So here it is: The Top 10 Trading Lessons for 2016!
I have to admit, creating this list was really fun. Not only because I got to look back and remember all of the great episodes we released and the knowledge that these fantastic guests shared with us, but also because I had the chance to think about the impact these episodes hopefully had on your trading too.
This Top 10 List was chosen based on a few factors, including download stats, feedback from listeners and some of my own personal favorites. So although this list is not solely based on analytics, each episode was chosen with the intention to offer powerful trading insights as you move into the new year.
So if you missed any of these episodes, make sure you listen to them before we ring in the new year!
Also make sure to download the FREE BONUS audio package — This audio contains the biggest trading lessons from each of the guests in this Top 10 list and I compiled them to make sure we all learn from their insights. It’s only short but it’s packed with valuable info!
One last note: NONE of this would be possible without you and your support. So I want to THANK YOU for a fantastic 2016!
So (drumroll please…..) here they are: My Top 10 Trading Lessons for 2016
As markets become more mature and more efficient, it can be become increasingly difficult to find sustainable edges.
Many traders are looking at the same data and using the same techniques, so what are our options here?
2 of the obvious options we have are:
In this episode, our guest Bert Mouler is going to discuss both options and share his solutions.
Bert has been an independent trader for close to a decade and is the President and CIO of Profluent Capital, which uses advanced AI and machine learning technology to produce uncorrelated alpha for their clients.
In our chat today, you will learn:
Most trading strategies have an optimal type of market condition where they work at their absolute best, so having an understanding of market conditions and being able to detect and adapt to them can really have a huge impact on trading performance.
But how can we measure market regimes properly?
What techniques can we use to find that delicate balance between stability and reactivity so that it improves performance rather than reduces it?
Our guest for this episode, Alan Clement, has completed considerable research into market regimes and is going to share his knowledge with us today!
Alan is a Certified Financial Technician, full time independent trader, quantitative trading systems designer and private investment consultant.
In our chat today, you will learn:
The performance profile of Mean Reversion is extremely desirable to a lot of traders.
Mean reversion trading strategies can produce high win rates and a smooth equity curve, however there are risks, which can result in giving back a large portion of profits, or of your trading account, some times in a very short period of time.
So what can you do to build mean reversion strategies that produce consistent profits while managing risk effectively?
Todays guest, PJ Sutherland, is here to share the knowledge he has gained from years of research and trading mean reversion strategies, and as you’re going to hear, he has some really interesting insights to share with us.
PJ has extensive experience in the development and deployment of quantified trading systems and has been active in the market for the past decade.
He is the founder and director of Alpha Investment Advisors, providing research to hedge funds and prop trading firms, and the founder of the website Quantlab for private traders.
In our chat today, you will learn:
There are a number of different aspects to trading that we really need to get a handle on to increase our odds of success. Some aspects we often put a lot of thought and analysis into, and others we may not consider so carefully or at all, which could be impacting our trading results without us even realizing.
Todays guest, Dr Howard Bandy, is here to discuss the foundations of trading, and some of these aspects we really need to consider, whether we’re just starting out or a more experienced trader.
Howard has over 50 years experience in the research and application of modelling and simulation of financial systems.
He has previously worked as a senior research analyst for a CTA firm, is a consultant to trading companies and individuals, as well as being an international speaker and publishing a number of books on quantitative trading systems.
In our chat today, you will learn:
Why is it that some traders can create trading strategies that perform well in real-time trading while other strategies fall apart?
How do some traders keep their trading strategies fresh and adaptive to market conditions while other strategies just stop working altogether?
Robert Pardo, president of Pardo Capital, author of the book ‘The Evaluation and Optimization of Trading Strategies’ and creator of the ‘Walk Forward Analysis’ approach, is here to chat about creating and optimizing strategies that are robust and continue to work in the future.
In our chat today, you will learn:
Who wants a steadily rising equity curve with little or no drawdown? I'm sure most traders do, but unfortunately it doesn’t usually end up that way.
Drawdown is a big part of trading and can be one of the the biggest challenges traders face, so what techniques can we use to potentially help reduce drawdowns?
Our guest for this episode, Scott Phillips, is going to share techniques he uses to manage drawdowns in his own trading.
In our chat you will learn:
Building robust trading strategies that can detect and adapt to market conditions can be a real challenge, and failure to do so can often result in poor trading performance and drawdowns.
How can we build more robust trading strategies that adapt to market conditions as they change?
Our guest for this episode, John Ehlers, who has a guest on episode 48, joins us to share some common problems traders face when building trading strategies along with tips on how to overcome them.
In our chat you will learn:
Trading algorithmically based on sentiment data is a relatively new field compared to more established approaches. With the explosion of social media and computing power, the analysis of sentiment data has also increased, with some hedge funds committing considerable resources to researching the applications of sentiment data in trading.
However, there is also some skepticism of the value of analyzing social media for trading, so what is sentiment trading all about? Can sentiment actually be used in trading models and how?
Our guest for this episode, Richard Peterson, has been analyzing sentiment for over 20 years. He started what was probably the world’s first fund specializing in sentiment trading, and now runs a company called MarketPsych, specializing in the collection and analysis of sentiment data.
In our chat you will learn:
Whether you’re a retail trader with a small account or a fund manager with millions or billions under management, something that we all need to consider carefully as traders is how or where we’re going to use the money in our trading accounts.
'Capital allocation' sounds boring but it can have such a huge impact on our trading results. Unfortunately, it can sometimes be overlooked for other aspects of trading like entries and exits, leaving traders with an inefficient use of their capital and can result in lower returns and poor performance.
Can we use our trading capital more efficiently to achieve higher returns? And if we can, then how?
Todays guest, Michael Melissinos, started out as a junior analyst at Bear Stearns and is now running his own systematic trend-following fund Melissinos Trading.
Mike is a competitive guy, always looking for ways to improve his trading performance and in today’s episode he's going to share with us some practical ideas and research, including:
Today’s guest is a trader that has been requested quite a few times actually, I’ve had a lot of requests to have this person as a guest on the show, and the guest is Adam Grimes.
Adam has two decades of experience in the industry as a trader, analyst and system developer and is currently Chief Investment Officer of Waverly Advisors.
He’s previously held positions at Level Partners, MBF Asset Management and SMB Capital and is the author of ‘The Art & Science of Technical Analysis: Market Structure, Price Action & Trading Strategies’.
For those of you that know Adam and his work, his approach to trading is a mix of quant and discretion, and I think even if you’re a purely systematic or quant based trader it’s interesting to hear other people’s approaches and points of view.
So we start off the chat by discussing his approach of mixing quant and discretionary models, and then we move onto behavioral factors in the market and why approaches that look at the market as purely rational fail.
We then end the chat discussing Keltner channels and their applications to trading, so there’s quite a variation in topics here but I’m sure you’ll find it interesting.
When I was preparing for the previous podcast episode on system trading through the Brexit, I had to review some of the past podcast episodes so that I could include some background content for the guests, and as I was going through some of those past episodes I realized that there was so much great information in them that I had already forgotten about.
I even found some concepts or ideas that didn’t really catch my interest because it wasn't appropriate to my trading at the time but it’s now more relevant to me personally, so I thought it might be time to do another review of some of the past episodes as a reminder and to perhaps gain or reinforce past insights.
Last year, we did a podcast episode where we reviewed episodes 1- 20. That was episode 30 if you’d like to go back and hear that.
In this episode we'll review lessons and highlights from episodes 21-40. Some of the topics we’ll be discussing are:
The results of the Brexit decision took a lot of people by surprise and the markets reacted accordingly. What was interesting about this market event is that we all knew the date and time period when the Brexit votes would start rolling in, so we had a rough idea when we might see some type of market reaction, if the market reacted at all.
As systematic traders, what should we do in this type of situation:
In this episode we’re asking 13 system traders and past guests of the podcast (actually it's 12 past guests and one future guest) about their approach to trading around the Brexit vote.
I’ll be asking them what their trading plan was going into the Brexit decision and you might be surprised with some of their answers.
I’ll also be asking them what factors they considered to reach that decision, whether they were happy with the approach after the event and any key learnings we can get out of this experience.
I personally found it really interesting to hear what they had to say so I’m sure you will too.
Traders are always looking for an edge and today's guest shares a simple approach he calls an 'unfair trading advantage', that can have a dramatic impact on trading strategy performance.
The guest on this episode has been on the show before, to discuss breakout trading strategies back in Episode 43. In that episde we discussed the steps to building breakout strategies and we even released a breakout strategy toolkit, included an ebook, cheatsheet and EasyLanguage code for 2 breakout trading strategies.
In this episode, our guest Tomas Nesnidal will be sharing a different trading approach, and it’s something he likes to call ‘an unfair trading advantage’.
He’s going to explain to us what it is and why he calls it an 'unfair advantage.' It's something that a lot of traders have probably heard about but perhaps are not aware of how to use it properly or even the positive impact it can have on trading results.
Tomas will explain it in this chat so take a listen!
Today we’re covering a topic which can really be a concern for traders of all levels, from beginner to pro, and that is the topic of strategy evaluation.
I’m sure we’ve all heard of data mining bias, over-optimization and curve fitting and the impacts this can have on our trading accounts.
We may be even using techniques such as Out Of Sample testing, Walk Forward Analysis, Monte Carlo analysis and a number of other measures to identify or reduce the impact of these issues, but do these approaches actually work? Are there limitations or dangers with these techniques? Are there better ways?
In this episode we talk to someone who evaluates trading systems for a living, plus his research into system evaluation techniques has won awards. The guest is Dave Walton.
Dave was the winner of the Wagner award in 2014 for a paper titled ‘Know your system – turning data mining bias to benefit through System Parameter Permutation’.
In our chat today we talk about the technique in his paper and how it can be applied to trading strategy evaluation. We also discuss some of the assumptions and limitations of the approach, and he shares with us some valuable insights he’s made since publishing the paper which have resulted in an updated approach he now considers a better alternative, so make sure you listen out for that.
Nelson Freeburg was the editor of Formula Research, a newsletter that developed systematic timing models for the stock, bond, and commodity markets.
He was also a research consultant working with institutional money managers to design proprietary timing models.
Nelson had been an active trader since 1980 and occasionally spoke about his work to audiences around the world.
In this episode, Linda Raschke shares memories of Nelson, his approach to model development and what we can learn by studying his work.
Markets are constantly changing. Trading edges come and go.
In an industry with such a low survival rate, where some areas are changing at an ever increasing rate, what does it actually take to not only survive, but thrive, over an extended period of time?
The guest on this episode, Linda Raschke, has been trading for over 35 years. She traded for several hedge funds before starting her own, ranking 17th out of 4500 hedge funds by Barclays Hedge for 'Best 5 year performance'.
She's experienced a large number of changes in the industry, some of them have been huge, but she’s managed to adapt and continues trading even today.
Linda stand out from the crowd for three factors: Performance, Longevity and Consistency, so what does it actually take?
What has she learnt over the years and what can we do to improve our own chances of performance, longevity and consistency?
In our chat with Linda we discuss some of the changes she’s experienced over the years and the impacts this has had on trading. We also hear about her approach to modelling the markets, understanding market behavior, trade management, day trading techniques and some fantastic questions submitted by fellow listeners. Make sure you don’t miss those!
PLUS loads of great questions submitted by Better System Trader listeners!
Trading can be tough, markets are noisy and finding signals in the market noise can be challenging. Also, applying indicators to trading strategies can introduce lag, however a lot of traders don’t even realize the lag their indicators are introducing or the impact it can have on trading. In fact, the guest in our chat today, John Ehlers said “One of the biggest enemies of traders is lag”.
So, what's the solution?
John Ehlers is well known in the commodity futures arena as the Creator of MESA, having pioneered the MESA method of cycle analysis in the late 1970's and becoming the founder of MESA Software.
He is author of four books including Rocket Science for Traders, Cycle Analytics for Traders, Cybernetic Analysis for Stocks and Futures and MESA and Trading Market Cycles.
He has also been a contributing editor of Stocks & Commodities, winning a number of awards for his work.
In our chat with John we discuss the issue of indicator lag, the impact it can have on trading and some solutions. We also talk about applications of Digital Signal Processing in trading, the MESA approach, regime switching, Cycles and the mistakes people make trading cycles.
Backtesting and execution are such key parts of algorithmic trading so choosing the wrong platform can have a huge impact on our trading.
There are loads of trading platforms available and a lot of considerations which need to be made when choosing one that suits our needs, so in this episode we’ll be discussing backtesting and execution platforms with Nitesh Khandelwal, department head at QuantInsti who also co-founded iRageCapital and iRage Global Advisory Services.
After our chat on algorithmic trading platforms we’ll also cover statistical arbitrage, high frequency trading and some interesting audience questions, so listen out for those.
I’m sure we all want to create trading strategies that perform better and last for longer but there are a number of issues we need to look out for when developing robust trading strategies, some are well-known and some perhaps aren't.
In this episode we’ll be talking with Perry Kaufman about strategy development and more specifically some of the issues that can catch us out when creating trading strategies. Perry raises some interesting points about optimization that may not be well known plus he shares loads of tips to creating more robust strategies.
Perry writes extensively on markets and strategies, having published fourteen books and has just released a new book on building algorithmic trading strategies, which we'll be discussing in this episode.
He has worked and consulted to a number of successful CTA, investment and prop trading groups, creating systematic trading and hedging programs.
This is also his 2nd appearance on the podcast, appearing as a guest way back in Episode 10.
Andrea Unger is the only trader to ever win the World Cup Championship of Futures Trading ®* titles 3 years in a row, with returns of 672% in 2008 (futures division), 115% in 2009 (futures division) and 240% in 2010 (futures & forex division).
This is his 2nd appearance on the podcast, he was also a guest on Episode 16.
In this episode Andrea discusses his approach to trade entries, how the traditional approach to entries can limit our ability to read the market and how he's modified the standard approach to identify entry opportunities.
Back in Episode 32 we had a chat with Laurent Bernut, a systematic short seller who spent years working in the Hedge Fund world specializing in short selling strategies.
He shared loads of knowledge with us in that episode but we actually had a lot more to talk about. We ran out of time back then so in this episode we’re going to continue with the chat, covering a bit more on short selling, including common problems and mistakes traders make when short selling, the 5 psychological stages of a bear market, how these stages manifest in market behavior and where we are now.
We also chat about his Convex position sizing model, visualizing your trading edge and how to tilt it more in your favor PLUS he shares with us a special trick to switch our minds from a flight or fight mode back into a state of flow.
We also have some great questions submitted by podcast listeners so listen out for those.
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.
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.
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 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.