In this series of Q&A posts, I’ll post some of the comments and questions under my ads or articles, as well as the answers to them.

This one is from the end of December 2021.

Comment

Still underperformed the market this year. The market made over 100% in the last year and half, while you are up 130% in the last 3 years. Nothing to brag about.

Answer

1. The profit of S&P500 “in the last year and half” since July is not > 100% but +54%. It’s obvious to me that you took the profitability of the market from the bottom of its decline in March 2020.

You can’t do that, because the risks have already been realized, which we had no way of knowing in advance. In data science, this is called Look-Ahead Bias and is a very gross error.

Take the period literally a few months earlier and you’ll see the profit drop from 119% to 46% and the drawdown increase from -11.1% to -35.5%.

2. My profit for 3.15 years is not 130% but 158% https://reallyeasytrade.com/trading-statistics-for-3-years/

3. My trading is market neutral, meaning a steady flow of profits from year to year. Whereas the S&P500 may not make any money for 10+ years and has a very low historical profit of 7% annually above inflation with monstrous drawdowns of 50%+.

4. You can’t compare returns for different time periods, the profit for 3.15 years should be compared with the profit for the same 3.15 years. 158% vs 77% SPY.

5. You can’t just compare absolute returns relative to each other; you need to compare profit (CAGR) / risk (MaxDD):

35.2/23.4 = 1.5 vs 19.9/35 = 0.57 1.5 / 0.57 = 2.63

My parameters are better than S&P500 not only in terms of profit but also in terms of risk/return ratio by more than 2.5 times.

6. The historical profit of S&P500 over the past 100+ years is no more than 7% above inflation and drawdowns of more than 50%, while my approach has been backtested with 50+ years of data and shows an expected return of 30% above inflation with drawdowns of no more than 30%, which is confirmed in real trading.

Such performance is physically impossible to achieve in accounts of billions of dollars due to the physical limitations of liquidity.

In accounts of up to several million, we can quite safely show these results because we have the advantage of a low base and instant execution of the volumes of our positions that large participants do not have.

This is an extremely large advantage that most investors do not know how to use correctly.