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Randomness of Commodity Trading Advisors Returns

InvestorEducation / Learn to Trade Nov 13, 2009 - 03:21 AM GMT

By: Andrew_Abraham

InvestorEducation

The reality is there exists a great deal of correlation between trend following commodity trading advisors… But there are always a difference in their returns…Many times because I have managed accounts I see a great overlap. It seems virtually every commodity trading advisor had the sugar trade. The sugar trade was a perfect setup. It was a low volatile period and for whatever reason sugar went upwards. The same can be argued for so many commodity trading advisors were short the US dollar.


Again..there are differences in returns. It finally dawned on me during a discussion with another commodity trading advisor that I will probably invest with. The differences can be as subtle as a difference in the stops used by the commodity trading advisor. In one of my systems… I use a 2 period standard deviation trailing stop. On another I use an ATR stop..similar but different…as well on a another model I use a combination of ATR and x period low ( or high ) in price. The same can be said on entries..Many commodity trading advisors are long Gold…but we have different entry prices. As well one of the commodity trading advisors I have allocated to scales into the trade. Again different results.

Point!

I know from all my years of experience to diversify and never allocate more than 5%. More so..

I know what my personal goal is …Compound my way to wealth.

With this goal in mind..if I allocate to groups of commodity traders that think the way I think…that are extremely aware of the risks…I am smoothing out my own trading. In one period I might out perform them…or vice versa… but it does not matter.. my goal is to compound money over the long run.

There will be a randomness of the returns of the commodity trading advisors I allocate to…as well as the commodity trading I do with my partners.

Andrew Abraham
www.myinvestorsplace.com

Andrew Abraham has been in the financial arena since 1990. He is a commodity trading ddvisor and co manager of a Commodity Pool. Since 1993 Andrew has been a proponent of quantitative mechanical trading programs. Andrew's major concern is not only total return on investment but rather the amount of risk that one would have to tolerate in order to achieve returns He focuses on developing quant models that encompass strict risk adherence and correlation. He has been a speaker at conferences as well as an author of numerous articles. Andrew has spent years researching ideas that have the potential to outperform indices as well as maintain fewer draw downs.

Visit Angus Jackson Partners (http://www.angusjacksonpartners.com) Contact: A.Abraham@AngusJackson.com (mailto:A.Abraham@AngusJackson.com)

© 2009 Copyright Andrew Abraham - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


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