In a battle of man versus machine, who will win? If you’re talking about trading, it will be the machine, hands down. This article will tell you why.
Some portfolios perform differently at different time. QT member will be seduced into jumping onto those that are generating the best returns today. May I suggest that this may not be the best blueprint to follow?
There are number of topics that come up on a regular basis on the trading blogosphere, but the one most important and the most frequently talked about, is “how the markets are rigged.” Anyone who has been in this business for any length of time can tell you with 100% certainty the markets are rigged. Plain and simple, the markets, specifically the exchanges, are totally geared towards screwing you, the retail investor.
“The Underwater Equity curve, popularized by Jack Schwager, presents a trader with a unique way of evaluating equity performance. Using this graph, the trader can view the relationship between time and magnitude of drawdown as they relate to new equity highs. This graph enables the trader to look at the performance from a pessimistic viewpoint pinpointing how much drawdown occurred and how long it took to rebound to hit a new equity high.”
Rolling returns are used to look at the returns of any system for the holding periods similar to those actually experienced by investors because it breaks a performance period into many smaller, overlapping periods, kind of like slowing a movie down to study it frame by frame.
What to do when we get filled at daily lows (or daily highs if shorting)? This is a very good “problem” to have but we still need to make sure we’re being fair to all members.