Hi guys, hi from Andrea Unger.
Today I would like to talk a bit about performance and discretionary versus systematic trading.
Performance I’m often asked how much can I expect to obtain with a systematic approach?
Well, I normally guess that a good systematic trader with a reasonable risk approach, can aim at some thing about thirty/thirtyfive percent a year, 30/35 percent a year return.
So, that’s more return, it’s not very small, believe me, it’s really good and I stress this with a reasonable risk in its training which means for a single trade something around one or two percent risk, in that interval, which means we try to keep drawdown around ten-fifteen percent maximum.
Maybe twenty percent in some specifically turbolent situations.
Maybe you don’t like this maybe you think about five hundred percent performance if I came here telling you but you can aim it five hundred percent, I would be a scam, because you see that in the contest but the contest is different.
I cannot come here to tell you that I cannot run hundred meters in 9’60 just because Usain Bolt is able to run that faster. It would be ridicolous and I could say fifteen seconds that would be reasonable, maybe not sure about that for myself, but for sure you have to distinguish what is a competition and what is a standard real-life trading
day by day where you aim at a reasonable growth of your account.
So reasonable risk, obviously, if you increase risk you can aim at higher performance to certain degree… I mean it’s not always linearly true, of course, if you increase risk you can get higher performance, if you have a
positive expectancy in your strategies but up to a certain level, above that again you would not have any edge.
But okay, let’s say, if you read on the internet you’ll find people claiming they get much better returns than those I mentioned, probably trading in a completely different way.
So let’s assume what they say is true, they are probably discretionary traders and I can tell you, I believe, I have not the proof, but I believe that the best discretionary trader in the world would always be the best systematic trader, because the discretionary trader has something, something… some talent that would put him ahead and top of the machine.
So he would still be the Machine, the human being would still beat the machine.
But I’m a systematic trader, I promote systematic trader so why if discretionary trading might get better performance because I said the best. I’m far from being the best discretionary trader in the world, they’re probably not even the best systematic, but my point is that discretionary trading to that level when you are the best is, in my opinion, really difficult to transmit to students because there is small something inside that talented trader that cannot be told.
it’s difficult, because it’s something where he is the best and that being the best is missing in the lessons he can’t transmit because it’s something inside himself, while on systematic trading, you have rules and you put all the rules togheter.
If you prepare a good rule set on the procedures, on how to prepare your infrastructure, then this can be told and can be applied by anybody .
Of course, there will always be somebody who still will be losing will be a disaster but this is not a shame, I
mean, most people should simply forget about trading, which is fine, we don’t need to trade, it’s not compulsory to trade.
So if you really feel that you are not good in trading that’s fine, I’m not good in many things… so, you’re
not obliged to try.
So again: discretionary training might be bad but is much more difficult to learn because to be the best or to be good enough to beat the market you need something… something.
Maybe you have it, fine, but normally normal people don’t have it.
I, myself, believe it I don’t have a specific talent in discretionary trading while systematic trading can be told the much more effective way.
Thirty/thirtyfive percent a year something that you can imagine to get if you are really good in systematic trading.
I cannot promise you more than that, it would be a scam, as I said, but you can learn systematic trading and you can aim at that kind of returns if you do things really properly and well done.
This is more or less what I have to tell you today, we meet next week.
Ciao, from Andrea Unger.