3 Performance Proof

Even if you are a minority of one, the truth is the truth.

—Gandhi

What we’ve got here is failure to communicate. Some men you just can’t reach, so you get what we had here last week, which is the way he wants it.

—Cool Hand Luke

It is a capital mistake to theorize before one has data.

Sir Arthur Conan Doyle1

Anyone can tell you they have a successful method or system, but the only objective measurement is raw data. If a claim is to be made, it must be supported. The numbers in this volume, across numerous third-party reporting services and inside disclosures on file with American and international regulatory authorities, don’t lie. You could be the skeptic and say: “Hold on, the numbers could be faked!” That doesn’t fly with decades of data across unrelated traders located in dozens of countries. This is not about one isolated Bernie Madoff track record open to hanky-panky. Thus, in reviewing legendary trend following performance histories and assorted research studies I alone might own (my insider investigation methods are a whole other book), I zeroed in on six key data concepts:

  1. Absolute returns
  2. Volatility
  3. Drawdowns
  4. Correlation
  5. Zero sum
  6. Berkshire Hathaway

Absolute Returns

An absolute return trading strategy means you are trying to make the most money possible. Author Alexander Ineichen defines it succinctly: An absolute return manager is essentially an asset manager without a benchmark—Bench marking can be viewed as a method of restricting investment ...

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