Niederhoffer thinks "follow the trend" sucks
- Thread starter GloriaBrown
- Start date
Same reason he left him 22 years ago.
Vic is brilliant but his ego leads to his downfall each time.
Why don't we ask a trading dictionary instead, since it is not up to interpretation, but definition?
[checking dictionary]*
Yeap, a slow upward drift is indeed a trend my friend.... It should be yours too.
*not really, just making a point
Trend IS drift
http://www.thefreedictionary.com/trend
trend
(trɛnd)
n.
1. the general course or prevailing tendency; drift: the trend of events.
James Altucher traded for Viktor Niederhoffer and he said he learned many things from him. One of these things was:
Always Protect the Downside. This is learned by negative example. As Nassim Taleb has pointed out ad nauseum, Black Swans occur. (See the Malcolm Gladwell article on Taleb to see Taleb’s thoughts on Victor.) No matter how much you test, there will be a “this time is different” moment that will force your bank account into oblivion. I trade a strategy based on selling puts and calls at levels where my software thinks its statistically unlikely the market hits those levels before the next options expirations day. But I also use some of the premium I earned from selling those puts and calls to buy slightly further out puts and calls as insurance the market doesn’t run away from me. No matter how confident the software is, always protect.
But the teacher did not practice himself what he teached his students. This confirms again: Viktor was a brilliant teacher, but a deadly dangerous trader. The losses wiped out virtually all of the gains the fund achieved racking up 35% annualized returns since inception. If he would have done what he teached he would never had 2 wipe outs, from which 1 blowup with apparently a massive amount of margin calls.
You can solve these margin calls in two ways:
NEVER EVER get a margin call. If you reached that point it means there was already a long time a problem with that position.
Second rule:
If you ever, due to black swan circumstances, get a margin call close this position completely and immediatelly.
A very long time ago I wiped out a 50K account. Since that day I never ever got a margin call again. I even never ever had a 4 points ES loss or open loss. So never a loss over $200 per Emini. After my blowup I understood immediatelly what the problem was and how to solve it. I learned very quickly.
Always Protect the Downside. This is learned by negative example. As Nassim Taleb has pointed out ad nauseum, Black Swans occur. (See the Malcolm Gladwell article on Taleb to see Taleb’s thoughts on Victor.) No matter how much you test, there will be a “this time is different” moment that will force your bank account into oblivion. I trade a strategy based on selling puts and calls at levels where my software thinks its statistically unlikely the market hits those levels before the next options expirations day. But I also use some of the premium I earned from selling those puts and calls to buy slightly further out puts and calls as insurance the market doesn’t run away from me. No matter how confident the software is, always protect.
But the teacher did not practice himself what he teached his students. This confirms again: Viktor was a brilliant teacher, but a deadly dangerous trader. The losses wiped out virtually all of the gains the fund achieved racking up 35% annualized returns since inception. If he would have done what he teached he would never had 2 wipe outs, from which 1 blowup with apparently a massive amount of margin calls.
You can solve these margin calls in two ways:
- add money (which is what Viktor did from the information that I can find)
- reduce your position
NEVER EVER get a margin call. If you reached that point it means there was already a long time a problem with that position.
Second rule:
If you ever, due to black swan circumstances, get a margin call close this position completely and immediatelly.
A very long time ago I wiped out a 50K account. Since that day I never ever got a margin call again. I even never ever had a 4 points ES loss or open loss. So never a loss over $200 per Emini. After my blowup I understood immediatelly what the problem was and how to solve it. I learned very quickly.
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Ah, it finally occurred to me why MrN doesn't much like Malcolm Gladwell, for whom he expressed disdain in another thread:
http://docs.comparacaodefundos.com/blowingup.pdf
I had forgotten about that article. All is understood.
http://docs.comparacaodefundos.com/blowingup.pdf
I had forgotten about that article. All is understood.
I know. Mr. N is full of it...
Wow, that's a good source when it comes to definining statistical terms. I'll have to remember it.
This may help you and the other math illiterate among us---
A series with drift can be modeled as yt=c+ϕyt−1+ϵt where c is the drift(constant), and ϕ=1
A series with trend can be modeled as yt=c+δt+ϕyt−1+ϵt where c is the drift(constant), δt is the deteministic time trend and ϕ=1
http://stats.stackexchange.com/ques...tween-series-with-drift-and-series-with-trend
Any questions about why a drift is not a trend
Peace
Surf
Drift is obviously a second order trend. But I'm not sure why we're even discussing it as trend or counter trend given that Vic or others are not selling 10y options on anything. It would be like saying one should not short the market because its a counter trend trade due to drift. That's just plain dumb.
Very interesting article. Thanks for sharing.
The next to last paragraph is the exact opposite of @marketsurfer ’s point of view.