Better System Trader

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.

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.

"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.

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 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.

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.

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

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 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.

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.

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!)

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.

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.

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.

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.

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 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

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 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.

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.