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Safe traders more risky than risky ones?

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  • p3t3rjj
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  • ProfBernardo
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    Last edited by ProfBernardo; 12-06-2014, 08:57 PM.

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  • p3t3rjj
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    Looking for a trader that targets 10% a month plus is dangerous, traders need to take what the market gives and if some months its only 3% that's fine. Other months could well exceed 10%, all depends if the conditions suit them.

    Don't just look at the MAX DD, look at how often the trader goes into that drawdown. IF a trader has hit 30% area once in a year and pulled himself out with taking too much risk that's fine.
    Everyone will go through a period of DD, just hope you lucky enough to build some equity before the DD comes.
    If hes a trader that visits the 15% plus DD on a regular basis, you looking for trouble.
    There is really no need for going into regular drawdown to achieve the 5 - 10% mark.
    DD is either your edge is not working in that specific market condition, and you need to cut risk until it passes.
    Or your risk is not under control, in this case the DD will have regular spikes.
    Be wary of traders that excessively engage the market to make a few percent.

    As an example the signal (censored) has engaged the market 5700 times to make 30% in 7 months. Which is fantastic if you collecting rebates, but as the investor with exposed capital, every trade exposes you to loss. In comparison Viper has only engaged the market 950 times in 19 months

    You don't want to be in the market all the time, get in and get out. Sure you can ride the trend, but that needs to be a positive trade, not having red day trades turn into long term investments on a regular basis.
    We talking on average here, we all have the odd one that drifts around and eventually comes our way, but that's where controlling your risk allows for this .

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  • pearcey2
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    I'd also take the first trader. Run it at 0.5x risk and even if he blows his whole account you lose 50%. Run the second trader at 5x risk and max historical DD would be 25%. Except when he trader asks for a bit of "wiggle room" to get out of his trades and that 25% turns to 50-60% and you're wondering what's the way out...

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  • SmartTrader
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    Originally posted by 12padams View Post

    My question to you guys is: Would you feel safer with a trader that makes 10% per month with a max drawdown of 30% or safer with a trader that makes 1% per month with a 5% max drawdown? Which trader would you choose to follow out of the two?
    Its not about 10% and 30% and 1% and 5%. You can always scale up or down as you follow signals. right? in this scenario you can normalize both the traders. If you follow the second one at 10x, he gives 10% per month with a DD of 50%. So obviously your choice has to be the first trader. If you want to take less risk, turn down your risk with respect to him. You need to concentrate on the risk reward ratios

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  • Nick
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    Originally posted by 12padams View Post
    When it comes to copying a signal I often like to see one making at least 10% per month with no losses on a month to month basis. From being a part of watching other signals both on and away from this site I have noticed that at any time your account could be blown overnight or over a week.

    So when I go for a signal lets say I put in $10,000. My hope is within 1 year maximum that $10,000 or whatever value I put in will be doubled so I can withdraw my initial capital and have in my eyes "no risk" or no loss of money I have earned myself.

    At any point in that year though all the money could disappear forever, I've seen it happen! That's why the moment you can withdraw your initial deposit I personally would do so. So when I look at a signal I think "How many months will it be before I can withdraw my initial deposit?" before anything else. The second thing I look at is the max historical drawdown.

    The issue I find with a "safe" trader only making 1% per month is that they can still lose money. Thats why I feel safer with a risky trader as I want my real money out of the system as fast as possible because it seems that one day all signals eventually take a huge loss and I don't want my money in there when that happens.

    My question to you guys is: Would you feel safer with a trader that makes 10% per month with a max drawdown of 30% or safer with a trader that makes 1% per month with a 5% max drawdown? Which trader would you choose to follow out of the two?

    I would go with the 10% per month trader since I want my money out of there as fast as possible. I've seen a trader called A75 who made around 20% a month for 2 years straight then blew it over a one week period. A similar situation has happened with Day Fox on this site so it's definitly something that can happen.
    Interesting question Adams. There has actually been a bit of research done on this exact subject by RAPA Cap Intro.

    The results were that it's better to increase the risk on a conservative strategy rather than reduce the risk on a risky one. What you'll find is that when a risky strategy is pushed to it's limits the amount of stress placed on the trader/manager is substantial and often effects their trading, however a conservative trader will continue to chug along as they have always done, improving the likelihood of recovery and continued success.

    I personally don't believe anyone should be shooting for 20% per month unless you're happy with the high probability of going bust, in which case you'll likely be trading it on a small account.

    I have a fair bit of personal experience with this from running the site. I have never seen a high risk trader recover after a devastating loss, even after topping up their account. Conversely I've jacked up the risk on Viper a few times on small accounts and find that it's a constant roller coaster of growth, bust and recovery.

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  • fxturtle
    replied
    Originally posted by 12padams View Post

    My question to you guys is: Would you feel safer with a trader that makes 10% per month with a max drawdown of 30% or safer with a trader that makes 1% per month with a 5% max drawdown? Which trader would you choose to follow out of the two?
    What if the moment you started to follow a 10% per month trader, then the shit the fan and blew your account? You're out of the game fast and furious.

    Everyone has different risk tolerant, you decide what is the best for you that if worse scenario happens, you won't be crying, sobbing and *****ing all week.

    Cheers,

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  • Neptune
    started a topic Safe traders more risky than risky ones?

    Safe traders more risky than risky ones?

    When it comes to copying a signal I often like to see one making at least 10% per month with no losses on a month to month basis. From being a part of watching other signals both on and away from this site I have noticed that at any time your account could be blown overnight or over a week.

    So when I go for a signal lets say I put in $10,000. My hope is within 1 year maximum that $10,000 or whatever value I put in will be doubled so I can withdraw my initial capital and have in my eyes "no risk" or no loss of money I have earned myself.

    At any point in that year though all the money could disappear forever, I've seen it happen! That's why the moment you can withdraw your initial deposit I personally would do so. So when I look at a signal I think "How many months will it be before I can withdraw my initial deposit?" before anything else. The second thing I look at is the max historical drawdown.

    The issue I find with a "safe" trader only making 1% per month is that they can still lose money. Thats why I feel safer with a risky trader as I want my real money out of the system as fast as possible because it seems that one day all signals eventually take a huge loss and I don't want my money in there when that happens.

    My question to you guys is: Would you feel safer with a trader that makes 10% per month with a max drawdown of 30% or safer with a trader that makes 1% per month with a 5% max drawdown? Which trader would you choose to follow out of the two?

    I would go with the 10% per month trader since I want my money out of there as fast as possible. I've seen a trader called A75 who made around 20% a month for 2 years straight then blew it over a one week period. A similar situation has happened with Day Fox on this site so it's definitly something that can happen.
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