i was looking at the top 100 traders in the trader monthly and ofcourse noticed that almost all were fundamentalist and were ex-analysts for companies like goldman sachs. are there any technicians that run that type of money? i can imagine it would be difficult. i know prop firms probably could but there was like only one prop firm ranked in the 100 and it was near the bottom. also how do those big billion dollar hedge funds handle stops? I know they have no stop orders so what do they do when a position dives on them?
Certainly a lot of them are on the list because they made big bets that happened to go the right way. To invoke Taleb, did they have a good year because they are "good traders" or because they were "lucky traders"? How many will still be on the list 5 years from now? No doubt if there was a "Bottom 100" traders list, it too would be populated with fundamental guys who made big bets, alas in the wrong direction, and many funds did indeed blow up last year. It's funny how you always read about the fund managers who are making a fortune running a hedge fund, but you never read about the guy who made a fortune by investing in hedge funds (probably because you already have a fortune by the time you start investing in them). If you make a huge bet and win, of course you come out looking like a super star. Once you have that reputation, even if you blow up after that, you can just start a new fund and tell everybody you learned your lesson, and raise even more money than before! (niederhoffer, meriwether, et al). The technical/quant guys may be more likely to use stops, as you mentioned, as well as profit targets, diversification, etc. They are more focused on minimizing downside and maximizing sharpe ratios, rather than maximizing absolute return. Thus, they may not have the same statistical outlier potential to the upside as the fundamental guys, by not taking the huge leveraged bets. However, they also will not have the same blow-up risk. That may explain their absence from the list, though there are a number of quant/systematic guys on the list though, if you will permit them in your definition of "technical traders" (Rentec, Winton, Campbell). Of course, Campbell actually >lost< double digit money last year, but because he gets his 2% mgmt fee on many billions of $, he still makes the list. After a couple decades of strong returns, I suppose they belong atop the list as much as the Johnny-come-latelys. But the Campbell entry highlights the fact that the "Top 100 Traders" is measured in terms of how much $ the principal(s) themselves took home, not necessarily performance (or risk-adjusted performance). That could be a measure of a better marketing dept than research dept for some of these guys! We are all in this trading schtick because in the end we want to make our net worth tomorrow a progressively larger number than it is today. Raising a lot of $ is one way to get there. But I bet there are a lot of guys out there who manage to churn out low double digit % years with low volatility and drawdown, time after time, that will never make this list, who I would much rather trust with my $ (though I couldn't afford their minimums no doubt!). A fun read nonetheless.
You make good points. It seems that the Market wizard books tend to be more dominated by technical traders. What always amazed me about the the guys in the market wizard books were that they all seemed to avg crazy returns every year. How does a guy average 300% over like 5 years? Is there some sort of funny math going on with there return calculations? I find it hard to believe a guy can quadriple his investor's money year in year out. I can understand the "Lucky" year as you point out but 5, thats amazing...