Today, we’re going to have a quick chat about the effectiveness of entries, and a simple technique you can use to determine how good an entry or exit really is.
I’ve been working on some breakout strategies lately and I’ve noticed in some of them that the entry really isn’t that important at all…
That is, I can be pretty loose with the entry values and get similar results…
So there are other components to the strategy that are actually driving the performance.
Now, this got me thinking about measuring the effectiveness of entries and exits, so today I want to share a technique that Kevin Davey calls the “monkey test”.
And no, you don’t need actual monkeys for this!
Let’s hear how Kevin uses the monkey test to check how good his entries and exits really are.
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.
Glad you could join us today where we get to chat with Stefano Serafini – the current leader of the World Cup Championship of Futures Trading®*
I met Stefano in New York at a trading masterclass a few years back and he’s been doing some great things with his trading.
As I mentioned, he’s the current leader of the World Cup Championship of Futures Trading®*
Sometimes in these trading competitions you see traders rocket to the top of the leaderboard really quickly, but they usually disappear just as quick.
Anyone who’s been watching the competition this year would have noticed that Stefano has been pretty consistent so far, so we’re going to discuss his trading approach, especially around intraday trading strategies and portfolio construction.
In our chat you will learn:
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.
As systematic and algorithmic traders, we have a number of tools and processes we can use to test and validate trading strategies.
For example, in-sample/out-of-sample testing, walk forward analysis, cluster analysis and a bunch more.
(And don’t forget all the fancy named techniques that have been lumped in with Machine Learning that are sometimes just rebadged techniques that have been around for ages already!)
Anyway, one of the tools that we have at our disposal is Monte Carlo analysis.
When you’re using a tool it can be good to understand how it works...
What are it’s strengths?
What are it’s weakness?
Today I’m going to share with you a little bit of audio from Dave Walton of Statistrade, explaining the benefits of Money Carlo analysis, and also a few of the weakness or false assumptions around Monte Carlo analysis that we really need to be aware of if we want to manage Monte Carlo effectively.
Let’s take a listen to what Dave has for us.
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.
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Today I want to share with you one of my favourite Seinfeld episodes ever.
It’s the episode where George Costanza realises that all of the decisions and actions he’s taken throughout his life have been the wrong ones.
So he decides to do everything the opposite.
He’s in the diner with Jerry and Elaine and he sees an attractive woman sitting up at the counter who seems to be interested in what he’s doing, glancing over at him.
Instead of sitting back and doing nothing about it he does the opposite...
He approaches the lady, announces that he’s a short, bald, unemployed man who still lives with his parents, and...
She immediately goes out with him!
Later on, he gets an interview for a job with the New York Yankees and during the interview he gets an opportunity to meet the owner.
Instead of sucking up to the owner, he does the opposite and tells him how much the team sucks, how he’s done a poor job managing it, making stupid decisions etc, and...
The owner immediately hires him!
Every time George does the opposite of what he would usually do, it works out well. He succeeds.
And guess what?
It can sometimes be the same with trading too...
Listen to find out how.
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.
The markets are in a constant state of adaptation.
Conditions change.
Strategies fall in and out of sync with the market, causing periods of good and poor performance.
So what can we do to improve consistency by making our systems adapt better to changes in market conditions?
Our guest for this episode, Brian Miller, is from Optimized Trading, and in our chat he shares with us:
Note: This is the 1st part of 2 recordings, look out for the 2nd part coming soon!
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.
Over the last few months you may have noticed an increase in the number of articles being published on the internet using Market Breadth to predict which way the stock markets could go next.
In fact, I saw one just recently that said the US stock market is set for a parabolic move.
Now, as systematic traders I'm sure most of us are not really interested in predicting those types of things...
However Market Breadth measures can provide us with additional insights into the underlying conditions in the market that aren’t so obvious looking at a price chart.
So today I want to share with you some Market Breadth knowledge from Greg Morris, who oversaw the management of over 5.5 billion dollars.
Take a few minutes now to hear from Greg about Market Breadth and what it can reveal about the underlying conditions in the markets.
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.
"I think most traders use canned indicators like a stochastic or RSI or MACD, with a fixed length without thinking much about them." - John Ehlers
They take the default length, or one that performed well in a backtest, or even one that has been recommended by someone else, and they start trading with it.
They may have a good run for a while...
And then it falls apart for no explainable reason...
The basic problem is that market conditions change, but indicators are fixed and don't adjust to changes in market activity.
So how can we make our indicators more adaptive to market conditions?
Take a listen as John Ehlers explains a technique we can use to build indicators that adapt to market conditions and also shares a simple trick to check if our indicators are in-tune with the markets or not.
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.
I have to admit… I’m a bit of a sceptic.
However, I’ve had so many people recommend meditation to me in the past.
Successful people.
People I have a lot of respect for.
In fact, some of the previous podcast guests, some big names, have shared with me how powerful meditation has been for them, both personally and for their trading.
But it’s not just traders, many successful business people swear by it too.
So, what’s all the fuss about?
I’m always on the lookout for anything extra that can give us an edge in the markets, so could meditation be something us traders can harness to our benefit?
Or is it all just some weird mumbo jumbo sham?
Well it’s time to find out, so in this episode I speak to Adam Grimes about meditation and trading, including:
This is only a short episode, so even if you’re a sceptic like me and think this may have nothing to do with trading, I recommend you take a listen anyway.
Try to approach it with an open mind and form your own opinion from there, so let’s jump over to our chat with Adam Grimes .
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.
Today I want to share an optimization insight from Perry Kaufman.
I was reading an article on a trading website and the author was making some assumptions based on the optimization results which may not have been entirely accurate.
I think alot of traders can get caught up making this same assumption...
I know I definitely have...
And it's good to be reminded of these types of things so we don't make the same mistakes.
Listen to Perry explaining what this assumption is, the danger in making it and how to overcome it.
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.
A few years back I was on a holiday with friends at Hamilton Island in the Whitsundays.
We were cruising around the island in a golf buggy when a friend suggests we go to the shooting range.
I'd never even touched a gun before but while we were there I decided to shoot a .44 Magnum...
'the most powerful handgun in the world' according to Dirty Harry!
Take a listen to hear what happens next and how it applies to trading.
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.
Indicators often form a large part of trading systems, however there are a number of issues caused by indicators that can result in under-performing trading strategies, like:
Today we talk to John Ehlers who is going to share with us a brand new indicator he's developed that overcomes alot of these issues. This new indicator:
Plus at the end of the chat we share how you can get a FREE copy of this new indicator to try it out for yourself.
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.
I'm currently in Sydney for a week doing some work, and I'm staying in one of the hotels near circular quay, overlooking Sydney Harbour.
I won't share name of the hotel because it's a well-known name, and it's actually a really nice hotel...
However I had an experience with them when I was checking in that I wanted to share because I think it has some nice parallels to trading strategies.
Take a listen!
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.
Most trading strategies are built to find repeatable patterns in the market and then attempt to exploit any future occurrences of the pattern to make a profit.
There are lots of different ways to find patterns, and in this episode Brent Penfold talks about patterns in price action.
Brent is a full time trader, author, educator and licensed Futures Advisor, and in our chat you will learn:
PLUS, we announce the lucky winner of the Better System Trader ‘Super-package’ giveaway, worth almost $20,000!
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.
Jack Schwager returns to answer all your trading questions.
Jack is a well known expert in the industry, working for some of wall streets leading firms and is also one of the founders of FundSeeder.
Plus, he's the author of the best-selling series of 'Market Wizards' books, which I'm sure most traders on this earth have read!
In this 2nd part of our chat with Jack, he answers all of the trading questions you submitted (well most of them anyway, unfortunately we didn't have all day to talk!)
Plus, to celebrate the milestone 100th episode, we've got a huge giveaway worth almost $20,000 - and one lucky trader is going to win it.
Listen for more details and information on how to enter.
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.
When I was learning to snowboard, I still remember the first time I got off the lift chair, strapped myself in the board and looked down the mountain.
It was really overwhelming and I wondered how I was actually going to get down there without any injuries!
My instructor was very comforting telling us ‘Not to focus on the bottom of the mountain’, because even though that’s the destination, to get there we were actually going to zig-zag down the mountain.
So we needed to focus on the next turn and how we were going to execute that.
We were told to look where we wanted to go, so if you want to go left then look left, your shoulder/hips will turn, your body weight will shift on the board and that will steer the board.
And as you’re moving across the mountain you obviously want to look for hazards, look for where you want to turn and focus on shifting your body weight to steer the board around the corner
It was all about the process.
By focusing on the process, the outcome would eventually come.
That is you'd work your way down to the bottom of the mountain with hopefully no broken bones!
However, if you were to just focus solely on the bottom of the mountain, then you're likely going to fall down and crash.
Trading can be a very outcome-focused activity, there is the temptation to focus on the results of our trades.
Did the trade make or lose money, how is our P/L progressing for the month or year?
Let’s take a listen to performance coach Rande Howell now as he shares a story about an Olympic hurdler and how his approach to focus applies to trading performance.
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.
It can be really interesting and exciting to research the markets and test different ideas but at some stage we need to decide if the strategy is ready for live trading.
Some traders can get stuck endlessly researching…
Trying to find that perfect system…
Which comes at a cost.
Let’s listen to Kris Longmore from Robot Wealth explain his approach to determining when a trading strategy is ready for live trading.
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.
Jack Schwager needs no introduction.
He's a well known expert in the industry, working for some of wall streets leading firms.
Plus he's the author of the best-selling series of 'Market Wizards' books, which I'm sure most traders on this planet have read!
In this chat with Jack we discuss Optimization Myths, referencing some interesting results of a study that analyses the effectiveness of optimization...
The results may not be what you expect...
And could have a huge impact on the way we test and trade strategies.
There are plenty of other nuggets of info too, including:
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.
Did you know there are some situations that can cause traders to throw away perfectly viable trading strategies, without even realizing it?
Imagine that!
Putting all that hard work and effort into building a trading strategy but due to some arbitrary decision we’re making during the strategy creation process, we throw the strategy away...
When it could have been a good trading strategy...
So, what could be causing this?
And, what’s the solution?
Let’s hear Dave Walton from Statistrade explain what this danger actually is so we know what to look out for, and then briefly discuss one of the solutions to this 'hidden' problem.
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.
Have you ever wondered what exactly is it that makes a trader successful?
Is it based on personality?
A specific approach to the markets?
Pure luck?
Dr Brett Steenbarger is a trader and performance coach, and gets heavily involved in the recruitment process for trading firms.
He gets to interview traders, see how they work and analyse their performance so he’s in a really great position to make these types of observations.
Take a listen to Brett sharing the 3 main components he's observed in successful traders.
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.
How many traders do you know that have successfully cornered a market?
If you're not familiar with the term 'corner the market', it means to get enough control of a commodity, stock or other asset so that you can manipulate the price.
There are a number of documented cases in history where people have tried...
... and it usually doesn't work out too well for them!
This weeks podcast guest Kurt Sakaeda has cornered a market, however it was more of an amusing accident that an intentional act.
And this is just one of the entertaining stories Kurt shares with us in our chat today.
Those familiar with the World Cup Trading championships would recognize Kurts name because he's won it a few times, with his first win in 2000 so he's been trading for a while.
In our chat with Kurt we discuss a mixture of trading topics, including:
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.
Last week I had to make an emergency trip to the hospital.
It highlighted a gap in my trading 'operation' (pardon the pun) so I wanted to share that with you so that you can learn from my mistakes.
How will your trading handle an emergency?
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.
Have you ever dreamed of leaving your day job to trade for a living?
Or living a life of freedom - travelling the world or hanging around at home, doing whatever you like during the day while you live off your trading profits?
When I first started getting into trading I had this grand vision in my mind of leaving my corporate job, travelling the world, living a life of luxury all supported by my trading profits.
It's a common goal for alot of traders, but getting to that stage can be difficult, and knowing when you're ready to make the leap can be challenging.
I regularly receive emails from people asking questions like:
The guest for this episode, Nick Radge from The Chartist, has an extensive trading history and also mentors other traders.
He's in a great position to answer all of our questions on trading for a living, so that's what he's going to do for us today, plus...
... he's also going to share some honest advice that all traders need to hear before taking the step to 'trading for a living'.
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.
“ When you have a bad entry, you can always work your way around it, but when you have a bad exit, this is final… This is when the P&L gets printed.” – Laurent Bernut
Exits have such a dramatic impact on overall strategy performance, so having a full and proper understanding of the best way to leverage exits is absolutely essential.
In this episode, Laurent Bernut from Alpha Secure Capital combines his witty sense of humor with his knowledge of exits, to entertain and to also share:
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.
I recently received an email asking me where all the trading ideas are.
I think every episode provides at least 1 idea of value, but one that stands out in my mind was the chat with Rob Hanna in episode 7.
In that episode he share loads of trading ideas.
But he also goes one step further and explains the technique he uses to find new trading ideas...
Every.
Single.
Day.
Using this technique we can find lots of ideas to test too.
Take a listen to this short audio snippet from Rob explaining how he never runs out of trading ideas to test.
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.
One of the appeals of automated trading is that it can be automated.
You can 'set it and forget it' if you want.
However there can be some dangers with doing so.
About a year and a half ago I went through a period of being a little bit slack with monitoring my automated strategies and there was one occasion where my 'set it and forget' approach turned into a case of 'forget it and regret it'...
... A stop loss order for one of my strategies had been rejected
... I failed to check my trading platform for a few days because I was travelling and tired
... That particular lesson cost me 2-3 times the original stop loss size.
So that was a stupid thing to do.
But I learnt my lesson and now I check my trading platform alot more.
A regular checkup to make sure everything is running smoothly is incredibly important because technology issues can (and will) happen at any time.
But there's another process I've implemented which has helped me to identify issues that could have gone on for a lot longer if I'd left them unchecked.
I got this process from Kevin Davey, so in this episode I've asked Kevin to join us for a quick chat to explain his own monitoring process some more, including some examples of the things he's found by following this process.
So lets head over to my chat with Kevin Davey to hear more.
Disclaimer:
Trading in the financial markets involves a substantial risk of loss and is not suitable for everyone. All content produced by Better System Trader is for informational or educational purposes only and does not constitute trading or investment advice. Past performance is not necessarily indicative of future results.