Better System Trader

Tomas Nesnidal has been a full-time trader for over 11 years, specializing in automated algorithmic trading strategies. He has experience with a number of trading styles, including option trading, spread trading, statistical arbitrage and market internals but in this episode we’re going to discuss one of his other specialties, breakout trading. In our chat we discuss the key components of a breakout strategy and how to combine them to create profitable trading strategies. We also discuss the degradation of strategies over time, how to add new life into old strategies and why creative thinking is such an important aspect of successful trading. In this episode we discuss The benefits of trading breakout strategies and what makes a good breakout strategy How to build profitable breakout strategies using 4 key components The degradation of strategies over time and how to add new life into old strategies Using filters to improve trading results Adapting strategies to market conditions The best timeframes and mark

Murray Ruggiero is the chief systems designer and market analyst at Tuttle Wealth Management, with around 200 million dollars under management. He is one of the world’s foremost experts on the use of intermarket and trend analysis in locating and confirming developing price moves in the markets. He is also a speaker, author and has been a contributing editor to Futures magazine since 1994, producing over 180 articles. In this episode we discuss various aspects of system development, including optimization, curve-fitting and creating robust strategies. We also discuss why strategies must have a premise, the importance and applications of intermarket analysis, cycles and a bunch of great questions from the audience. In this episode we discuss Factors to success in system development Why it’s important to understand the underlying premise of a system Techniques to reduce or avoid curve-fitting and develop robust strategies Why Intermarket Analysis is so important and how it can be used to create profitable trad

For those traders looking for an edge in every aspect of trading, today's topic is something that isn't discussed too much but has had a great impact on the 2 guests of this episode. The topic is collaboration in trading and the guests are Michael Cook and Kevin Davey. Both of these guests have appeared on the podcast before, with Michael being a guest on Episode 39 and Kevin being a guest on Episode 5 and Episode 38. Both have extensive trading experience too, successfully trading their own money and others. In this episode they share the impact collaboration has had on their own trading as well as why collaboration is so important, the actual benefits to traders, how to find the right people and tips to maximising effectiveness. In this episode we discuss Why it pays to put the work into strategies other people would find awkward or too difficult Why collaboration is so important in trading The benefits of collaboration and what you could be missing out on The different levels of collaboration and tips to

Larry Williams has been a guest of the podcast before, sharing insights from 50 years of trading in Episode 20. In 1987 he won the World Cup™ trading championship, turning $10,000 to over $1.1 million in 12 months. He is a published author, with a long list of best-selling books and has also created a number of market indicators including Williams %R, Ultimate Oscillator, the Williams Accumulation/Distribution Indicator, COT indices, cycle forecasts, market sentiment and value measures. In this episode we'll be discussing algorithmic forecasting, the methods and applications of forecasting, cycles and seasonality, plus some forecasts for the markets in 2016. In this episode we discuss Why algorithmic forecasting can be so interesting and so challenging Is forecasting just an academic exercise or can it actually be applied to real trading? The difference between Larrys forecasts and others made in the media How past cycles can project what may happen in the future How Larry actually generates forecasts based

We've been very lucky to have a number of trading champions on the podcast before and this episode we get to talk to another champion trader, Michael Cook, who won the World Cup Trading championships in 2007 (Futures), 2011 (Stocks) and 2014 (Futures). Michael worked in the institutional world for a number of years before leaving behind the banks and hedge funds to trade for himself. In this episode we'll be discussing how to increase returns with the same risk, using the market to determine stop levels, selecting a position sizing algorithm and the role of discretion in systematic trading. In this episode we discuss How a short statement from Larry Williams influenced Michael to enter the World Cup Trading championship and what we can all learn from it How Michael won the trading championship multiple times and the unexpected benefit of winning A method to increasing returns for a given risk Why market related stops make more sense that a fixed cash amount Position sizing algorithms and why fixed fractional

Happy New Year! The start of a new year is typically the time when people review their accomplishments and progress for the past year, and make fresh plans for the year to come. I thought it might be good to do a quick bonus episode with someone who knows all about setting goals and achieving them. That person is World Cup trading champion Kevin Davey, who was a guest of the show on Episode 5. Now this is a bonus episode so it’s a really short one but it’s full of great information, including the importance of goals in trading, common mistakes traders make when setting goals and the process to creating good goals. Whether you're an accomplished goal setter or just starting out I think you'll find value in what Kevin has to share with us today so I hope you enjoy this short chat on goals in trading. In this episode we discuss Why it’s important to have goals in trading The impacts of not having goals can have on trading success The types of goals appropriate to traders Common mistakes traders make when settin

In this episode we’re discussing the results of a quantitative study on stop losses completed by Cesar Alvarez of Alvarez Quant Trading. Cesar was also a guest of the show way back in Episode 3. Cesar was director of research for Connors Research for almost 9 years, developing quantitative trading models for individuals, prop traders and hedge funds. In this episode he’s going to share the results of a quantitative study on stop losses, also testing out some common pieces of trading advice to see if they're actually true. Stops can have such a huge impact on trading results so I'm sure traders of all levels will find this research invaluable.   We will be discussing backtesting results and some charts. We'll be explaining them for those who are listening along but if you’d also like to see the results while we discuss them, you can download a copy or even watch as a video in the show notes page at bettersystemtrader.com/37. I hope you enjoy Cesars discussion of ‘Stops - the Good, the Bad and the Ugly’. In thi

Creating robust trading strategies can be a difficult task, sometimes taking months or even years to generate something you find acceptable. Even then, once you start trading it live there is no guarantee it’ll work in the future. With strategy creation being such an involved process at times, how would you like it if you could just tell the computer the results you wanted and let it figure out the trading rules? Is it actually possible to create robust trading strategies that way? In this episode Michael Bryant from Adaptrade talks to us about automatic code generation, methods to exploit trade dependency and techniques to trade the equity curve. Michael has been trading the markets since 1994, providing trading systems for the futures markets and even managing money as a CTA. He is founder of Adaptrade, a company which provides innovative software tools for individual and professional traders. In this episode we discuss The traditional approach to creating trading systems and issues caused by this approach

Andrew Gibbs has been involved in the financial markets since 2001 and is the founder and CEO of Halifax New Zealand. Andrew has extensive experience in all forms of equity and derivative contracts, managing millions of dollars and trading a number of markets around the world. In this episode we discuss volatility and methods to trading the VIX plus the benefits and methods of including fundamental data in technical quant models. Topics discussed Instruments you can use to trade volatility and the benefits or disadvantages of each What makes the VIX attractive to trade and why it often trends over time The types of trading styles that suit the VIX The dangers of trading volatility products Seasonality in the VIX How to get started building volatility trading models Fundamental data and the types of fundamental datasets that work well in quantitative models Why some fundamentals work better than others The frequency of fundamental data release and how that dictates trading model style How to account for revis

Jay Kaeppel has over 25 years experience in the financial markets. He has worked as the Head Trader for a CTA and published a number of popular trading books on Futures, Options and Stock Market Seasonality. He also spent a number of years writing a weekly column titled “Kaeppel’s Corner” and publishes on his blog “Jay On The Markets”. He is now Portfolio Manager for Alpha Investment Management, offering strategies such as the ‘Alpha Multi-Income Strategy’ to investors. In this episode we discuss a number of seasonal tendencies, how they can be integrated into a trading model, the applications of the Known Trend Index and the reasons why most traders fail. Topics discussed The Santa Claus rally - what it is and how to trade it How to use seasonality to complement other models Seasonality tendencies around holidays Monthly seasonal tendencies and a simple monthly seasonal system that vastly outperforms stock index returns Boiling down the trading process into 4 simple words Using leveraged ETFs for seasonalit

Laurent Bernut was a systematic short seller with Fidelity for 8 years. His mandate was to underperform the longest bear market in modern history: Japanese equities. Prior to that, he worked in the Hedge Fund world for 5 years. He now runs an automated Forex strategy and travels the world with his family. In this episode we talk all about Short selling, creating shorting strategies, the challenges of implementation and how to manage risk. We also discuss the importance of exits, insights into Bear markets, autotrading Forex and why complexity is a form of laziness. Topics discussed The benefits of developing a strategy on the short side first and why long/short symmetry is important Challenges with executing short systems and solutions The most important aspect to worry about when short selling Finding short candidates in a Bull market and why you should ignore absolute performance Tips to creating profitable short strategies The importance of exits and how to test them Insights into Bear markets The 3 wrong

Thomas Stridsman has over 20 years experience in the financial markets. He was an editor for Futures magazine and published two books on trading system development and money management. He is now a fund manager at Alfakraft, specialising in short-term trend following strategies with a focus on dynamic size allocation and risk distribution algorithms. In this episode we discuss strategy testing, why you need to normalise metrics, tips to creating robust strategies and why he doesn't test entries and exits any more (and what to focus on instead). Topics discussed The differences between short term trend following and long term trend following Why backtesting metrics should be normalised to give an accurate picture of performance Why you should look to restrict the number of consecutive winners and losers The difference between a good model and a profitable one Tips to creating robust systems Trading costs and when to include them in testing Using standard deviation to determine system robustness How his system

Greg Morris was Sr. Vice President, Chief Technical Analyst, and Chairman of the Investment Committee for Stadion Money Management, overseeing the management of over $5.5 billion in assets.  He has been featured in the media a number of times, being invited to lecture about technical market analysis around the world. He is currently semi-retired, serving as a consultant and working on a few projects, including golf. In this episode we talk about the real definition of risk and how to manage it, the applications of market breadth and how the 'Weight of the evidence' concept can be used in trading. Topics discussed Why defining risk as volatility isn't accurate and what risk really is Can diversification actually be used to minimise risk? Why Rebalancing doesn't make sense The ‘Weight of the evidence’ concept and how it can be used in trading Why it’s important to test indicators over non-standard ranges What market breadth measures can reveal in market tops Different types of breadth and their applications in

A couple of weeks ago I went back through all the guests we've had on the show so far and realised how very fortunate we've been to have so many fantastic guests on the show, sharing their knowledge and experience, some of them with more than 50 years of trading experience! To be honest, I’d actually forgotten some of the topics we’d covered so far and going back through them was an excellent reminder of all the valuable information the guests had shared, so for Episode 30 I thought it might be a good idea to revisit some of the highlights from the earlier episodes so that those that haven’t heard them will go and listen to them, and those who have already listened may get some value out of hearing the highlights again. I know when I went back through them it reminded me of some things that I wanted to test or investigate further, and I really found it a valuable exercise so I hope you do too. This episode will cover some of the highlights from episodes 1 to 20; some of my favourites and some of yours. Topics

Alan Clement is a Certified Financial Technician, full time independent trader, quantitative trading systems designer and private investment consultant. He is also a councillor with the Australian Technical Analysts Association and contributes to the technical analysis articles for Fairfax press. In this episode we talk about Rotational trading systems, the impact of stops on results and alternatives to managing risk. Alan also shares some interesting tips into measuring system health, dynamic position sizing and anticipating trading signals. Topics discussed Rotational trading - entries, exits and managing risk Methods to measure momentum in trend following strategies The impact of stop losses in trading systems and alternatives to managing risk Tips to position sizing without a stop loss Using dynamic profit targets to reduce risk and increase return Why drawdown is not a single number Using Monte Carlo analysis as a dynamic position sizing tool Methods to determining current system health Factors to consi

David Aronson is a pioneer in machine learning and nonlinear trading system development and signal boosting/filtering. He is author of “Evidence Based Technical Analysis” and his most recent book "Statistically Sound Machine Learning for Algorithmic Trading of Financial Instruments" is an in-depth look at developing predictive-model-based trading systems. He was also an adjunct professor of finance, regularly teaching MBA and financial engineering students a graduate-level course in technical analysis, data mining and predictive analytics. In this episode David shares research into the effectiveness of indicators to identify Bull and Bear markets; he’s tested a large number of indicators and combinations with some interesting results! We also discuss issues with data mining, conditions where traditional methods of measuring data mining levels can be problematic and then finish up with the future state of Technical Analysis. Topics discussed What the popular Golden and Death Cross can tell us about the probab

Dr. Gary Dayton has been an active trader since 1999 and is President of a consulting firm that specializes in developing “peak” performance in traders. His approach to trading psychology is very different to the traditional approaches used by other trading coaches, introducing traders to the practise of mindfulness to not only overcome fear and other unwanted trading emotions but to develop the concentration and focus needed to trade successfully. In this episode we discuss why traditional approaches to controlling emotions don't work, the role of emotions in trading and how mindfulness can improve trading performance. He also shares some tips on how to get started practising mindfulness, the benefits it can have outside of trading and how the approach of Mental Parking can increase focus. Topics discussed Comparisons of sports and trading performance Traditional approaches to handling emotions in trading and why they don't work Why it’s impossible to suppress your emotions Landing a plane in the Hudson Riv

Robert Carver is an independent systematic trader who spent more than seven years working for one of the worlds largest systematic hedge funds. In this episode we discuss trading rules, what makes a good trading rule and the advantages of using continuous rather than binary rules. He also shares insights into over-fitting and the challenges of walk-forward testing that can make it impractical. Topics discussed What makes a good trading rule The advantages of simple rules Why only some trading rules are profitable Walk-forward testing and some of the challenges that can make it impractical How much data you actually need to determine if a trading rule is better than another Why choosing the optimal values during a walk-forward test is not the best approach and some alternatives Weighting trading rules Steps to avoid over-fitting Should trading rules be adjusted for individual instruments? Continuous trading rules compared to binary rules The applications and advantages of continuous trading rules What makes a

Brett N. Steenbarger, Ph.D. is a trader, psychologist and trading coach who has been actively involved in the financial markets since the late 1970s. He is the author of a number of popular trading performance books and consults for hedge funds, investment banks and proprietary trading groups. Brett has an interest in using historical patterns in markets to find a trading edge publishing measures and strategies on his popular TraderFeed blog. He is also a regular contributor to Forbes. In this episode we discuss creativity, static thinking and why it's important to have unique ideas for trading success. We also cover tips to increasing our creativity, why traditional trading rules need to be updated, the challenges of daytrading and how to overcome them. Topics discussed Three important components of successful traders Why the traditional rules of trading need to be updated Why traders get stuck in static thinking and need to be more like entreprenuers The two different types of trading brains and how u

In this episode Dr Van Tharp talks about beliefs and their impact on trading, the qualities of successful traders, adapting trading to market types, position sizing, trading mistakes and overcoming fear, perfectionism and impatience. Topics discussed How Van got started in the markets and the issues he faced initially The main reasons the majority of trades are unsuccessful How traders can identify the type of strategies that suits them What it means to trade your beliefs in the market How to assess whether your beliefs are useful or limiting The real importance of psychology in trading Your collection of parts and how they interact The process of transformation in a trader Qualities of losing traders and how to test yourself for them The impact mistakes could be having on your results without even knowing How to cope with larger trade sizes as your account grows PLUS listener questions on: Using position sizing to meet your objectives The 6 market types, how to measure them and how to apply it to your