Steven Cohen: "This is not a perfect game [...] you’re going to be wrong a lot"

[ChkitOut]

Quote from kinggyppo:

http://www.pdf-search-engine.com/the-new-market-wizards-pdf.html

whoever scanned that book did a terrible job.

btw new market wizards is different than stock market wizards right?

 

[taowave]

Are we talking about predetermined scaling in levels and amounts or simply a wildman who doubles down??

There are certainly systems that favor scaling in....

Quote from SkepticTrader:

Not sure who you are referring to here on ET but it's impossible in the real world of trading. It is possible though in the hypothetical world of play money trading where an unlimited bankroll allows you to continuously average down on your losers. One blogger who has a legion of Kool-Aid drinking devotees comes to mind there.

 

[SkepticTrader]

Quote from taowave:

Are we talking about predetermined scaling in levels and amounts or simply a wildman who doubles down??

There are certainly systems that favor scaling in....

No, a wildman who as the market keeps going against him will keep increasing his leveraged positions using an unlimited bankroll of make believe money.

 

[aradiel]

Quote from taowave:

Are we talking about predetermined scaling in levels and amounts or simply a wildman who doubles down??

There are certainly systems that favor scaling in....

Even if you have a nobel class scientific system of averagin down you are just one fat tail event away of getting wiped out (ask LTCM). Victor Niedderhofer is another manager that uses statistics a lot and doesnt like stop orders and he blew two times, and I consider the guy a genius.

 

[jones247]

Quote from aradiel:

So, yesterday I was re-reading the Stock Market Wizards book, specially the Steven Cohen interview, and I found a piece of information that deeply caught my attention:

Mr. Schwager Question:
When you put on a trade and it goes against you, how do you decide when you’re wrong? (The question actually relates to him and his traders)"

Mr. Cohen Answer:
“This is not a perfect game. I compile statistics on my traders. My best trader makes money only 63% of the time. Most traders make money only in the 50 to 55 percent range. That means you’re going to be wrong a lot. If that’s the case, you better make sure your losses are as small as they can be, and that your winners are bigger"

It is simply amazing that a guy with a track record of + ~40% anually after 50% of perfomance fees said something like this. He is either bluffing or money mangement is really what makes the difference between the tiny percentage of sucesfull traders and the rest. Since it is suposedly very hard to foretell the future, even for the legends, it is how you handle the winning and the losing positions that is the determinant factor of your bottom line.

I like this theory.

With Steve Cohen's traders having a 50% - 55% win rate, what type of risk:reward is associted with such win rates??? If the r:r is 1:3 or 1:4, then any trader would be extremely desirous of even a 50% win rate...

50% win rate with a 1:3 or better r:r equals VERY WEALTHY!!

Walt

 

[NoDoji]

It's all about money management. I recommend this journal to anyone who thinks otherwise. More losers than winners, and he's not only won the bet already but is up well over 50% now. I know he's for real because I spent most of the year in a trading room with him and he called all his trades live.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=148752&perpage=6&pagenumber=1

Sadly, he stopped posting do to a spammer who refused to leave his thread alone.

 

[taowave]

You really arent talking about averaging down,You are talking about being over-leveraged with no money mnagement.Thats the bottom line

As for Vic,I went over his option positions a while ago,and his underlying notional on his short OTM put positions was so large relative to his equity that he was doomed to fail.

Vic is one of the few traders who is a genius and a blithering idiot at the same time.There is simply zero excuse for the size/type of the positions he puts on the books.

Quote from aradiel:

Even if you have a nobel class scientific system of averagin down you are just one fat tail event away of getting wiped out (ask LTCM). Victor Niedderhofer is another manager that uses statistics a lot and doesnt like stop orders and he blew two times, and I consider the guy a genius.

 

[squirly309]

I just bought this book. Can't wait to read it. Amazon's got some super cheap copies for those who are still looking.

 

[Nattdog]

"He is either bluffing or money mangement is really what makes the difference between the tiny percentage of sucesfull traders and the rest."

I am going to dispute the premise here.

His statement about the win rates and payoffs his traders achieve does not imply the secret is money management. If only it was "that easy."

If one has a trading strategy that skews the results such that winners are much larger than losers while having a 50% win rate, this suggests a significant trading edge that THEN can be taken advantage of with money management.

The fact is, if most traders really could get "much larger winners than losers
50% of the time" trading would be easy. If only it were so.