That is almost certainly true in the high frequency trading arena where an individual has no chance against a well capitalised HFT firm, but not in the sorts of systems that I trade (holding periods averaging weeks or months). That's a very good question to ask, but I don't need to be better than the hedge funds, I just need to be better than the market on average, as long as I stay away from the areas where they definitely have an advantage. I think that true trading skill is rare, and thus most people are better off with mechanical rather than discretionary systems [although there are some exceptions as I discuss here]. You are probably an exception to that rule, but I am not: I have probably made a good discretionary call four times in the last 15 years, which isn't enough times to prove anything; and certainly isn't enough to make a career out of. However, I do think that individual traders do have some advantages over institutions even when running systematic strategies (freedom from 'style boxes', ability to run more diversified portfolios where capital allows, less brain suck from non productive activities like compliance). My own performance has been pretty competitive with the large funds in my particular slice of the industry. OK I agree with this: Mathematically, your drawdown is a product of your leverage and your risk adjusted return (Sharpe Ratio). Double your leverage, and for a given underlying Sharpe Ratio you will double your expected drawdown. For any sharpe ratio there is an optimal leverage of leverage (the infamous Kelly criteria) that will optimise your geometric returns and final wealth, so you can restate this as an optimal level of leverage. And you're right that most institutions run at risk which is well below what Kelly says they can do. For example, a world leading hedge fund that runs at a Sharpe Ratio of 1.0 can theoretically run at 100% annualised risk, which would mean some pretty hefty drawdowns. But most run at less than 50%; and for some types of relative value funds it can get down to 10%. [If I take my own trading account for example, my risk target is 25% a year which is higher than most institutions, and I've encountered a maximum drawdown of 17% in live trading over just under 7 years. If I look at the backtest then the drawdowns are bigger] And you are right, that some of that is down to client appetite [although more sophisticated clients prefer higher risk targets, since it makes for fairer fee structures]. But it's also because institutions recognise that a theoretical result is exactly that - theoretical. And there are a thousand reasons why you shouldn't use as much leverage as theory says. And it's much better to use too little leverage rather than too much. For example, if my optimal leverage gives me an expected (geometric) return of 25% a year, then using half of that would give me 18.8% a year; not as good but still pretty good. But if I use twice as much as the optimal leverage then my expected return is.... zero. Using any more and I'd be expecting to lose money. I'd argue that the vast majority of retail traders are running at risk levels well beyond what even is theoretically optimal, because they're vastly overestimating their likely risk adjusted profitability. So I don't think that the ability of retail traders to stomach more risk than institutions is an advantage. Given that the average retail trader is much much worse than the average institution in terms of risk adjusted returns, if anything they should be using even less risk than the institutions are. GAT
%% I see your points. BUT i still use a 50/200 period on my inverse ETFs like SDS qqq/QLD.......... But since the market goes up about 75% of the time /moving averages may still help some. I've noticed stock systems shorts never have made what the long systems do; but i use discretion with my moving averages + never consider a bounce off 55 dma an auto buy even if many millions/billions have been made that way.....................................
%% Good way to learn levels; + better than bit con[rat poison mr Buffet named it]LOL..........................................................
Why do moving averages SUCK so much? Omg. The same reason you can't buy a $200 pair of Jordans and expect to make it to the NBA. I mean wtf... are you guys really this clueless? Whatever. Maybe tweak it down to the 183.0452971 moving average and you'll achieve the Holy Grail.
Funds, computers, algos, etc. are all garbage. Markets never change, allowing the use of ancient techniques handed down from traders from Mesopotamia, to Thales of Miletus, to Munehisa Honma and Livermore, to this: https://www.elitetrader.com/et/threads/prediction-based-trading.351176/page-40 Do you think that Livermore ever used moving averages? NEVER! So that means the truth of the markets cannot be found through technological advancements; it is by looking deep into the past, backtested from thousands of years ago from cuneiform and papyrus scrolls, that one can discern a repeatable pattern that has endured to the present day. This is because human behavior remains unchanging.
All you Holmes. I was just lookin' for what you saw at a glance. You're a dangerous man. youtu.be/UqyT8IEBkvY?t=43 I read your responce to BStr and took a look. Check the date on this TitleBar:
Still in the running. How'd that be lookin' these days? I'm Options Ignorant. Or something else entirely, Still got Friday. Let her rip, skip. E, S, E? My Dbl Bot was a non-starter.
preci-ate the kind words sir. Price is tellling us something. Many a ways to interpret signal within the noise. Some can see signal within static brownish motion dots. Nice chart btw.