The New Age of Commodity Trading
Posted: Tue Sep 26, 2006 5:42 pm
Not sure what to call this subject, but what does everyone think of the markets for commodity trading over the past 2 to 4 years? During this period there has been an unprecedented amount of new money poured into trading the little commodity markets (compared to the huge equity markets) and a gazillion hedge funds setup to trade every conceivable edge their staff of MIT PhDs can dream up on their banks of computers.
It seems the really successful funds, like the SACs of the world, make the bulk of their money in equities - I guess since they have a bulk ton of money and can't stuff too much of it into commodities. Those funds that mostly trade commodities, like John Henry & Co., have not done too well these past few years - lower than typical measurements of other financial instruments (but of course over the long term they do very well).
When running backtests over the last 20 to 30 years, it shows a marked decline (or DD) in the past couple of 5 years on all types of systems. Yes, human nature never changes. Yes, the markets will come back. Yes, there will be a watershed of all this excess cash and the markets will start "behaving" again (meaning "trending" for many of us). Amaranth maybe an example.
Just musing here and wondering what others think about the markets in recent times. I am doing fine - making money - caught the usual trends in sugar, silver and nat gas on the way down - or at least my fair share of it. But there have been plenty of hits taken along the way with all this chop in so many markets.
Every now and then you hear or see someone claiming they are making 100 or 200 percent returns - and well they might be. But over many years I would think us independent traders would be doing well to be making anything like what a venture capital fund makes - which is on average around 40% ROI. In this current environment that would seem pretty hard to achieve.
Any thoughts?
It seems the really successful funds, like the SACs of the world, make the bulk of their money in equities - I guess since they have a bulk ton of money and can't stuff too much of it into commodities. Those funds that mostly trade commodities, like John Henry & Co., have not done too well these past few years - lower than typical measurements of other financial instruments (but of course over the long term they do very well).
When running backtests over the last 20 to 30 years, it shows a marked decline (or DD) in the past couple of 5 years on all types of systems. Yes, human nature never changes. Yes, the markets will come back. Yes, there will be a watershed of all this excess cash and the markets will start "behaving" again (meaning "trending" for many of us). Amaranth maybe an example.
Just musing here and wondering what others think about the markets in recent times. I am doing fine - making money - caught the usual trends in sugar, silver and nat gas on the way down - or at least my fair share of it. But there have been plenty of hits taken along the way with all this chop in so many markets.
Every now and then you hear or see someone claiming they are making 100 or 200 percent returns - and well they might be. But over many years I would think us independent traders would be doing well to be making anything like what a venture capital fund makes - which is on average around 40% ROI. In this current environment that would seem pretty hard to achieve.
Any thoughts?