Better System Trader

Did you know there are some situations that can cause traders to throw away perfectly viable trading strategies, without even realizing it? Imagine that! Putting all that hard work and effort into building a trading strategy but due to some arbitrary decision we’re making during the strategy creation process, we throw the strategy away... When it could have been a good trading strategy... So, what could be causing this? And, what’s the solution? Let’s hear Dave Walton from Statistrade explain what this danger actually is so we know what to look out for, and then briefly discuss one of the solutions to this 'hidden' problem.

Have you ever wondered what exactly is it that makes a trader successful? Is it based on personality? A specific approach to the markets? Pure luck? Dr Brett Steenbarger is a trader and performance coach, and gets heavily involved in the recruitment process for trading firms. He gets to interview traders, see how they work and analyse their performance so he’s in a really great position to make these types of observations. Take a listen to Brett sharing the 3 main components he's observed in successful traders.

How many traders do you know that have successfully cornered a market? If you're not familiar with the term 'corner the market', it means to get enough control of a commodity, stock or other asset so that you can manipulate the price. There are a number of documented cases in history where people have tried... ... and it usually doesn't work out too well for them! This weeks podcast guest Kurt Sakaeda has cornered a market, however it was more of an amusing accident that an intentional act. And this is just one of the entertaining stories Kurt shares with us in our chat today. Those familiar with the World Cup Trading championships would recognize Kurts name because he's won it a few times, with his first win in 2000 so he's been trading for a while. In our chat with Kurt we discuss a mixture of trading topics, including: How to include seasonality in trading models and why you don’t need to worry about curve-fitting seasonal trades, The dangers of counterparty risk and how to reduce them, Finding profitable

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?

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

“ 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.

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.

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 un

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.

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 mor

"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.

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 tr

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.

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

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 mar

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.

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

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 Varianc

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

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 abo