Trading Wisdom for Aspiring Hedge Fund Managers

chipmunk · Sep 6, 2012

simply means i am a longer term investor in these stocks. Not short term trading. I can hold on to my positions for 2+ years if it keeps running. Stocks like TASR, HANS, LULU etc. Invest low, hold on, sell for big profits. I gave up on short term trading years ago.

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I'm not sure what "end of day investing" means, but if you can do that consistently and at scale, such would definitely qualify as excellent.

chipmunk · Sep 6, 2012

I have always stuck by a ratio of 2:1 or better.

But again i presume these funds you talk about are big in $$ size? That's a different game to the one I play.

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My guess is, when trading size without leverage, a ratio for Return:MaxDD greater than 1.5 (close to 25%:17% as mentioned below) would be quite extraordinary! Just 2 cents.

chipmunk · Sep 6, 2012

Hey what size was he trading for this?

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Interview with a Trading Legend. Our extensive interview with good friend (and legendary trader) Peter Brandt, who traded with the original Commodities Corp and achieved 41.6% compound returns over 30 years.

darkhorse · Sep 6, 2012

Trading Wisdom 22: Climbing Without Desire

"Mountains should be climbed with as little effort as possible and without desire. The reality of your own nature should determine the speed. If you become restless, speed up. If you become winded, slow down. You climb the mountain in an equilibrium between restlessness and exhaustion. Then, when you're no longer thinking ahead, each footstep isn't just a means to an end but a unique event in itself. This leaf has jagged edges. This rock looks loose. From this place the snow is less visible, even though closer. These are things you should notice anyway. To live only for some future goal is shallow. It's the sides of the mountain which sustain life, not the top. Here's where things grow. But of course, without the top you can't have any sides. It's the top that defines the sides."

- Robert Pirsig, ZATAOMM

JS Comment:

Pirsig's perspective is very different from Bruce Lee's, who, as a number of you noted, died at age 32.

Which aspects of trading are more suited to Lee's relentless progress focus - "constantly exceeding one's level" - and which are more suited to Pirsig's "climbing without desire" ideal?

Could the optimal configuration of desire / non-desire be tested empirically, by determining the results you get with each, as measured against benchmarks like consistency, accuracy, overall output quality, etcetera?

Could Lee's ideas apply within a Pirsig framework, in the sense of striving to exceed when feeling restless, versus observing the environment when calm and so on?

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darkhorse · Sep 6, 2012

Quote from chipmunk:

Hey what size was he trading for this?

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Don't know - never asked about average or max AUM.

His style could easily accommodate nine figures though.

Wide Tailz · Sep 7, 2012

Quote from darkhorse:

Trading Wisdom 22: Climbing Without Desire

"Mountains should be climbed with as little effort as possible and without desire.

Long distance cycler here.

Something strange happens when I don't push as hard up the hills and into the headwinds, and just try to make myself comfortable, be in the moment, and relax.

I go twice as far.

The trading analog: cut size until it barely matters if you win or lose, and just focus on the process. In the worst case, you will take a lot longer to go bust, and you will gain experience. In the best, you will still have doubled your money, and have gained a lot more valuable experience along the way.

Wide Tailz · Sep 7, 2012

Quote from darkhorse:

Trading Wisdom 21: Constantly Exceeding One's Level

"if I run any more I'm liable to have a heart attack and die." He said, "Then die."

Plungers go bust.

darkhorse · Sep 7, 2012

Quote from Wide Tailz:

Long distance cycler here.

Something strange happens when I don't push as hard up the hills and into the headwinds, and just try to make myself comfortable, be in the moment, and relax.

I go twice as far.

The trading analog: cut size until it barely matters if you win or lose, and just focus on the process. In the worst case, you will take a lot longer to go bust, and you will gain experience. In the best, you will still have doubled your money, and have gained a lot more valuable experience along the way.

And yet, if you plan to cycle competitively, pain must become your intimate companion.

The most intense growth periods I have ever experienced were often accompanied by pain - and by a sense of pushing to the absolute limit, pushing through the pain barrier. (This applies especially in various forms of strength and endurance training.)

Both perspectives have value, and apply in different situations. To be intense 24/7 is to risk injury or burnout. But to be laid back 24/7 is never to become great in the first place.

darkhorse · Sep 7, 2012

Quote from Wide Tailz:

Plungers go bust.

Not if you do it right.

As the saying goes, "If you're going to bet the farm, have two farms."

This is taken as a warning not to risk too much. But you can also look at it like this: After building a cushion of profits over an excellent trading period, you can take a goodly portion of that profit and treat it as your "second farm," making a very large bet with a limited risk options position (assuming the conviction-based opportunity is there).

If you are wrong, you wind up having a good year instead of a great year. But if you are right, you go from a great year to an absolutely fucking fantastic year - without ever placing your original farm at risk.

Knowing how to do this, and how to do it properly without unduly increasing mortality risk or initial capital risk, is one of the hidden factors rarely talked about that puts some traders head and shoulders above the rest, in respect to their ability to deliver superior risk-adjusted returns.

cdcaveman · Sep 7, 2012

Quote from darkhorse:

Not if you do it right.

As the saying goes, "If you're going to bet the farm, have two farms."

This is taken as a warning not to risk too much. But you can also look at it like this: After building a cushion of profits over an excellent trading period, you can take a goodly portion of that profit and treat it as your "second farm," making a very large bet with a limited risk options position (assuming the conviction-based opportunity is there).

If you are wrong, you wind up having a good year instead of a great year. But if you are right, you go from a great year to an absolutely fucking fantastic year - without ever placing your original farm at risk.

Knowing how to do this, and how to do it properly without unduly increasing mortality risk or initial capital risk, is one of the hidden factors rarely talked about that puts some traders head and shoulders above the rest, in respect to their ability to deliver superior risk-adjusted returns.

plungers sometimes remind me of pessimistic contrarians .. my personality is like that ... so i have to watch it.. i call myself a Realist though.. haha love the two farms quote.. i'm using that from now on.... the quote on quote "boy plunger" ended up ending his own life... i'm not looking for roller coaster ride emotional strategies myself... i just wanna make money.