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Re:Day Trading for a Living? by simtel20 on Wednesday September 11, 2019 @10:35PM (#20947280)
The issue with LTCM wasn't just that they didn't test sufficiently - the problem is that traders could take positions without supervision and any accountability. My understanding is that any firms that survived that period (and I believe they were all pulling the same shenanigans as LTCM, just maybe to a lesser degree) now have risk management because unlike Lehman/Bear they can't just foist that risk off onto the public market. No one at the head of a multi-billion dollar hedge fund wants to stop being there if all they have to do to endure is pay for risk management.

*edit: I'm not a serious student of this aspect, but I recall that none of the top independent hedge funds took a bath in the 2007+ collapse (that is, those that weren't in-house funds from a major wall st. company). They all had their risk management in order and all did pretty well in buying distressed assets. Some like Bridgewater really managed to grow non-stop right through that.

Re:Day Trading for a Living? by PorterDuff on Wednesday September 11, 2019 @10:48PM (#20947361)
As I remember the book, they back tested quite a lot. It's just that whenever they went live with trading reality changed on 'em. Go figure.
Re:Day Trading for a Living? by simtel20 on Sunday September 15, 2019 @12:13AM (#20975541)
They were exposed to a margin call. Trading reality changing or no, if you can get taken out by your prime broker at the end of the day, you need to account for that too and they didn't.
Re:Day Trading for a Living? by tim333 on Thursday September 12, 2019 @10:32AM (#20951878)
One thing backtesting misses is the other market participants may see what you are up to in live trading and try to take advantage. That was a big factor with LTCM.