Qullamaggie on Drawdowns Are Part of the Game
“How do you keep a strong disciplined mentality through winning and losing streaks? Well, first you have to have experienced it all a few times before, like I blew up four times. So you know, I’ve had many drawdowns in my trading career—many drawdowns, you know, 10, 20, 30, 40%. So you kinda gain confidence.
You realize you know doubling your account in a month. Well, no, I don’t. It doesn’t happen too often nowadays, but it’s just part of the game. If you follow the rules and trade good setups, it’s just part of the game. Having drawdowns, especially after a big run, it’s also just part of the game. It’s just normal; you’re not gonna have a linear trading curve.
It’s like I saw a documentary on Netflix about the Madoff guy - the guy who kind of discovered it, was interviewed. When he saw Madoff, he looked into his pitch and saw his equity curve, and it was like linear. It looked something like this, and he said that guy’s a fraud. There’s nothing in real life in financial markets that looks like this.
In reality, the best stocks, the best hedge funds, the best investors. Their equity curves are gonna be like this. This is how it’s gonna be right? What? Why can’t I draw a line? Why can’t I draw a line? Oh no. Ah, why can’t I draw lines? Okay, here now, and this would be like the mean of the returns, right? This is how it looks in the Medallion Fund. It looks like this, like Berkshire Hathaway looks like this, Amazon stock looks like this, and Netflix looks like this, but this doesn’t exist. This is a scam.”
Howard Marks offers a contrarian view on investing:
"The investors who never finish in the top quartile are better than the ones who do."
He tells the story of a Midwest pension fund manager named Dave Van Bencotton who, for 14 years straight, finished every single year between the 27th and 47th percentile.
Howard contrasts Dave with a New York fund manager who had a catastrophic year — a value firm that bet heavily on banks, collapsed in performance, and then justified it publicly with this logic:
"If you want to be in the top 5% of money managers, you have to be willing to be in the bottom 5%."
Howard's reaction was immediate:
"I like the first guy better."
That juxtaposition became the title of his very first investment memo, written October 12th, 1990:
The Route to Performance.
Most investors visualise the normal distribution and think the same way: shoot for the upper tail, swing for the fences, find the massive winners.
Oaktree's approach is the opposite.
"Cut off the bottom tail."
Remove terrible from the equation. If your range of outcomes consists of fabulous, excellent, very good, good, not so good, and so-so — but never terrible — you'll be one of the best performers over time.
"Not after one year. Somebody else will swing for the fences and hit it exactly right and will be lionized for her performance that one year."
"Who can do it for 30 years?"
The lesson is to understand that in compounding systems, avoiding catastrophe is more powerful than hitting a home run.
"Yesterday we talked about the mindset of a consistent winner and the rules you have to follow to be successful. There's nothing complicated about those rules. Cut losses quickly, let winners run, add to winners not losers, trade in line with the market, don't over concentrate, pre-define your risk and so on and so forth.
It's one thing to know the rules, it's another thing entirely to follow them, religiously, on every trade. The interesting thing about trading is you can follow the rules perfectly 99x in a row and have huge success, but on the 100th trade if you violate 1 or more rules with a big position you can unravel all your previous success in virtually no time at all. 99 good decisions wiped out with one really bad one.
No different from a recovering alcoholic having one drink after 20 years of sobriety and starting all over again."
- Charles Harris "Trader's Journey Part 1"
Peter Lynch:
“I frankly think it’s a tragedy in America that the small investor has been convinced by the media…that they don’t have a chance.
That the big institutions with all their computers, degrees, and money have all the edges. It just isn’t true at all.”
There has been a lot of talk about how to use AI in investing.
This week, we sit down with someone who is actually using it to build real-world strategies.
We talk to Pictet Head of Quantitative Investments David Wright about how he and his team do it.
https://t.co/QCRI7O4eUa
Inside Two Sigma & AQR with Bill Mann: How Early Quants Built Edge Before the Modern Tools Existed
Bill Mann spent nearly 11 years across two of the world's most elite quant funds — AQR & Two Sigma — rising to Senior Vice President while building alpha models, establishing quantamental research teams, & designing the ML/AI systems that powered their forecasts.
"A real edge you used to have 15 years ago was creating your own version of someone else's data."
We cover:
- How Two Sigma's fundamentals team built proprietary data pipelines before vendors existed
- Why point-in-time databases were a secret weapon — & how look-ahead bias destroyed competitors
- The crowding problem hiding inside everyone's favorite value factor
- LLMs in quant research: what agents can already replace & what still requires human intuition
- Why junior quants are at risk — & the one mindset that keeps senior researchers irreplaceable
- How HarmoniQ Insights pivoted from advising buy-side firms to backing fintech startups with sweat equity
- The New Barbarians thesis: crypto natives meeting old Wall Street, & why both sides need each other
- Bill's one piece of advice for aspiring quants: build your own model, put real money behind it, learn from the losses
Timestamps:
00:00 Intro
00:57 Life as a Quant at Two Sigma
02:36 Finding Edge in Fundamental Data
07:04 Creating a Creative Quant Research Culture
11:19 How LLMs Change Quantitative Trading
15:52 AI’s Impact on Junior Quant Careers
22:56 Using AI Tools for Learning
23:57 HarmoniQ Insights: Advising Fintech Startups
30:47 The New Barbarians Podcast Explained
33:26 Crypto and Market Makers vs TradFi
34:54 Career Advice for Aspiring Quants
38:46 Final Takeaways
carlos: “the fitter you are, the lower your heart rate. the lower your heart rate, the less stress you feel. the less stress you feel, the more thinking capacity you have”
“it’s a lot easier to take decisions at 130bpm than to take decisions at 170”
👌🏼😮💨✨
Clement Ang achieved 150%+ returns this year in the USIC.
One of my favorite follows, Clement is inpsired by the likes of Minvervini, Gil Morales, Jeff Sun, Oliver Kell, Qullamaggie, and others.
Here are 6 great takeaways from his recent Traderlion Interview:
1. Never Giving Up
After a mix of shorting along with overtrading, revenge trading, and trading on tilt, Clement found himself in a 60-70% drawdown. He distinctly remembers sitting at his condo pool, having no idea how he would recover. Contemplating if he should give up, and if trading was for him for not. He took a 1-2 month break and rebounded by studying how stocks move, building his own modelbook, studying top traders, and coming up with rules for himself.
2. Loss Analysis and Stopping Drawdowns
At a dinner with USIC top performer Christian Flanders, Clement was recommended to 1) cut size when losing until you find traction again, and 2) do monthly loss adjustment exercises. "Hypothetically, if you change all those negative months to just -5%, what would your eventual return be?" Doing this, Clement saw the importance of minimizing drawdown. This was a turning point for Clement. He decided to join the USIC again for 2025, and his returns relfected the drawdown control this time around.
3. Calculating Agregate Profit and Loss for Trades He Shouldn't Have Taken
Clement took a total of 1,294 trades in 2025. Out of the 1,294, he found he was able to back out of about 500 trades that were not proper trades. When calculating the aggregate PnL for those trades, trades taken for reasons such as there was no setup but he felt FOMO, or an overtrading problem, he found it was a huge chunk. By removing for those 500 trades, he saw it boosted his profitability. Clement suggests to calculate what your returns would be if you removed for those trades. This is to bring into your consciousness not to make those same mistakes again.
4. Weekly and Monthly Reviews
Leaving his corporate job and becoming a full time trader in 2025, it imposed more pressure on him to perform. The pressure spurred him to take his reviews very seriously. With every trade he logs, he reviews them on a weekly basis. On each trade, you want to be tagging. “Which trades are mistakes, and what exactly is the mistake. Which trades did you execute well, and why - was it a perfect steup, what was the market like at the time.” At the end of the month, do a monthly write up. Doing so, you can really take a look back and see how you performed against your opportunity set.
5. Study Great Traders and Market History
Clement noticed the top traders say the same thing but in a different manner. Clement found traders he wanted to study. Gil Morales, Mark Minvervini, etc. Picked up on not just their methodologies, but also psychologically what they are thinking. Found commonalities, and implemented them into his own system. And with AI, Clement found it is easy to go back and read about market history. “History does not repeat, but it always rhymes. There are a lot of resources online, great X accounts that do fantastic hisoritcal charts. Go there, take it and study it. Run the history of the stock and why it went up, through an AI model, and build examples. This is a form of a modelbook as well." Study model book stocks and their historical precedence.
6. You Can Make Mistakes and Still Outperform
Despite missing big winners in 2025, $BE $IREN $MP, he only needed a couple of good winners to put on a good year. He advises traders to think longer term. "You have 252 trading days in the year to string together a good return. So don't be in a rush, expecially if you are not finding any traction, or trading poorly." - Clement Ang
If you are not already following him, highly recommend doing so. Witnessed him call out early and navigate the recent metals trade beautifully. Has great information and a great attitude towards the markets.
And take time to listen to his interview in depth. It's a great listen.
The primary reason people don't achieve big goals is because they don't realize that the only source of truth is making mistakes. They soak up advice and theory, expecting it to be an exact match to their mind, experience, and situation just to fail once and give up completely.
This is probably one of my favorite clips from Stanley Druckenmiller. Listen to it at the start of every new year
"We have always believed that January 1 is when the house starts. I think this is the reason we have not had a down year. When I am up, I will play much more aggressively.
I see a lot of managers get up 20% and say I want to book my year, I made my high watermark, lets go to the beach. I am the opposite. Frankly I learned a lot of that from George [Soros]. If you are up 20 or 30%, you are playing the house money, thats when you try to get up 60 or 70%."
Qullamaggie on Breakout Trading Works When Markets Are Strong
“Yeah, I mean look, the breakout trading like breakout trading works when the market is strong. You know, in a period like this, breakouts don’t work. And you won’t get any setups. That’s a good thing you can just know chill. You can take a vacation.
This is the Nasdaq. You know when the 10 day, the 20 day moving averages start sloping lower, and the 10 day gets lower than the 20 day, you know you don’t trade breakouts even if you see a good setup. You shouldn’t trade it, right? Same thing here.
Now I trade different methods, so I do trade during these periods. I do a lot of mean reversion stuff, but these periods you shouldn’t trade.
Like when they’re 10 day and 20 days start sloping lower, and the 10 day is below the 20 day, no trading. No breakout trading. And it’s fine you don’t have to trade every day every week every month.
Thisis where the big money is made okay. This is where you know you wait out the bad times, and this is where you know when the 10 day starts rising higher, the 20 day starts getting higher. The 10 is above the 20 day. This is where you double, triple your account, okay.
Then you have periods like these that are sideways. You know if you can break even during these times you got you know you’re doing a good job, and then you get a period like this again. You double, triple your account. Then you sit out some types of periods when the moving averages start sloping lower. The 10 and 20, and then you get a period like this where you double, triple, quadruple your account, boom.
And when the 10 day and 20 day start sloping lower, 10 day is below the 20 day that’s when you sit and wait. You go and enjoy life. Let the amateurs trade, let them churn their accounts. Let them blow up. And when the times get good again that’s when you double triple your accounts.”
A Navy SEAL, a Fortune 500 CEO, and a chess grandmaster all read the same book.
None of them play tennis.
The Inner Game of Tennis by W. Timothy Gallwey is the best performance psychology book ever written.
Here are 10 best quotes:
Trading psychology is one of those topics that’s endlessly debated. Plenty of people dismiss it outright and insist it doesn’t matter. For me, it’s been one of the biggest drivers of my success. Once you’ve come across strategies with real alpha, the challenge shifts from discovery to preservation. This means maintaining that edge and knowing when to press the gas and when to let off the gas. That ultimately comes down to statistically grounded evidence paired with psychological discipline in your process especially during the bad times.
I’ve been obsessed with this game for more than 15 years. And have practically dedicated my life to the art of what it is. That obsession shows up in the small, often unglamorous things I do to make sure I’m operating at my best when it counts.
Those “small things” include constantly reviewing strategy performance, spending time on idea generation and optimization, digging into alternative data sources, and revisiting old edges and understanding why they stopped working and what conditions might bring them back. It also means going to conferences, understanding who’s doing what and why, identifying the top players in the space and studying their behavior/ tendencies/ thought process, and just as importantly, understanding what the weakest players are doing and where and why they tend to fail.
Some of the external aspects may sound like cliché fitness/ health -social media nonsense (which is why I’m hesitant to share them), but it’s hard to argue that you can consistently make sound, second by second decisions involving hundreds of millions of dollars while running on two hours of sleep. There is a point of optimality that you can bring your mind and body to.
The broader point is simple, in any serious craft, success comes from the work you put in outside of the baseline effort that everyone else is willing to do. Baseline efforts will always yield baseline results.
Qullamaggie on Dan Zanger
“Dan Zanger, I think he is great. I learned a lot from Dan Sanger. Love your stops, not your stocks. Best motto ever. It’s the same; it’s the same thing again. Dan Zanger too—like he studied what works in the markets. He made tens of millions, and in a few years, he’s probably made 100 million since.
Well, he has a lot of articles on the internet, but you can also subscribe to his - I went through all his old newsletters from the 90s to like 2012, reviewing every single newsletter. I just looked at what he looked for regarding the chart patterns. It’s the same thing I look for now.
It’s just these simple patterns I talk about all the time, like these channels. You have a big momentum stock that goes up and builds a channel. You have a big momentum stock builds a channel this way. You have a momentum stock does something like this with higher lows. These triangles channels high tight flags.
It doesn’t matter if you learn from Minervini, Zanger, it’s the same thing. Or Stockbee. It’s the same thing over and over.
It’s so easy you just need to train your brain to see these patterns.
On the strongest stocks that’s the key. Not some random piece of shit. People keep posting these random stocks that have these bull flags. But you need the strongest stocks. You don’t have an edge trading some random shit stock.”
How to become expert at thing:
1 iteratively take on concrete projects and accomplish them depth wise, learning “on demand” (ie don’t learn bottom up breadth wise)
2 teach/summarize everything you learn in your own words
3 only compare yourself to younger you, never to others