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Better System Trader

If you’re looking for inspiration, motivation and practical advice on improving your trading results, Better System Trader delivers every week. Each episode brings you an expert trader who shares their own story, along with the steps, both good and bad, that they’ve taken on their path to success. With a focus on actionable insights, the tips and tricks used by the experts contain loads of value, providing you with insanely practical tips and tools you can start using TODAY. Improve your trading with Better System Trader.
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Now displaying: 2018
Nov 25, 2018

With so much focus often on the actual trading strategies or investments, portfolio construction can sometimes become an afterthought… or not even considered.

However, as we’re going to hear about today, portfolio construction and optimization has the potential for huge increases in wealth...

But there are a number of aspects we need to carefully consider if we want to maximise the potential of portfolios.

Joining us today as our special guest is Adam Butler, CIO from quantitative asset management company Resolve Asset Management.

Adam has published some interesting research on portfolio construction and optimization, and he’s even provided a portfolio optimization framework that can guide investors and traders towards the appropriate optimization method.

In my discussion with Adam today, you’re going to discover:

  • How some traders and investors apply rules to portfolio construction based on a flawed premise,
  • How the ‘Portfolio Optimization Machine’ framework can guide investors toward the appropriate optimization method,
  • Why some errors in estimates don’t have a particularly large impact on portfolio outcome and where the real challenges comes in,
  • The differences in constructing portfolios in stocks versus futures,
  • The multiple dimensions of diversification and how to approach the risks of rebalancing,
  • How to choose the best portfolio construction and optimization technique for you,
  • Plus much more.
Oct 28, 2018

With recent market stock market actions, talk again is turning to whether this is just another correction.

Will the bull market resume or are we in the beginning stages of a bear market?

In this episode we have a timely look at the market with Troy Bombardia from investment research firm Fundamental Capital and the website BullMarkets.co.

Troy has been working in his family’s hedge fund for 10 years now, and applies a unique mix of Fundamentals, Technicals, and Statistics to his trading models.

In my discussion with Troy today, you’re going to discover:

  • Why Technicals alone can’t give an accurate reflection of the long-term market view and what you need to incorporate instead,
  • Why lots of traders that use fundamental analysis are doing it wrong and which fundamentals really drive stock market declines,
  • The difference between a bear market and a “big decline” and the conditions to watch out for in each,
  • Why leading economic indicators are also leading stock market indicators, and how to read them to prepare for potential market changes,
  • What the economic indicators are saying about stock market conditions right now, including when the Bull market could be ending and the final step to watch out for as it unfolds,
  • The importance of reflection in trading, and the 2 key aspects traders need to focus on to always be improving,
  • And much more.
Sep 30, 2018

Joining us today as special guest is Michael Grech from Quantopolis.

Mike is a quantitative trader with a background in signal processing and computer modelling, and in our chat you'll discover a number of interesting topics, including:

  • Trading based on assumptions and building portfolios of diversified strategies,
  • Why every trader should have some kind of volatility strategy in their portfolio and how to balance risk vs reward in volatility strategies,
  • Mike's latest book on quantitative investing,
  • How concepts from the book "Thinking Fast and Slow" have applications to traders.
  • Plus, Mike is going to let us in on a project he’s currently working on that uses a combination of simple systems and Artificial Intelligence to mimic a human trader and also to calculate market probabilities.

We cover a lot in this episode so check out my chat with Michael Grech.

Sep 17, 2018

A common dream sold to traders, especially when they’re starting out,  is the dream of sitting back on the beach sipping cocktails while our trading systems go to work and make us money.

While certain aspects of that dream are possible, for example automated trading, traders still need to do a lot of work to get to that point.

We’ve got to research the markets, find trading edges, do testing and robustness checks, monitor strategies and systems, tweak and adjust where required...

It’s really not as simple as the dream sounds.

But with recent advances in technology, including AI, machine learning and quantum computing, are we close to having fully autonomous trading systems?

That is, can systems really learn trading rules themselves, find profitable edges and trade them, while we do sit back on the beach, boat or couch sipping cocktails and counting our money?

In this podcast episode we're going to explore how recent advances in technology are impacting the trading space now and where it could be taking us in the future.

And to do that we have special guest Dr Tom Starke from AAAQuants.

Tom specialises in AI and machine learning solutions and he has some interesting insights to share with us, so let’s get started now and jump over now to my chat with Dr Tom Starke.

Sep 2, 2018

In this episode we’re going to be talking about the pits.

The trading pits may be closed (or most of them are anyway) but there is a lot of history there. There are lots of stories and events that occurred in the pits over the years that we can still learn from today.

On this podcast episode we have special guest Damon Pavlatos who has been extensively involved in the commodity and financial futures industry since 1978.

He has held Exchange Memberships on the CME, CBOT and Mid America Exchange.

Not only did he trade on the floor for himself but he also executed for some of the biggest players around, including Paul Tudor Jones, Louis Bacon, Monroe Trout, Toby Crabel and others.

In Damons 40+ years of experience he’s seen a lot, and he’s experienced a lot too. So, in our chat today he’s going to share some interesting stories from the floor, and some valuable lessons for traders of all levels of experience too.

Some of the things you’ll discover in my chat with Damon are:

  • The crash of ’87 – what it was like leading up to, trading through it and how the crash of 2008 was scarier than the crash of 87,
  • One of the biggest causes of traders blowing up their accounts - it may not be what you think,
  • Why volume could be the most important indicator and how order flow ‘clues’ can impact trading results,
  • Why it so important to ‘stay ahead of the curve’ and adapt to changes in technology and the markets,
  • Why some types of brokerage firms are dangerous and how to check if they’re properly capitalised,
  • And so much more.

We cover a lot in this episode so let’s jump over now to my chat with Damon.

Aug 19, 2018

Ever wonder how the ‘other side’ trades?

I suppose it depends what ‘trading world’ you live in but in this episode we’re exploring 2 different worlds - the institutional world AND the private trading world.

And joining us to do that is special guest Petra Zacek.

Petra started out in the institutional world and in this episode she shares some interesting stories and lessons about her time there.

But now that she’s a private trader she’s also going to share some insights into trading her own account and the transition from institutional to private trading.

Some of the things you’ll hear in our chat today are:

  • Why it’s important to think outside the box and express your trade idea in different ways,
  • Making the switch from institutional to private trading and the impact her institutional experience has had on her trading today,
  • How the institutional world research ideas, including what private traders are up against and how we can compete,
  • Benefits of collaboration, using algos as an additional filter on top of a setup, how to balance accuracy with win/loss ratio plus a whole lot more.

So let’s jump over to my chat now with Petra.

Aug 5, 2018

Quite often the focus for traders are the technical aspects of trading - indicators, back-testing procedures, robustness checks, statistics, trading platforms, infrastructure etc.

All of these aspects can have an impact on trading performance.

However, there are other aspects of trading too that often go unrecognised, ignored, and can have a huge impact on our performance no matter how good our strategies are.

What are they?

Joining us today to discuss high performance trading is Mandi Pour Rafsendjani.

Mandi is a trader, speaker and peak performance trading coach who works with independent traders, prop trading firms and hedge funds to improve their trading performance.

Some of the things you’ll discover in my chat with Mandi are:

  • The key aspects that set high performing traders apart from everyone else,
  • How traders can identify what’s really holding back their performance,
  • Why it’s important to have a ‘reset button’,
  • Two aspects of drawdown and how traders can more effectively manage drawdown,
  • How to strengthen your ‘taking-losses’ muscle to better handle losses,
  • And much more.

So let’s jump over now to my chat with Mandi on high performance trading.

Jul 22, 2018

"Backtesting trading strategies does not work!”

Got your attention?

Maybe you agree with this statement.

Perhaps you strongly disagree and you’re currently heading out to the backyard to grab your pitchfork.

Or maybe you’re shaking your head thinking ‘what the heck swanny, have you finally lost it man?’.

Well, the good news is I haven’t lost it (yet). We're going to dive deeper into this statement in the podcast episode today.

But first, I'd like to introduce our guest - John Ehlers.

John is a friend of the show. He’s been a guest multiple times, discussing topics such as cycles, indicators and digital signal processing. In our chat today we’re going to tackle robustness and also intraday trading.

Some of the things you’ll hear on the show today are:

  • The startling differences between intraday and daily timeframes and the critical factors you need to watch out for,
  • Why it’s more difficult to predict where market prices are going on an intraday basic compared to daily timeframe, and how you need to think about intraday data differently,
  • We’ll be digging deeper into this “Backtesting trading strategies does not work” statement to find out what it means,
  • How to use a simple Genetic Optimization trick to determine the robustness of a strategy
  • How Genetic Optimization can be used to identify suitable ranges for optimization parameters
  • Why short walk forward periods could be better than longer,
  • Plus a whole lot more.

So lets jump over to my chat now with John Ehlers.

Jul 7, 2018

As Warren Buffet once said: "the stock market is a manic depressive.

The market can be full of euphoria and greed one moment, and switch to fear and panic the next.

This can often be a time of danger and high-risk for some traders, but for other traders it’s a time of immense opportunity.

How?

In this podcast episode we’re joined by special guest Larry Connors.

Larry has over 30 years in the financial markets industry and has been featured on the Wall Street Journal, Bloomberg, Dow Jones, & many others.

He has been providing high-quality, data-driven trading research for over 15 years, and I’m sure that many BST listeners have a stack of his books on their bookshelf. I definitely do!

In my chat with Larry you'll discover:

  • How human emotions drive the market, and why it’s so important to look beyond price charts and indicators to understand what's moving the market,
  • How we can leverage extremes in specific human emotions to create quantifiable and profitable edges,
  • How Larry came up with the idea of publishing his book ‘Buy the Fear, Sell the Greed’ and what traders can learn from it,
  • 3 simple indicators to quickly judge the mood of the market,
  • How Warren Buffets investment approach to be ‘fearful when others are greedy and greedy when others are fearful’ can also apply to short-term trading,
  • And yes, I’m going to ask Larry about that famous ‘Stops hurt’ chapter published over 10 years ago that still has people talking today,
  • Plus we cover a whole lot more.
Jun 24, 2018

In this podcast episode we’re going to be talking about strategy design and different ways to look at the markets, and joining us as our special guests is Rikard Nilsson from Autostock.

Rikard trades all different styles and markets, and has even built his own trading platform with some interesting features he’s going to share with us.

Plus he’s going to share some interesting ideas on how he looks at the markets, some of which you may not have heard of before, including:

  • The 'Predictive Average' indicator – how it can be used to indicate potential market behaviours over the following days/weeks and months,
  • Validating strategies across different instruments,
  • Excluding certain parts of the day based on data,
  • Adaptive 'Backtrack Technology' and how to filter trading signals and position sizing dynamically based on past market behaviour,
  • Plus loads more, so let’s jump over now to my chat with Rikard.
Jun 10, 2018

A huge part of algorithmic trading is all about stacking the odds in our favour.

Finding statistical edges, identifying times when probabilities indicate that market conditions are either favourable for a trade or perhaps unfavourable for a trade.

And although probabilities aren’t certainties, they can still be an important guides for traders, so joining us as special guest for this episode is Scott Hodson from Probable Trades.

Some of the things you’ll discover in my chat with Scott are:

  • How to apply probabilities to trading strategies and why looking at cross-sectional probabilities across multiple dimensions of data can potentially enhance trading results,
  • How a Probability Almanac can help track the performance of a trading strategy over certain time periods,
  • Why it can sometimes pay to have a fundamental knowledge of the stocks you’re buying instead of just blindly following trading signals,
  • How analysing risk to reward of past trades can help to determine at what point taking more risk is not beneficial,
  • Why you need to care for your ‘emotional capital, just as much as your ‘trading capital’,
  • A specific type of stop that can reduce the length and size of drawdowns,
  • Shorting strategies as a hedge to smooth out the equity curve and reduce drawdowns,
  • And much more.
May 27, 2018

In this episode we’re going to be talking about holey strategies and portfolios.

Now, when I say "holey" I’m not talking about religion, divine intervention, holy grails or anything like that, although we could probably apply todays topics to those type of strategies that need divine intervention (and who hasn’t had a strategy like that at some point?).

No, when I say "holey" I mean something with a hole in it, like a bucket that has a hole in the bottom.

When you put water or some other liquid into that bucket, obviously it starts leaking, reducing the performance of that bucket and today we’ll be discussing holes in trading strategies and portfolios that could be reducing trading performance.

Joining us as special guest for this episode is Ryan Moffett from Blackpier Capital.

Ryan has spent the last 12 years specializing in designing and trading robust strategies, working with and being mentored by traders out of the CBOE as well as hedge fund managers out of New York and California.

Some of the things you’ll discover in my chat with Ryan are:

  • Why manual backtesting can be more beneficial than automated testing,
  • How ‘deliberate practise’ can be used in the strategy creation process to get a deep understanding of a strategy,
  • How to find holes in a trading strategy that could punish your trading performance,
  • The hole in people’s portfolios and how allocating a small portion to ‘the 4th asset class’ can be a good hedge for a portfolio when other markets aren’t doing too well,
  • Plus a hole lot more... (see what I did there!)
May 12, 2018

Confidence is a powerful thing – when people have it they can do some pretty amazing things, but on the opposite side, a lack of confidence can be debilitating too, and for traders it can have some similar effects, especially when the performance of a strategy starts to suffer and a trader has money on the line.

So, what can we do about this?

How can we have more confidence in the strategies that we build and trade? Confidence that we’ve built strategies that are robust. Confidence to continue trading strategies during the periods when strategy performance may be struggling.

Our special guest for this episode is Adrian Reid from Enlightened Stock Trading, and in our chat Adrian is going to enlighten us on building trading strategies that we can have confidence in.

We’re not just going to talk about trading psychology here, but Adrian will be sharing practical aspects of system design and validation, that can give us more confidence in the strategies that we create and trade live.

Some of the things you’ll discover in my chat with Adrian are:

  • The 5 key areas traders must address to build confidence in a trading system,
  • Significance testing - why it’s important to strip a strategy down to just the core components and how to determine which components are really driving performance,
  • Why the transition from backtesting a strategy to trading it live can be a difficult and uncertain one, and the preparation steps you need to take to make the transition smooth,
  • How a technique called ‘start-date stepping’ can provide valuable insights into how a strategy could really perform in live trading,
  • Plus, performance profiling across market conditions, sensitivity testing, why traders lose discipline, testing strategy rules in reverse, and much more.
Apr 29, 2018

Predictive modelling is used in many aspects of our lives today..

in the banking and insurance industries to assess the risks and behaviours of customers…

in marketing to anticipate customer purchasing behaviours…

in meteorology to forecast the weather…

in fact there are too many applications to list here but predictive modelling has the potential to be applied pretty much anywhere, even in the markets.

Now you may be saying ‘wait, I’m not in the business of predicting, my trading is all reactive, I don’t predict, I just follow the markets’.

I’m not going to go into that argument today but before you make any decisions or judgements about this episode I invite you to take a listen because we discuss the predictability of indicators, and some of the things you’ll hear in our chat about indicators are very interesting, no matter how you use them in your own trading.

Our guest for this episode is John MacLeod. John has a background in using Predictive Modelling, working as a consultant to develop predictive models in consumer banking and mass marketing, and has applied this expertise to the stockmarkets as well.

Some of the things you’ll discover in my chat with John are:

  • Predictive modelling – what it is and how can it be used in trading to select stocks that may be setup for a big move,
  • Using indicators as predictors and 3 major conclusions John has made by analyzing the predictability of 160 indicators – these results may surprise you!
  • The accuracy of predictive modelling, which factors can impact accuracy and the easiest time periods to produce high accuracy predictions,
  • How data derived from indicators can actually be more effective as predictors then the indicators themselves,
  • Plus much more.
Apr 15, 2018

I think it’s pretty safe to say we’ve had some interesting times in the markets so far this year.

There has been an increase in uncertainty, higher volatility and even outside of the markets there have been a number of events that seem to be impacting the markets.

Some traders may be seeing the current market environment as riskier than it has been in the recent past, while other traders may be enjoying the increased opportunity, but whichever way you look at it, there is something that all traders need to consider if they want to last a long time in this business, and that is how to protect capital through proper risk management.

The guest on the show this episode is risk management expert Aaron Brown, who has worked for JP Morgan, Morgan Stanley and even spent 10 years as risk manager for quant based hedge fund AQR.

In our chat today we’re going to cover some interesting and practical aspects of Risk and Risk Management, and how we can plan for and protect ourselves, which you may find incredibly timely given recent market developments. Some of the things you’ll discover in my chat with Aaron are:

  • The biggest misconception about risk and how traders should really be looking at risk instead,
  • Why low volatility environments can be riskier than high volatility environments,
  • One of the biggest risks to the markets that can impact everyone and can be hard to measure and how to plan for it,
  • How traders should approach drawdown management,
  • Why correlations are ‘mythical’ and the right way to think about financial markets,
  • Risks in the markets today.
Apr 1, 2018

One of the biggest issues we have as systematic and algorithmic traders is that the markets are dynamic and constantly changing, however its quite common to build trading strategies that are static and are designed to take advantage of an optimal set of conditions which don’t actually last very long, if at all.

This can cause periods of good and poor performance as trading strategies fall in and out of sync with the markets, so it makes logical sense to try including some adaptive elements into trading strategies to help them adjust better to the markets as they change.

Our guest for this episode is Jane Fox, aka Trader Janie.

Jane runs the website Quantitrader, and is here to share some of the techniques she uses to add  dynamic abilities to her trading strategies, plus we discuss some other important topics too, including:

  • The top 3 components of trading strategies and how adding adaptability to these components can improve a trading strategy,
  • Why static stop losses could be hurting your trading performance and some techniques Janie uses to overcome these issues,
  • How a ‘circuit breaker’ can save your trading account when things turn ugly,
  • A dynamic position sizing technique Jane uses to increase returns while also reducing drawdowns,
  • Plus a whole lot more so let’s get started with my chat with Trader Janie.
Mar 18, 2018

The discovery of DNA as well as the understanding of its function and structure may be one of the most important discoveries of the last century.

As researchers continue to unlock its secrets, the applications to the scientific, medical, agricultural and forensics fields has been enormous.

From enabling the breeding of animals and crops that are better resistant to disease, to being able to accurately identify criminals and victims, and even to detect diseases early on and create breakthrough treatments for diseases that were previously considered lethal, DNA research is having a huge effect on mankind.

But just as scientists are getting a better understanding of DNA and it’s potential applications, can traders apply the same to the markets?

One of the topics we discuss in this podcast episode is the 'DNA approach’ to trading. What is it, how can we understand it and what are the benefits?

To discuss this topic plus a number of others, we're joined by Bruce Vanstone from Vanstone Trading.

Bruce is a trader, consultant and university lecturer in Computational Finance and Big Data. He’s published a number of research papers and trading systems, and presented material at a number of non-academic conferences. He also consults to a boutique funds management business, trading personally and at a larger fund management level.

In our chat with Bruce you’ll discover:

  • The 'DNA approach' to trading and why you need to understand it,
  • How to add another layer of logic over a strategy to identify the best trading conditions,
  • Why it’s important to have trading strategies with academic credibility,
  • How a simple change in timeframe can increase returns and reduce drawdowns,
  • The common ‘trap’ strategy creators fall into when adjusting strategies without even realising it,
  • Plus much more.

Let’s head on over to my chat with Bruce.

Mar 4, 2018

The idea for this podcast episode has its roots in a trip I made to the States last year.

I was at a conference and one of the speakers was 1993 Karate World Champion Ricardo Teixeira.

Ricardo was explaining how he came about becoming World Karate Champion and he shared his #1 secret to achieving this success, any ideas what it was?

It was something that sounds incredibly boring, but it produces big results, and that is:

Mastering the fundamentals.

Ricardo explained that leading up to the World Championships, he spent months and months just practising the core fundamental moves. He wasn’t practising all those complicated, fancy looking moves you see in the Hollywood films.

No.

He spent weeks just practising a punch...

Until he became so great at it that nobody else could beat him.

I think this “mastering the fundamentals” approach has strong applications to trading too.

Many traders, especially when starting out, think that the latest software or fanciest indicator is going to guarantee their success, but over time I think we realise that there are some core fundamentals to trading which really bring the results, and perhaps from time to time we even forget them too, so today we’re going to discuss some fundamentals with our guest Martin Lembak.

Martin is in a very interesting position because he has access to hundreds of different trading strategies, being traded live in the markets, so he’s in a very exclusive position to see what works and what doesn’t.

In our chat today you’ll here:

  • Why it’s important to understand the characteristics of a market before trying to create or match strategies to that market,
  • How to choose the types of strategies that suit the personality of the market and the types of trading styles that are the most popular (and profitable) in the markets right now,
  • Commonalities between developers of successful trading strategies and what traders can do to accelerate their progress,
  • The fundamentals of portfolio construction, including some challenges and false assumptions of creating portfolios,
  • Broker selection and some warning signs when assessing whether a broker is safe to use,
  • Plus much more.

So, let’s get started, over to my chat with Martin.

Feb 18, 2018

We have a really interesting one here for you today, one that may challenge your existing thoughts on trading models.

I know this episode has certainly made me think about it from a different angle, so I hope you enjoy this.

Our guest for this episode is Kevin Saunders from Tribelet Capital.

Kevin is a specialist in electronic trading across many international exchanges, co-founding Non Correlated Capital in 2009, which later became a licensed CTA with more than USD 40 million under management.

He has won a bunch of awards for his trading and academic achievements, and he also developed a program here in Australia called the “Joey Experiment” which we’re going to talk a little bit about as well.

In our chat today you’ll discover:

  • Why traders must disentangle themselves from the requirement that a model must work and produce money – and the alternative approach that uses charts more predictable than the underlying market,
  • Why building a mathematical model is like creating a unicorn that doesn’t represent reality,
  • Why traders need to stop thinking about building a model as a ‘solution’ and how to think about it instead,
  • Plus much more.

Sounds interesting? Well let’s get started, and jump over now to my chat with Kevin.

Feb 4, 2018

In this podcast episode we’re going to be talking about something that can have a huge impact on the markets and on trading strategies. It’s something that can happen very quickly and cause a lot of damage, and that is spikes in volatility.

And our special guest to discuss volatility spikes today is Andrew Thrasher, who published a research paper called ‘Forecasting a Volatility Tsunami’, which won the Charles Dow award in 2017.

Whenever the VIX is at low levels we here all about in the mainstream media, with the implication that it’s about to rise, however a low level in the VIX alone doesn’t necessarily mean volatility is going to increase, and in our chat today Andrew is going to explain why and he’s also going to share his research and the 3 key factors that can actually improve predictions of volatility spikes.

In our chat today you’ll here:

  • How volatility is usually interpreted and why this common approach is unreliable and missing a key part of the picture,
  • Why a low VIX reading alone is not a good predictor that volatility will rise,
  • 3 key factors that can improve predictions of volatility spikes,
  • Plus much more.
Jan 7, 2018

Welcome to the first podcast episode for 2018, happy new year!

I hope that you had a great Christmas or holiday season and all the best for 2018.

In this podcast episode we’re talking about the impacts that large institutions can have on the markets, especially on stocks, and how certain institutional behaviours can indicate potentially big moves in prices.

Our special guest is Jason Bodner from Macro Analytics for Professionals (MAP).

His previous experience working some big institutional orders has given him some valuable insights that I’m sure we can all find useful, so in our discussion today you’ll hear:

  • How institutional activity can indicate potentially big moves and the signals to look out for,
  • How the techniques of scouting out players on a sports team can apply to stock selection too,
  • 3 basic factors that can quickly identify when institutions are working a big trade, plus loads of other signals to watch for as well,
  • How mixing technical with fundamental factors can give you a more complete picture than just technical or fundamentals alone,
  • Plus much more.
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