sharpe ratio
- Thread starter trend2009
- Start date
I found a few seashells on the seashore one time but it turns out they weren't worth much.
Now I'm un-following this thread. It's no longer fun.
An automated strategy could never produce a 7-10 sharpe unless quantum computing was involved, even with a fund manager it would take the exceptional who can generate 200%/500%pa with decent capital allocated (not micro accounts).
I know these people and it takes quantum approaches done manually (the algos identify the scenario not the trade) to produce those types of returns and then they target 3-5 Sharpe, not 7-10, the 7-10 are on private accounts and maybe Private Fund/Family Office, not third party allocation funds because it cannot be scaled outside of a closed loop, and that is the end of that.
It shows how desperate everyone is today, they are touting quantum returns in 2023, what level can an efficient fund manager underperform or outperform a quantum computer on a contextual basis (the markets have context built in to them to disintegrate algos indirectly and retail directly), I already know the number but if you don't have that then everything else is someone providing an illusion.
how quantum computing helps? Any has quantum computing?
The denominator of the sharpe ratio is the annual standard deviation, which for S&P 500 is probably somewhere near 15%. The numerator is the annualized return minus the risk free rate. So if that rate averages 3%, a sharpe ratio of 1 means you would have a risk profile similar to S&P 500 but return 18% a year.
That would be unbelievable and extremely rare over a multi-decade period. If you can have a risk profile similar to S&P 500 and double it's annual performance (e.g. 18% a year) and can do that for a few decades, you would be one of the few elite traders in the world.
If you do 12% a year with a risk profile similar to S&P 500 for a few decades you are still a mini God. Unfortunately, most people have an extremely unrealistic understanding of what can be achieved in trading. Most people are fooled by randomness and look at performance under a 20 year period or have ridiculous risk profiles and are on the edge of ruin but have run well enough to not lose everything.
Beat the S&P by a few percent for decades and have a similar risk profile and you are very elite believe it or not. The Hedge Fund Market Wizards book is pretty good if you want to see what's achievable, although these people all ran well too, just like poker players that made it big. The other market wizards books I'd stay away from if you want a reasonable understanding of what's actually possible.
That would be unbelievable and extremely rare over a multi-decade period. If you can have a risk profile similar to S&P 500 and double it's annual performance (e.g. 18% a year) and can do that for a few decades, you would be one of the few elite traders in the world.
If you do 12% a year with a risk profile similar to S&P 500 for a few decades you are still a mini God. Unfortunately, most people have an extremely unrealistic understanding of what can be achieved in trading. Most people are fooled by randomness and look at performance under a 20 year period or have ridiculous risk profiles and are on the edge of ruin but have run well enough to not lose everything.
Beat the S&P by a few percent for decades and have a similar risk profile and you are very elite believe it or not. The Hedge Fund Market Wizards book is pretty good if you want to see what's achievable, although these people all ran well too, just like poker players that made it big. The other market wizards books I'd stay away from if you want a reasonable understanding of what's actually possible.
Rentec Medallion blows the risk profile of the S&P out of the water.
And they are managing $15 Billion.
While i cant do a sharpe of 2 on $15 Billion.
I can do a sharpe of 2 on a $15K account and also a $150K account, i can guarantee you that.
I could also do it on a $1.5Million account.
But not a $15 Million account.
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I think a big part of the point is... how long can you keep that 2 going for. @Actuarial_Fun is talking about decades.
Systems can stop working, i got no problems with that.
You just have trade the way you know best and hope for the best.
There are no guarantees. If someone made 100% five years straight, is still no guarantee of what they will make next year or the next 10 years.
But you have to keep a positive outlook, otherwise you wont have the motivation to keep going when things get though.
You just have trade the way you know best and hope for the best.
There are no guarantees. If someone made 100% five years straight, is still no guarantee of what they will make next year or the next 10 years.
But you have to keep a positive outlook, otherwise you wont have the motivation to keep going when things get though.