What's the difference between trader and portfolio manager?

Hi Smoker & Ghost-of-Cutten & others,

In your experience, do you know successful traders (discretionary or quantitative) that make their income from the most liquid and efficient market of all: EURUSD spot ?

Reading this thread i get the impression that all experienced discretionary and quantitative (automated) traders keep themselves away from spot forex.

I am sure many readers would like to know the opinion from people who have been in the market for years.

Thanks!
 
Interesting, thanks. I still haven't found back the name of the guy, but he was legit I think. I remember his daily volume figures were really impressive.
 
Quote from 2sorh:

Many posters in this forum are NOT traders, but people of other backgrounds.

I don't know specifically what background they have. But if one poster talks about day trading is not possible, you can bet all your account that he is NOT a day trader.

Some posters are from institutions (not mental ones, I hope), these people definitely post stuff that is not flattering to day trading and day traders. It's understandable that they hate day traders, because they themselves don't know day trading or have lost money trying to day trade, and they definitely lose their institutional money when they trade.

Remember that guy who constantly posted stuff like: small traders lose, they just lose. I can tell you one thing for sure: He is NOT a day trader and has no clue of day trading.

Next time someone posts about day trading, he or she should declare if he is a day trader or not.

If someone is from an institution and posts stuff unfavorable to day traders, we have a right to know where he comes from.

By the way, I am a day trader and I try to take money from you institutional losers every day. I don't hide my purpose, I want to take your money. I know you institutions are bad in the market, my action is to take advantage of your stupidity. But, please, don't steal my money from my account. If you do co-locating, that's tolerable. I can also tolerate front-running from you losers. But stealing my money, that's a NO NO.
More...
==========
Great line on the mental/institution thought.LOL

But except for well capitalized market maker types...;
daytrading is such a small percentage of trading, best for most to forget it.:cool:
 
Quote from murray t turtle:

==========
Great line on the mental/institution thought.LOL

But except for well capitalized market maker types...;
daytrading is such a small percentage of trading, best for most to forget it.:cool:
More...

so you admit you are not a day trader.

But many posters here thought you must be a good day trader because you registered many years ago=survived for a long time.
:D :D
 
Hi libitum,

Quote from libitum:

Hi Smoker & Ghost-of-Cutten & others,

In your experience, do you know successful traders (discretionary or quantitative) that make their income from the most liquid and efficient market of all: EURUSD spot ?
More...

No but (isn’t there always a ‘but’) then again I don’t know anyone that runs any reasonable amount of money that doesn’t actively trade EU/$ in size.

Correct me if I am wrong but I think you are trying to get an opinion on the theory floated around on this thread and others that there is more edge in trading illiquid frontier kind of markets vs huge liquid markets?

In my opinion this is a two edged sword and a bit of a loaded question and I am sorry but I doubt if I will give you the answer you appear to be searching for.

I do believe it is easier to make money in any market liquid or frontier where you personally have knowledge/experience better than the average player. That is what is important and not whether the market in question is liquid or frontier.

Now just a heads up! I think it is dangerous for your net worth to assume that the reason that you can’t make money trading EU/$ (if that is the case) is because it is liquid verses maybe it is because your trading method is simply not positive expectation (enough).

I really am doubtful that a negative expectation trading method in the liquid EU/$ Market will suddenly turn into a positive expectation trading method when applied to a frontier market.

It is my personal belief that a positive expectation method should work in both markets and if it doesn’t it most likely isn’t robust enough for production.

Even if on paper you think it is easier to make money in frontier markets the execution will kill you so that beautiful theoretical equity curve generated in back testing due to the “obvious inefficiencies” of frontier markets turns into a Trojan horse experience (and not in a good way).

It is my opinion (and against all academic opinion) that there is not a direct observable relationship between liquidity and efficiency i.e. the professors’ trick themselves into seeing a causal relationship.

I think of it this way; if it works in both liquid and frontier markets not just in testing but in real time trading then it is good enough to put into production. If it doesn’t then I believe it is prudent to go back to the drawing board.


Quote from libitum:

Reading this thread i get the impression that all experienced discretionary and quantitative (automated) traders keep themselves away from spot forex.
More...

I don’t know about the opinions and experiences of the people on this thread but I can confirm that I can’t remember anyone in the dozens and dozens of funds pitching for that that have come in here who mentioned they don’t trade large liquid markets like EU/$.

Allocation size pretty much means they have to trade the huge liquid markets.

And as for the frontier specialists; they do what they do because they think they know a particular market better than everyone else and NOT because their method stopped working in liquid FX spot due to it being too efficient and thus that is why they are now trading the illiquid and thus “inefficient” frontier market.

Hope that was clear.

Warmest Regards, Smoker
 
Quote from Van_der_Voort_4:

that's your volume guy

http://www.elitetrader.com/vb/attachment.php?s=&postid=1263772
More...

Thanks for the link Van_der_Voot!

Hi TraDaTor,

I don’t know of this guy and my Serbian guy just left on summer leave with his family in Belgrade due to the 45 degree (that’s in centigrade Americans) summer heat out here in the sandbox so I can’t directly ask him and really don’t want to hassle him on holiday.

Of course maybe my guy is interviewing with Vlad Jovanovic while I write this?

Vlad Jovanovic and moi did cross paths but not at the same time. The link says Vlad Jovanovic worked at Bank of America options group which many years ago was the same group I came out of ie CRT (Chicago Research and Trading).

CRT sold out to Nations Bank who later merged with B of A and thus CRT and the B of A options group are one in the same.

I left CRT to join a London based Hedge Fund several months after CRT sold out to Nations Bank (before the B of A deal) and the CRT partners headed for the beach. I had worked for a big bank at the start of my career and had a “been there, done that and once was enough” experience. Besides I was tired of interbank/floor options market making etc and wanted to go into money management.

Anyway we missed each other at the same shop by a few years etc.

This Vlad Jovanovic’s group looks like one of the dozens of shops doing this kind of high frequency “trading” which is viewed by the asset allocators as a sector of the hedge fund industry like CTAs, long/short, yield arb etc etc etc.

However these types of “automated HF” shops are further broken down into two different styles.

One style is like this Vlad Jovanovic which is not “prop/position” trading as it is generally defined by instead is more “market making” or working the spread etc and whenever possible but especially over night not carrying positions.

The second is where I would place moi which is using the same type of automated computer infrastructure and “execution” algorithms to put on both micro short term, regular day trading short term and the long term strategic directional positions at the least cost/slippage etc. To get on reasonable size this type of automated computer infrastructure is fast becoming a requirement which is why we originally hired our Serbian computer/math dude.

Anyway Vlad Jovanovic sounds like a real interesting guy and I must say in the last several years of socializing in the Serbian community out here as long as you stay off the subject of the civil war and the USA/NATO bombing them they are more fun than a barrel of monkeys.

Also Serbian women (ex Yugoslavian women in general) are far above the European/North American standard in being smoking hot.

Just saying!

Warmest Regards, Smoker
 
Great! Thanks for the answers!

I am new to trading and I am trying to decide in which market to focus. Spot forex seems to be the easiest (lots of brokers, minimal requirements, low spreads, free trading software), however there is a lot of economic theory about perfect markets that makes me wary of forex. On top of that, I dont see around many prop firms specializing in currency trading.

My background is computational mathematics and my main problem is not that backtesting does not give positive expectation. My problem is that the positive expectation can be due to overfitting, and only through lengthy live trading I will know if my methods work or not (Ive been live in fx just over a month, or about 100 trades, too little to know).

From your answers i understand that fx is tradeable (and not a scam where the only winners are the brokers, as many forums say, based on perfect market theory as I already mentioned). Btw, other traders input is also welcome.

I have another question (if I may): What are acceptable max drawdowns from real in-production strategies? Is the maximum acceptable days, or weeks, or months or years before reaching the next Equity peak? (eg. when do I know that my algo needs to go back to drawing board?)

And to make the question fit into the thread topic... What is the max drawdown (in ROI, and time) before the hedge fund pulls out the money from the traders account?

Cheers!

-libitum
 
Thanks Van der Voort, that's him indeed.

Smoker, nice to have an ex CRT on the board. Joe Ritchie 's interview in the market wizards is one of my favorites : their first visit at the Merc where they almost got escorted out, the secret trading cards, the team spirit... I know it's just folklore but that always makes a good story.:)
 
Hi Libitum,

Sorry for not getting back sooner; it is Ramadan out here in the Sandbox and I got busy on some other stuff.

Quote from libitum:

Great! Thanks for the answers!

I am new to trading and I am trying to decide in which market to focus. Spot forex seems to be the easiest (lots of brokers, minimal requirements, low spreads, free trading software), however there is a lot of economic theory about perfect markets that makes me wary of forex. On top of that, I dont see around many prop firms specializing in currency trading.
More...

All I can tell you is the vast (really vast) number of successful Hedge Funds/CTAs all include foreign exchange in their trading profile and dealing in size almost forces this choice.

You know your numbers better than I do so if your numbers look good in a market then IMO if your size permits I would be tempted to include it.

Quote from libitum:
My background is computational mathematics and my main problem is not that backtesting does not give positive expectation. My problem is that the positive expectation can be due to overfitting, and only through lengthy live trading I will know if my methods work or not (Ive been live in fx just over a month, or about 100 trades, too little to know).
More...

Again take my comments with a grain of salt since I don’t know your particular situation/method etc but in my experience there is less back testing issues with over fitting than there are with underestimating trading costs. If you are a math type of guy there are mathematical techniques both in text books and some proprietary that can be used to get a good idea about over fitting which makes it more or less a “solved” problem.

And best of all even if you don’t know any math the market it self will give you a big hint about over fitting usually before you burn through your bankroll.

And even if you are “over fit” if you diversify enough you can “ballpark” it away so it is not an unbeatable monster. However if you don't have the assets to diversify across markets/time bucket/signal flag/risk budgeting etc then it is really freaking dangerous.

IMO trading costs are the million dollar question in testing. Also every one of us has a “special” proprietary way of estimating their impact but no one I know yet has a closed form solution.

What really bugs me about it is just when I think I have an algorithm solution the goal posts shift.

Quote from libitum:
From your answers i understand that fx is tradeable (and not a scam where the only winners are the brokers, as many forums say, based on perfect market theory as I already mentioned). Btw, other traders input is also welcome.
More...

As I said above just about everyone I know trades FX in their profile.

Quote from libitum:
I have another question (if I may): What are acceptable max drawdowns from real in-production strategies? Is the maximum acceptable days, or weeks, or months or years before reaching the next Equity peak? (eg. when do I know that my algo needs to go back to drawing board?)
More...

Completely depends on your own risk profile and if you are trading other people’s money it depends on their risk profile.

Quote from libitum:
And to make the question fit into the thread topic... What is the max drawdown (in ROI, and time) before the hedge fund pulls out the money from the traders account?
More...

This depends on how the trader/hedge funds trading profile fits in with the other traders/hedge funds that make with the overall alternative investments portfolio of the hedge fund/asset allocator.

For example I have personally seen a guy in a 60% drawdown (who did come all the way back and lots more) kept open due to the “fit” of his profile and have seen other guys shut down in small double digit drawdowns (these are not stat arb profiles but outright direction).

Individual asset allocators each have their own risk profile/expectations but to get a broad overview is easy since the information is public.

Just look at the return curve for the individual hedge fund/CTAs that make up whatever hedge fund sector your profile falls into.

For Example if it is CTAs just run the numbers on the equity return curve of the CTAs that make up the BTOP 50 index. All that information is public and you can easily do the analysis in excel or one of the hundreds of other quant software packages.

That tells you exactly what kind of profile has attracted the asset allocators money so all the answers to your questions are right there in front of you.

If you can produce the same risk/return profile as the public return curves of the top 20 guys measured in assets under management of the “whatever is your style” profile and do it with size then you are at least through the door and now fighting in the same league.

Now the catch 22: The final step is you have to pass due diligence AND THEN be able to convince an asset allocator that your profile is replicable into the future with size. Do that and welcome to the pot of gold at the end of the trading rainbow.

Asset allocators like record executives dream of the finding the Beatles and not being fooled by another one hit wonder that after a record year exits the business with a big kaboom.

Just my two dirhams worth!

Good luck,

Warmest Regards, Smoker
 
You must log in or register to reply here.
Back
Top