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I've read this idea in a few Quants interviews and articles. The quants are Dalio and Winton. Their fund mention something along the lines of targeting a % of return or % of drawdown. What do they mean by that? How do you go about targeting a certain level of return with the lowest risk possible? The first thing I considered was MPT, but then given that these are trend followers, I doubt they believe it the idea very much.

Any idea where I should start digging? I am sure there is some sort of theory and research in other fields that can be applied here, but I cant seem to figure out what.

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This is just a broad appeal to build a strategy, so it's not really an answerable question. It's like asking, "how do I do a start-up that's guaranteed to succeed?" – chrisaycock♦ Apr 21 '12 at 12:25
@chrisaycock: I believe that this question could be recast in "value at risk" terms. (I don't know how to do this.) If so, might it be a candidate for reopening? – Tom Au Apr 26 '12 at 20:45
Any question can be reopened if it's edited to be in scope. But as you say, I'm not sure how this could ever be made in scope. – chrisaycock♦ Apr 26 '12 at 21:06

closed as off topic by SRKX♦, chrisaycock♦ Apr 21 '12 at 12:25

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