The notion of a fraud as large as that perpetrated by Bernie Madoff intrigues me and offers a lesson for traders. Madoffs great sales hook was that his form offer very high returns – there is nothing unusual about this but what was unusual about Madoff is that he made this offer with a very smooth equity curve. Equity curves are supposed to be bumpy since they reflect the natural ebbs and flows of the trading cycles. Smooth equity curves are a warning that something is very wrong.
If you come across someone purporting to have a smooth equity curve and they are trying to sell you something then it is a con. So if you come across some plonker telling you that you can make 2% per week with no drawdown and no losing trades you know they are a crim.
