"Something just doesnt add up with all of this...." Here's a short story...... Around '61 or so I was just settling into a life in Greenwich, Conn. As it goes, there are seasonal parties and people do meet people while grazing and imbibing. A broad mix of types. I meet a guy who was tall and suave and well spoken.... After a while I knew what he did and in passing he did inquire of my vocation. I failed his test up to the point where I said I did what he did but just as an avocation to pass the spare time I had in the work I was doing. He's a pro like you are speaking of and I am just an amateur. We kept in touch over the years. Early on was was asked to contribute to his operations. So I did. They paid portal to portal from Greenwich to NYC or any other place where I spent time. (sleeping time included). All I can say it that there is a mystic about providing white papers that are acted upon. I never provided any, mind you, I just critiqued them and "fixed" them. Its like a big effort almost around the clock gets a draft ready for timely distribution and chacks come back if the info is acted upon. I am asked to review the draft. I cannot imagine how the workers came to their viewpoints and how all the data they asembled says to do this or that. It is like a disconnect from reality. I never had to aurgue for my points and revisions; they just flew. Naturally you can say " Hershey that why the users never made any money with the white papaers. But they did!! And it was an anomoly that they did in that shop. I was narrow in those days because everything about position trading was done by hand. I just did trading in about four sectors that invloved primary industries. There was always action in one or more. Meetings, luncheons, conferencing, it was all the same. A good colateral example is the business of financial planning for wealthy people. These guys are all licensed too. The ivy league schools are steeped in it. Look at the top 25 in EMBA (BW) and you can see that even the criteria there is not appropriate. Also note this week that they commented on hurricaine control (spreading stuff on the water....lol) What doesn't add up is the way tradition and self selection just creams the possibility of anyone accomplishing anything in the industry. It is very acceptable to not achieve anything except to perpetuate the status quo. I designed a handicapping method for the racing committee of the NY Yatch Club one off season. It was deja vu; they just sat there and said "WE can't do that" I paired racing records with boat design; what did it say?.....lol young skippers (all blue bloods) in used boats were out sailing the older skippers with the bright and shinny new boats. Think TJ Watson and Palawan (350k tank testing cost in Holland) against John Marshall and Vat 69 (a used Bounty II). These parallels are ingrained in the society and who owns the businesses (old money). You can look at the failure of the recent Greenwich based Nobel loaded whatever and see how traditioal BS sunk it. Now, you can see that STEVIE has wormed his way onto the local turf but he is an "outsider" player who also can't quite rip it off. Those oak desks and panelling in Nebraska is not a super game either. OPM is whats makes it tick and it is't notable either. The third meeting of our local IBD club had its first cycles of "making money" occur. We are meeting every two weeks now. The guys who weren't on paper were turning over 10% a week, they say We work about 3 hours plus a meeting and they just nail the techniques down like it is a fifth grade test on fractions. No one really knows that using todays computers could possibly limit making money in any way. They Just Do It. The lousiest skilled three day trade was 28% and the others (top dogs) were running around 40% a pop in one cycle. People have told you size is a problem for big money just cause tey are all continually invested. I set a limit of not trading more than 10% of the cummulative daily volume of an issue as an amateur. Obviously I am anything but big money. But I am timely as all get out which is the exact opposite of balancing portfolios. Why would anyone ever balance a portfolio??? Balance?????? Why??????
>>>>>If you look at the disparity between annualize fund returns and private trader returns in the competitions, were talking 12% annual VS HUNDREDS of percentage points.<<<< I always like to learn something so what "real money" competitions have traders showing hundreds of percentage points returns? Maybe simulated, but that is in no way, shape or form remotely similar to real money trading. As for *real money* competitions there were the U.S. Trading Championships sponsored by Norm Zadeh and then there are the Robbins trading contests. You also have MoniResearch which monitors the real money managed accounts of various money managers. Then you have the "real time" but *not* real money tracking of various trading systems by Futures Truth company and other monitoring organizations such as Timer Digest and Hulbert which track the gurus and newsletter writers but as with Futures Truth, in real time, but not real money.
http://www.fxcm.com/trading-contest-exchange.jsp is the only one i can find right now. all the real-money competitions are held by brokers it seems. the fxcm only has the top 5, but i remember some guy from ET joined a competition on another broker (i think the thread asked you to predict how well he would do in his competition and everyone thought he would eat it) and they had system traders section, and discretionary traders, and discretionary traders were pulling in a few hundred percentage points. If you look through the past months, they show you the losers as well, which there are a lot of, but consistent winners....
Hi, I have often ask the very same questions myself and I think it is because: 1) The bigger the fund size, the more limited are their product choices due to liquidity problems. 2) Fund managers sometimes failed to cut losses short because they would look like fools if it was just a false whipsaw move so they tend to hang on to losing positions and average down to lower the cost basis. 3) The incentive to keep the job and not rock the boat means they are going to be very conservative. Stability of job is their top priority and they sleep well at night. Striving for higher returns means higher risk is involved and it is not worth it. 4) Some fund managers might not use their best strategies because they always keep them to themselves. 5) Their strategies are also limited to what is allowed under their fund's trading mandate. 6) Major trading decisions are seldom made by a single person. Mostly they must be approved by investment committee and it is easier to go along the consensus rather than stick your head out.
"The public's out there throwing darts at a board. Well I don't throw darts at a board. I bet on sure things." "You ever wonder why a fund manager can't beat the S&P 500? Because they're sheep, and the sheep get slaughtered." --GG
Lets say I have a long only system that trades the underlying SP500 stocks on a long term basis and generates 40% annual returns with an occasional 50% drawdown in '73,'87,'01. Would you be able to trade it, or would you settle for something that mirrored the market? What does your gut tell you?
In order to achieve high triple digit annual returns, you'll have employ a lot of leverage and risk a large portion of your portfolio in a single trade. Even the best managers will eventually hit a few losses, and you'll be wiped out. It's possible to find the optimum leverage given you know the other parameters (potential loss, potential win and of course, win:loss ratio), and I'm willing to bet it would be quite low in most circumstances, unless you have some holy grail trading system. If you run fund, you are in the interest of staying around for the long-term, if you employ sound risk management, it's not possible to attain the results you're referring too. After all, look at all the richest players, mate. They're the slow and steady hedge funds not the 500% per month Oandaite.
OneHipCat: Good point. I wouldnt expect a mutal fund to make triple digital returns because all of the limitations put on them. But have you checked the hedge fund index recently? it's not really that impressive either. Their annualized returns arent blowing anyones socks off and they have tons of money, tons of resources, smart guys, the works. So, dare I ask if the traders on here at ET find themselves with similar annualized returns as hedge funds? better? worse? I'd like to know..
Looking at the historical performance figures of star hedge funds, I think the best a hedge fund can aim for in a given year would be between 100-200%, and that would be considered a banner year. I really don't think it's realistically possible to sustain performance better than that over the long-term for reasons I mentioned earlier. It also depends on strategy, a global macro fund would probably be able to run a lot more money than a long-short equity or event driven fund, who, if managed very high amounts would definetly have an anchor on performance.