Who's the Better Trader?

tireg · Mar 21, 2006

RedManPlus, your gains are so.. consistent!? I'm in awe.

Any advise you could give someone new as far as optimizing hedging goes or optimizing a trading strategy? Books you'd recommend, articles, etc.

ltcobretti · Mar 21, 2006

Maybe Trader A started badly and made a huge recovery to the mathematical point that he/she started with $100 lost 50% the first day and turned that $50 into $135 for a 170% gain. That is much better than the other 25% gain

The point is the person with more money is better no matter how they did it, the decision is made depending on risk calculations...

StacyTrader1 · Mar 21, 2006

Trader B is BY FAR SUPERIOR.

Trader A is one drawdown away from being bankrupt.

Ciao!

Stacy

ElectricSavant · Mar 21, 2006

My alter -ego

Quote from TooL:

Trader A finishes the year up 35% after having a max drawdown of 50%.

Trader B finishes the year up 25% after having a max drawdown of 5%.

I think Trader B is the better trader because conservation of capital is the most important skill/talent of any trader/investor. Loss and decay is all around in the market and the universe. Its called entropy. You drop a TV from 100 feet high, it doesn't turn into Green-Blue Chimpanzee with Buffulo Wings and fly away. No it gets smashed into 1000 pieces. You are not a hero after coming back from a huge loss, you're just a lucky. Reward is always related to risk, and by risking more to come back you risk total ruin.

Aaron · Mar 30, 2006

Quote from Aaron:

Does anyone else know of any recoveries from such a large drawdown?

Found one: http://www.ditomassogroup.com/DTGDD.htm

Di Tomasso Group's Equilibrium Investment Program has twice had worse than 60% down years and had a worst drawdown of 85%. Incredibly, he's come back to reach a new equity peak. Di Tomasso is profiled in the March issue of Futures Magazine.

Di Tomasso makes fundamental calls on commodity values and doesn't trade financial futures. According to the article he is short crude and long the grains.

Aaron Schindler
Schindler Trading

TheStudent · May 25, 2006

I think David Beach's 3x Discretionary fund on IASG recorded a drawdown more than 50% last year.

Investors abandoned the sinking ship and then lo and behold, he finished the year positive.

http://www.iasg.com/SnapshotPT.asp?ID=54

Longhorns · May 25, 2006

Quote from TheStudent:

I think David Beach's 3x Discretionary fund on IASG recorded a drawdown more than 50% last year.

Investors abandoned the sinking ship and then lo and behold, he finished the year positive.

http://www.iasg.com/SnapshotPT.asp?ID=54

The total yearly returns are abysmal for that amount of risk (maximum drawdown was almost 72%!!!)

Only way to invest in that fund is to wait for 3 or 4 consecutive losing months, or a 40%-50% drawdown and then jump in.

tireg · May 25, 2006

Quote from Longhorns:

The total yearly returns are abysmal for that amount of risk (maximum drawdown was almost 72%!!!)

Only way to invest in that fund is to wait for 3 or 4 consecutive losing months, or a 40%-50% drawdown and then jump in.

What if that 50% dd turns into a 80 or 90% dd? You assume that just b/c he had a nice recovery he can do it again.

I can lose my own money. Must be one hell of a psychological rollercoaster though.

TheStudent · May 25, 2006

Quote from Longhorns:

The total yearly returns are abysmal for that amount of risk (maximum drawdown was almost 72%!!!)

Only way to invest in that fund is to wait for 3 or 4 consecutive losing months, or a 40%-50% drawdown and then jump in.

It only seems that way because of .... survivorship bias

ie - those that go on to lose all your money get erased from databases.

Incidentally, David Beach is a fine and very successful manager.

Longhorns · May 25, 2006

Quote from tireg:

What if that 50% dd turns into a 80 or 90% dd? You assume that just b/c he had a nice recovery he can do it again.

Not assuming anything...just saying that THE ONLY WAY I would ever invest in that fund is after a massive drawdown.