Randomness of Returns
There are those Madoff lovers who want consist smooth returns. Well they do not exist in the real world. As much as there is correlation between commodity trading advisors there is a randomness of returns over time. Some commodity trading advisors seem to have a great run and then hit a wall with some ugly draw downs or periods in which they do not generate returns. The reality is …This is the reality. I will further qualify this. Out of all the commodity trading advisors out there I have or would only allocate to a small number of them. Too many commodity trading advisors have no idea about managing risk and there are all of those option sellers which make consistent money until they explode one month.
Commodity trading advisors can have the so called “best” plan but it all depends on what the markets can offer. The analogy I always make is one can have the best fishing rod but if the fish are not biting it will not matter.
Bottom line do your homework either if you are trading yourself or investing in a commodity trading advisor. Do not chase last months returns or last years returns. Understand there will be ugly draw downs. Understand there will be long periods that nothing happens. . Understand that no one will ring a bell when some market starts to trend and goes to prices almost unimaginable. Understand when these instances do happen( which is very rare) they make up for all the conditions. Understand exactly how the methodology or system works. Understand exactly the risk filters. This will give you the confidence to follow the commodity trading advisor during the draw downs or your own trading.
Commodity trading is not for everyone and past performance is not indicative of future performance. If you want to be successful in trend following & commodity trading, Understand you need extreme patience and tempered expectations. Understand Discipline is as important as the risk management & system itself.
Trend following is not retirement in a box!
Trading futures and options involves substantial risk of loss no matter who is managing your money and is not suitable for all investors. Past performance is not indicative of future results
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