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Professional Traders Do Not Chase Returns

The easiest thing a laymen can do is chase returns. Chasing returns means investing in hedge fund managers or commodity trading advisors when they have a good run. Professional traders who understand compounding invest with other traders as well. What these professional traders do is buy draw downs and more importantly do their due diligence.

Good returns can be a magical elixir which can turn into poison. I had a discussion last night with a trading group whose founder had worked at commodity corp. Commodity corp was one of the power houses for commodity trading and trend following. We discussed a hedge fund who had interesting returns and of rather large size. However one of the founders of the hedge fund had been involved in a real estate development outside of the USA. The project failed and lawsuits started flying. All was well and good with the hedge fund or so it seemed. My thoughts I stated where, where there is smoke …there is fire. There are so many trading ideas out there it just was not worth trying to chase returns. I thought the hedge fund manager should have been focusing solely on his fund and not an offshore real estate deal. As in my own trading my passion is prevalent. When I invest with outside trend followers or commodity trading advisors I want to see the same passion. Trading is hard enough let alone when someone does not have passion.

Passion is one of the keys of success. When I invest in outside managers, I want world class commodity trading advisors or hedge fund managers. World class means they have been around for at least 10 years and have 15% CAR of returns on average. I will not settle nor should you.

Professional traders do not chase returns!

Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts, commodity options or forex can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results. You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources.

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