Really Rich Guys - Top 10 Traders

[JoseGonzlez]

i used to work in the day trading industry and had 3 or 4 good years (just smalltime stuff compared to these guys but i was paid a few hundred K a year) (my trades dont work anymore.)

in all honesty it was not stressful at all. the lows and bad luck runs were never as bad as poker.

these guys dont have it as rough in the stress department as someone fulltime pokering and they are paid alot better.
in all honesty the guys who are uber successful at poker have alot of skills they need to do this type of work and at its roots is very similar.

so yeah if anyone has any opportunity to get into the trading business and is good at poker the skills transfer over really well.

[RunDownHouse]

crazy,

I thought Buffet had been a stud for three decades or more. Am I wrong? If not, is he a complete outlier or aberration? If not, what's the problem in your correlation between Kelly curves and market success?

My understanding of the Kelly criteria come almost completely from a paper by Stephen Levitt (author of Freakonomics), in which he discusses NFL gambling markets. From what I picked up, Kelly's criterion dictate an optimal bet size that dictate a bet size that guarantees NOT going busto.

Assuming that my understanding of Kelly is correct - that a perfect Kelly bettor has no chance of going busto, as you stated - I'm not sure where the disconnect is.

[El Diablo]

stox,

Let me translate for you:

Barronspeak: "guy who owns the hedge fund i work at is easily worth 20bil."

English: "guy who owns the hedge fund i work at may be worth over a billion dollars."

[ed8383]

my question would be, can an average joe do this? can an average joe pick up a bunch of books, learn the market and make himself rich if he is good enough and lucky enough? don't you need money to make money in this field? (unlike poker where a small deposit can lead to great things if you're good)

[xxThe_Lebowskixx]

Barron,

Lets kidnap him and extort randsom.

[ChipStorm]

[ QUOTE ]
my question would be, can an average joe do this? can an average joe pick up a bunch of books, learn the market and make himself rich if he is good enough and lucky enough? don't you need money to make money in this field? (unlike poker where a small deposit can lead to great things if you're good)

[/ QUOTE ]
Short answer is no. I work on an energies trading floor (gas, coal, electric power), one of the very few to have survived and prospered over the last 10 years. (I've been there 7 years.) IMO:

1. Poker skills would and do transfer well: successful traders are analytical, highly disciplined, almost never tilt. But,

2. Successful gas traders know much more about the gas market than could be learned from books (and there are some pretty specific books). It's complicated, and they need to be 100% up on its structure and on current events. The books only get you to rank amateur status.

3. Successful traders require significant organizational support: capital, custom analytical tools, colleague traders working related markets. It's a team game. While the distribution of return results is going to be insanely broad (6-10% one-day moves in gas occur with alarming frequency), trying to go the gas market alone would amount to infinite arrogance.

[Benal]

[ QUOTE ]
don't you need money to make money in this field?

[/ QUOTE ]

For the most part yes, although anyone can get lucky with some penny stock that ends up curing cancer or something.

[bottomset]

[ QUOTE ]
stox,

Let me translate for you:

Barronspeak: "guy who owns the hedge fund i work at is easily worth 20bil."

English: "guy who owns the hedge fund i work at may be worth over a billion dollars."

[/ QUOTE ]

yeah only 4ppl are at 20billion in the US, 1billion could happen

[crazy canuck]

[ QUOTE ]

I thought Buffet had been a stud for three decades or more. Am I wrong? If not, is he a complete outlier or aberration? If not, what's the problem in your correlation between Kelly curves and market success?

[/ QUOTE ]

Yes, he is a stud. But like DcifrThs said the top traders/investors must be taking on excess risk, otherwise they would not be on top.

Maybe there is an investor with Buffet's exact skill who blew up after 10 years and nobody knows about him. And there might someone else who made good money for 30 years but not money people know about him because he didn't take on too much risk. For example Ed Thorp (yes the blackjack guy) comes to mind.

In Kelly betting the percentage of the current bankroll to be bet is proportional to your edge. If you're edge is 10%, it means that you have 55% winners in a game where the 2 outcomes are doubling your bet or losing it. So this means your supposed to be betting 1/10th of your roll! If your edge is 20% (so you have 60% winners), you're supposed to be betting 1/5th! While you'll never go bust the variance of such a strategy is extremely high.

Therefore, even half Kelly is too much risk and quarter Kelly seems to be much more optimal.

[DesertCat]

[ QUOTE ]


Maybe there is an investor with Buffet's exact skill who blew up after 10 years and nobody knows about him. And there might someone else who made good money for 30 years but not money people know about him because he didn't take on too much risk.

[/ QUOTE ]

Someone who has Buffett's skill set would never blow up. He takes little risk, never uses leverage except in some small merger arb subsets of his portfolio. He's got 50+ years with only one down year (-6%) so his results aren't volatile. Most top value investors follow the similar strategies, which is why they don't blow up either.

The most interesting traders to me are Cohen (SAC) and Simons (Renaissance). Both charge massive fees, have large funds and still crush the market after fees for long periods. Simons supposedly uses much less leverage than other funds. Both of these guys should be figments of our imagination according to "A random walk down wall street".