In this weeks Thursday Trading Thought we're going to discuss a market pattern that was identified over 80 years ago, perhaps even longer, that could indicate what happens in the markets for the rest of 2017. Now, I can imagine some traders are probably thinking, "who cares about some old, dusty trading rule from the 1900's, surely that has no relevance to the markets today?" Well, that's what we're going to discuss with our guest Brent Penfold, who is going to answer the following questions, pl...
Sep 28, 2017•20 min
With the explosion of computing power, more and more resources are being deployed to analyse the markets. Edges that used to work are being eroded away or destroyed as traders from all around the world get to work analysing the same sets of price data. Add to that mix the sophisticated machine learning algorithms and the rooms full of PhDs, how do we even compete with that? If everyone is looking at the same price data, is trading based on price alone enough, and if not, then what is the solutio...
Sep 21, 2017•10 min
In this episode we're going to explore a topic we don't cover much on this podcast and that is options trading. 2 of the mains reasons we don't discuss options trading much, is firstly because I don't trade options myself and have limited knowledge of how to use them, but also because there are some challenges with testing options strategies which makes it difficult to backtest them systematically. However, there are some potentially huge benefits to trading systematic options strategies in a po...
Sep 17, 2017•32 min
In this weeks Thursday Trading Thought we're going to inject some inspiration into the podcast. Trading is a really tough business and sometimes as traders we can get into a bit of a funk, no matter what level of trading we're at. But we're only human and we're all trying to get better, so in this episode I've pulled together 3 of my favourite stories or motivations from the podcast. We've had a lot of inspirational guests on the show over the years so I could have pulled out a whole bunch of th...
Sep 15, 2017•7 min
Fear, Hope and Greed are 3 dangers that traders of all levels need to watch out for. They can have sometimes have a dramatic impact on our trading results, and even cause traders to quit trading or to blow up their accounts. And even if you think you've got them covered things can change pretty quickly, and even seasoned pros that are often as cool as ice can turn into a quivering mess in the corner! OK, that was a little dramatic, but it can happen and I'm sure you get the point that at times t...
Sep 07, 2017•11 min
So here it is, the 2nd part of our conversation with Brian Miller from Optimized Trading. In the chat today we're going to combine some new topics with an expansion on our previous conversation, including: The application of game theory in trading (it doesn't just apply to HFT), The importance of letting the R&D process guide you instead of trying to squeeze it into a preconceived idea, How to balance simplicity with complexity for more robust trading solutions, The impacts of price data evo...
Sep 04, 2017•39 min
A common misconception with systematic and algorithmic trading is that it removes the impacts of human psychology on trading. But that's really not the case. In fact, even when we've got trading platforms automatically executing trades for us, the mental aspects of trading can still have an impact on execution, model development, position sizing and other areas... Sometimes without us even knowing. And not only can they have a negative effect on our trading results, but can also take a toll on o...
Sep 01, 2017•12 min
You may have noticed over the past few weeks of 'Thursday Trading Thoughts' that we've been following a theme. In episode 113 we heard about a test Kevin Davey calls the 'Monkey test', which can be used to measure the effectiveness of entries and exits. Then in episode 114 we reviewed a technique that Dave Bergstrom shared to measure the decay of a trading edge so that we can determine when an edge has gone, and not overstay our welcome at the party. In this weeks trading thought we're going to ...
Aug 25, 2017•9 min
Glad you could join us today for our chat about intelligent systems that maintain themselves. Sounds good doesn't it? Well actually, that's not all we're going to discuss today, we've got so much more than that. Our guest for this episode is David Stendahl, from Signal Trading Group . David is a CTA with more than 20 years of experience designing and trading systems, and not only is he an international speaker and the author of 4 books but he also co-created the backtester in Tradestation many y...
Aug 20, 2017•41 min
Last week we reviewed a technique Kevin Davey shared to measure the effectiveness of entries and exits using something he calls 'the monkey test'. This week we're going to look at entries and exits from a slightly different angle: How can we measure a trading edge after we've entered a trade, Is it possible to identify when that edge has disappeared so we can consider exiting the trade rather than overstaying our welcome? In this episode we're going to review a technique that Dave Bergstrom uses...
Aug 18, 2017•7 min
Today, we're going to have a quick chat about the effectiveness of entries, and a simple technique you can use to determine how good an entry or exit really is. I've been working on some breakout strategies lately and I've noticed in some of them that the entry really isn't that important at all… That is, I can be pretty loose with the entry values and get similar results… So there are other components to the strategy that are actually driving the performance. Now, this got me thinking about mea...
Aug 11, 2017•4 min
Glad you could join us today where we get to chat with Stefano Serafini – the current leader of the World Cup Championship of Futures Trading®* I met Stefano in New York at a trading masterclass a few years back and he's been doing some great things with his trading. As I mentioned, he's the current leader of the World Cup Championship of Futures Trading®* Sometimes in these trading competitions you see traders rocket to the top of the leaderboard really quickly, but they usually disappear just ...
Aug 06, 2017•35 min
As systematic and algorithmic traders, we have a number of tools and processes we can use to test and validate trading strategies. For example, in-sample/out-of-sample testing, walk forward analysis, cluster analysis and a bunch more. (And don't forget all the fancy named techniques that have been lumped in with Machine Learning that are sometimes just rebadged techniques that have been around for ages already!) Anyway, one of the tools that we have at our disposal is Monte Carlo analysis. When ...
Aug 04, 2017•7 min
T Today I want to share with you one of my favourite Seinfeld episodes ever. It's the episode where George Costanza realises that all of the decisions and actions he's taken throughout his life have been the wrong ones. So he decides to do everything the opposite. He's in the diner with Jerry and Elaine and he sees an attractive woman sitting up at the counter who seems to be interested in what he's doing, glancing over at him. Instead of sitting back and doing nothing about it he does the oppos...
Jul 28, 2017•4 min
The markets are in a constant state of adaptation. Conditions change. Strategies fall in and out of sync with the market, causing periods of good and poor performance. So what can we do to improve consistency by making our systems adapt better to changes in market conditions? Our guest for this episode, Brian Miller, is from Optimized Trading, and in our chat he shares with us: Why implementing adaptability into strategy design is so important and some techniques you can use to create adaptive s...
Jul 23, 2017•31 min
Over the last few months you may have noticed an increase in the number of articles being published on the internet using Market Breadth to predict which way the stock markets could go next. In fact, I saw one just recently that said the US stock market is set for a parabolic move. Now, as systematic traders I'm sure most of us are not really interested in predicting those types of things... However Market Breadth measures can provide us with additional insights into the underlying conditions in...
Jul 21, 2017•9 min
" I think most traders use canned indicators like a stochastic or RSI or MACD, with a fixed length without thinking much about them. " - John Ehlers They take the default length, or one that performed well in a backtest, or even one that has been recommended by someone else, and they start trading with it. They may have a good run for a while... And then it falls apart for no explainable reason... The basic problem is that market conditions change, but indicators are fixed and don't adjust to ch...
Jul 13, 2017•7 min
I have to admit… I'm a bit of a sceptic. However, I've had so many people recommend meditation to me in the past. Successful people. People I have a lot of respect for. In fact, some of the previous podcast guests, some big names, have shared with me how powerful meditation has been for them, both personally and for their trading. But it's not just traders, many successful business people swear by it too. So, what's all the fuss about? I'm always on the lookout for anything extra that can give u...
Jul 09, 2017•35 min
Today I want to share an optimization insight from Perry Kaufman. I was reading an article on a trading website and the author was making some assumptions based on the optimization results which may not have been entirely accurate. I think alot of traders can get caught up making this same assumption... I know I definitely have... And it's good to be reminded of these types of things so we don't make the same mistakes. Listen to Perry explaining what this assumption is, the danger in making it a...
Jul 07, 2017•8 min
A few years back I was on a holiday with friends at Hamilton Island in the Whitsundays. We were cruising around the island in a golf buggy when a friend suggests we go to the shooting range. I'd never even touched a gun before but while we were there I decided to shoot a .44 Magnum... 'the most powerful handgun in the world' according to Dirty Harry! Take a listen to hear what happens next and how it applies to trading. Disclaimer: Trading in the financial markets involves a substantial risk of ...
Jun 30, 2017•7 min
Indicators often form a large part of trading systems, however there are a number of issues caused by indicators that can result in under-performing trading strategies, like: they're reactive, instead of predictive, they have alot of lag, which means they're slow to respond to the markets, and they can often give you a signal too late so you've already missed some of the move or even a large part of the move! Today we talk to John Ehlers who is going to share with us a brand new indicator he's d...
Jun 25, 2017•27 min
I'm currently in Sydney for a week doing some work, and I'm staying in one of the hotels near circular quay, overlooking Sydney Harbour. I won't share name of the hotel because it's a well-known name, and it's actually a really nice hotel... However I had an experience with them when I was checking in that I wanted to share because I think it has some nice parallels to trading strategies. Take a listen! Disclaimer: Trading in the financial markets involves a substantial risk of loss and is not s...
Jun 22, 2017•5 min
Most trading strategies are built to find repeatable patterns in the market and then attempt to exploit any future occurrences of the pattern to make a profit. There are lots of different ways to find patterns, and in this episode Brent Penfold talks about patterns in price action. Brent is a full time trader, author, educator and licensed Futures Advisor, and in our chat you will learn: Why it can be better to focus primarily on price instead of a collection of indicators, How to identify patte...
Jun 18, 2017•35 min
Jack Schwager returns to answer all your trading questions. Jack is a well known expert in the industry, working for some of wall streets leading firms and is also one of the founders of FundSeeder. Plus, he's the author of the best-selling series of 'Market Wizards' books, which I'm sure most traders on this earth have read! In this 2nd part of our chat with Jack, he answers all of the trading questions you submitted (well most of them anyway, unfortunately we didn't have all day to talk!) Plus...
Jun 11, 2017•1 hr 5 min
When I was learning to snowboard, I still remember the first time I got off the lift chair, strapped myself in the board and looked down the mountain. It was really overwhelming and I wondered how I was actually going to get down there without any injuries! My instructor was very comforting telling us 'Not to focus on the bottom of the mountain', because even though that's the destination, to get there we were actually going to zig-zag down the mountain. So we needed to focus on the next turn an...
Jun 09, 2017•10 min
It can be really interesting and exciting to research the markets and test different ideas but at some stage we need to decide if the strategy is ready for live trading. Some traders can get stuck endlessly researching… Trying to find that perfect system… Which comes at a cost. How do we avoid getting bogged down in research? How do we know when a trading strategy is actually ready for trading? Let's listen to Kris Longmore from Robot Wealth explain his approach to determining when a trading str...
Jun 02, 2017•5 min
Jack Schwager needs no introduction. He's a well known expert in the industry, working for some of wall streets leading firms. Plus he's the author of the best-selling series of 'Market Wizards' books, which I'm sure most traders on this planet have read! In this chat with Jack we discuss Optimization Myths, referencing some interesting results of a study that analyses the effectiveness of optimization... The results may not be what you expect... And could have a huge impact on the way we test a...
May 28, 2017•27 min
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 wh...
May 25, 2017•7 min
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 suc...
May 18, 2017•6 min
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 ...
May 14, 2017•43 min
