I don’t have performance-standards for my trading. No goals for annualized growth figures or anything like that. That’s a recipe for stress and failure.
I simply start with “how much am I willing to lose?”. All I can control is how much I risk on each trade. Based on historical research and trading in real life over the past 13 years, I believe there’s a long-term edge in positioning with trends.
I know the near-term might not deliver enough big trends to make money, but that’s OK. I’m cool with that trade. I know I have to keep losses small in the meantime until big trends show up again.
Not everyone is cool with that though. Some people (both investors and managers) want to make money all the time. They want their metrics met. They have performance goals that must be hit or else.
Being an investment manager myself, the thought of being beholden to unreasonable investors who demanded I meet their metrics consistently no matter what means I’d be living under constant pressure. The threat of them firing me would always be lurking. How could I even follow my strategy properly?
We see this all across the investing community today. It’s not enough to outperform your benchmark over the long run, you must do so every year by a certain percentage while maintaining a higher Sharpe ratio and low correlation.
Good luck. Those investors aren’t for me. I like the people I’ve got. I may never achieve the highest AUM or have a fancy office in midtown Manhattan, but I know my investors well. They know me. They like what I do and how I do it. They don’t hold me to unrealistic standards I could never achieve.
And guess what? We’re all calm. We’re healthy. We’re not stressed out. And we perform just fine. I’ll make that trade all day long.