*Drawdown - PursuitOfEdge/books GitHub Wiki

Monroe Trout

  • 1.5% risk per trade
  • 4% max dd / day (was only hit twice in 2 years)
  • 10% max dd / month
  • 10% max dd overall

Larry Hite

  • 1% risk per trade

Steve Burns

  • 1-2% risk per trade
    • recommends 2% risk per trade at $10k, 1% risk per trade at $50k, 0.5% risk per trade at $100k
  • 5% max dd / month
  • 20% return + single-digit drawdown + less than 1 hour a day to operate = holy grail

Jason Shapiro

  • 0.7% risk per trade
  • 10-20% target vol
  • 34% return
  • 16.1% maxDD

Paul Tudor Jones

  • 10% max dd
  • 1:5 RR

Bruce Kovner

  • no more than 1% risk per trade personally
  • recommends 1-2% risk per trade (5-10% that novices try to use is too much)

Michael Marcus

  • 5% risk in one "idea" (which could be multiple positions from different strategies)

Tom Basso

  • 1-3% risk per trade
  • 6% was biggest loss ever on silver

Michael Platt

  • 0.25% risk per trade
  • 14% return
  • 5% max dd discretionary, 3% max dd flagship fund

Warren Buffett

  • 0.76 sharpe vs. the 0.5 market sharpe

Ed Seykota

  • only speculate with 10% of liquid net worth
  • 1% risk per trade

Peter Brandt

  • writes if more than 3% risk per trade then plan to go bust, and personally uses only 0.5% himself

Charlie Burton

  • no more than 2-3% risk per trade

Duomo

  • 2% risk per trade

Jack Schwager

  • wrote when Market Wizards 1 came out and Larry Hite recommended 1% risk per trade, that seemed conservative to him. but now he thinks that's extremely aggressive and only uses .10%

Bill Lipschutz

  • 1:3 RR for short-term trades, 1:5 RR for long-term trades

Mark Minervini

  • on average you should not be risking more than 1.5% per trade; 2.5% max if you are experienced and really on top of things

Daljit Dhaliwal

  • cut in half at 5%, cut in half again at 8%, stop trading at 15%

William Eckhardt

  • no more than 2-2.5% risk per trade (the Turtles used 2%)

https://abnormalreturns.com/2012/06/13/ed-thorp-on-trend-following-an-excerpt-from-hedge-fund-market-wizards/ Ed Thorpe

  • drawdown of 5-10% start reducing positions by an additional 1%. 20% would have been shut off. before hitting 20%, should realize the system is not as good as it seems and shouldn't be traded. maxdd got to 14-15% which they were trading 1/3 of original size.
  • 1/10 or 1/20 Kelly for trend following

Tom Dante

  • 2% risk per trade

payout; maximum daily var/halved/fired

Millennium standard deal

  • start $100m, halved at 5%=$5m, fired at 10%=$10m, this is to restrict a manager's loss to 7.5%

stat/vol arb

  • typically require 3-5% max drawdown and 2+ sharpe

Citadel and Schoenfeld

  • 1-2% tighter than Millennium

https://www.wallstreetoasis.com/forum/hedge-fund/multistrat-terms-for-pms

  • Millennium Macro
    • 18%; 2.5/5/7%
  • Balyasny Macro
    • 16%; 1/5/10%
  • Bluecrest
    • 3-4.5% max dd to get cut in half, lose another 3% and get fired. this is to restrict a manager's loss to 10%

https://www.wallstreetoasis.com/forum/hedge-fund/balyasny-asset-management Balyasny

  • _/2.5/5%

Bluecrest

  • ; _/3/6%
  • most have a 0-1.5 sharpe, 2 is good but not incredible, real outliers are 3+. less than 5% of top traders at all banks have hit 3+
  • 0 negative years

general

  • just have to make low single-digit returns even 2-3% is enough with high liquidity that works at size
  • low vol and low return can have sharpe 1, leverage to any risk within reason. some PMs have a vol of 3%, return of 4$, correl of 0, and make millions

https://www.buysidehustle.com/the-basics-of-working-at-a-multi-manager-hedge-fund/

  • ~2.5-5% drawdown
  • relative neutral, 50% long/short
  • usually only deploy 60% of capital at a time
  • aim to make 1-5% per year

https://www.youtube.com/watch?v=YXSwLaXnjGg&ab_channel=InstituteofTrading

  • market-neutral e.g. 25 positions long + 25 positions short
  • 2% max position size
  • aim for 20% return with 15% vol = 1.33 sharpe

https://www.wallstreetoasis.com/forum/hedge-fund/performance-of-the-best-pms-at-mms

  • max dd = X; vol = X/2; 2+ sharpe if stellar year, PnL = X
  • 2-3% vol, 4-6% return = 2 sharpe, fired at 5% max dd
  • 2% is a solid year for market neutral strategy, 4% is exceptional by maybe only 5% of teams

https://www.wallstreetoasis.com/forum/hedge-fund/what-ive-learned-about-hedge-fund-structure-and-compensation

  • 1.5/2.5/5% dd limits

https://www.wallstreetoasis.com/forum/job-search/tried-to-start-my-own-fund-not-really-working-out-what-should-i-do-from-here

  • 1.5 year track record
  • under 5% max dd
  • 1.5+ sharpe
  • 2008/2009 max dd under 10%

https://www.wallstreetoasis.com/forum/hedge-fund/ask-me-anything-buy-side-systematic-quant

  • live sharpe 2-3
  • backtest sharpe 4-5
  • 1-1.5% vol
  • 2-3% max dd, fired at 5%

https://www.joincolossus.com/episodes/36513013/balyasny-building-a-better-model?tab=transcript

  • aim for 7% annualized vol, 2 sharpe

https://www.wallstreetoasis.com/forum/trading/do-i-have-a-good-strategy

  • typically 1/5/10% or 1/4/8%
  • most large equity market neutral quant funds go for 3-6%

https://www.mondrian-alpha.com/articles/macro/millennium-year-in-review#:~:text=Max%20drawdown%20is%202x30%20and,capital%20in%20any%20given%20timeframe.

  • 3-4% average vol per strategy
  • 4-5% max cumulative drawdown, capital is halved after first time hit, then reduced to 3% for next cycle
  • VaR limit 1.75-2.5%
  • 4.75-6% stop losses
  • 4% max drawdown
  • deploy 60-75% of allocated capital

https://www.wallstreetoasis.com/forum/hedge-fund/starting-off-a-pa-riskdrawdown-limits

  • starting drawdown limit should be the stdev of the asset class e.g. long-only equities is ~16% so at 2x leverage the drawdown limit is half of that = 8%

FTMO

  • 10% max dd
  • 5% max daily loss

My Forex Funds

  • 12% max dd
  • 5% max daily loss

5%ers

  • 4-6% max dd
  • 2% risk per trade

Earn2Trade

  • 10% max dd
  • 3.55% EOD dd, 2.2% daily loss limit

SMB Capital

  • 2% max daily loss
  • start at $500 max daily loss, every 2 weeks get bumped up or down

Topstep

  • 2% max daily loss
  • 3% trailing max drawdown

LMI

  • 2% max daily loss

Chasing Returns

  • 5% max daily loss

CME Group

  • 2% risk per trade

Warrior Trading

  • 1% risk per trade

OneUpTrader

  • 2.65% max daily loss

DTTW

  • 2% risk per trade

https://tradethatswing.com/setting-a-daily-loss-limit-when-day-trading/

  • 2-3% max daily loss, 3% is the most anyone should be losing in a single day; 1% risk per trade
  • if beginner: 0.25-5% risk per trade, daily loss limit 1.5%

https://www.thebalance.com/why-day-traders-need-daily-stop-loss-1031384

  • 3% max daily loss

https://help.darwinex.com/var https://coda.io/@darwinex/pivot/risk-benchmark-3 Darwinex

  • 6.5% monthly VaR, 22.5% ann, 1.45% daily, this is also the average of the SP500 index
  • drawdowns above 10% investors start to sell, at 15-18% they sell 50% of their investment, so 10% max is bearable for most

Apteros

  • 8% max drawdown
  • 3% daily loss limit

SMB Equities Tryout

  • 1.333% daily loss limit, 3 exceptions per month, 7 exceptions total
  • 6.666% max drawdown
  • less than 0.5% risk per trade