Need Trader Advice: Include Sharpe and CAGR?
I'd like to get the viewpoints of some experienced traders. I am from a target, three years out of school and have been trading on my own. I will be applying for some commodity shops (think Glencore, Trafigura, Louis-Dreyfus, Vitol, etc.).
I've been trading for the past three years with a CAGR of 27% but a Sharpe of .65. My max drawdown is 70% (I got skinned in the silver trade this May). I trade equities, commodities and derivatives on those mainly, and a small amount of FX and fixed income.
If I am going for a trading position, should I list my stats? I realize that my Sharpe and drawdown are shitty and I don't even know if my CAGR would be considered good.
Are there any other stats I should put on there?
That sharpe isnt that bad...macro guys always have lower Sharpe's. Paul Tudor Jones' career sharpe is something like .6. This is one of the many reasons I think the sharpe ratio is a highly flawed statistic.
The 70% draw-down is, however, not good. You should have a ready explanation of why that happened and what you learned from it because an equivalent loss in a real trading job would definitely cost you your job.
Totally agree.
Re: Sharpe ratio: http://www.edge-fund.com/Hard02.pdf
I was actually short silver when the CME raised silver margins in May (I recall it was the very night that Bin Laden was round-housed), and wound up almost doubling my account size. Felt exhilarating.
Your CAGR is actually good, but drawdowns are outrageous. Read the Paul Tudor Jones interview in Market Wizards and try to trade a lot more defensively. I personally never risk more than 2% of my equity on a trade regardless of my conviction, but do see what works for you.
That article is good...to me a very high sharpe ratio is an indication that the trader in question has a short vol or option-selling strategy and therefore is vulnerable to a blow up. A consistent winner with a sharpe under 1 to me is ideal...it means they are a profitable trader and that they are long vol and therefore less prone to blow-up.
Absolutely, Nassim Taleb outlined exactly that (theory of 'anti-fragility'- selling volatility for steady income but getting killed in 'fat-tail' events) in the following video: http://www.sas.upenn.edu/ppe/Events/Goldstone/Goldstone2011.htm
Great links, both for the Sharpe article and the Taleb vid. Thank you.
thank you for the insightful comments. i liked market wizards. it was remarkable that PTJ was one of the few traders that never had an early career blowup. that seems to be a rare phenomenon.
the may silver debacle was more of a problem of vol crush rather than price action for me. by the second day of the slamming i had gone long to short (although i was far too levered long to begin with) but the real killer was i was buying vol dear and selling it cheap. so i should have done a better job of hedging my longs and irrespective of that i should have been short instead of long vol that horrendous week.
That is not true. He covers in a few of the questions where he gets smoked trading cotton to the tune of costing his clients a significant amount of capital when he was a broker. While running Tudor Investment Corp however, you are correct in that there have not been any blow ups which is why a lot of people (including myself) consider him one of the best of all time. I think every great trader has had a wild blow up, but the key is that most have come while trading early in their careers with personal accounts or under the tutelage of someone who either had blind faith or saw real potential regardless of some one-off event.
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