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Unfortunately,that's very true.You have to keep the seats filled in the casino to make money.It's sad that in reality the average investor doesn't really have a shot by following the buy and hold mantra being regurgitated constantly by the industry.I understand the skepticism and disgust that i read in many of these postsThat's why forums like this are needed more than ever.

MUCH BETTER post!Just remember that no one here is saying the road thay took to do well as a trader is the ONLY road to take.There are many ways to get to the same goal.All we try to do is be open-minded because everytime I thought I knew all I needed to know about trading,I learned something more that helped open my eyes to greater possibilities.Then,I would look back at what i thought I knew ,and realized I knew almost nothing in comparison to what I had just learned.I'm sure my learning isn't over by any means!I'm sure there's much more to know.That's why although I may not agree with someone's opinions on trading,i still respect what they have to say.It's not about being better than you or anyone else.i KNOW there are people who are vastly superior to me financially and in their trading record.It's about being the best that I can be and sharing information that might help somebody else along.That's why we're all here,in my opinion. Good Luck to you!

Actually that's not the case.Only 1 or 2 managers did that in 2008 for liquidity purposes.Paul Tudor Jones was flat in 2008 as the market fell apart,but investors had to draw on his fund because it was the only source of liquidity that wasn't destroyed.In order not to be forced into selling illiquid assets at a ridiculous price,He separated a small piece of his fund into a separate account to keep the investment intact.If you look at his performance before 2008 and after,his numbers are stellar.It's sad that people who can't accept the fact that someone does a great job, must make negative comments with no evidence to support them in order to make themselves feel better.These are people to learn and improve from.I highly doubt that any of the people i mentioned need fees to survive since they are all centimillionaires or billionaires!

glad you understood! stay well..

Bt the way rdhtci,my comment about trading conservatively was not directed at you.It was directed at Gosu.In fact,my whole response earlier was to his comments on trading ES in response to you.Sorry if I indicated otherwise.

By the way,If you think your examples are extremely conservative by risk standards,I wish you well but you may want to think again...............:crap:

Amigo, I understand the futures markets very well,as I am a licensed futures trader as well as securities trader of many financial instruments for a major institution.That silly little math problem you referred to has been used by Ed Seykota,William Eckhart,Richard Dennis,paul Tudor Jones,Michael Marcus,JohnHenry and Louis to name a few.When you can show me your documented records that rival their returns,then i'll be happy to listen to you.As to my experience,i have been trading over 30 years and am still around so I think i might have some idea of how the whole thing works.Your example,unfortunately fails significantly at making your case.No,according to someone who trades their system properly,you CAN'T trade ES because 1% of $20,000 is $200.The $3000 loss exceeds his parameters for risk so he is PROHIBITED from trading it,if he's true to his system.You should have stopped there.Many people with SIGNIFICANT accounts have securites that are eliminated from their basket for that very reason.It DOESN'T mean they can't trade at all.Who says I have to trade ES to trade successfully?I could pick something else to trade that would fit my parameters easily.I guess I and all the traders I mentioned above are idiots according to you,because that's how they trade!You must have over 10 Billion Dollars to call Ed Seykota or Louis Bacon an idiot.That silly math problem has kept them still trading as well.Who says that anyone would trade only 1 contract in an account as stated above.My statement was that you can trade a smaller account using trend following depending on what you trade.Who are you to say what or how a person should trade?I gave a simplified example of how someone could trade to avoid RoR.When did I say that this was the optimal way to trade?As to your comment about skill and not using silly little formulas ,that tells me that you have an ego and that you're probably trading aggressively.Us silly little quants don't say we have skill,we just were fortunate to have had a favorable probability outcome on our trade.You keep trading according to your skill and i'll keep trading according to my silly little formula.I never said my way was great and yours idiotic.I suggest you have the courtesy to do the same for me and anyone else who tries to help others have enough knowledge to make an informed decision on how they want to trade.Lastly, I suggest you read the book "Market Wizards" by Jack Schwager and focus on the chapter about Larry Hite,the "IDIOT" who NEVER RISKS MORE THAN 1% ON ANY TRADE,and has averaged 30% A YEAR,had annual returns of a WORST +13% to a BEST +60%,whose largest loss in any 6 month period was ONLY 15%, and UNDER 1% in ANY12 MONTH PERIOD.(NOT JUST CALENDER YEARS!) and then come back and try make your argument about"SILLY LITTLE FORMULAS" again! If you can do better than that with your SKILL,let me know........

Yes.THe first reason is that the margin requirements on some futures contracts can be substantial so it may exceed the amount of capital you have available,so you would not be able to trade certain markets.Or when sizing for risk ,you might not even be able to trade 1 contract if you size for volatility.These factors would prohibit you from having the diversification and non correlation that you should have when trading futures contracts using a trend following methodology.

Hi BlowFish, It's true that having a low number of% winners effects drawdown and RoR.However,it doesn't necessarily mean you need a large account to size properly,nor does it mean you have to trade multiple instruments,although preferable for non correlation purposes.The drawdown will be contingent on what percentage risk per position you use.If i risk .1% on a position and lose 89 times in a row, i would only have a single digit drawdown!As far as having a large account, that depends on what instruments you are trading.If you trading futures,I agree.if you're trading equities or options(properly!) you don't have to have a very large account.I read your link and agreed with all but the argument of perceived risk with the 2 systems.A person should be trading mechanically for the exact purpose of avoiding emotions and being disciplined in their trading.Why the heck would i trade a lower expectancy system if i'm aware of the fact that i will have significantly more strings of losses?The trader in the article is looking at the maximum end of position risk to make his argument.Why would i accept a reward to risk ratio of.50 vs. 1.1? Couldn't I bet $1 instead of $3 so that my drawdown will be much lower and i still get the higher expectancy over time.What if my system generates 3 times the amount of trades than system A does over the same time frame?That would be the equivalent of trading the maximum of 3 dollars to get the highest return with a much lower RoR.If the statement is that emotionally it would be very hard for a trader to keep trading the system when in a drawdown,then he shouldn't trade it ,regardless of the expectancy.But if that system could be traded as i stated above where the drawdown would be comfortable with a much greater expectancy,then you should trade it.I agree with the overall premise of finding a trading system that fits you as a person.But the 1 critical factor being left out of that interview is what am I looking for as an acceptable rate of return?Why is it always assumed that we want to trade at the absolute limit to get the gigantic return?If a system at the max makes 50% a year with a max drawdown of60%,can i trade it at a risk size that makes me 12% a year with a 14.5% drawdown?When building a system,it is critical to consider risk of ruin.But remember that RoR is subjective and the first thing to consider is what i am looking for as an acceptable rate of return.My risk of ruin could be i don't want to lose more than 20% of my account value versus yours being you don't want to lose more than 50% of your account.Just food for thought.

once again,i agree.That's why many traders stopped using the Kelly Criterion to determine optimal position sizing to maximize return.It's way too aggressive in terms of sizing as far as i'm concerned.

You summed it up perfectly.We all probably haven't seen our worst drawdowns.However we can lower the probabilty of ruin by controlling position size and portfolio heat.

Tom, I don't see how having a stop as an exit can leave more money in the market than trading without stops!The very purpose of the stop is to have an exit that will help you quantify your risk. As to your comments that a good trader can decipher news,trade on instinct,etc...,if that's your belief,i wish you well.As far as i'm concerned noone can predict or decipher anything that will tell them where a security price will be in the future.All we can do is have a setup for entry,layout our best case and worse case scenario,hopefully preset our risk,and wait for the trade to either go one way or the other.That's how i trade and will continue to trade.I'm very happy knowing my portfolio heat at any given moment(barring a black swan or fat tail event).It helps me sleep at night and live to fight another day.So,I don't see a case for argument.I say to each his own and good luck!

Very ,Very true! The supposedly once in a lifetime event seems to happen every few years!

By the way most algorithmic trading also sets up for entry,and position sizing as well asdefining system parameters.

Tom You can trade as you like,but you should know that algorthmic trading is based on determining a mathematical exit or stop.Every major disaster from long term capital to lehman brothers was due to the lack of risk management.Tell me something ,if you have no stops,how do you decide where to get out?If you decide mentally than you're still using a mental stop.You can trade without stops obviously.However history has shown that trading on emotions (fear,greed) has been the worst way to trade.I'll send you the chart of inflows and outflows for the last 100 years if you like.By the way,no algorithmic trader would ever run a monte carlo sim on a coin toss for an actual system.It's a total waste of time.If you're using a strategic overlay as you said and that tells you where to get out,it's a stop.Just because you don't place it on the books it doesn't mean it doesn't exist.By the way also if you have a loss and don't sell,it's still a loss.Your alternative to trading without stops IS to trade without stops.if you're comfortable with that,i'm happy for you.I have no idea what you're talking about with the coin flip and getting nowhere comment.Nobody trades on a coin flip.We use actual intraday market data to determine if a system will be profitable or not.The good discretionary trader is a human with feelings.That's a disadvantage when it comes to trading.It doesn't mean you can't trade discretionarily.Lastly,it has been proven that entry/exit is one of the least important factors when trading.It's only about 10% of a system.Do some empirical research on the topic and i'm sure you'll come up with the same conclusion.Good luck! P.S. By the way ,i've done several years of research on this ,contrary to your belief.I have an office full of data that i can show you.We can compare your results to my results on stops if you like!I hope you have empirical data to present your case.

Forgive me if I missed something but if the payout is always the same,isn't it obvious that if you increase the win percentage,then you'll earn more and drawdown less?I guess i'm just missing the significance of the graph.How about if you have a game that has an 80% win rate of $.10 and a 20% loss rate of $.50.You have a high win probability but negative expectancy.

BTW,sorry for the name mixup,but I was doing 3 things at once!LOL

Thanks for the reply Nakachalet, I wasn't implying that trend following is the only way to trade.Jones and Bacon are macro traders,Simmons is an algorithmic HFT trader,william o'neil is CANSLIM.However what i was trying to point out is that the common factor of all these traders is risk management.That's more important than entry,exit and win/loss percentages yet many traders tend to focus on the latter.As to your comments and experience in trend following ,I humbly disagree.I have traded my own modified trend following and run about 50 million (literally!) monte carlos and simulations and have found that: 1) Win Loss ratio is even to slightly below even. 2)You don't need a very lage amount of capital to trade trend following systems.It's a function of what you trade and how much risk you take per position. 3)Drawdowns are not very long at all if you don't risk a large percentage per position.If you trade like Richard Dennis then they might be,but like you said not everybody wants to trade like richard dennis(including myself!) 4)The profit is not predominantly deriveed from a small number of trades.That is only the case when you trade concentrated positions.If your portfolio heat is spread among 20 or 30 instruments with small risk per trade parameters,then you won't see that phenomenon.There are thousands of ETFs that will do the trick if you don't trade futures(Which I Don't). 5)Timeframes are set by the trader,not the system.Certainly a system will have parameters that work better than others but anyone can devise or find a system that suits their timeframe. Lastly, I again reiterate that I was not implying that Trend Following is the only way to make money trading.I trade other styles such as mean reversion as well.What i was trying to get across is that your money management algorithm and position sizing strategy are the most inportant factors that should be considered when trading any system.Also,you might want to try running your trend following tests using smaller risk levels and more instruments.You'll probably see that the returns and drawdowns relation to each other improves not assymetricly with the percentage adjustment down in risk.In fact in most cases,risk to drawdown improves nicely.Just food for thought. All the best,Nick

Guys, All I can say is that trading without stops is almost a sure way of guaranteeing you will be wiped out at some point.I've done alot of research on this topic.In this thread i see the Gambler's Fallacy,prediction bias,confirmation bias etc...,.The big points you're missing in all this are that: 1) In real trading ,you can lose way more than $1 when making a trade(gap down,gap up,etc) and 2)it's not how many times you win or lose,it's how much you make when you win vs how much you lose.If your wins are multiple sizes larger than your losses, you will still make money even when your win percentage is substantially below your loss plercentage.If you look at guys like William Eckhart,Richard dennis,ed seykota,Jim simmons,Louis Bacon,Paul Tudor Jones,they've stated publicly that they are only right about 35% of the time.However,if you look at their track record(really long ones!) they have never remotely come close to ruin.They have all attributed this to risk management.(Trading with predetermined exits)Just build a system that over the long term has a positive expectation and risk amounts per trade that will make you money but always keep you alive to trade the next day.This is only my humble opinion.i hope it helps.

Reminiscences is a great example of investor psychology and its pitfalls.It also exemplifies how trend following can lead to great success if adhered to.By the way,Livermore had millions left when he died both in cash and had given his wife a trust account worth millions which she blew up.The fact that Reminiscences is recommended still today by some of the greatest traders in the world(who are not dead or broke by the way!) should speak for itself.