Scaling Up A Trading Startegy

Discussion in 'Automated Trading' started by dima777, Aug 27, 2008.

  1. dima777


    I am perplexed by this question. Why small traders consider a 20% yearly return on their accounts an average accomplishment - while the huge funds consider this a major feat? Lets say you have a working strategy which averages 50 accuracy and 2 reward to risk ratio across 10 markets - which makes you 20% a year on a 10.000 account - cannot this same gain be made on a 10.000.000 or a 100 million account - from the same signals the system generates?
  2. Up to those levels probably. But there is the obvious issue of liquidity, drawdowns, sharpe ratios , and all the metrics that suddenly become much more important when the size MUM becomes much larger. Individuals risking 10k of their own capital tend to view risk quite differently than a manager running say a couple of hundred million. The biiger one becomes the more capital preservation becomes important, especially when it's OPM, which at the couple of hundred million mark+ it probably is.
  3. dima777


    thanks.....that makes sense...but wouldst cite sharpe ratio as a reason why small traders win larger returns though...
  4. here's another metaphor to help you visualize it:

    10,000 TRADERS with a similiar investment style and each with $100,000 in trading capital end up emulating a single trader/fund managing a billion dollars under the same style.