One think has been in my mind for some time. How much of a market's movement can be captured by a trader would be mainly determined by the perception/mindset (such as trend-following) of the trader, besides his skills (such as computational capability) and knowledge of tools (such as options). Therefore the maximum possible and feasible returns for the individual trader would then has a ceiling accordingly, unless the above three aspects can be upgraded/improved significantly with a leap. There is always a possibility that one day you could find/develop a better (new/main) system with 100% incremental profitability (say from 20% to 40%), then what would you do with your spare (old) system?
It seems JH has got several systems in his book(s). But did he or his associates mention which is his main one with the best performance? Then we know the others are his spare systems that we don't have to pay much attention reading/learning (at all)?
Here is your first encounter: http://www.elitetrader.com/vb/showthread.php?s=&threadid=203194&highlight=jack http://www.elitetrader.com/vb/showthread.php?s=&postid=2903369#post2903369
For me, at least, I don't have a "spare" system per se, I have different market conditions. From the late 90's until about 2005, I used to trade mean reversion. For the past few years I am all about emergent trend following. So, did the system change or did you develop a new system to meet changing market conditions? Part of development process as a career trader requires that you re-invent and adapt yourself accordingly to different market dynamics.
perhaps jh can answer your question better. why would he have two obviously different systems? anybody knows? perhaps one for futures trading long and short, always in the market. another for selecting stocks trading long only.
Google thanks for pointing us to the site! So GS guys are trying to hijack the social investing brand? I'd rather stick to Kiva for that... both for karma AND performance (so far). But I did study Coverstor's offering in detail, and I think I will give it a go, because it is the only advisory service that eliminates the biggest problem in the industry (apart from the lack of edge of course), i.e. the client's perverse market timing (fund investors earn much less than their funds, chasing rallies and selling into panics). And if you are any good, there is also the free incubation / audit potential. One used to pay for this priviledge at least $5k a year before NET 2.0... And if you aren't, then your money invested there won't be wasted either, because there is at least one guy whose equity curve I really liked, so I suppose they got me hooked already. It seems though they have some wrinkles to iron out first before they start attracting CTAs and ex-traders on top of SeekingAlpha bloggers... : * you can only charge an asset-based management fee, i.e. NO INCENTIVE FEE permitted, so the real work of earning alpha for the clients will not be rewarded at all. Compensation structure suitable for backfitted system vendors and no good for hedgies / CTAs. After all, when trading for a living, you can pay yourself only the exact fee which is missing here... * they cap your management fee (at 2.30% p.a.) but no caps for client funds, they can grow to any size, stifling your edge, * painfully delayed auto-replication ("typically less than two minutes"), so prepare for slippage (the more adverse the better you are), especially if the large time window has been left for tail-gaters (this is financial industry after all...) * they require mutual-fund-style instant liquidity (no minimum holding / lock-up periods so no illiquid assets either), * no derivatives (but surely that should include a ban on leveraged and inverse ETFs, which are obviously worse than the things they wanted to avoid, especially for longer time frames), * shorting considered too risky (will give you a risk score of 2/5, barring all incoming IRA money), * full trade history visible for everyone to see and reverse-engineer (not merely portfolio composition, but full trade history delayed by just 1 day, which is sometimes good enough to repicate performance without subscription...) * excessively large minimum investment (the usual $25k PDT minimum for daytrading strategies), too large to attract funds from the average guy. After all, they sell mutual funds in units of 100 bucks not without a reason - a quarter of Americans have < $1k and 40% < $10k in savings...) So in essence they say they are for the small guy but in fact expect them to bring the large guy's capital. Worse still, they plan to compensate advisors of large guys with small guy's fees and in return require high levels of protection, transparency, and liquidity, typical of those seen only in small guy offerings... so it won't work for clients and won't work for advisors either. But I'm wrong in 60% of cases, so don't bet on that
The royalties wouldn't even be worth my time writing a book. The markets have killed my ego. I have developed and traded some 20 systems that are profitable each year with drawdowns up to 50%, most are based on longer term trading commodities which make so much more usually than day trading. The longer term have eventually blended into what I trade now for longer term, so there is some overlapping. But day trading methods have gone total opposite from the first one I made to how I trade now, it has taken me 29.5 years to find my holy grail for day trading ES, I seldom ever lose, but I am scalping. And it is not something you can throw a thousand contracts into on limit orders, but I do average down on each trade, so even a breakeven trade becomes a profitable trade. When I do have a lose, it is massive, but I don't care. I believe spare methods is the evolution of a traders time into his craft of trading. I go back to what I first did 30 years ago, and frankly, it is close to what I do now. You don't need fancy anything to make money trading, you just need the discipline to sit there and wait for your signal and carry out the trade like a robot. Not interested in writing a book, selling anything or mentoring any more people. No more 18 hour days nor 7 days a week. I do my 6 hours a day M-F and walk away.....Life is good.