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Strategies & Market Trends : ACRT going to Zero -- Ignore unavailable to you. Want to Upgrade?

To: Doug R who wrote (317)	5/23/1999 9:58:00 AM
From: Daniel Chisholm	Read Replies (1) \| Respond to of 320

At 3 weeks into May, proper timing has put me up 180% for the month. On how much of your capital? At what leverage? Note that I have nothing against making big bets, nor nothing against using leverage. It's just that to say you're up 180% is meaningless without some further context. If you placed 100% (or more) of your capital at risk, and made 180% on that in little under a month, it would seem to me that you may have taken an enormous risk of permanently losing a substantial amount of your capital, in the event that something went wrong with your position or the market. For example, if $10,000 is all the trading capital I have and I spend all $10K on lottery tickets, winning $28,000, I might claim to have "made 180%". Anyone would probably agree however that I took a needlessly large risk of losing (statisitically) about half my trading capital. On the other hand, if I "invested" $100 of my trading capital in lottery tickets, and won $18,000 with that, I might also claim to have "made 180%". However, when someone criticizes my investing methodology (buying lottery tickets), I can at least point out that I was only risking (statistically) about $50 of my trading capital. (Sorry about the lottery ticket analogy, I really don't mean to suggest that your investments are comparable to lottery tickets) It is for this reason that when people ask me what sort of percentage returns I make on my portfolio (consisting almost entirely of shorts), I answer them "I don't know". They seem puzzled by this, and I have to explain that I honestly haven't figured out a fair and representative way to translate the dollars I've made into a comparable "xx% per year" figure that one could fairly compare to buying blue chip stocks or buying bonds. If anyone here has figured out a way to fairly describe one's gains or losses, I'm all ears and would appreciate hearing about it. - Daniel