Trading Wisdom for Aspiring Hedge Fund Managers

Status
Not open for further replies.
Quote from maler:

There is nothing theoretical about the issue I raised.
If you make your money in a job and trade as a hobby then
I agree, you can ignore what I said.
But if you are a market professional that pays the bills
with the money you pull from the market then what I said
is relevant.
Been doing this full time for a few years now, and it feels
like after taxes, bills and accounting for inflation I am not
much ahead in purchasing power from where I started.
Looks to me like if you want to trade for a living,
you either swing for the fences to get any compounding
on your capital or else go work for someone else.
More...


Well this is much the point of OPM (other people's money) and becoming a hedge fund manager in the first place.

A strategy that reliably generates 15 - 20% annual returns with low risk (acceptably minimized drawdowns) in today's near-zero interest rate environment would be VERY attractive to a wide cross section of high net worth investors, if presented credibly and convincingly.

A trader with, say, $5 million in AUM, who took 20% incentive on a 20% year, would earn $200,000. And the more the strategy scales via additional investor capital, the higher the potential payoff (without increased market leverage).
 
Quote from darkhorse:

...
More...
Let's see who is standing after the fight is done. It shouldn't take too long. Maybe 10 more years. We're getting rid off investors. The more we get rid off, the more they chase us. It's like an infestation of roaches.
 
Trading Wisdom 03: Exiting Losers to Maintain Objectivity

"The more you lose in a trade, the less objective you become. Exiting a losing trade quickly clears your head and restores your objectivity. After a breather, you might put the same trade back on if you can intellectually justify it, but you have to constantly remind yourself that there's a myriad of opportunities in the marketplace. By preserving your capital through the use of a stop, you make it possible to wait patiently for a high-probability trade with a low-risk entry point."

- Marty Schwartz, Pit Bull

JS Comment:

How quickly do you exit your losing trades?

Do you lose objectivity when the market goes against you?

Do you use time stops as well as price stops? What is your optimal cut time - based on analysis of past trades, that statistical point at which "if it hasn't worked by now, it's probably not going to work at all?"

If you experimented with cutting losses even faster, what might happen?

Get Pit Bull on Amazon

Get Trading Wisdom via e-mail
 
Quote from NielsBohredBush:

Let's see who is standing after the fight is done. It shouldn't take too long. Maybe 10 more years. We're getting rid off investors. The more we get rid off, the more they chase us. It's like an infestation of roaches.
More...


Funny - I've heard the same sentiment expressed by value investors (in respect to traders)...

In challenging environments the weak of all stripes get culled. Which, in turn, means greater opportunity for survivors when the cycle turns.
 
Quote from maler:

There is nothing theoretical about the issue I raised.
If you make your money in a job and trade as a hobby then
I agree, you can ignore what I said.
But if you are a market professional that pays the bills
with the money you pull from the market then what I said
is relevant.
Been doing this full time for a few years now, and it feels
like after taxes, bills and accounting for inflation I am not
much ahead in purchasing power from where I started.
Looks to me like if you want to trade for a living,
you either swing for the fences to get any compounding
on your capital or else go work for someone else.
More...

As a sole trader the numbers are simple:

CAGR, adjusted by the tax rate, times your capital base, minus your annual spending = your annual increase (or decrease) in capital.

E.g. 30% per annum, 1/3 tax rate brings it down to 20% per annum. If your capital base is 300k and your living expenses are >60k a year, you will eventually go broke despite having an excellent annual return.

Assuming any good pro trader can make 15% per annum minimum, then if your expenses are 60k (entry level middle class) you need a capital base of 600k just to break even each year, and more like 1 million to compound wealth meaningfully. At 30% you need 300k/500k.

Short answer - you must either live on tinned food in a bedsit for a few years, have 500k-1mill capital, or be able to make 50%+ per annum, or move to a tax haven, in order to make it as a sole trader. If you can't do that, then you should go work for a trading firm, or raise investor capital.
 
Quote from darkhorse:

Funny - I've heard the same sentiment expressed by value investors (in respect to traders)...

In challenging environments the weak of all stripes get culled. Which, in turn, means greater opportunity for survivors when the cycle turns.
More...
I don't see any Neanderthal (male or female) running around. Do you know why?.:)
 
Quote from NielsBohredBush:

I don't see any Neanderthal (male or female) running around. Do you know why?.:)
More...


Okay, I'll bite. Neanderthals went extinct because they lost an arms race to the more socially attuned homo sapiens.

Humanity's ancestors, as evidenced by their higher degree of proliferation in respect to art and early culture, probably mastered social cooperation to a level and degree that Neanderthals did not, allowing roving bands of hunter gatherers, working in concert, to kill off their solo artist neanderthal cousins as they competed for the same food sources with meaningful geographical overlap.

But what exactly is your point? Are you suggesting that traders are an evolutionary step beyond investors? That doesn't make sense. Traders and investors co-exist at different points within the market ecosystem, and in fact have a largely symbiotic relationship. There is no convincing (or even logical) evidence to suggest that one group is on a trajectory to wipe the other out.
 
I think Neanderthal simply starved to death (mostly), when competing for the same resources in the same geographical location with a more intelligent opponent.

There are gorillas, chimpanzees, orangutans, tigers, etc, etc, etc. But why no Neanderthal?.

The same thing is happening to Homo Sapiens (mostly) competing against Homo Sapiens Economicus. It has happened for thousands of years, but becoming more organized and systematic now: Wide segments of human population (regardless of IQ) are being starved to death, and a small segment is profiting and prospering, for no reasons other than (mostly) hereditary wealth, and old-boy-network connections.

This is where we're at and where we 'enter' the 'fight': We intend to save the higher IQ population from starvation, and to show the NWO, what 'order' really means. We are going to take all their money, possessions and power, and then let them starve to death. We will offer them the, more humane, alternative of sterilization instead of starvation.

There are more differences between a 200 IQ human and a 100 IQ human, than between a Homo Sapiens and a Neanderthal. But there are too few of us, for now.

A few normal humans hold most of the wealth and power, for now. But that is not going to last very long. Once we control the wealth, power and the means of production, we'll institute some 'order'... peacefully... but we'll defend properly, if attacked...

There will be no more 'monkeys' in power in any country. Maybe we'll put all the high profile ones, that survive, in a Zoo.

Then we can move on to Mars and other places.
 
Quote from NielsBohredBush:


Then we can move on to Mars and other places.
More...


Sure thing, good luck with that. They're sending color photos back now, maybe you can pick your spot to build :)
 
Trading Wisdom 04: The Great Trades Are Obvious

"The great trades don't require predictions. The Soros trade of going short the pound in 1992 was based on something that had already happened - an ongoing deep recession that made it inevitable that the U.K. would not maintain the high interest rates required by remaining in the E.R.M. Afterward, everyone said, "That was incredibly obvious."

"Most of the great trades are incredibly obvious. It was the same in late 2007. In my mind, it was clear that the financial system was imploding and that most market participants hadn't noticed."

- Colm O' Shea, Hedge Fund Market Wizards

JS Comment:

Do you agree that the great trades are obvious? Why do so many market participants miss what is unfolding right before their eyes?

What are the elements in your process for observing, keeping tabs on, and exploiting major macro trends?

Get Hedge Fund Market Wizards on Amazon

Get Trading Wisdom via e-mail
 
Status
Not open for further replies.
Back
Top