Better System Trader

Last week I had to make an emergency trip to the hospital. It highlighted a gap in my trading 'operation' (pardon the pun) so I wanted to share that with you so that you can learn from my mistakes. How will your trading handle an emergency? 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.

Have you ever dreamed of leaving your day job to trade for a living? Or living a life of freedom - travelling the world or hanging around at home, doing whatever you like during the day while you live off your trading profits? When I first started getting into trading I had this grand vision in my mind of leaving my corporate job, travelling the world, living a life of luxury all supported by my trading profits. It's a common goal for alot of traders, but getting to that stage can be difficult, and knowing when you're ready to make the leap can be challenging. I regularly receive emails from people asking questions like: How do I know I'm ready to trade for a living, How do I become a full-time trader, How much money do I need, What other factors do I need to consider before taking this step. The guest for this episode, Nick Radge from The Chartist, has an extensive trading history and also mentors other traders. He's in a great position to answer all of our questions on trading for a living, so that's what he's going to do for us today, plus... ... he's also going to share some honest advice that all traders need to hear before taking the step to 'trading for a living'. 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.

" When you have a bad entry, you can always work your way around it, but when you have a bad exit, this is final… This is when the P&L gets printed." – Laurent Bernut Exits have such a dramatic impact on overall strategy performance, so having a full and proper understanding of the best way to leverage exits is absolutely essential. In this episode, Laurent Bernut from Alpha Secure Capital combines his witty sense of humor with his knowledge of exits, to entertain and to also share: How to classify exits and set them to achieve much clearer, neater, and better trading strategies, A simple technique to determine if you've overstayed your welcome in a trade, stay too long and you could suffer! How to use "the game of two-thirds" to determine the length of a time-exit, Plus much more, including the correct way to think about stop-losses, how to deal with free-loaders in a portfolio and the ultimate entry technique to test you have a robust exit strategy. 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 recently received an email asking me where all the trading ideas are. I think every episode provides at least 1 idea of value, but one that stands out in my mind was the chat with Rob Hanna in episode 7. In that episode he share loads of trading ideas. But he also goes one step further and explains the technique he uses to find new trading ideas... Every. Single. Day. Using this technique we can find lots of ideas to test too. Take a listen to this short audio snippet from Rob explaining how he never runs out of trading ideas to test. 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 appeals of automated trading is that it can be automated. You can 'set it and forget it' if you want. However there can be some dangers with doing so. About a year and a half ago I went through a period of being a little bit slack with monitoring my automated strategies and there was one occasion where my 'set it and forget' approach turned into a case of 'forget it and regret it'... ... A stop loss order for one of my strategies had been rejected ... I failed to check my trading platform for a few days because I was travelling and tired ... That particular lesson cost me 2-3 times the original stop loss size. So that was a stupid thing to do. But I learnt my lesson and now I check my trading platform alot more. A regular checkup to make sure everything is running smoothly is incredibly important because technology issues can (and will) happen at any time. But there's another process I've implemented which has helped me to identify issues that could have gone on for a lot longer if I'd left them unchecked. I got this process from Kevin Davey, so in this episode I've asked Kevin to join us for a quick chat to explain his own monitoring process some more, including some examples of the things he's found by following this process. So lets head over to my chat with Kevin Davey to hear 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.

Market corrections can be a stressful and challenging time for some traders, but it can also be a time of incredible opportunity. How can we not only protect our trading accounts but also grow our capital even further during market corrections? Our guest for this episode, @Ivanhoff, is author of the book 'Crash: How to Protect and Grow Capital During Corrections' and in this episode he's going to share with us: Some of the warning signs a correction could be starting and how to protect your capital during market corrections, The opportunities available in market corrections and how to take advantage of these to grow capital, How the characteristics of corrections are changing over time and the impacts this could have for future market corrections, Current market conditions and what this could be telling us. 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.

Earlier this week I was on a flight from LAX back to Melbourne. As we were sitting on the plane waiting for our departure I overheard a flight attendant say to a fellow passenger that one of the other planes had been struck by lightning causing delays to other flights. At the time I didn't know if a lightning strike on a plane was a bad thing, it sure sounds like something you don't want to experience, however it got me thinking about the risks of flying. Now admittedly, it's probably not the best thing to be thinking about just before the plane takes off for a 16 hour flight across the Pacific ocean at night but luckily my thoughts quickly switched to trading and the risks we face as traders. One of the concepts which immediately came to my mind was 'risk of ruin', which we first discussed way back in episode 2. In that podcast interview, futures trader Brent Penfold says: "In my humble opinion, I think the risk of ruin is number one or the most important concept in trading." I want to share a little bit more of that audio with you now, because it explains: Why risk of ruin is such an important concept for traders to understand, What traders need to know about risk of ruin, How to calculate your own risk of ruin. Plus I'll share what happens to a plane when it's struck by lightning, so 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.

"Basing your decisions on past data is like driving down the road, looking in the rear-view mirror". For the most part, traders don't know what's going to happen in the future and never will. In the previous podcast episode, Gary Hart explains how considering future probabilities can be beneficial, suggesting traders "base decisions on the probable future instead of the certain past." In this episode, we explore this idea further by reviewing a dangerous trading assumption and how traders can better position themselves for future market conditions. 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.

Our guest for the episode is Gary Hart, the founder of Trendfinder Trading Systems, a company offering mechanical intraday and swing trading strategies in futures. Gary has been trading futures for close to two decades now, becoming a member of the NFA and a registered CTA. He's had a number of trading strategies take the top spots in Futures Truth rankings so we're going to discuss how he builds trading strategies that do that plus we also cover a lot of other aspects of trading, including: The challenges of developing day-trading strategies and how to overcome them The worst time to trade intraday strategies that can hurt performance Why price-based strategies have lost their edge and how integrating additional data can provide superior performance over purely price-based strategies How to construct a portfolio of strategies and identify ones that complement each other Plus much more, including overfitting, optimization, swing-trading, correlation, market behaviour, index trading, volatility and reusing 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.

One of the biggest challenges we face as traders is strategies that either fail or experience a reduction in performance over time. There are a number of possible causes for this, one obviously being changes in the market. In podcast Episode 10, Perry Kaufman discussed the change in the markets and how they've become noisier over time, with an increase in erratic movements up and down. This increase in market noise can have a huge impact on trading strategies and particular trading styles too and we're going to hear a little bit more about that from Perry today, including: How market noise has changed over time and what it means to different markets, How to measure the level of market noise, The impacts market noise has on particular trading styles and how to adjust strategies accordingly, and How this information can be used to our advantage to determine the type of strategy that suits a market. So lets take a listen to Perry. 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.

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.

Our guest for this episode is Art Collins. Art's story is interesting because in his younger days he was an expert card counter in black jack, and he's translated some of those skills into building robust trading strategies from really simple market concepts. Not only is Art a trader but he's published a number of books and magazines articles, he's done lecturing, both online and offline so I'm sure you've seen his name around the place and it's an honor to have him here on the show today. In this episode Art shares: How to combine simple market concepts to create robust trading strategies The four rules of system development to reduce over-optimization Simple ways to improve the statistical reliability of our strategies What traders can learn from Arts experiences being an expert card counter in black jack 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.

Let me tell you the story of 2 lumberjacks and how we can become better traders by NOT 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.

Let's have a bit of fun today. It's Australia Day, so we're going with an Aussie theme for this Thursday Trading Thought... I'm going to share an email about a lamington and what it can teach us about trading strategies. (Yes, food and trading combined - it's ingenious! Just don't listen to it before bed...) Happy Australia Day! 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.

Risk Management… It's not as sexy as the latest hot indicator… Or the undiscovered penny stock poised for an explosive move… Or the trading guru who appeared out of nowhere and is now promising to share the "secrets" to making million dollar profits overnight… … But there are a whole host of risks that have the potential to destroy trading accounts in just seconds, so it's an incredibly important topic for serious traders to consider. We have plenty of examples in history that show what happens when Risk Management goes bad, so what can we learn from these and how can we best protect ourselves from catastrophic losses? Our guest for this episode, Robert Carver, is an independent systematic trader, freelance writer and research consultant. He spent years working for one of the world's largest systematic hedge funds and is the author of "Systematic Trading: A unique new way to make investment and trading decisions." In this episode, Rob shares with us: The different types of risk we face as traders – including 'hidden' risks that can destroy trading accounts in seconds What can go wrong when Risk Management goes bad (we have some great examples in history to learn from!) Common mistakes and assumptions traders make with Risk Management that can lead to heavy losses Tips and techniques to identifying and "managing" Risk 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.

Today we have a quick chat about technology and in particular Blockchain. Yes, Blockchain has been around for a few years now but we're really seeing more and more of it in the news lately, and there has been a lot of hype about the potential applications of this technology. Some people have even said the Blockchain will have a greater impact on our lives than ANY other technology that exists today. How big is that? Much of the hype around Blockchain has been focused on the financial industry, or the potential for Blockchain to fundamentally change the financial services industry. Which got me thinking.. ... How could this impact us in the future, both as traders and as fine, upstanding members of society? :-) Anyway, my own personal knowledge of Blockchain was pretty limited - even though I'd heard of it a number of times I didn't really have an idea of what it was. But I do remember that Bert Mouler mentioned it episode 64 of the podcast where we were discussing cryptocurrencies. So I asked Bert to come back on the show and give us a very quick introduction into Blockchain: What is it Why are people so excited about it The possible applications to the financial services industry, traders and society in general. So let's head over to Bert and hear what the fuss is all about! 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.

How do we know when it's time to quit working on a trading strategy and move on to something else? Here's a lesson from the TV show Gold Rush. 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.

The guest for this episode is Jack Vogel from Alpha Architect, a quantitative asset management and consulting firm. Jack has published a number of papers on SSRN and also co-authored a couple of books including "Quantitative Momentum: a practitioners guide to building a momentum-based stock selection system". In our chat with Jack you will hear: Momentum - what is it, what causes it and the different types you need to be aware of How to best apply momentum techniques to a portfolio Why measuring the quality of a trend is so important and how to do it 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.

What can traders learn from airline pilot Captain Sullenberger and his response and actions landing a plane in the Hudson River? 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.

So here it is: The Top 10 Trading Lessons for 2016! I have to admit, creating this list was really fun. Not only because I got to look back and remember all of the great episodes we released and the knowledge that these fantastic guests shared with us, but also because I had the chance to think about the impact these episodes hopefully had on your trading too. This Top 10 List was chosen based on a few factors, including download stats, feedback from listeners and some of my own personal favorites. So although this list is not solely based on analytics, each episode was chosen with the intention to offer powerful trading insights as you move into the new year. So if you missed any of these episodes, make sure you listen to them before we ring in the new year! Also make sure to download the FREE BONUS audio package — This audio contains the biggest trading lessons from each of the guests in this Top 10 list and I compiled them to make sure we all learn from their insights. It's only short but it's packed with valuable info! One last note: NONE of this would be possible without you and your support. So I want to THANK YOU for a fantastic 2016! So (drumroll please…..) here they are: My Top 10 Trading Lessons for 2016 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 markets become more mature and more efficient, it can be become increasingly difficult to find sustainable edges. Many traders are looking at the same data and using the same techniques, so what are our options here? 2 of the obvious options we have are: Try to find a unique approach to the markets or at least something that isn't so popular, Explore alternative markets where inefficiencies are more prevalent. In this episode, our guest Bert Mouler is going to discuss both options and share his solutions. Bert has been an independent trader for close to a decade and is the President and CIO of Profluent Capital, which uses advanced AI and machine learning technology to produce uncorrelated alpha for their clients. In our chat today, you will learn: Cryptocurrency markets – what to trade, the huge inefficiencies that exist and finding edges in the bitcoin markets The advantages and disadvantages of Machine Learning and tips to use it effectively in trading Feature engineering and the importance of looking at data in unique ways 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.

Most trading strategies have an optimal type of market condition where they work at their absolute best, so having an understanding of market conditions and being able to detect and adapt to them can really have a huge impact on trading performance. But how can we measure market regimes properly? What techniques can we use to find that delicate balance between stability and reactivity so that it improves performance rather than reduces it? Our guest for this episode, Alan Clement, has completed considerable research into market regimes and is going to share his knowledge with us today! Alan is a Certified Financial Technician, full time independent trader, quantitative trading systems designer and private investment consultant. In our chat today, you will learn: Market regimes – what they are and how they can impact the performance of your trading strategies The different types of Market Regimes and key aspects to consider when defining them Indicators, market breadth and intermarket measures – which ones are the best for detecting market regimes? 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.

The performance profile of Mean Reversion is extremely desirable to a lot of traders. Mean reversion trading strategies can produce high win rates and a smooth equity curve, however there are risks, which can result in giving back a large portion of profits, or of your trading account, some times in a very short period of time. So what can you do to build mean reversion strategies that produce consistent profits while managing risk effectively? Todays guest, PJ Sutherland, is here to share the knowledge he has gained from years of research and trading mean reversion strategies, and as you're going to hear, he has some really interesting insights to share with us. PJ has extensive experience in the development and deployment of quantified trading systems and has been active in the market for the past decade. He is the founder and director of Alpha Investment Advisors, providing research to hedge funds and prop trading firms, and the founder of the website Quantlab for private traders. In our chat today, you will learn: The key drivers of short-term returns in mean reversion trading The impact of market environments on mean reversion strategies and how to detect and adjust strategies to varying market conditions Should you 'Catch a falling knife' or wait for confirmation? How to determine which entry technique is best for you Building a portfolio of strategies using parameter ranges across the mean reversion curve Simple but powerful techniques to managing risk in mean reversion 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.

There are a number of different aspects to trading that we really need to get a handle on to increase our odds of success. Some aspects we often put a lot of thought and analysis into, and others we may not consider so carefully or at all, which could be impacting our trading results without us even realizing. Todays guest, Dr Howard Bandy, is here to discuss the foundations of trading, and some of these aspects we really need to consider, whether we're just starting out or a more experienced trader. Howard has over 50 years experience in the research and application of modelling and simulation of financial systems. He has previously worked as a senior research analyst for a CTA firm, is a consultant to trading companies and individuals, as well as being an international speaker and publishing a number of books on quantitative trading systems. In our chat today, you will learn: How to systematically choose the right markets to fit you risk profile, trading style and objectives The 3 characteristics a market must have to be tradable The difference between Impulse signals vs State signals and how they can be used to manage trades and monitor trade health The four parameters you need to understand to define your own risk tolerance Choosing the best objective function to evaluate trading strategy performance 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.

Why is it that some traders can create trading strategies that perform well in real-time trading while other strategies fall apart? How do some traders keep their trading strategies fresh and adaptive to market conditions while other strategies just stop working altogether? Robert Pardo, president of Pardo Capital, author of the book 'The Evaluation and Optimization of Trading Strategies' and creator of the 'Walk Forward Analysis' approach, is here to chat about creating and optimizing strategies that are robust and continue to work in the future. In our chat today, you will learn: Common mistakes traders make that can cause strategies to fail in real-time trading The dangers of traditional optimization techniques and how they can be reduced and even overcome How to determine if a strategy really is robust, while keeping it fresh and adapting to market conditions 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.

Who wants a steadily rising equity curve with little or no drawdown? I'm sure most traders do, but unfortunately it doesn't usually end up that way. Drawdown is a big part of trading and can be one of the the biggest challenges traders face, so what techniques can we use to potentially help reduce drawdowns? Our guest for this episode, Scott Phillips, is going to share techniques he uses to manage drawdowns in his own trading. In our chat you will learn: How to quickly test a trading idea to determine if it's worth more investigation Why it's so important to understand market types, the impacts it could be having on your trading results and how you can leverage this knowledge to create strategies with enhanced performance How to improve your trading results through better trade management and multiple 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.

Building robust trading strategies that can detect and adapt to market conditions can be a real challenge, and failure to do so can often result in poor trading performance and drawdowns. How can we build more robust trading strategies that adapt to market conditions as they change? Our guest for this episode, John Ehlers, who has a guest on episode 48, joins us to share some common problems traders face when building trading strategies along with tips on how to overcome them. In our chat you will learn: Tips and techniques to detecting and adapting to market conditions Common problems traders face with indicators and how to fix them The 4 requirements to building a robust trading strategy How the conventional wisdom of using indicators causes late signals and how to use them to anticipate instead A simple technique to determine if your indicators are working properly for the market conditions 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.

Trading algorithmically based on sentiment data is a relatively new field compared to more established approaches. With the explosion of social media and computing power, the analysis of sentiment data has also increased, with some hedge funds committing considerable resources to researching the applications of sentiment data in trading. However, there is also some skepticism of the value of analyzing social media for trading, so what is sentiment trading all about? Can sentiment actually be used in trading models and how? Our guest for this episode, Richard Peterson, has been analyzing sentiment for over 20 years. He started what was probably the world's first fund specializing in sentiment trading, and now runs a company called MarketPsych, specializing in the collection and analysis of sentiment data. In our chat you will learn: Why sentiment is so important and how it can give traders an edge The challenges of using sentiment data in trading models The best and worst markets for sentiment analysis as a predictor Applications of sentiment analysis in quant models and the future of sentiment analysis 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.

Whether you're a retail trader with a small account or a fund manager with millions or billions under management, something that we all need to consider carefully as traders is how or where we're going to use the money in our trading accounts. 'Capital allocation' sounds boring but it can have such a huge impact on our trading results. Unfortunately, it can sometimes be overlooked for other aspects of trading like entries and exits, leaving traders with an inefficient use of their capital and can result in lower returns and poor performance. Can we use our trading capital more efficiently to achieve higher returns? And if we can, then how? Todays guest, Michael Melissinos, started out as a junior analyst at Bear Stearns and is now running his own systematic trend-following fund Melissinos Trading. Mike is a competitive guy, always looking for ways to improve his trading performance and in today's episode he's going to share with us some practical ideas and research, including: The 3 most important things that influence trading performance Why what you trade is more important than entries and exits Ideas to improve trading results through dynamic capital allocation How to use indicator scores to measure trend strength 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.

Today's guest is a trader that has been requested quite a few times actually, I've had a lot of requests to have this person as a guest on the show, and the guest is Adam Grimes. Adam has two decades of experience in the industry as a trader, analyst and system developer and is currently Chief Investment Officer of Waverly Advisors. He's previously held positions at Level Partners, MBF Asset Management and SMB Capital and is the author of 'The Art & Science of Technical Analysis: Market Structure, Price Action & Trading Strategies'. For those of you that know Adam and his work, his approach to trading is a mix of quant and discretion, and I think even if you're a purely systematic or quant based trader it's interesting to hear other people's approaches and points of view. So we start off the chat by discussing his approach of mixing quant and discretionary models, and then we move onto behavioral factors in the market and why approaches that look at the market as purely rational fail. We then end the chat discussing Keltner channels and their applications to trading, so there's quite a variation in topics here but I'm sure you'll find it interesting. Topics discussed Mixing discretionary decisions with a quantitative framework Why behavioral factors in the markets are so important and why approaches that look at the market as purely rational fail The application of Keltner Channels in 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.

When I was preparing for the previous podcast episode on system trading through the Brexit, I had to review some of the past podcast episodes so that I could include some background content for the guests, and as I was going through some of those past episodes I realized that there was so much great information in them that I had already forgotten about. I even found some concepts or ideas that didn't really catch my interest because it wasn't appropriate to my trading at the time but it's now more relevant to me personally, so I thought it might be time to do another review of some of the past episodes as a reminder and to perhaps gain or reinforce past insights. Last year, we did a podcast episode where we reviewed episodes 1- 20. That was episode 30 if you'd like to go back and hear that. In this episode we'll review lessons and highlights from episodes 21-40. Some of the topics we'll be discussing are: How to never run out of trading ideas, The importance of creativity and a simple technique to increasing our creativity, How to manage data mining and avoid overfitting, A number of approaches to building robust trading strategies, How to bet bigger with a smaller overall risk, 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.

The results of the Brexit decision took a lot of people by surprise and the markets reacted accordingly. What was interesting about this market event is that we all knew the date and time period when the Brexit votes would start rolling in, so we had a rough idea when we might see some type of market reaction, if the market reacted at all. As systematic traders, what should we do in this type of situation: Should we continue trading as usual, following our systems? Should we override our systems to reduce exposure, or perhaps temporarily stop trading altogether? Are there any other approaches that we should consider? How do we go about deciding what to do? In this episode we're asking 13 system traders and past guests of the podcast (actually it's 12 past guests and one future guest) about their approach to trading around the Brexit vote. I'll be asking them what their trading plan was going into the Brexit decision and you might be surprised with some of their answers. I'll also be asking them what factors they considered to reach that decision, whether they were happy with the approach after the event and any key learnings we can get out of this experience. I personally found it really interesting to hear what they had to say so I'm sure you will too. Topics discussed How 13 pro system traders approached the Brexit decision - did they trade through it, reduce exposure, stop trading or something else? Their answers may surprise you! The factors they considered when deciding on that approach Lessons learned and insights from their results and the market reaction to the Brexit decision 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.

Traders are always looking for an edge and today's guest shares a simple approach he calls an 'unfair trading advantage', that can have a dramatic impact on trading strategy performance. The guest on this episode has been on the show before, to discuss breakout trading strategies back in Episode 43. In that episde we discussed the steps to building breakout strategies and we even released a breakout strategy toolkit, included an ebook, cheatsheet and EasyLanguage code for 2 breakout trading strategies. In this episode, our guest Tomas Nesnidal will be sharing a different trading approach, and it's something he likes to call 'an unfair trading advantage'. He's going to explain to us what it is and why he calls it an 'unfair advantage.' It's something that a lot of traders have probably heard about but perhaps are not aware of how to use it properly or even the positive impact it can have on trading results. Tomas will explain it in this chat so take a listen! Topics discussed An 'unfair trading advantage' all traders should consider for their own trading strategies The technique that most traders have probably heard about but don't know how to use properly The incredible impacts this technique can have on trading performance 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.

Today we're covering a topic which can really be a concern for traders of all levels, from beginner to pro, and that is the topic of strategy evaluation. Have you ever found that real-life performance does not match expected results? Or perhaps you have a strategy that is stuck in a drawdown and wondering if it's actually broken? I'm sure we've all heard of data mining bias, over-optimization and curve fitting and the impacts this can have on our trading accounts. We may be even using techniques such as Out Of Sample testing, Walk Forward Analysis, Monte Carlo analysis and a number of other measures to identify or reduce the impact of these issues, but do these approaches actually work? Are there limitations or dangers with these techniques? Are there better ways? In this episode we talk to someone who evaluates trading systems for a living, plus his research into system evaluation techniques has won awards. The guest is Dave Walton. Dave was the winner of the Wagner award in 2014 for a paper titled 'Know your system – turning data mining bias to benefit through System Parameter Permutation'. In our chat today we talk about the technique in his paper and how it can be applied to trading strategy evaluation. We also discuss some of the assumptions and limitations of the approach, and he shares with us some valuable insights he's made since publishing the paper which have resulted in an updated approach he now considers a better alternative, so make sure you listen out for that. Topics discussed How the typical approaches to system development can introduce datamining bias without you knowing The types of systems that can increase the chance of data mining bias and what to look for How the method of splitting your out of sample data could be causing you to throw away good strategies Out of sample, walk forward analysis and Monte Carlo - do they actually reduce data mining bias? The problems with using Monte Carlo analysis to assess strategy performance and why it doesn't protect from overfitting System Parameter Permutation - how to use it, why use the median, parameter range selection and new insights since the SPP paper was published How System Parameter Randomization solves some of the issues of System Parameter Permutation Stochastic modelling and how it can be used to determine if a rule is adding value to your strategy 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.

Nelson Freeburg was the editor of Formula Research, a newsletter that developed systematic timing models for the stock, bond, and commodity markets. He was also a research consultant working with institutional money managers to design proprietary timing models. Nelson had been an active trader since 1980 and occasionally spoke about his work to audiences around the world. In this episode, Linda Raschke shares memories of Nelson, his approach to model development and what we can learn by studying his work. Topics discussed Timing models and the components Nelson used in his models Russell growth vs Russell value model Out of sample testing and sample size Why Nelson focused so much on reducing drawdown Nelsons biggest strengths in modelling and what we can learn from his approach Voting systems The benefits of overlaying 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.

Markets are constantly changing. Trading edges come and go. In an industry with such a low survival rate, where some areas are changing at an ever increasing rate, what does it actually take to not only survive, but thrive, over an extended period of time? The guest on this episode, Linda Raschke, has been trading for over 35 years. She traded for several hedge funds before starting her own, ranking 17th out of 4500 hedge funds by Barclays Hedge for 'Best 5 year performance'. She's experienced a large number of changes in the industry, some of them have been huge, but she's managed to adapt and continues trading even today. Linda stand out from the crowd for three factors: Performance, Longevity and Consistency, so what does it actually take? What has she learnt over the years and what can we do to improve our own chances of performance, longevity and consistency? In our chat with Linda we discuss some of the changes she's experienced over the years and the impacts this has had on trading. We also hear about her approach to modelling the markets, understanding market behavior, trade management, day trading techniques and some fantastic questions submitted by fellow listeners. Make sure you don't miss those! Topics discussed Changes in the markets over time and the impacts that has had on strategies and their performance How to use modelling to identify market behavior and edges AI, machine learning and neural network techniques Tips and factors to consider when daytrading Reading market behavior throughout the day PLUS loads of great questions submitted by Better System Trader listeners! 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.

Trading can be tough, markets are noisy and finding signals in the market noise can be challenging. Also, applying indicators to trading strategies can introduce lag, however a lot of traders don't even realize the lag their indicators are introducing or the impact it can have on trading. In fact, the guest in our chat today, John Ehlers said "One of the biggest enemies of traders is lag". So, what's the solution? John Ehlers is well known in the commodity futures arena as the Creator of MESA, having pioneered the MESA method of cycle analysis in the late 1970's and becoming the founder of MESA Software. He is author of four books including Rocket Science for Traders, Cycle Analytics for Traders, Cybernetic Analysis for Stocks and Futures and MESA and Trading Market Cycles. He has also been a contributing editor of Stocks & Commodities, winning a number of awards for his work. In our chat with John we discuss the issue of indicator lag, the impact it can have on trading and some solutions. We also talk about applications of Digital Signal Processing in trading, the MESA approach, regime switching, Cycles and the mistakes people make trading cycles. Topics discussed MESA and it's application to trading Alternatives to the MESA approach and which is best for the markets How cycle length can determine indicator length Common mistakes people make with cycles Cycles and DSP techniques as regime filters The problems caused by indicator lag and solutions to reducing lag The best low-lag filter and oscillator available Getting started with Cycles and DSP 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 and execution are such key parts of algorithmic trading so choosing the wrong platform can have a huge impact on our trading. There are loads of trading platforms available and a lot of considerations which need to be made when choosing one that suits our needs, so in this episode we'll be discussing backtesting and execution platforms with Nitesh Khandelwal, department head at QuantInsti who also co-founded iRageCapital and iRage Global Advisory Services. After our chat on algorithmic trading platforms we'll also cover statistical arbitrage, high frequency trading and some interesting audience questions, so listen out for those. Topics discussed The 3 key components to an algorithmic trading platform and the basic questions you need to answer before choosing a trading platform Why backtesting and execution platforms should be separate Choosing a programming language and why python has become a popular choice in trading The benefits and drawbacks of using python in trading Statistical Arbitrage, how it came about and the benefits of the approach The primary risks of statistical arbitrage, especially during times of market stress and how they can be reduced The most important factor in stat arb trading Common mistakes traders make when building statistical arbitrage 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.

I'm sure we all want to create trading strategies that perform better and last for longer but there are a number of issues we need to look out for when developing robust trading strategies, some are well-known and some perhaps aren't. In this episode we'll be talking with Perry Kaufman about strategy development and more specifically some of the issues that can catch us out when creating trading strategies. Perry raises some interesting points about optimization that may not be well known plus he shares loads of tips to creating more robust strategies. Perry writes extensively on markets and strategies, having published fourteen books and has just released a new book on building algorithmic trading strategies, which we'll be discussing in this episode. He has worked and consulted to a number of successful CTA, investment and prop trading groups, creating systematic trading and hedging programs. This is also his 2nd appearance on the podcast, appearing as a guest way back in Episode 10. Topics discussed The most robust type of systems How your choice of optimization values could be misrepresenting your results and how to choose parameters that give a more accurate picture The mistakes traders make when analyzing optimization runs and tips to doing it properly How to really determine if a new trading rule is robust Reducing risk by using multiple parameters What the number of profitable runs in an optimization can tell you about the robustness of a strategy Why diversifying across strategies instead of across markets could be a better approach The challenges of building robust strategies using Genetic Algorithms and Neural Networks 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.

Andrea Unger is the only trader to ever win the World Cup Championship of Futures Trading ®* titles 3 years in a row, with returns of 672% in 2008 (futures division), 115% in 2009 (futures division) and 240% in 2010 (futures & forex division). This is his 2nd appearance on the podcast, he was also a guest on Episode 16. In this episode Andrea discusses his approach to trade entries, how the traditional approach to entries can limit our ability to read the market and how he's modified the standard approach to identify entry opportunities. Topics discussed The typical approach to entries and how Andrea uses a modified approach to identify and test his entries Why starting an entry with a setup can limit your ability to read the markets The grouping of setups and how the style of trigger you use can determine the most appropriate setup The best timeframes for indicators and the impact lower timeframes can have on indicators Combining intraday and daily timeframes for better entries How Daily Factor can be used to determine the type of move to expect next Symmetrical patterns - when it makes sense to use symmetry and when it doesn't 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.

Back in Episode 32 we had a chat with Laurent Bernut, a systematic short seller who spent years working in the Hedge Fund world specializing in short selling strategies. He shared loads of knowledge with us in that episode but we actually had a lot more to talk about. We ran out of time back then so in this episode we're going to continue with the chat, covering a bit more on short selling, including common problems and mistakes traders make when short selling, the 5 psychological stages of a bear market, how these stages manifest in market behavior and where we are now. We also chat about his Convex position sizing model, visualizing your trading edge and how to tilt it more in your favor PLUS he shares with us a special trick to switch our minds from a flight or fight mode back into a state of flow. We also have some great questions submitted by podcast listeners so listen out for those. Topics discussed Common problems traders face when short selling When to never short a stock The 5 psychological stages of a bear market, how they manifest in the markets and where are we now? How Laurents Convex position sizing model adapts position size differently in periods of performance and drawdown Visualizing your trading edge and tilting it in your favor based on trading style The main components of a short trading strategy Why a break of support is often not the best place to enter a short trade and what to do instead A simple 'jedi mind trick' that switches your mind from fight or flight into a flow state 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.