timsk
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Tread vey carefully. Be highly sceptical about all the hype. Ask detailed questions about how they trade and especially how your account will be protected from losses. The outfit I went with (years ago now) lost a lot of my money, including 15% in one day. Long before I'd even heard of a stop loss - let alone knowing how they worked, I thought that ain't right. It spooked me and I got out. Not a good experience for me, but a catalyst to learn how to trade for myself. Now, If I lose all my money, at least I can have the satisfaction of doing it myself!FifthAce said:
:cheesy:
Tim.
T Squared Trading
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To Tim
Hey Tim,
Good reply. For the sake of full disclosure, the institutional branch of our company offers managed forex accounts.
I agree with you to a point. A managed forex account is a good way to diversify your overall portfolio IF and that's a big IF, the account is managed correctly in terms of risk. Relying on past performance may or not be the best way of doing this. We offer a demo to clients interested primarily so they see how our risk management and position sizing works. The client is able to see if we're using large stops and our position sizing (the 2 primary variables for why large uncontrollable drawdowns occur.) Of course, this is risky on our part. If we happen to have a month where we lost a few % points, the client might assume that our "stuff," is not good. Quite frankly, if a client is judging any system off of one month losing 3%, then perhaps that client isn't ready for a managed account of any kind. If though, as you pointed out Tim, a managed account loses 15% in one day...well, that's another story.
I think a client has to have realistic expectations, as well. The top fund managers in the world have investors waiting in line to plunk down a minimum million dollars, expecting returns of 15-30%, with a similar sized drawdown. An unrealistic expectation would be someone expecting returns of 50%+ while only being comfortable with a 10% drawdown. If you are looking for a high return, you need to be able to stomach a large drawdown. Of course there are always exceptions to this, and I'm sure everyone has a story of a 100% return in 1 month, etc. That's great and good for that person, but over time, the statement above holds true.
There is nothing guranteed in the world of managed accounts except for one thing. No matter how high the return you deliver to the client, it will never be enough, and the client will always claim they could have made a higher return trading on their own. Similar to a professional athlete though, a money manager of any kind needs to be able to accept the praise along with the scrutiny.
Sorry if I'm a bit long winded but I wanted to give you the viewpoint of someone within the "managed account" industry.
Take Care,
T2
Hey Tim,
Good reply. For the sake of full disclosure, the institutional branch of our company offers managed forex accounts.
I agree with you to a point. A managed forex account is a good way to diversify your overall portfolio IF and that's a big IF, the account is managed correctly in terms of risk. Relying on past performance may or not be the best way of doing this. We offer a demo to clients interested primarily so they see how our risk management and position sizing works. The client is able to see if we're using large stops and our position sizing (the 2 primary variables for why large uncontrollable drawdowns occur.) Of course, this is risky on our part. If we happen to have a month where we lost a few % points, the client might assume that our "stuff," is not good. Quite frankly, if a client is judging any system off of one month losing 3%, then perhaps that client isn't ready for a managed account of any kind. If though, as you pointed out Tim, a managed account loses 15% in one day...well, that's another story.
I think a client has to have realistic expectations, as well. The top fund managers in the world have investors waiting in line to plunk down a minimum million dollars, expecting returns of 15-30%, with a similar sized drawdown. An unrealistic expectation would be someone expecting returns of 50%+ while only being comfortable with a 10% drawdown. If you are looking for a high return, you need to be able to stomach a large drawdown. Of course there are always exceptions to this, and I'm sure everyone has a story of a 100% return in 1 month, etc. That's great and good for that person, but over time, the statement above holds true.
There is nothing guranteed in the world of managed accounts except for one thing. No matter how high the return you deliver to the client, it will never be enough, and the client will always claim they could have made a higher return trading on their own. Similar to a professional athlete though, a money manager of any kind needs to be able to accept the praise along with the scrutiny.
Sorry if I'm a bit long winded but I wanted to give you the viewpoint of someone within the "managed account" industry.
Take Care,
T2
timsk
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Hi T2,
Your reply got me thinking about what actually happened, so I've looked out the statements to check. The 15% loss in one day that I mentioned in my response to 5thAce is wrong - it was only 4.8%. However, this was their very first trade on the first day! The omen wasn't good and, if confirmation were needed that things would get worse, I had only to look at my new account I.D. No. . . 666!
I became a client in March 2002 and I closed the account in September 2002. Of those 7 months, only one showed a small profit; the others were all loss making, of which September was the worst at over 16% down. Naturally I e-mailed and phoned them to express my concerns. I was given lots of reassuring spiel about how things would improve and the 'turbulent market conditions' would soon settle and 150 pips per month profit target was very realistic. As I said earlier, at the time I knew nothing at all about T.A. and had yet to discover the delights of stop losses and trends. However, their e-mails, glitzy web site and verbal reassurances were at odds with the bottom line on my monthly statements. There was a clear downward trend and it was obvious that I had to set a limit beyond which I wasn't prepared to go. I finally pulled the plug after losing lost 30% of my deposit capital.
I don't doubt that there are good companies out there who perform well and generate handsome profits for their clients. You (or your company) may well be one of them - I hope so. The problem that 5thAce has - and anyone else considering managed accounts - is how to distinguish the good from the bad? As I know to my cost, this isn't as easy as one might imagine, hence my recommendation to 5thAce and anyone else to tread carefully and exercise extreme caution.
Tim.
Your reply got me thinking about what actually happened, so I've looked out the statements to check. The 15% loss in one day that I mentioned in my response to 5thAce is wrong - it was only 4.8%. However, this was their very first trade on the first day! The omen wasn't good and, if confirmation were needed that things would get worse, I had only to look at my new account I.D. No. . . 666!
I became a client in March 2002 and I closed the account in September 2002. Of those 7 months, only one showed a small profit; the others were all loss making, of which September was the worst at over 16% down. Naturally I e-mailed and phoned them to express my concerns. I was given lots of reassuring spiel about how things would improve and the 'turbulent market conditions' would soon settle and 150 pips per month profit target was very realistic. As I said earlier, at the time I knew nothing at all about T.A. and had yet to discover the delights of stop losses and trends. However, their e-mails, glitzy web site and verbal reassurances were at odds with the bottom line on my monthly statements. There was a clear downward trend and it was obvious that I had to set a limit beyond which I wasn't prepared to go. I finally pulled the plug after losing lost 30% of my deposit capital.
I don't doubt that there are good companies out there who perform well and generate handsome profits for their clients. You (or your company) may well be one of them - I hope so. The problem that 5thAce has - and anyone else considering managed accounts - is how to distinguish the good from the bad? As I know to my cost, this isn't as easy as one might imagine, hence my recommendation to 5thAce and anyone else to tread carefully and exercise extreme caution.
Tim.
T Squared Trading
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Hi Tim,
I'm enjoying this exchange of dialogue. I bet your account was opened on Friday the 13th too...lol. Seriously though, I'm sorry to hear about your bad experience with managed accounts, and agree one has to tread very carefully in their search for a reputable managed account. It sounds like you learned a valuable lesson, though.
It's bad business to make unflattering comments about other people in our business. I think the guy you dealt with was sincere when he said they were having trouble with the "turbulent" market. I assume he meant choppy, and if so, that is indeed a mechanical traders nemesis. Of course there are certain ways to combat this, but its a tricky proposition. I'm not too keen on the 150 pip per month assurance, though. Again, speaking from a personal point of view, we tell our clients that its impossible to know when profits will occur only that with our models specifically, they happen in clusters. Take for example our Cable model. For the past few months its basically been sideways. The past month, its up almost 20% and currently in the midst of nearly a 600 pip profitable trade. Unfortunately, if a client were to come on board next week, he may not see a profitable trade in the same Cable strategy until January...its the nature of the beast.
With that said, it looks like u gave this specific account almost 6 months, and in our opinion that is an adequate amount of time to expect some positive monthly performance.
I guess with the exception of a cd or money market account, etc, there is an assumed risk in any investment. Obviously, a managed account is quite an unorthodox investment that needs to be treated by the client as such with extreme caution as you noted.
Take care,
T2
I'm enjoying this exchange of dialogue. I bet your account was opened on Friday the 13th too...lol. Seriously though, I'm sorry to hear about your bad experience with managed accounts, and agree one has to tread very carefully in their search for a reputable managed account. It sounds like you learned a valuable lesson, though.
It's bad business to make unflattering comments about other people in our business. I think the guy you dealt with was sincere when he said they were having trouble with the "turbulent" market. I assume he meant choppy, and if so, that is indeed a mechanical traders nemesis. Of course there are certain ways to combat this, but its a tricky proposition. I'm not too keen on the 150 pip per month assurance, though. Again, speaking from a personal point of view, we tell our clients that its impossible to know when profits will occur only that with our models specifically, they happen in clusters. Take for example our Cable model. For the past few months its basically been sideways. The past month, its up almost 20% and currently in the midst of nearly a 600 pip profitable trade. Unfortunately, if a client were to come on board next week, he may not see a profitable trade in the same Cable strategy until January...its the nature of the beast.
With that said, it looks like u gave this specific account almost 6 months, and in our opinion that is an adequate amount of time to expect some positive monthly performance.
I guess with the exception of a cd or money market account, etc, there is an assumed risk in any investment. Obviously, a managed account is quite an unorthodox investment that needs to be treated by the client as such with extreme caution as you noted.
Take care,
T2
problem is there is much more money than good managers/traders available. Period. There is no such thing as hard time for trading, bad economic moment etc., there is only bad traders. Anyway, trading skill isn't easy to obtain. No school, social network or business connection will make someone a good trader. And that is exactly how funds recruit wannabe-managers-turn-traders. In the end, bad results are expected and natural. Look at last few years results of majority of hedge funds. Silly, really while during that time opportunities were endless.
Trader with 10 years of experience usually knows more than one with 8 years of experience. And there are pretty few succesfull 10+ year traders. But despite of this, funds and trading firms are popping up around every corner. Everyone obviously wants chunk, but this thing is very elusive.
Funny thing is, for those minority in the know trading is pretty easy and even intuitive job.
Trader with 10 years of experience usually knows more than one with 8 years of experience. And there are pretty few succesfull 10+ year traders. But despite of this, funds and trading firms are popping up around every corner. Everyone obviously wants chunk, but this thing is very elusive.
Funny thing is, for those minority in the know trading is pretty easy and even intuitive job.
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T Squared Trading
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To Zagreb
Hi Zagreb,
Good post. Yes, I agree there is a ton of money looking to be properly allocated. I think there are a plethora of good money managers/traders available to investors, but there are more than enough horror stories similar to timsk's to give them a bad name.
I respectfully disagree with you about there not being a "hard time for trading." Speaking strictly with respect to our automated trading systems, we find that "choppy" markets give more than a few of our models an increased amount of stop outs. This was evident during the early part of the summer, and produced a drawdown for our accounts. This is not to say that other traders/systems were not able to make money during this same time, just that this period could be classified as a hard time for trading for us. As I've consistently preached, though, as long as you are using proper money management, you can make it through these "hard times for trading."
I do agree with you that trading is definitely not a skill easy to obtain. I firmly believe that you can learn how to trade to a point by repetitive technical and fundamental analysis. But what seperates Joe Trader from Stevie Cohen, is something you are born with. It's the ability to see certain things within the markets that not everyone can see...like you say, it's almost intuitive.
You're also correct that a majority of hedge funds have had rough go of it the past few years. This can be misleading, however, when judging the overall competance of a money manager. Take a look at one of our idols, John Henry. He is one of the greatest traders of all time, but if you look at his performance from the past 2 years, you would be skeptical of his trading skills. Why do investors keep pouring money into his funds? Because you can see from his track record, he can pull out of this "slump" quite easily by putting up a 40+% year. He truely is an incredible trader.
Anyway, again, good post, and look forward to contributing to this thread,
T2
Hi Zagreb,
Good post. Yes, I agree there is a ton of money looking to be properly allocated. I think there are a plethora of good money managers/traders available to investors, but there are more than enough horror stories similar to timsk's to give them a bad name.
I respectfully disagree with you about there not being a "hard time for trading." Speaking strictly with respect to our automated trading systems, we find that "choppy" markets give more than a few of our models an increased amount of stop outs. This was evident during the early part of the summer, and produced a drawdown for our accounts. This is not to say that other traders/systems were not able to make money during this same time, just that this period could be classified as a hard time for trading for us. As I've consistently preached, though, as long as you are using proper money management, you can make it through these "hard times for trading."
I do agree with you that trading is definitely not a skill easy to obtain. I firmly believe that you can learn how to trade to a point by repetitive technical and fundamental analysis. But what seperates Joe Trader from Stevie Cohen, is something you are born with. It's the ability to see certain things within the markets that not everyone can see...like you say, it's almost intuitive.
You're also correct that a majority of hedge funds have had rough go of it the past few years. This can be misleading, however, when judging the overall competance of a money manager. Take a look at one of our idols, John Henry. He is one of the greatest traders of all time, but if you look at his performance from the past 2 years, you would be skeptical of his trading skills. Why do investors keep pouring money into his funds? Because you can see from his track record, he can pull out of this "slump" quite easily by putting up a 40+% year. He truely is an incredible trader.
Anyway, again, good post, and look forward to contributing to this thread,
T2
hi T
With respect, I will defend attitude that there are no bad trading periods, only bad traders. During trending period best ones will earn most - results will make them best. During choppy (or trendless) periods those will lose least possible - result will also make them best. Like car race, on straight paths speed is most important, while on curvy roads avoiding falling out of street is most desired skill. We don't say 'bad times for racing' driving thru this part.
Finaly, using 'hard time for trading' sintagma is counterproductive because it implies war-alike environment comparing trading with fighting. Quite contrary, good trader is in line with the market, there is no hostile situation ever for him/her. If you want to look at trading business in war terms, then market and skilled trader are on the same side, fighting together against those that think market is enemy.
There is really pure and simple distinction between best traders and 'good' ones, during all times: those who earn more in the end are better. I understand your problems during recent 'choppy' times, but it's maybe because mechanical system still cannot beat skilled discretionary trader. It's up to you to find better way. Result, and not path to it is again only thing that counts.
Similar, I cannot find one excuse for recent bad period of many hedge funds. They are good, but they are not good enough, because they didn't change system fast enough. If you look at charts a few years back, you will see literally sea of (missed) opportunities. In this business there are no excuses, like there is in other businesses.
Re. trading as inherited skill, I strongly believe it can be learned without special talent (I'm good example)
regards and be friendly with the Market
Dagg
With respect, I will defend attitude that there are no bad trading periods, only bad traders. During trending period best ones will earn most - results will make them best. During choppy (or trendless) periods those will lose least possible - result will also make them best. Like car race, on straight paths speed is most important, while on curvy roads avoiding falling out of street is most desired skill. We don't say 'bad times for racing' driving thru this part.
Finaly, using 'hard time for trading' sintagma is counterproductive because it implies war-alike environment comparing trading with fighting. Quite contrary, good trader is in line with the market, there is no hostile situation ever for him/her. If you want to look at trading business in war terms, then market and skilled trader are on the same side, fighting together against those that think market is enemy.
There is really pure and simple distinction between best traders and 'good' ones, during all times: those who earn more in the end are better. I understand your problems during recent 'choppy' times, but it's maybe because mechanical system still cannot beat skilled discretionary trader. It's up to you to find better way. Result, and not path to it is again only thing that counts.
Similar, I cannot find one excuse for recent bad period of many hedge funds. They are good, but they are not good enough, because they didn't change system fast enough. If you look at charts a few years back, you will see literally sea of (missed) opportunities. In this business there are no excuses, like there is in other businesses.
Re. trading as inherited skill, I strongly believe it can be learned without special talent (I'm good example)
regards and be friendly with the Market
Dagg
T Squared Trading
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Reply to Zagreb #2
Hi Dagg,
Again, another well thought out posting. Unfortunately, I agree with very little you said. That doesn't make your opinions wrong and mine right...just a differing of viewpoints. But hey, that's why they make vanilla and chocolate ice cream...different strokes for different folks. I'll touch on your points briefly, just for the fun of it.
The one point I agree with you on is during choppy periods. During choppy periods those that keep their drawdowns to the minimum will ultimately be successful, taking for granted they kill the trending markets. There are many ways of doing this, but money management as always is key. I like your "race car" analogy.
Your war example is indeed interesting but has no relevance to mechanical trading. This is precisely the reason my firm uses such strategies in our trading. We're able to eliminate all emotion and allow our systems to do the work. The only human intervention is monitoring the position sizing and risk management.
I appreciate your sympathy to our "problems during recent choppy times." I'm not going to get into a pissing match with you on whether our trading models are as profitable as discretionary traders performance. As I said in the first paragraph, different strokes for different folks. I'm sure you realize that many of the top traders in the world use mechanical trading.
I don't think the top money managers are offering any excuses for their recent "bad period." You said they are good but not good enough, and they didn't change their system fast enough. Of course, it's very easy to say that in hindsight. I think it's very brave to say that John Henry, Stevie Cohen, etc. are not good enough. Taken into consideration they've beaten the S&P 500 on a consistent basis, and have made their investors tons of money, it's pretty tough to say such a thing. I'm sure when Cohen is on his Citation eating cracked crab and lobster, he's not stressing much about the "sea of missed opportunites" in the past few years.
I'm not going to dispute your point that good trading can't be learned, but I stand by my view that a majority of great traders were born with some unique traits.
Dagg, judging from our exchanges, it sounds like you have this trading thing figured out. I'm very happy for you and wish you continued success.
T2
Hi Dagg,
Again, another well thought out posting. Unfortunately, I agree with very little you said. That doesn't make your opinions wrong and mine right...just a differing of viewpoints. But hey, that's why they make vanilla and chocolate ice cream...different strokes for different folks. I'll touch on your points briefly, just for the fun of it.
The one point I agree with you on is during choppy periods. During choppy periods those that keep their drawdowns to the minimum will ultimately be successful, taking for granted they kill the trending markets. There are many ways of doing this, but money management as always is key. I like your "race car" analogy.
Your war example is indeed interesting but has no relevance to mechanical trading. This is precisely the reason my firm uses such strategies in our trading. We're able to eliminate all emotion and allow our systems to do the work. The only human intervention is monitoring the position sizing and risk management.
I appreciate your sympathy to our "problems during recent choppy times." I'm not going to get into a pissing match with you on whether our trading models are as profitable as discretionary traders performance. As I said in the first paragraph, different strokes for different folks. I'm sure you realize that many of the top traders in the world use mechanical trading.
I don't think the top money managers are offering any excuses for their recent "bad period." You said they are good but not good enough, and they didn't change their system fast enough. Of course, it's very easy to say that in hindsight. I think it's very brave to say that John Henry, Stevie Cohen, etc. are not good enough. Taken into consideration they've beaten the S&P 500 on a consistent basis, and have made their investors tons of money, it's pretty tough to say such a thing. I'm sure when Cohen is on his Citation eating cracked crab and lobster, he's not stressing much about the "sea of missed opportunites" in the past few years.
I'm not going to dispute your point that good trading can't be learned, but I stand by my view that a majority of great traders were born with some unique traits.
Dagg, judging from our exchanges, it sounds like you have this trading thing figured out. I'm very happy for you and wish you continued success.
T2
T
allow me to clarify some of my thoughts. I would never think about Mr. Henry and other top league as bad traders. Not in a million years, I respect them to the fullest. My point was that there is too much under-performing 'traders' or 'managers' who simply cannot compete (but still earn hefty salaries while losing people's money).
I also fully agree and accept mechanical trading as a profitable way. My thought was that mechanical systems only work for those who don't need them anyway. Thus for traders who are profitable without them. Mechanical system serves them only as automation tool in order to avoid mundane tasks. Average people wrongly believe that black box will somehow compensate their inability to earn by using their own skills.
Mechanical system in the hand of a skilled trader has its strengths, it is perfectly 'calm' and focused to 'now situation' (however, I personally haven't problem with those requirements, so no need for mechanical help here).
But mechanical system has its weaknesses too, it has to be tweaked/finetuned endlessly. So less work as intention often means equal (or more) work at the end. This is especially true today where majority has one-click trade access and there are so many new traders and methods present - it adds to the choppiness and shorter life of particular profitable tactics. Actually, I slightly tweak my methods permanently.
You are right, there are more than one path to success, but they are all based on sole trader's skill. I prefer discretion, you prefer mechanical trading, but at the core of both of us is our skill/ability to earn more than we lose.
Merry Christmas and a Happy New Year to all
P.S. I looked around your KEG site abit and considering fact that you risk under one percent per trade, your monthly results are very good indeed. Congrats! You must be earning mucho pips to obtain that result.
allow me to clarify some of my thoughts. I would never think about Mr. Henry and other top league as bad traders. Not in a million years, I respect them to the fullest. My point was that there is too much under-performing 'traders' or 'managers' who simply cannot compete (but still earn hefty salaries while losing people's money).
I also fully agree and accept mechanical trading as a profitable way. My thought was that mechanical systems only work for those who don't need them anyway. Thus for traders who are profitable without them. Mechanical system serves them only as automation tool in order to avoid mundane tasks. Average people wrongly believe that black box will somehow compensate their inability to earn by using their own skills.
Mechanical system in the hand of a skilled trader has its strengths, it is perfectly 'calm' and focused to 'now situation' (however, I personally haven't problem with those requirements, so no need for mechanical help here).
But mechanical system has its weaknesses too, it has to be tweaked/finetuned endlessly. So less work as intention often means equal (or more) work at the end. This is especially true today where majority has one-click trade access and there are so many new traders and methods present - it adds to the choppiness and shorter life of particular profitable tactics. Actually, I slightly tweak my methods permanently.
You are right, there are more than one path to success, but they are all based on sole trader's skill. I prefer discretion, you prefer mechanical trading, but at the core of both of us is our skill/ability to earn more than we lose.
Merry Christmas and a Happy New Year to all
P.S. I looked around your KEG site abit and considering fact that you risk under one percent per trade, your monthly results are very good indeed. Congrats! You must be earning mucho pips to obtain that result.
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T Squared Trading
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Response To Zagreb (3)
Hi Dagg,
Finally....we finally agree 100% on one of our posts....who would have thunk it? Very well put, Dagg.
Merry Christmas and Happy Holidays to all, as well. Don't drink too much egg nog, and don't eat the yellow snow!!!
T2
Hi Dagg,
Finally....we finally agree 100% on one of our posts....who would have thunk it? Very well put, Dagg.
Merry Christmas and Happy Holidays to all, as well. Don't drink too much egg nog, and don't eat the yellow snow!!!
T2
EliteFX
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They'll 'manage' your money all right.
Right out of your account to theirs
You mean funds to be withdraw from client's trading account by money manager? Well this is next to impossible.
However I do agree that there are so many good, bad, and ugly faces claiming themselves as forex money managers but there are some extra ordinary too.
Daniel Webb
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Look for companies that are staffed 24 hours a day with experienced forex traders; traders who are real people making a living in the market everyday. Find managers whose signals are delivered to you in real time through email, instant messengers, or sms text messaging. And make sure such signals have exact entry points, stop loss levels, and take profit points. What you want is absolutely no guesswork involved and no technical analysis on your part.
Kingofpips
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We are staffed 24 hours a day however our signals are sent directly to your account. After managing nearly 50 accounts for the past 10 months I realize most investors are not necessarily seeking huge returns but more importantly consistent steady returns, complete transparency and good communication.