Duh, I just realized you were making the same point. Sorry bout that... I think it's time for me to take another break from ET
i think there are two distinct "schools" of thinking here. on one side there are the traders, who are much more interested in absolute amounts, since they have x capital to play with and want to make y money out of it. but since smart traders are aware of risk/return issues, these traders find some rules of thumb to address these issues. like "double your exposure if your account doubles", or "ignore open positions but be aware of increased blow out risk" - you see where i am heading to. on the other hand there are the fund managers, who simply think in percentage terms - always. and from their perspective a dollar in and open position is equal to a dollar in a closed position. they always apply the same methodology no matter what absolute capital they manage (i ignore her specific cases and siutations). now these two schools often don't speak the same language and one somehow laughs about the other. i belong to the fund manager group and i learned to deeply respect the many bright aspects of traders, who feel the market in their venes. but, with all given respect, i think when it comes to risk, the fund managers use to be technologically ahead. when you think it through you cannot really argue that in principle open positions should be ignored. as cutten pointed out it simply means to ignore part of reality. that can never be good in the long run. though it might increase return in the short run. peace
one of the key aspects in trading is the way one treats different markets. IMHO there are two different ways: all the same or different approaches for different markets. people who came from black jack or something similar IMO prefer the first approach. to them the market is a set of casino tables. all the tables are equal and their only goal is to find a robust positive expectancy game. by treating all equal fitting effects are limited and robustness increases. defenders of the other school claim that the corn future is a different thing than the eMini. thus it is efficient to treat it differently. as is often the case there is no final answer and there need not be one. i would like to discuss in the light of turtle trading what the current approaches are or could be. what measures can be taken to avoid overfitting, but still covers some specific market aspects.
another thing that i have observed with successful CTAs (at least a think i could figure that out of their equity curves) is the different treatment of movements in the fixed income market. these markets offer two different kind of setUps for a trendfollower IMO. first is just the normal swinging thing, which makes up 90% of all trades. but second are the simultaneous flight to quality trades, which are IMO sharper, more volatile and with limited trading length of several weeks to few months. i wonder if some else thought about trading these two different things differently. usually a turtle would lever these trades down, but i wonder if this is not to conservative for this kind of setUp. peace
''Any ideas why guests wouldnt sign up as members since its free?''-Curtis Faith turtletradingsoftware.com ============================================ 1] My read is some would rather read with discretion, than write with discretion; the former may be less risky. 2]Peradventure some under 13 years are still working on parental permission; others have the internet options but may still be battling cookies & cookie monster so to speak .
actually there is a web-site that has the risk and money management back-end to just do that. For a measly $10,000 you can control up to 10 currency pairs. The web-site is; http://coach4traders.com/cgi-bin/
Let's look at the scenario when the drawdown of 50% occurs after a while and you already posted some decent gains. The drawdown essentially is on the house money if the account has appreciated 180% since its inception. And an open position can always turn around. If the sell criteria has not met yet the turtles would keep it. The likelihood of this happening is not that great since there would be some signals to get them out before it gets there (number of days against etc) Ed Seykota said that if you want exceptional results you must accept drawdowns and if you want low drawdowns than should not expect great huge returns. If you can not reconcile that than you shouldn't trade.
You are basically just restating the position here, without really providing evidence to support it. For example: "In pursuit of superior profits, a good trader may take outsized risks when he is ahead that he would never take when he is behind." You don't give any supporting evidence to justify this assumption. Why can't a trader during a bad drawdown take an outsized risk, if the trade opportunity is exceptional? If I offered you 100-1 on heads on a coin flip, would you refuse to bet big because you had lost 30% YTD? If you had the reverse proposition, would you bet just because you were ahead? "If you take a YTD perspective, your equity curve perception is very different, allowing you to employ more aggressive money management techniques when appropriate and ehancing absolute profits in the long run." Again you are begging the quesiton. Why should having a different "equity curve perception" make any difference to your choice of position size and risk control? A loss of 30 units is a loss of 30 units, whether you had a great or terrible run up to that point. To repeat - a trader with a great opportunity is able to bet as little or as much (subject to margin) as he likes; his equity curve, regardless of period, does not restrict or enhance that ability in any way whatsoever. The basic position is as follows - if a trading approach would ever result in two traders with identical capital, methods, and risk preference taking on different position sizes, then that trading approach is logically inconsistent. Any method which advocates X and not X at the same time is clearly irrational.
Put it this way: two CTA's have $10 million each. One of them is up 40% on the year; the other is down 40%, closing in on the drawdown cutoff point where trading ceases. They have the same equity point, but their situations are completely the opposite. One is having a solid year, the other is on the edge of being shut down. In this case, an outsized position would threaten the survival of the trader in drawdown, and therefore the potential gain is not worth the risk. Reward to risk is not uniform, and neither is psychology, because the weighting of the components change. When survival is at stake, risk control is paramount. When a good year is virtually assured, however, higher exposure is more palatable and desirable. "To attain truly superior returns is to grind it out until youâre up 30-40%, and then if you have convictions, go for a 100% year. If you can put together a few near-100% years and avoid losing years, you can achieve really outstanding returns." -Stanley Druckenmiller p.s. if my reply is off topic it's because this thread is so old I forgot the original discussion...