nobel_1101
Junior member
- Messages
- 31
- Likes
- 4
I'd suggest broadening the scope of your consideration to include the possibility that a long-term trader might be in more than one position at a time (and not simply in stocks), as well as the impact of reinvestment on drawdowns. It makes all the difference.
As an example, I've been long futures for metals, grains, energies, and several softs (e.g. cotton, coffee) for some time now. Each of these markets has experienced significant, sharp retracements nearly simultaneously:
Gold -18%
Silver -24%
Crude Oil -16%
Chicago Wheat -29%
MPLS Wheat -42%
Cotton -25%
Sugar -24%
Cocoa -25%
Coffee -27%
These are leveraged instruments making large percentage moves against my positions, yet somehow my portfolio has experienced only a 2.4% drawdown. A similar market event occurred last July/August, with a similar small impact on my portfolio. Either miracles are taking place or maybe, just maybe, there is something to what I'm saying here.
FWIW, a fund's offering memorandum or disclosure document typically lays out all but the most intimate details of their trading methodology. It's actually relatively easy to ascertain the style used by a manager. Most advertise it openly. This allows a straightforward comparison of risk-adjusted returns across styles for anyone sufficiently motivated to perform one.
jj
Ok you seem to have answered my question (albeit in a roundabout way). I use stocks purely for illustration of this discussion.
So if all your positions declined almost simultaneously an average of -25% and your account only reduced by 2.4% then fair enough. But what's not possible (and this goes back to qwertyuiop1 original question) is for this long-term system to make the same large profits as a short term system.
From your own figures, if all your positions increased by 100% then your account will only increase by 9.6%.
You can't have it both ways, either the long term system has low drawdowns and low profits, or high drawdowns and high profits.