Round II of a systematic trading masterclass with Laurens Bensdorp: architect non-correlated, purpose-built portfolios—mix trend following, mean reversion, and long-volatility hedges to drive smoother, higher risk-adjusted returns.

We unpack the “paradox of diversification” (Parrondo’s paradox) to turn “ugly” equity curves into compounding machines, and when (not) to switch systems off to avoid recency bias and overfitting.

Plus: robust portfolio construction, capital allocation, and highlights from Laurens’ latest book, Trading Retirement Accounts.

Combining losing investments into a winner:

https://blog.ephorie.de/parrondos-paradox-in-finance-combine-two-losing-investments-into-a-winner

"The Paradox of Diversification" paper:

https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1567126

More on our site: https://www.thealgorithmicadvantage.com

#Quant #SystematicTrading #AlgorithmicTrading #PortfolioConstruction #Diversification #RiskManagement #TrendFollowing #MeanReversion #Volatility #Hedging #Backtesting #Robustness

Dive into the deep experience of quantitative trading with Cesar Alvarez (trader first, martial artist second), a veteran trader known for his mastery in mean reversion, breakouts, momentum, ETF and volatility strategies. Discover his innovative methods building a dynamic portfolio, retiring strategies, parameter sensitivity tests, strategy robustness checks, and the art of balancing risk and return to ensure long-term trading success. Cesar’s insights highlight essential strategies for thriving in volatile markets, fine-tuning strategy components, and avoiding the trap of overfitting. Perfect for systematic traders looking for practical edges!

#QuantTrading #MeanReversion #AlgorithmicTrading #ETFStrategies #QuantTrading

Contents:

0:00 Cesar's Journey: Discretionary to Quant Trading

3:59 Inside Connors Research: Mean Reversion Insights

5:48 Cesar's Current Quant Trading Portfolio

8:35 Tactical ETF Strategies & Retirement Focus

14:34 Designing Quant Strategies: Goals & Principles

17:07 Robustness Testing & Avoiding Overfitting

22:49 Knowing When to Retire a Trading Strategy

29:53 Amibroker vs RealTest: Tools for Systematic Traders

34:03 Cesar’s Featured Quant Trading Strategies

37:03 Short Selling & Mean Reversion in Bear Markets

41:12 Breakout & Momentum Strategies for Stocks

43:53 Navigating Volatility: Trading VIX & SVIX ETFs

50:50 Secrets to Effective Mean Reversion TradingWhat could it be?

A Smart Portfolio of Trend Following, Mean Reversion & Hedging Strategies

Unlock insane returns with quant crypto trading! Discover how Pavel from Robuxio builds robust portfolios combining mean reversion, momentum, and hedging strategies—even with limited historical data. Learn essential techniques for managing crypto volatility, optimizing execution, and leveraging diversified strategies. Curious? Dive into the show!

#QuantTrading #CryptoTrading #Momentum #MeanReversion #Hedging #AlgorithmicTrading #CryptoStrategies

Psychology for Quant Traders? Really?

Quantitative futures traders like to think in code, not clichés—but Dr Brett Steenbarger makes a compelling case that mindset is part of the edge. In this interview, Brett argues that the same statistical rigor quants apply to markets should be applied to the grey matter behind the keyboard. Here's a guide for the advanced systematic trader who suspects “psy-stuff” might be more than motivational posters.

The punch-line from Brett’s research is simple: systematic trading is less “set-and-forget” and more Formula 1 pit-crew—engineering precision plus real-time human performance. Code finds edges; psychology keeps you creative enough to refresh them. Or, as one of Brett’s blog posts puts it, “We can’t run robust systems from brittle minds.” Not a bad mantra to stick on your trading monitor!

#traderpsychology #tradermindset #tradinginthezone

Finishing our little mini-series on shorter-term futures trading we talk to Andrea Unger and happily inject some click-bait in the form of gloating about his 672% return in a single year when he won the World Trading Competition. Naturally, we know that this kind of return is generated by specifically trying to win the comp, and taking on the associated risks! If you've been asleep the first two guests in this series were Bob Pardo and Kevin Davey. Between the three we've got a complete masterclass in shorter-term, diversified and responsive futures trading!

Andrea Unger is actually a four-time World Trading Champion, and here he offers a comprehensive and structured approach to quantitative trading in futures markets, emphasizing practical methods for strategy design, robustness testing, portfolio construction, and system deployment.

www.thealgorithmicadvantage.com

Kevin’s systematic approach melds rigorous quantitative testing with pragmatic risk management and monthly maintenance protocols. By enforcing single-pass optimizations, extensive real-time validation, and lean portfolio sizes, he constructs a robust trading framework designed for consistency and longevity. Advanced traders can draw from his workshop principles to refine strategy design, navigate common back-testing pitfalls, and build diversified, adaptive portfolios capable of weathering market uncertainties.

Topics:

Strategy Design Principles

Walk Forward Analysis: Best Practices and Common Mistakes

Robustness Testing Beyond Walk Forward

Tech Stack and Automation Tools

Portfolio Construction Process

Monthly Maintenance and Rebalancing

Risk Management and Psychological Preparedness

Performance Benchmarks and Goals

In the cutthroat world of algorithmic futures trading, a structured process is non-negotiable. Kevin Davey’s approach—defining objectives, rigorous validation via walk-forward and Monte Carlo methods, live incubation, and proactive portfolio management—offers advanced quantitative traders a framework to thrive in. By blending engineering precision with market adaptability, his methodology underscores that success lies not just in the strategies themselves, but in the disciplined process behind them.

www.thealgorithmicadvantage.com

Many trading strategies are developed using extensive historical data to calibrate model parameters. However, this process often leads to over-optimization, where the strategy is too finely tuned to past market conditions. Two things stand out:

Noise vs. Signal: Financial markets inherently contain a high degree of randomness. A model that fits historical data exceptionally well may simply be capturing random fluctuations rather than a persistent trading edge. Regime Shifts: Markets change over time. A strategy that works during a bull market might not perform in a bear market or during periods of high volatility.

Enter Walk-Forward Analysis. It's also not easy, but if done right can create an incredible method to solve for over-fitting in a systematic manner, leading to:

Realistic Performance Metrics: By testing on entirely out-of-sample data (not just one out of sample period), traders can obtain performance metrics that are closer to what would be experienced in real-world trading. Adaptive Strategies: Walk forward analysis inherently forces a re-optimization process. This means the model is continually updated to reflect more recent market conditions, thereby reducing the risk that it’s built solely on outdated historical data. Robust Parameter Selection: Instead of selecting a single “optimal” parameter set that may be an outlier, traders can identify a plateau of robust parameters that perform consistently across multiple windows. This approach minimizes the risk of curve fitting, ensuring the strategy’s parameters are not overly sensitive to one specific dataset.

Of the two biggest problems quantitative traders probably face, the first is over-optimization and the second is likely finding inspiration for new ideas. In-depth interviews with market wizards surely has to be one of the best ways to learn quickly, avoid common pitfalls and find untold amounts of inspiration hidden between the lines. Listening to experts that have been at it for decades, for me anyway, is an incredible education. In this show I invite you to again spend over an hour with Bob Pardo on the ins and outs of his trading, his philosophy and his edge. And the best bit is, this is just part 1 of 2. In the second part I'm going to deep-dive walk forward analysis with him and I'm sure I'll be walking away with some highly practical tips and tricks.

Bob’s career spans several decades of evolving market dynamics, groundbreaking system development, and a philosophy rooted in adaptability and robustness. His journey—from early days on the trading floor to pioneering walk forward analysis and working with the likes of Solomon Brothers, Dunn Capital, Daiwa Securities & Goldman Sachs—offers a compelling narrative for quantitative traders seeking both inspiration and technical insights.

Intra-day Futures Traders and others - grab a chamomile tea and enjoy!

www.thealgorithmicadvantage.com for contacts and more.

The A-Z of building a systematic futures portfolio

In this episode, seasoned trader Rob Carver shared his nuanced approach to building and managing a diversified futures portfolio—a methodology that appeals to advanced, technical traders, while we also covered off some of the 'basics' of futures trading, such as rolling, back-adjusting, and so on. I did my best to break down the key elements of his strategy, from market selection to dynamic optimization and continuous trading. A couple of interesting things came up, there's a lot of detail in here, and luckily you can go to his blog and books for all the technical detail.

For the long-term futures trader with a smaller account, this is essential listening. How much diversification across markets and models is enough? How can we capture the benefits of this diversification with a limited account size? Rob has innovative approaches to both market diversification and model diversification to generate a highly capital efficient approach.

For futures data, check out Norgate on our site: https://thealgorithmicadvantage.com/tools/

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