The good news is the law of active management; sharpe ratio increases as the square root of 2 every time you halve your holding period. I reckon my average sharpe per market pre-cost is about 0.4, with roughly a one month holding period. With a one day holding period that sharpe "should" push up to about 1.8. The not so good news. This is a theoretical result. Certainly I've never seen sharpe ratios consistently increasing by this factor. For most systematic trading rules I see fairly flat performance (pre-cost) up to about a 3 month holding period (so around 40 SR points pre cost), and then performance tails off. The bad news; on the very cheapest future I trade trading twice a day (holding for half a day) costs me 33 SR points a year on paper. Thats pretty much the entire performance I see from my trading rules gone. On an average future it costs 160 basis points. So that's all the theoretical raw performance gone. On the spreadbets that a lot of UK retail traders use to day trade its more like 500 basis points. Perhaps only the very best high frequency shops have the sharpe needed to overcome this.
Actually you'll be one of the few that employ these rules. Everyone has heard them, but almost no one employs them.
Dear trading Gods,Please do not let this turn into another sermon on the perils of scaling out. And no,prudent use of capital is not an edge.. Any winning chimp knows that
Capital and the prudent use thereof is the only true edge in trading. Why am I successful? I employ prudent use of capital which includes letting winners run to full maturity with full position on.
it must be wonderful to be able to do that. Many times my winners turn into losers. Sometimes I prematurely take a profit. Can't wait to read your book.
Capital is not an edge unless you can corner/ manipulate markets or run a portfolio like Millenium. Im guessing that you are far more successful than Loeb,Simmons,Cohen,Tepper etc as you have THE edge to trading..and capital.... Why you are successful is a far different claim to possessing the universal truth of trading. Don't confuse the two
It's useless to bother with someone who is not intelligent enough to realize that he is stating their is an edge outside of capital itself by writing above "letting winners run to their full maturity." Oh, sure, your trade size dictates what that maturity is right? rofl. Nothing to see here folks!