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jcl
Registered: Jan 2012
Posts: 407 |
06-10-12 10:51 AM
By the way, why are you always asking what I'm doing?
In a discussion it does not matter at all what a participant is doing and how long he is trading. Only the arguments matter. Besides, it is not actually a qualification to have traded for 20 years. The statistics are probably correct that most traders are losing. So the main difference between a veteran trader and a newbie is that the veteran has lost more money.
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sle
Registered: Apr 2003
Posts: 1609 |
06-10-12 06:04 PM
Quote from jcl: The difference is that trade returns can be measured for the past, but trade risk can not be measured at all, not even for the past - that's what I was trying to explain to you all the time.
I specifically said that you can use you favorite risk measure it - it would still be an improvement over simply taking returns. When you look at your algo strategies, you are most certainly are forced to make an assumption of your risk metric, yet you chose to do so.
Quote from jcl: For calculating risk adjusted return, you use variance, drawdown, or some other proxy of risk. The Sharpe Ratio for instance uses the standard deviation. All this gives you very different performance data. Risk adjusted return is not some objective measurement, as you seem to assume, but it's subjective, dependent on how you define it. Therefore using it would make no sense in the Kahneman study.
There are a number of assumptions in that study that are just as questionable. Assuming some random index as a benchmark is as much of a loss of objectivity as assuming some sort of risk metric. Assuming that any sample that was volunteered by some random "professional firms" is representative of the overall population is a major (and a very questionable assumption) assumption.
Any scientific paper contains a number of biases that reviewers either focus on or choose to ignore. I suspect that you are swayed by the fact that Kahneman is a Nobel laureate and has written a bestseller, hence he can't be wrong. My PhD adviser was a Nobel laureate too - it was way easier for him to get papers past peer review, while personally I felt that the papers were total crap (like the majority of scientific papers).
Quote from jcl: Besides, it is not actually a qualification to have traded for 20 years. The statistics are probably correct that most traders are losing. So the main difference between a veteran trader and a newbie is that the veteran has lost more money.
The fact that a hypothesis is true in a cross-sectional sample does not make it stable in a temporal sample. For example, the fact that 95% (I'd recon the number is higher, more like 99%) traders in any given population lose can be representative of attrition which actually would mean that traders that have traded for 20 years are the 1% that actually figured it out.
I don't see anything magical about the fact that majority loses - as I said, in any activity with zero barriers to entry you would see similar attrition rates. How many people that know how to cook become profitable chefs? How many girls that take ballet classes in the childhood become professional dancers?
Quote from jcl: In a discussion it does not matter at all what a participant is doing and how long he is trading. Only the arguments matter.
It matters - with a professional trader I'd use a different line of reasoning then with a software salesman and yet I'd use very different arguments with someone who has done serious science.
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jcl
Registered: Jan 2012
Posts: 407 |
06-11-12 08:47 AM
Quote from sle:
I specifically said that you can use you favorite risk measure it - it would still be an improvement over simply taking returns. When you look at your algo strategies, you are most certainly are forced to make an assumption of your risk metric, yet you chose to do so.
Yes, for comparing or optimizing strategies. For this it doesn't matter when the risk metric is not objective.
The same strategies that give a Sharpe Ratio 2 in my trade platform come out with a Sharpe Ratio about 3 in Ninja Trader - despite the fact that the Sharpe Ratio is based on a well defined formula. The reason is that I'm calculating the Sharpe Ratio from the equity curve, while Ninja Trader possibly uses the balance curve, or the trade returns, or a different time frame. So, even the same performance indicators are often not comparable between different platforms. When you publish something, there are good reasons to use a more objective performance measure, even if that does not consider risk.
Quote from sle:
It matters - with a professional trader I'd use a different line of reasoning then with a software salesman and yet I'd use very different arguments with someone who has done serious science.
Well, in that case I'd ask you with all respect to use just your best arguments or line of reasoning in future discussions.
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PHOENIX TRADING
Registered: Mar 2012
Posts: 6676 |
06-11-12 11:40 AM
Quote from jcl:
Yes, for comparing or optimizing strategies. For this it doesn't matter when the risk metric is not objective.
The same strategies that give a Sharpe Ratio 2 in my trade platform come out with a Sharpe Ratio about 3 in Ninja Trader - despite the fact that the Sharpe Ratio is based on a well defined formula. The reason is that I'm calculating the Sharpe Ratio from the equity curve, while Ninja Trader possibly uses the balance curve, or the trade returns, or a different time frame. So, even the same performance indicators are often not comparable between different platforms. When you publish something, there are good reasons to use a more objective performance measure, even if that does not consider risk.
All the more reason to uniformly define and quantify your measurements. Gross returns alone are useless bits of trivia for example "trading competitions" come to mind.
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