| Fund or
affiliation
Methodology
- Trading the futures
market using a combination of discretionary and
systems based methodology.
Research Techniques
Employed
- Trout’s staff
monitors the slippage in each market, and of each
broker that they use, on a daily basis.
- They test out many
models and systems on every combination of
markets and interval relationships; and screen
out models and relationships that they cannot
make logical sense to explain. (versus trend
following)
Trading Techniques
Employed
- Due to Trout’s
floor trading experience, he has a good eye for
picking out where stops are going to be.
- 50% of Trout’s
trading is determined by systems, but he
exercises discretion as to how he executes the
trades.
- The other 50%
includes "magnet effect" and
information flow from the floor contacts. Trading
against locals, and trading along players they
repsect.
- Trout likes to trade
the "magnet effect", the tendency of
markets to get to round numbers. In these
situations, he monitors the noise level on the
floor to decide whether the market would trade
through that number.
Risk Management
Techniques Employed
- Loss limit of 1.5%
on every single trade; will liquidate trade if
breached.
- Loss limit of 4% of
total equity on every day; will liquidate all
positions and stop trading for the rest of the
day.
- Loss limit of 10% of
total equity per month; will liquidate everything
and stop until next month.
- At the end of each
month, they decide the maximum volume they will
trade in each market.
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Philosophy
and beliefs
- Believes that
whoever has the highest daily Sharpe ratio is the
best trader.
- Trout believes his
success is explained by:
- Good research, being
their edge.
- A rational approach
to money management.
- Pays a very low
commission.
- They have the best
execution in the business.
- People who work for
him keeps a large part of their net worth in the
fund, including 95% of his.
- Trout thinks that
the minute he doesn’t have fun trading, he
would quit.
- If he is in the
business of picking CTA’s, he will base on
the total dollar profit extracted from markets.
- He believes in
moving averages, but not in Fibonacci
retracements, Gaan angles, RSI and stochastics.
History and other
facts
- Trout did his senior
thesis at Harvard on stock index futures, the
conclusion of which is that the probability of
very large price changes is much greater than
that assumed by standard statistics.
- Trout went to work
for Victor Niederhoffer who also studied at
Harvard.
Performance Record
- 67% over 5 years:
"Over the 5-year period surveyed, his
average return was 67% but, astoundingly, his
largest drawdown during that entire period was
just over 8%."
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