[kimchi]

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Just wondering, do any traders here work without leverage?

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I used to trade ETFs without leverage (not through choice, but because they were held in a tax-free account that didn't allow leverage).

I would have done better just buying & holding the funds I traded - although I made gains while only being on average invested 30% in equities at any one time. If I could have used leverage, then obviously I would have done better.

People always think leverage and futures etc. are risky. The S&P500 futures contract is known as 'the rocket' for being very volatile - but its not. It's just that most people who trade it don't have sufficient enough capital to employ proper position sizing and risk management.

Leverage is only risky if you don't employ proper risk management.

That Niederhoff link won't open for some reason, but I suspect that since he was using OPM, then he took on riskier positions which is a definate incentive to do due to hedge fund manager's payment/commission schemes. These payment stuctures emphasise them striving for huge gains in a single financial year at the expense of long-term risk management.

I suspect that given a fee structure which favoured risk-adjusted returns, he would stop busting out every couple of years. But then 'investors' love to gamble.

I read some interviews a while back with some famous hedge fund traders from the 80s & 90s (Market Wizards books maybe?) and if they had a year returning much over 25% then they would look again at their risk-management and search for ways to reduce risk.