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Yeah, seems criteria for “old timers” which is:
“These are strategies that have been tracked by Collective2 for over three years, and which have outperformed the S&P500 over their lifetime.”
may not be indicative of good performance. Maybe survivorship bias at work? (in that only systems that survived 3 years and beat sp500 are on the list but a bad system can easily get lucky and do that (survive 3 years and beat sp500)).
I totally agree, you’ve got a good point here, there are plenty of “lucky” trading systems with no particular trading edge whatsoever.
It seems that much of the results for most strategies just like with most managed mutual funds is survivorship bias.
@ExtremeTrading @QuantTiger I have two theories as to why the IRA board has done better.
Your study does not mention the “top 15 IRA board” drawdown, do you have it?
Thanks.
On the contrary, some of the biggest gains have been made on the short side by the real insiders.
Think major stock market crashes and such, 1929 style…
Yes, but if we add inflation and transaction costs (not to mention taxes) the average return of the stock market is much lower, but it’s still one of the best ways to park our money.
I don’t because this would require me measuring the value of each strategy each day. It would be very tedious. C2 data explorer could help but when a strategy goes private etc. I think that messes with the data availability.
So the top 15 IRA systems outperformed the SPY, according to your 3-year test, but we don’t know the maximum drawdown they experienced.
Unfortunately, without that metric (return to risk) comparing apples with apples becomes impossible.
It still wouldn’t be apples to apples. It would just be two metrics instead of one. But yes no drawdown available.
15 random, mostly anonymous people on the internet managing managing your money. Often taking big risks, using extra leverage, not using stops, etc.
Ownership of 500 of the largest companies in the US with many experts running them and with aligned profit incentives.
No we would have a ratio, return divided by maximum drawdown.
With that ratio, comparing trading systems becomes much more easier.
I hope you get your data. IMHO SPY is a much safer long term investment.
Assuming a 55.19% drawdown does not bother you (SPY’s max drawdown)
The safest course of action is to time and beat the market with a trading system.
This trading system must also greatly reduce the maximum drawdown.
That’s what Collective2 is all about about after all, beating the market with less downside volatility.
My view is that to beat a market return (over long periods of time) I believe the best odds are to take on more risk than a market. For example, the best way to beat the bond market is not to trade individual bonds and try to beat it or try and time the bond market, it is to take on more risk than the bond market - aka buy equities. Unfortunately with more risk more volatility is almost assured.
Not necessarily, if all depends on the maximum drawdown of the trading system.
Here is an extreme example : If your system has a maximum drawdown of 1% then you can use huge leverage and make a killing over time.
On the other hand if your system has a 70% max drawdown then there is absolutely nothing you can do, any leverage will blow up your trading account fast, sooner or later.
Few people know that but the return on Bonds is greater than stocks, if you apply the correct leverage!
What depends on it? What do you mean?
Seems like you have the logic that more leverage isn’t more risky. I strongly disagree and feel like I’ve had his discussion with you before. If not, someone that thinks very similarly.
No, more leverage is good IF, and only IF the maximum drawdown of the trading system is extremely small. It’s all related to the risk of ruin and the mathematical expectancy of the system.
Systems with very very small drawdown and larger average profit can use more leverage than systems with much bigger drawdowns and small average profit.
The ROI, sorry my comment was not clear.
are you looking to leverage C2 systems if their drawdown is low enough for you? I’m of the opinion that no matter how small an assets or strategy’s previous drawdown was that doesn’t tell you much about the future. C2Star has been a great example of that for me.
We are only talking about fully backtested trading systems that show a strong trading edge and very small downside volatility over a long period of time.
