edge is good to make look if system balance but edge is estimate, and in some case maybe even illusion warrent buffet "the precision it projects is a chimera" (about something else) but edge is still useful to make approximate look if system balance to the plus i like secret of master trading game by the van tharp, it is equity curve simulator
bwolinsky, hit me up with this info whenever you get the chance. I'll check this thread later. Thanks.
The flaw in this study is it's looking at traders without an edge, or traders with a negative edge. For traders with an edge, it's a different story. From my own numbers, with daytrading I make a higher % return on capital with far lower drawdowns than any other strategy. The only disadvantages are lack of scalability, and having to put in the screen time. If I could scale it more then I wouldn't even bother with investing or position trading.
When it comes to markets, academics should STFU and find something else with cheap data [and possibility of a Goldman Sachs partnership as the payoff for success}. I am sick and tired of their meaningless pronouncements.
Risking 25% of capital is ridiculous. The 10% he uses later on is also ridiculous. By comparison, since the start of the bear market 18 months ago, my biggest peak-valley drawdown on my daytrading was 1.2% and I typically risk about 0.1% per trade. In other words, I take about 1/100th of the risk per trade they assume in the study. And during the most volatile market environment since the 1929-32 bear, with numerous government interventions, huge swings, and numerous gap moves, my worst peak-valley loss was 1/8th of what the academics propose risk *on each trade*. I think the flaw in their study is clear - they are assuming way too much risk, at least 10 times what is prudent, and 100 times what one full-time daytrader risks.
Yeah I just saw, not sure why I missed that, I think I confused it with another thread I was reading. I addressed the other issue i.e. they assumed way too big a bet size, as in about 10 to 100 times too big a trade size.
I recently wrote an article in TM on something related. It's not just risk per trade but risk per campaign that needs to be considered. If a trader took 10 straight shorts during the index rally, even if he only lost 2.5% per trade he'd be down 25% on the move. Not to mention if you were wrong in two or more highly correlated markets. In some futures markets-soybeans, Bonds, currency futures, gold-it's pretty hard to limit your loss to anything less than $500 a contract. Five bills is only a 5 dollar move in gold. One needs to be pretty darn exact to trade with a 2 dollar stop.
I said I never closed below my starting capital on c2, so I never had an annualized -29% return. And that is verifiable, here www.collective2.com/go/pairsqidqld .
Yes this is verified, bylow I never closed below my starting capital. That doesn't mean I never had losing days. Re-read the quote, as the original quote claimed I once had a -29% APR, which is impossible if I never closed below my starting capital. Verified by C2 over the past 800 days now.