Better System Trader

Tomas Nesnidal has been a full-time trader for over 11 years, specializing in automated algorithmic trading strategies.

He has experience with a number of trading styles, including option trading, spread trading, statistical arbitrage and market internals but in this episode we're going to discuss one of his other specialties, breakout trading.

In our chat we discuss the key components of a breakout strategy and how to combine them to create profitable trading strategies. We also discuss the degradation of strategies over time, how to add new life into old strategies and why creative thinking is such an important aspect of successful trading.

• The benefits of trading breakout strategies and what makes a good breakout strategy
• How to build profitable breakout strategies using 4 key components
• The degradation of strategies over time and how to add new life into old strategies
• Using filters to improve trading results
• Adapting strategies to market conditions
• The best timeframes and markets for breakout 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.

Murray Ruggiero is the chief systems designer and market analyst at Tuttle Wealth Management, with around 200 million dollars under management.

He is one of the world's foremost experts on the use of intermarket and trend analysis in locating and confirming developing price moves in the markets.

He is also a speaker, author and has been a contributing editor to Futures magazine since 1994, producing over 180 articles.

In this episode we discuss various aspects of system development, including optimization, curve-fitting and creating robust strategies. We also discuss why strategies must have a premise, the importance and applications of intermarket analysis, cycles and a bunch of great questions from the audience.

• Factors to success in system development
• Why it's important to understand the underlying premise of a system
• Techniques to reduce or avoid curve-fitting and develop robust strategies
• Why Intermarket Analysis is so important and how it can be used to create profitable trading strategies
• How to get started with intermarket analysis and common issues traders face
• Using cycles to detect market breakouts and other applications

• How to determine if a strategy has broken down or is just in a normal state of drawdown
• The relationship between drawdown and time
• Creating robust strategies and which ones have stood the test of time
• Performance of Tuttle Wealth Management and the differences between managing money for others and trading your own money
• Exits and how to choose the correct exit for your entry method
• Effective uses of AI in trading
• Regime switching between strategies
• The future of 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.

For those traders looking for an edge in every aspect of trading, today's topic is something that isn't discussed too much but has had a great impact on the 2 guests of this episode.

The topic is collaboration in trading and the guests are Michael Cook and Kevin Davey.

Both of these guests have appeared on the podcast before, with Michael being a guest on Episode 39 and Kevin being a guest on Episode 5 and Episode 38.

Both have extensive trading experience too, successfully trading their own money and others.

In this episode they share the impact collaboration has had on their own trading as well as why collaboration is so important, the actual benefits to traders, how to find the right people and tips to maximising effectiveness.

• Why it pays to put the work into strategies other people would find awkward or too difficult
• Why collaboration is so important in trading
• The benefits of collaboration and what you could be missing out on
• The different levels of collaboration and tips to maximising it's effectiveness
• How to determine if someone may be a good fit for collaboration
• How to find traders to collaborate with
• The most important aspects of trading
• The most common mistake traders make

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.

Larry Williams has been a guest of the podcast before, sharing insights from 50 years of trading in Episode 20.

In 1987 he won the World Cup™ trading championship, turning $10,000 to over $1.1 million in 12 months.

He is a published author, with a long list of best-selling books and has also created a number of market indicators including Williams %R, Ultimate Oscillator, the Williams Accumulation/Distribution Indicator, COT indices, cycle forecasts, market sentiment and value measures.

In this episode we'll be discussing algorithmic forecasting, the methods and applications of forecasting, cycles and seasonality, plus some forecasts for the markets in 2016.

• Why algorithmic forecasting can be so interesting and so challenging
• Is forecasting just an academic exercise or can it actually be applied to real trading?
• The difference between Larrys forecasts and others made in the media
• How past cycles can project what may happen in the future
• How Larry actually generates forecasts based on past market behaviour
• Factors that can make forecasts inaccurate and why some factors aren't even considered when forecasting
• How the forecasting process has changed over the years
• Forecasts for the Australian and US markets in 2016
• Which factors have the best forecasting ability

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.

We've been very lucky to have a number of trading champions on the podcast before and this episode we get to talk to another champion trader, Michael Cook, who won the World Cup Trading championships in 2007 (Futures), 2011 (Stocks) and 2014 (Futures).

Michael worked in the institutional world for a number of years before leaving behind the banks and hedge funds to trade for himself.

In this episode we'll be discussing how to increase returns with the same risk, using the market to determine stop levels, selecting a position sizing algorithm and the role of discretion in systematic trading.

• How a short statement from Larry Williams influenced Michael to enter the World Cup Trading championship and what we can all learn from it
• How Michael won the trading championship multiple times and the unexpected benefit of winning
• A method to increasing returns for a given risk
• Why market related stops make more sense that a fixed cash amount
• Position sizing algorithms and why fixed fractional is often the best approach
• How to recognise conditions that could cause a strategy to fail before it actually does
• Hard and soft stops, and how to consider the risk of each
• The role of discretion in systematic trading
• Occasions where it make sense to override trading strategies - being more trader than system purist
• Where to find trading ideas

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.

Happy New Year!

The start of a new year is typically the time when people review their accomplishments and progress for the past year, and make fresh plans for the year to come.

I thought it might be good to do a quick bonus episode with someone who knows all about setting goals and achieving them. That person is World Cup trading champion Kevin Davey, who was a guest of the show on Episode 5.

Now this is a bonus episode so it's a really short one but it's full of great information, including the importance of goals in trading, common mistakes traders make when setting goals and the process to creating good goals.

Whether you're an accomplished goal setter or just starting out I think you'll find value in what Kevin has to share with us today so I hope you enjoy this short chat on goals in trading.

• Why it's important to have goals in trading
• The impacts of not having goals can have on trading success
• The types of goals appropriate to traders
• Common mistakes traders make when setting goals
• An easy way to create good goals
• How to determine if your performance goals are attainable
• Why some traders get hung up on goals that aren't relevant
• Why you need a time limit on your goals

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 discussing the results of a quantitative study on stop losses completed by Cesar Alvarez of Alvarez Quant Trading. Cesar was also a guest of the show way back in Episode 3.

Cesar was director of research for Connors Research for almost 9 years, developing quantitative trading models for individuals, prop traders and hedge funds.

In this episode he's going to share the results of a quantitative study on stop losses, also testing out some common pieces of trading advice to see if they're actually true.

Stops can have such a huge impact on trading results so I'm sure traders of all levels will find this research invaluable.

We will be discussing backtesting results and some charts. We'll be explaining them for those who are listening along but if you'd also like to see the results while we discuss them, you can download a copy or even watch as a video in the show notes page at bettersystemtrader.com/37.

I hope you enjoy Cesars discussion of 'Stops - the Good, the Bad and the Ugly'.

• Different types of stops, their application and performance results
• Percentage vs Volatility based stops
• Intraday vs End of Day stops
• Trailing stops vs Targets
• Some common trading statements that are often assumed to be true and the results of testing them - do they hold up?
• The levels of Stop knowledge, which level are you at?

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.

Creating robust trading strategies can be a difficult task, sometimes taking months or even years to generate something you find acceptable. Even then, once you start trading it live there is no guarantee it'll work in the future.

With strategy creation being such an involved process at times, how would you like it if you could just tell the computer the results you wanted and let it figure out the trading rules? Is it actually possible to create robust trading strategies that way?

In this episode Michael Bryant from Adaptrade talks to us about automatic code generation, methods to exploit trade dependency and techniques to trade the equity curve.

Michael has been trading the markets since 1994, providing trading systems for the futures markets and even managing money as a CTA.

He is founder of Adaptrade, a company which provides innovative software tools for individual and professional traders.

• The traditional approach to creating trading systems and issues caused by this approach
• Potential areas of improvement in traditional approaches to system development
• Evolution of the strategy creation process
• Genetic programming and optimisation and it's use in trading strategy creation
• The advantages of automatic code generation
• Measuring and reducing over-fitting when using genetic optimisation techniques
• Addressing concerns with removing human logic from the strategy development process
• Degrees of freedom and the impact if can have on strategy results
• Trade dependency, how to detect it and methods to exploit it
• Trading the equity curve based on trade dependency and trading style
• Which stage of the strategy creation process to include position sizing
• Common position sizing mistakes traders make

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.

Andrew Gibbs has been involved in the financial markets since 2001 and is the founder and CEO of Halifax New Zealand.

Andrew has extensive experience in all forms of equity and derivative contracts, managing millions of dollars and trading a number of markets around the world.

In this episode we discuss volatility and methods to trading the VIX plus the benefits and methods of including fundamental data in technical quant models.

• Instruments you can use to trade volatility and the benefits or disadvantages of each
• What makes the VIX attractive to trade and why it often trends over time
• The types of trading styles that suit the VIX
• The dangers of trading volatility products
• Seasonality in the VIX
• How to get started building volatility trading models
• Fundamental data and the types of fundamental datasets that work well in quantitative models
• Why some fundamentals work better than others
• The frequency of fundamental data release and how that dictates trading model style
• How to account for revisions to data
• The impact of including fundamental data can have on trading results
• Technical vs Fundamental data and which tends to be more robust
• Issues with fundamental data and company reporting accuracy
• How to reduce the chances of investing in a company that is likely to go bust
• Combining fundamentals and technical data and how to test
• How to get started building fundamental quant models

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.

Jay Kaeppel has over 25 years experience in the financial markets.

He has worked as the Head Trader for a CTA and published a number of popular trading books on Futures, Options and Stock Market Seasonality.

He also spent a number of years writing a weekly column titled "Kaeppel's Corner" and publishes on his blog "Jay On The Markets".

He is now Portfolio Manager for Alpha Investment Management, offering strategies such as the 'Alpha Multi-Income Strategy' to investors.

In this episode we discuss a number of seasonal tendencies, how they can be integrated into a trading model, the applications of the Known Trend Index and the reasons why most traders fail.

• The Santa Claus rally - what it is and how to trade it
• How to use seasonality to complement other models
• Seasonality tendencies around holidays
• Monthly seasonal tendencies and a simple monthly seasonal system that vastly outperforms stock index returns
• Boiling down the trading process into 4 simple words
• Using leveraged ETFs for seasonality trades
• The worst performing month of the year (it's not October)
• Converting seasonal tendencies into a trading model
• A simple seasonal sector system that takes only 6 trades per year
• Diversification vs Specialisation and the impact it can have on trading and drawdowns
• Are seasonal trading strategies just data mining?
• The Known Trends Index (KTI) and how it can be used in trading
• Why most traders fail

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.