5 ms·
Agreed, errors are non-normal so 20+ sigma is practically false. But it's not too far off -- I've seen strategies that never have a down day and have daily shar
by consz 12y ago
Agreed, errors are non-normal so 20+ sigma is practically false. But it's not too far off -- I've seen strategies that never have a down day and have daily sharpes of 2.5-3.0, and those setups will generally have incredibly high sigma values even after accounting for non-normality (and other assumptions).
- joosters 12y agoRemember, strategies that 'never have a down day' are only one day away from having a down day... ...and there are plenty of strategies that had only a single down day, unfortunately that one down day wiping out the entire company :)
- consz 12y agoSure, but most strategies have such small positions that even if the market went to 0 instantly at your maximum long position, you'd still lose less than a year's worth of PNL in that strategy. The more relevant risk of blowout is something like Knight happening, statistical black swan events are not really an issue (in HFT).
- stevewepay 12y agoI used to be very big into algorithmic and day trading, and one trader I was introduced to had Martingale'd himself into a record of something like 2 years without suffering a loss. Then he suffered a 300k loss and wiped out all of his earning plus more and then he lost a lot of his followers, at least for a while.
- deleted 12y ago[deleted]