Jan

1

A main goal of the spec list is discrediting ballyhoo: Many so-called quant this quant that show the arithmetic capital appreciation and a fixed bet creating an artificially inaccurate accumulation. Some show the max loss, but due to volatility drag (33% needed to recover 25% drawdown) the growth will not be as their charts show. Instead of $100,000 bet every trade, after a 25% loss the fund is under water.

On the upside geometric returns will rapidly outpace the arithmetic returns due to compounding rather than a fixed trade amount but they don't use that either. So the quant charts twitter charts are wrong in 2 of the most important aspects.

Larry Williams:

What I have come to believe and practice that in money management is all that matters is the trade I’m in right now. The past numbers of the strategy have no bearing on what I will do. Why? Its like a gunfight —you will kill or killed. The trade I am in now will lose or win. There are no other options. That is the hard reality I deal with and protect myself accordingly.

Jeff Watson agrees:

Bingo!

H. Humbert asks:

So are you all saying you literally have to create a new strategy or a version of the old strategy from scratch in every single trade, without regard for the past. This can't be right, can it?

Larry Williams replies:

Oh no, not at all each trade offers the same odds of winning, 50/50, so ‘bet’ accordingly.


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