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Gary Fritz wrote:
> Any kind of long-term breakout system like that is going to
> suffer equity swings, but if you stick it out you should do OK.
> I have a friend who trades a very simple breakout system, and he
> expects (and has been seeing) roughly 50-100% returns per year
> with frequent 50% drawdowns. The Aberration website shows an
> average of $31k per year for the last 20 years on their large
> portfolio, which is aimed at a $50-100k account. Now whether
> there has been after-the-fact portfolio tweaking or other games I
> don't know, but those kinds of returns are certainly possible
> with long-term systems.
Aberration has hit historical maxDD levels in all published portfolios
recently.
This year has been particularly tough for many trendfollowers:
http://www.streetstories.com/dunn_art_futures.html
http://www.allanicapital.com/Performance.htm
Unless backtested on cherry-picked (in hindsight) market portfolios,
most long-term truly diversified trendfollowing systems will show a MAR
(Compound Annual Growth Rate / MaxDD) of 0.5 to 1.0 (ie avg 25%/yr with
maxDD of 50%). Which btw is the MAR of most trendfollowing CTAs / hedge
funds. If you had a portfolio dominated by currencies and financials the
last few years, you could achieve a (lucky?) MAR of 1.0 or even >2.0,
but would have suffered your biggest drawdown ever in the last few
months. I've written here in O-list in the past that some markets have
stopped performing during the early-mid 90s and those that did, never
returned to glory (sofar).
Market selection is #1 factor. That's why results (actual or backtested)
can be very misleading. Some unethical system and backtest software
vendors do that all the time, cherry picking markets, then reporting MAR
of 3-5.
Regards, M
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