Better System Trader

Last week I finished reading a book called 'Peak – Secrets from the new science of expertise'.

I wanted to share a concept from that book with you today because it contains a model that has the potential to:

• accelerate the learning process and
• dramatically increase our level of expertise in a short amount of time.

What trader wouldn't want that?

Most people tend to assume that if they keep working on something they will automatically get better at it, but performance scientists have shown that is not necessarily what happens.

A lot of people reach a certain level of competence and plateau...

Others don't really progress much at all...

And often the process can take a long time to play out, progress can be slow...

So that leads to the question, is it possible to reduce the amount of time that process takes?

Are there techniques that we can use to accelerate the process?

Well, there are and today we're going to talk about one called "deliberate practice".

Our special guest, Kris Longmore from Robot Wealth, is going to explain what deliberate practice is and how we can leverage it to become better traders, faster.

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.

Machine learning has seen a huge amount of growth over recent years with the increase in available data and processing power.

It's an incredibly powerful toolset for uncovering patterns and relationships in data, however, these tools can be challenging to learn, apply correctly and are also open to abuse.

Our guest for the episode, Kris Longmore from Robot Wealth, specializes in Machine Learning, Algorithmic Trading and Artificial Intelligence.

He is the co-founder and Head of Quantitative Research at Quantify Partners and also provides consulting and educational services through his website Robot Wealth.

In this episode Kris is going to share with us some of his insights into Machine Learning and strategy validation, including:

• How Machine Learning can be used to analyse huge amounts of data, uncover patterns and relationships, and define a trading edge,
• How Machine Learning tools can be abused and the common mistakes that traders make with Machine Learning,
• Strategy validation techniques that best suit market data and 1 popular technique that shouldn't be used,
• How to approach the vast libraries of algorithms available today,
• Why delaying the trading process can lead to opportunity cost and how to know when a model is ready for trading,
• 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.

One of the main challenges with Mean Reversion trading is when to get into a trade, which can have a huge impact on profit and drawdown levels.

How far from the Mean should we wait before considering a trade?

PJ Sutherland shares the approach he uses to:

• Lower drawdowns
• Reduce the role of luck in trading
• Produce performance results that more closely resemble backtest results.

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.

"My best losing year ever" and how traders can become better by learning from drawdowns, losses and other trading challenges.

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.

With the toolsets we have available to us today it's really quite easy to create a trading strategy by just mining market data.

As we've just heard in that opening bit of audio and also from previous podcast guests too, if you try enough combinations you can find something that appears to work purely by chance or by luck.

The challenge however is trying to identify something that could be sustainable.

Something that may persist long enough in the future for us to take advantage of, and hopefully make some money from.

Our guest for this episode, Dave Bergstrom from BuildAlpha, has spent years researching, building, testing, and implementing market making and trading strategies for a high frequency trading firm, CTAs, money managers, individual clients, and even aspiring retail traders.

In this episode Dave is going to share some of his insights into strategy development and validation, including:

• How adjusting the ratio of in-sample/out-of-sample data can lead to creating different types of strategies
• Variance testing – what is it and how can it be used in the strategy creation process
• How E-ratios can be used to determine how an edge decays over time & weed out potentially poor strategies with good backtest results
• Why volume and volatility are important factors to consider when building trading strategies
• Loads of other ideas to test and validate the robustness of trading strategies.

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.

My face-off with a deadly brown snake - what can traders 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.

In the previous podcast episode with Larry Tentarelli, we opened up the opportunity to submit questions for Larry and received quite a few pages.

Surprisingly, a large portion of the questions were about exits.

Why are exits so hot?

I actually asked Larry why he thought exits were such a hot topic and he suggested that perhaps exits are an area that people really struggle with.

This got me thinking about exits more and I recalled an interesting point that Murray Ruggiero made back in episode 42.

I think Murray raised a really important concept which most traders may not even consider when they're looking at exits and specifically how to choose the best type of exit for your strategy, which we'll get to in just a sec.

How do you choose the right exit?

Larry was kind enough to share his philosophy behind exits but you may have noticed that he didn't give exact details about them, which I think was intentional because it's something that traders really need to figure out for themselves.

So then how do you go about choosing the best type of exits for a strategy?

Let's take a listen to Murray answering a question from a listener about exits.

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 traders, we can sometimes get tempted into making things more complicated than they need to be.

Entries...

Exits...

Position sizing...

Trade management...

There are a number of aspects to trading where we get to decide how simple or complicated we really want to make it.

Our guest for this episode, Larry Tentarelli, has developed a simple, no nonsense approach to trading and in our chat he shares the trading insights and approaches he's developed over the past 20 years.

In this episode Larry shares:

• Simple techniques to trading and trade management that turned Larrys trading consistently profitable
• How traders can overcome the challenges of finding a trading style that suits their personality
• The "four legs of a table" approach to trading and why it's so important for trading success
• Why there is no perfect entry signal and the key aspect of trading you should focus on instead
• PLUS a bunch of listener questions submitted by you!

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 that Dr Seuss wrote the book "Green Eggs and Ham" on a bet that he couldn't write a book with 50 words or less?

That's right, in 1960, the founder of Random House made a $50 bet with Dr. Seuss that he would not be able to write a book using only 50 different words.

Well he accepted the challenge…

Creating "Green Eggs and Ham"…

And that book has sold more than 200 million copies, making it one of the best-selling childrens books in history!

Think that was a fluke?

Dr Seuss found that setting constraints was so powerful he used it with other books as well.

His book 'The Cat in the Hat' was limited to around 250 different words from a list of 348 words selected from a first graders vocabulary list.

That book sold millions of copies too.

Dr Seuss is just one example of the power of constraints, showing us that setting limits can often produce better results than "keeping our options open".

Constraints can force us to think better, work better, and come up with more creative solutions.

So how can we apply this principle to trading?

What impact can it have?

In this episode we discuss a few ideas from Kevin Davey, 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.

One of the most common uses for optimization is to find the best value or best group of values for a trading strategy, but is this approach only giving us part of the picture?

Are there other uses for optimization that we can leverage to create better trading strategies?

Today we're going to have a quick chat with World Cup Trading Champion Andrea Unger, the only trader to ever win the competition 3 years in a row.

Andrea has a slightly different view on optimization which we touched upon in a previous podcast episode, back in Episode 16.

Today we're going to dig into that a little more and hear Andrea's thoughts on optimization and how he uses it to get a deeper understanding of 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.