And we're back for the 2nd episode in this 3-part series on building Mean Reversion strategies with Cesar Alvarez from Alvarez Quant Trading.
In the first episode we discussed the goal of Mean Reversion trading, how to select a trading universe, a number of effective techniques to measuring Mean Reversion and how to combine indicators to identify better quality trades.
If you haven't listened to that episode yet, you should check it out first here.
In this 2nd episode in the Mean Reversion series, Cesar will be sharing:
Watch out for the 3rd episode in the series, where Cesar answers all the questions submitted by Better System Trader listeners.
Have you ever wondered:
I'm sure there are reasons for all of these, but on the surface they don't seem to make sense.
What about stop losses, do they make sense?
We often hear the trading rule of 'always use a stop loss', no matter what, use it everywhere, but…
Does it actually make sense to ALWAYS use a stop loss?
Or are there occasions when using a stop loss DOESNT make sense?
And if so, how do you handle that? How do you manage your risk?
In this week’s trading thought, we’re going to review a chat with Dr Ernie Chan about stop losses, and we discuss these exact points, so let head on over to Ernie and find out if it makes sense to ALWAYS use a stop loss.
We’ve got something special organised for you here...
This is the 1st episode in a special 2-part series on building Mean Reversion trading strategies.
And to discuss Mean Reversion we have a special guest, someone who has been on the podcast a couple of times already - Cesar Alvarez from Alvarez Quant Trading.
Those of you who know Cesars work would be aware that he is a Mean Reversion specialist.
He has a wealth of knowledge on Mean Reversion trading that he's going to share with us over this special 2-part series, so I’m really excited to be sharing it with you.
In this first episode Cesar will be sharing:
It seems from the emails I’ve been getting lately that more and more traders are becoming concerned about the state of the markets, especially the stock markets, which is understandable.
And the concern is really around what’s going to happen when the stockmarkets start falling.
What could happen to their strategies and accounts and how can they prepare for it now?
How can they protect their portfolios?
One form of protection that often comes up is using diversification to reduce portfolio risk.
However, a common question that is raised is how to actually go about diversifying?
Is there more protection in diversifying across markets, or staying in the same market and diversifying across strategies?
In this short piece of audio, Perry Kaufman discusses how he looks at diversification, and it’s something you may want to consider when you’re thinking about how to protect your own trading account and portfolio in a market downturn.
In this weeks ‘Trading thought’ we’re going to discuss an issue that all traders have to face...
How do you know when to stop trading a strategy?
A common approach is to wait for a strategy to reach the maximum historical drawdown and then either stop trading the system or look at modifying it or optimizing it, but...
There are a couple of problems with that approach:
When we have a system that goes into drawdown, we never really know if it’s the beginning of the end for that strategy or if it will be a drawdown within expectations, so it can be tricky issue to address.
Can this be managed differently?
Are there warning signs to watch out for that can tell us if our strategy is sick or healthy and can we manage these sick strategies differently without having such an impact on our trading accounts?
In this episode we’re going to hear from Alan Clement, who is going to share some ideas on measuring system health, so take a listen to our chat with Alan.
Trade management is a critical component of a trading strategy.
It can often be the difference between a profitable trade and a loss...
However many traders focus on the entry only and leave trade management as an afterthought.
In episode 49 of the podcast, Linda Raschke, said "trade management is probably the most neglected area of system development".
In that episode we focused on Linda's approach to modelling the markets but in this episode Linda is back to discuss trade management and exits, including: