each other probabilistically speaking.
I also remark that people now use the term "money management" to avoid the proper term that is martingale mathematically because when there is no edge you can do whatever you want it won't change it. Gamblers seem to be very difficult to be convinced by that whereas it is rigourously mathematically demonstrated. Doubling at each lost is a martingale, but reducing at each lost also, although it is commonly called "anti-martingale" rule or more nobly "money management" - to make things appear more serious - it doesn't change the mathematical fact that it is still a martingale.
http://www.elitetrader.com/vb/showthread.php?s=&postid=472506&highlight=martingale#post472506
5. In general one track record doesn't prove statistically speaking nothing about the future as it is ONE SAMPLE only. I'm laughing when people chose a system based on that: they are like the public who chose the hottest hedge fund or mutual because it was the hottest of the year. And the following one or two year it often perform very badly.
6. Most system is hugely based on martingale rules which marketing disguises under the term "money management" whereas money management without true forecast is a martingale. A martingale amplifies chance (including bad luck) but it stays chance. And that is seen when the martingale is continued to be applied in same proportion there is nothing astonishing that the system reloses everything. People are impressed by an illusion.
7. Nevertheless it doesn't mean that it is not worth: it is a strategy. The strategy is more or less futile at long term if the edge of the casino is against you. In stock market it is more controversial see http://www.elitetrader.com/vb/showt...mp;pagenumber=4
When you say "few walk with their winnings" do you mean just for the day or forever ? . Because if they don't go away forever, it doesn't change much as each party of black jack is independant from each other probabilistically speaking.
I also remark that people now use the term "money management" to avoid the proper term that is martingale mathematically because when there is no edge you can do whatever you want it won't change it. Gamblers seem to be very difficult to be convinced by that whereas it is rigourously mathematically demonstrated. Doubling at each lost is a martingale, but reducing at each lost also, although it is commonly called "anti-martingale" rule or more nobly "money management" - to make things appear more serious - it doesn't change the mathematical fact that it is still a martingale.
Curtis,
I noticed after reading all the Market Wizards books, that all of the successful traders could not emphasize money management enough. It was probably the most common recurring theme (psychology was 2nd). How much of the continued success of William Eckhardt, Jerry Parker and others would you attribute to their position sizing strategies? When you say William Eckhardt has been developing new strategies and innovating, do you think that his new strategies are basically maximising the full advantage of proper money management techniques? Obviously he is trying to keep an edge with his research, but how important would his position sizing strategies be? For example, I have noticed that when keeping your win % same, changing to strategies that have high multiples of win size to loss size does not decrease your drawdown % by too much after a certain point (but it still increases profitability greatly). The converse, (keeping win size to loss size constant, while raising probability of winning) reduces drawdown % enormously.
Are these the sort of areas we should be examining? Is this where the cutting edge between professionals and amateurs is drawn?
I wouldn't make the distinction between amateur and professional since there are some excellent amateur traders and plenty of poor professional ones.
I make the distinction between losing traders, successful traders, and world-class traders.
I don't think money management is the differentiator between the world-class and the successful traders, but it can be the differentiator between the successful and the losing ones.
It's more of a baseline entry requirement. If you overtrade or don't manage risk correctly, you go bust or blow up psychologically because the ups and downs get to you.
All the good traders manage risk well. There are no exceptions. Anyone who is not managing risk very carefully is just a busted losing trader waiting to happen.
How many daytrading millionaires were there in early 2000 that ended up busting and couldn't make money thereafter? Were any of them actually good traders at the time?
The best have subsequently reexamined their approach and have adopted risk management techniques including proper position sizing and have developed a better understanding of the implication of trade size, diversification, etc. on fluctuations in equity and the risk of going bust.
Unless and until a trader crosses that threshold, I would not consider them to be a good trader. Talented, perhaps, gifted perhaps, but you aren't a good trader until you understand and have internalized what can kill you.
As far as what differentiates the world-class from the merely successful, I think that the very best traders tend to be less married to a particular way of doing things and are always testing new ideas, reconfirming long-held beliefs, and growing their repetoire of approaches. I believe that Bill Eckhardt is doing this and therefore that he will continue to be among the top traders over the next several years.
The one distinguishing characteristic that I see in common among the very best is the ability to see the forest and the trees at the same time and to move their focus effortlessly between these two extremes; the ability to understand the minutia while at the same time holding the big-picture perspective of the context of the market and how the parts fit together.
- Curtis