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Tag Archives: trading
One of the biggest challenges in implementing TAA portfolios is coming as close to the theoretical returns as possible. Theoretical returns are based on index returns which are not available in the real world. In this post I’ll explore the major items that keep investors from achieving published theoretical returns of TAA strategies and discuss some ways to minimize the gap between theory and reality. This is definitely an advanced topic but a critical one that I really never seen addressed in the financial blogosphere. First, let’s look at the three big reasons for the gap between theoretical and real returns for TAA … Continue reading
A quick follow up to my last post on risk management. In the approach I outlined in that post the first component of the strategy was to limit losses. I gave the example of limiting losses per trade to 1% of equity capital and my more conservative approach of 0.3% of equity capital per trade. Today I just want to highlight why this is so important. The table and chart below show the % loss versus the return required to get back to breakeven. This is simple math. If you have $1K and lose 50%, it takes a return of … Continue reading