Who wants to be a Billionaire?

Discussion in 'Trading' started by acrary, Jan 22, 2004.

  1. acrary


    In the spirit of those that would give up everything to be rich I thought I'd post something I learned years ago.

    I used to be our firms representative to the FIA (Futures Industry Association). One of my duties was to attend monthly dinners with other members in the Wall Street area. At each dinner we'd have an open bar followed by dinner and finally a guest speaker would lecture us for awhile on some aspect of the industry. This was followed up with a Q&A session where any member could ask the guest questions.

    At one dinner I attended, the guest speaker was a guy that is now a billionaire and owns a baseball team. His talk was about how he started and grew his firm to have such a impact on the CTA industry. One of the highlights of his style was his ability to dig out of deep holes at incredible rates. One month he'd be down 30% for the year and two months later he'd be up 25%. I don't know if he had too much to drink or was tired or what but in the Q&A he let slip too much info about how he got out of holes. I spent a couple of months trying to model his ruturns from the 80's. In the end I was able to closely match his performance with this general model:

    1). Use two long term moving averages. Start long trades when the shorter crossed over the longer and start short trades when the shorter crossed under the longer.

    2). Use 2% of account for each trade

    3). Compute the price the market must reach tomorrow for the position to crossover. If the shorter MA is under the longer then we're short. We need to figure out the price the market must reach tomorrow for the price to crossover to a long. Ex. crossover for corn might be 2.52 and today's close might be 2.20 so the market would have to move .32 to hit the crossover.

    4). When ahead from the last entry by the amount of the range to the crossover add another position (2% of account). Ex. If the crossover is .32 and you're ahead from the last position by .35 then add another position using (total account *.02)/ (contract multiplier * .32) to figure the number of contracts to add.

    5). When the crossover happens, exit all positions at once. And initiate the first position going in the other direction.

    6). Diversify into as many potential trending markets as possible ex. energy, currencies, etc.

    Now that you know this billionaires secret I expect to see lots more millionaires in next years "How much did you make this year thread" (lol)

    Good trading to all
  2. rgelite


  3. at least a millionaire, right? :)
  4. Here, count me in. Thanks.
  5. the secrets of JH ?

  6. John Henry??!!
  7. Just a thought:

    It's fun to learn a simple strategy used by the billionaires who afford to take $2 million risk in order to make $1 milllion profits! :D

  8. rgelite


    Yah, not to impugn The Turtles (who have documented success) but I always have laughed at that (unrelated) joke that starts out, "Want to make a million dollars? Fine. First, get a million dollars in capital for step 2. Next, ..." :D
  9. acrary


    I usually don't answer this type of question but for some reason I don't feel the need to hide tonight. YES, and I have a personal contact person at the IRS (probably the only people that love people of means). Isn't life just great?
  10. Thanks for sharing that one with us acrary,

    I've just saved a copy of your post to my "Further research file"

    The idea should in theory work with any indicator based on two different time frames.

    I kind like the idea of following the system until the drawdown is really big, then using it to give a market bias knowing the market is likely to whip back the other way pretty quickly.

    Less time in the market, lower drawdown.

    You can also apply it in four time frames to smooth the equity curve.

    Thanks again

    #10     Jan 22, 2004