Tuesday, April 03, 2007

The mathematics of hedging

I have a trading system
Long only= 126% per year with drawdown
of 16.5%
Short only = 980% per year
with drawdown of 14.41%

Now what happens if you trade long+short simultaneously???
annnual return 1301%
drawdown of 11.9%
:)

The market is not as simple as many people think
And most amateur traders like myself do not trade long + short simultaneously
because we're used to the traditional wisdom
of
a) follow the trend
b) follow the market trend

problem is
right now
there is no real trend.
There is chaos+confusion.
Only the nimble traders will survive :)
Good luck for the next 3 months!!
This monetary tightening has to stop+inflation has to come under control.
until that happens the corrective mood will continue.

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