5 years of brutally honest systematic trading advice in 13 minutes.
Summary
TLDRIn this insightful trading advice video, the speaker shares seven key tips from his five-year experience. He emphasizes the importance of focusing on strategy execution over capital, the inevitability of market shifts requiring perpetual adaptation, and the necessity of aligning trading methods with personal strengths. The speaker also highlights the need for specific, quantifiable criteria in systematic trading, the importance of out-of-sample testing for strategy validation, and the value of embracing responsibility for continuous improvement. This summary aims to engage viewers by distilling the essence of the script into a concise and informative overview.
Takeaways
- 📈 **Prioritize Execution Over Capital**: Focus on perfecting your trading execution before scaling up with more capital.
- 💰 **Understand Initial Capital Risks**: Be prepared for the possibility of losing your initial trading capital, especially in the first year.
- 🚀 **Strategy Development is Key**: Develop and test your trading strategy with simulated or low capital before going live with larger sums.
- 🧠 **Adaptation is Vital**: The market constantly changes, so your trading strategy must adapt to remain profitable.
- 🎯 **Leverage Your Strengths**: Align your trading approach with your natural abilities and personality for faster progress.
- 🔍 **Systematic Trading Specificity**: Transform your trading ideas into quantifiable criteria for entry and exit signals to create a systematic strategy.
- ⚖️ **Out-of-Sample Data Testing**: Validate your strategy with out-of-sample data to ensure it can handle unseen market conditions.
- 🔧 **Simplicity Over Complexity**: Simple strategies are less prone to overfitting and often more robust than complex ones.
- 🤔 **Responsibility for Improvement**: Take responsibility for your trading decisions and learn from mistakes to improve.
- 🛠️ **Risk Management is Crucial**: Implement proper risk management techniques, potentially using automated systems if self-discipline is lacking.
- 🔗 **Focus on What Moves the Needle**: Concentrate on areas where you naturally excel rather than trying to fix every weakness.
Q & A
What is the primary advice given for someone new to trading?
-The speaker advises new traders not to rush into trading with large capital. Instead, they should focus on honing their execution skills with smaller accounts or simulated capital to get used to the market dynamics and manage transaction costs.
Why is it suggested to start with smaller accounts or simulated capital?
-Starting with smaller accounts helps in managing transaction costs, which can significantly eat into profits. Additionally, it's common for initial capital to be lost in the first year, so focusing on strategy and execution is more important than making a large profit early on.
What is the speaker's perspective on the longevity of a trading strategy?
-The speaker emphasizes that trading involves perpetual research and strategy adjustments due to market shifts. They dispel the myth that once a strategy is honed, it will be set for life, highlighting the need for continuous adaptation.
Why is adaptation crucial in trading according to the speaker?
-Adaptation is crucial because markets shift, and strategies that may have worked well in the past can stop working or need refinement. Those who adapt are more likely to survive and maintain profitability in the long term.
What does the speaker suggest about focusing on one's strengths in trading?
-The speaker suggests that focusing on areas where one naturally excels can lead to faster progress and a better fit for one's personality. Aligning with one's strengths can yield more significant and faster progress in trading.
How does the speaker describe the importance of risk management?
-The speaker highlights the importance of sticking to proper risk management as a critical factor for consistent progress. Without it, even the best strategies cannot save a trader from significant losses.
What is the significance of defining specific conditions in systematic trading?
-Defining specific quantifiable criteria for entry and exit signals is crucial for creating a systematic trading strategy. It allows for objective and repeatable evaluation, which is necessary for algorithmic trading and avoiding overfitting.
Why is it important to pass an AOS (Apparent Out of Sample) test for a trading strategy?
-An AOS test is important because it helps validate a strategy's effectiveness on unseen data. If a strategy fails on out-of-sample data, it is unlikely to perform well in live markets, which react to new, unseen data.
What does the speaker suggest about the complexity of trading strategies?
-The speaker suggests focusing on simplicity over complexity. Simple strategies are generally more robust and easier to maintain than intricate ones. Complexity can lead to overfitting and requires more rigorous testing.
How does the speaker view the role of responsibility in improving trading skills?
-The speaker views responsibility as a key factor for improvement. By taking responsibility for decisions and analyzing mistakes, traders can adapt, iterate, and improve their strategies for future trades.
What is the speaker's stance on blaming external factors for trading mistakes?
-The speaker advises against blaming external factors for trading mistakes. Instead, they encourage traders to take responsibility for their actions, as blaming others leads to stagnation and hinders growth and improvement.
Outlines
🤑 Trading Tips and Adaptation in the Market
The speaker, who goes by 'go,trades', shares insights from their five-year trading experience. They emphasize the importance of focusing on trade execution before capital, as many new traders lose their initial capital within the first year. The speaker advises using small accounts to get accustomed to real-time market trading and managing emotions. They stress the need for perpetual research and strategy adjustments due to market shifts. Adaptation is key to long-term success, and focusing on one's strengths can lead to faster progress. The speaker shares their personal journey from discretionary trading to a more systematic approach, which aligned better with their data and statistical strengths.
📉 Risk Management and Systematic Trading
The paragraph discusses the necessity of addressing weaknesses, particularly in risk management, to ensure consistent progress in trading. The speaker admits their own struggles with risk management during trades but has improved by implementing automated risk management techniques. They also delve into the intricacies of converting trading strategies into algorithms, highlighting the importance of specificity and quantifiable criteria for entry and exit signals. The speaker warns against overfitting strategies to historical data and the importance of out-of-sample (OOS) testing to ensure a strategy's validity in live markets. They advocate for simplicity in strategies, as complex ones require more rigorous testing and are prone to overfitting.
💡 Simplicity in Strategies and Personal Responsibility
The speaker argues that simpler strategies are less likely to be overfitted and can perform well when combined in a portfolio. They acknowledge that complex strategies can work, especially for hedge funds, but caution that creating a non-overfit complex strategy is challenging. The speaker shares their preference for simplicity in strategy development. They also discuss the importance of taking personal responsibility for trading decisions. Blaming external factors for losses leads to stagnation, whereas self-analysis and adaptation lead to improvement. The speaker encourages traders to analyze their mistakes, adapt their strategies, and iterate for better performance in future trades.
Mindmap
Keywords
💡Systematic Trading
💡Execution
💡Capital
💡Transaction Costs
💡Strategy Development
💡Adaptation
💡Strengths
💡Risk Management
💡Algorithmic Trading
💡Out-of-Sample Data
💡Complexity
💡Responsibility
Highlights
Don't rush into trading with capital; focus on execution first.
Smaller accounts suffer from transaction costs, impacting profitability.
Initial capital often lost in the first year, so focus on strategy and execution.
Prioritize strategy development and testing with simulated or low capital.
Adaptation is crucial for continued success in trading.
Trading is a set of skills, mainly adaptation and strategy development.
Market shifts require perpetual research and strategy adjustments.
Focus on areas where you naturally excel for faster progress.
Aligning with personal strengths can yield faster progress in systematic trading.
Simple strategies often prove more robust than single intricate ones.
Systematic trading relies on specific quantifiable criteria for entry and exit signals.
A strategy must pass an AOS (Appreciation of Sample) test to be valid in live markets.
Effective strategies are more important than just impressive tests.
Complexity increases the risk of overfitting and demands more rigorous testing.
Responsibility breeds improvement in trading; blaming others leads to stagnation.
Take control, analyze, adapt, iterate, and improve for the next trade.
Embrace the reality that most problems stem from your decisions.
Transcripts
5 years of bruly honest systematic
trading advice I'm in also known as go
trades and I also run on bias trading
let's get straight into this this is
personally from my own five years of
experience trading I actually have about
five years in a ha give would take just
coming up to it um but trading has been
incredibly difficult uh challenge coming
up to this and luckily I have been
profitable for a while now but here are
primarily seven tips that have really
helped me over the years don't rush into
Trading with capital it's much better to
focus on execution first now Capital
always feels like the answer especially
when you are newer to trading but focus
on honing execution first smaller
accounts definitely will suffer from
transaction costs making edges harder to
actually be profitable from because
transaction costs you know eat into so
much of the percentage of profits that
you're actually making from that Capital
but the fact is is many of the times the
initial Capital that you put into
trading is going to be lost in the first
year so there's no reason really in the
first year to be aiming to make as much
profit as possible uh and that reason
being that you don't need that much
Capital you just actually need to be
honing your strategy and execution
primarily so PRI prioritize strategy
development and testing with simulated
capital or even low capitals get used to
actually trading the market real time
and kind of having that first initial
emotions when you do come into trading
as that will um happen and it's going to
be most likely a very New Sensation to a
lot of you at least it was to me it will
never be easy your Edge may work
flawlessly for a while but due to Market
shifts it will end up needing refinement
or you know potentially stop working all
together whether automated or
discretionary the journey involves
Perpetual research and strategy
adjustments so continued success the
Mon's adaptation um this is really a
early thing I thought uh was apparent in
trading everyone used to say or maybe it
was just me thinking about it was that
once I hone this strategy I'll be set
and then I'll be making this amount
every single year and that's going to be
happening over my whole life and then I
get to compound that and maybe I could
invest some of it into the S&P and then
blah blah blah you can go down a rabbit
hole of everything that you assume is
going to happen if you can you know lock
down this one strategy and be profitable
from it the reality is is trading
actually is a set of skills and those
skills are mainly adaptation and you
know obviously there's a lot of like
strategy development and things like
that but um you need to be able to adapt
otherwise you will at some point die uh
or your profits at least will heavily
decrease now that may not be you know a
sign where you you need to be adapting
for the next 50 years maybe you work
incredibly hard on trading and you make
a really sizable amount of money in 10
years 5 years and then you use that
money and go into lower risk assets like
bonds or setting up a portfolio using
spy or something like that um that
definitely can be a trajectory that you
may want to go down however the point is
is that don't expect that trading is
going to be the same you know in the
next 10 years in the next year uh
markets really do shift and things will
really stop working at some point I know
a lot of Traders that had really amazing
easy long strategies in 2020 and 2022
2023 2024 have been rough for pretty
much all of them and the only ones that
actually survived are the ones that were
able to adapt so adaptation is crucial
strengths move the needle focus on areas
where you naturally Excel this offers
two advantages faster progress due to
compounding knowledge and a better fit
for your personality when I aligned with
my data and statistic strengths my
systematic approach yielded three times
faster progress compared to
discretionary trading um now this is a
an idea I like to describe it is that if
you're not fitting to your personality
and what your strengths are you may be
trying to push uh you know a rock up a
hill when you could be doing a much
easier activity or with much more pros
and strengths coming behind you being
able to you know boost you going towards
that progress um my my apologies for bad
metaphor there but hopefully you kind of
get the idea that I'm trying to convey
across um mainly for me it was was I was
not naturally talented with patent
recognition or really anything that goes
along with um discretionary trading and
I know some people actually are some
people really do come into trading and
they have something about pattern
recognition that just works for them
really well and they can just stare at a
chart all day for two years and then
really pick up very unique things that
move a stock or unique things that they
found um and that can really be
beneficial to them so I'm definitely not
a a component saying systematic trading
is for everyone or algorithmic trading
is for for everyone but at least in my
opinion I want to expose this kind of
world to as many people as possible so
that more and more people can understand
if this is you know a part they want to
go down uh with algorithmic or
systematic trading um I do personally
still believe that there is a huge realm
of exponential kind of progress when you
match experience with data um but
realistically I think this video is more
aimed to people beginning or you know
medium tier where maybe you haven't got
as much experience and being profitable
for a while um so the key Point here is
strengths will move the progress bar
faster than focusing on your weaknesses
or trying to fix those as much as
possible now there are some weaknesses
you will need to try and fix for example
if you can't stick to proper risk
management then there isn't much help
really anything else can do to um allow
you to make consistent progress if you
are blowing up every four weeks um there
is not really a strategy out there
that's going to be able to save you from
that the only thing that can save you
from that is sending in maybe automated
risk management if you cannot rely on
yourself this personally was the case
for me I have never personally been very
good at risk management just when I'm in
a trade uh I've been better at risk
management when I'm on a high time frame
meaning like I'm managing risk over a
week over a month things like that I'm
actually quite good at that uh at least
you know currently um but in a trade I
was terrible I would blow up uh or you
know take a huge loss um on a particular
trade very easily for me so personally a
lot of risk management techniques I've
kind of moved out into the broker side
of things to make sure my broker has my
Max loss and all those kind kind of
things for intraday and trade specific
things uh and then I'm managing the risk
of the kind of portfolio strategies you
know on a weekly monthly quarterly basis
which is a lot easier for me to actually
consistently and objectively look at and
think about um so just some food for
forth there systematic trading relies on
specific conditions not just a checklist
now I've had the privilege to work with
you know 200 plus Traders now uh whether
that be retail institutional or Prop
Shops uh on a huge array of different
strategies when we've been converting
them into algorithms or back testing
them but over that time I've also had
many calls with different Traders um
that were interested in working with us
or you know just anything really around
back testing and pretty much everyone I
will say says they have a simple system
while this primarily is I would say
about 80% of the time not true uh many
people believe they have a simple system
because it is simple to them and that's
not actually what defines a simple
system uh many people will say hey I'm
I'm just you know wanting to do this
particular strategy around Market
structure and I have these orderflow
kind of confirmation things as the
confirmed trade now that is very simple
to say um that isn't simple to actually
turn into a systematic trading strategy
that you can objectively and repeatably
look at and evaluate um to actually
become more systematic you need to turn
them into specific quantifiable criteria
for entry and exit signals
um if
you I don't know the the quickest way
I've normally helps people do this is by
jumping on cool with them for about 30
minutes and we get to quantify and I get
to use my experience to help them break
down those sort of ideas but if you're
going to be doing this alone
realistically using IF and all
statements is the most crucial and being
incredibly specific about how a
condition is being met so for example if
you were to say hey I'm looking for um
I'm looking for a higher high to be
broken well how is that higher high
being defined are we using you know
willing fractals how are you defining
what is a swing High all those kind of
things then next is you know how many BS
are related to that what about if
there's a higher high but it happens you
know x amount of bars between each other
is that still true is that not true um
what about if there's a high higher in a
range for a while and then it takes you
know x amount of ball straty breakout
maybe it's the next day that it breaks
out does that still mean it is true
there's a lot of things around there
that you need to be able to Define to
properly say and repeatedly look at to
see if that actually qualifies as a vow
trigger um and this is incredibly
important for systemat creating and
going into the algorithmic side of
things AOS sample data above all a
strategy must pass an AOS sample test to
be valid in live markets if it fails on
out of sample data it is unlikely to
work in real time you need effective
strategies not just impressive tests um
this is incredibly important because I
still see so many people only back
testing uh once and just using a you
know historical data set and then back
testing over it um that is great but if
you've optimized over that whole um
historical data set said you're going to
be left realistically with probably an
overfitted strategy and what you need to
do there is split that data into two
sets in Sample and out of sample or you
can do something called a walk forward
optimization I've also got a video on
that kind of topic on my YouTube if you
want to check it out um but those kind
of techniques are very important to
actually get a realistic idea of how a
strategy would perform on unseen data
which is primarily unseen data is live
data so when you imagine taking a
strategy live it is now reacting to data
it's never seen before and never been
optimized on um so that kind of is the
term unseen data because it's never got
into it also you f out sample data and
things like that um so yeah this is a
very simple quote but a very strong
meaning at least to me complexity gets
you in trouble each added layer
increases the risk of overfitting while
complexity can be achieved it demands
more rigorous testing and is generally
harder to maintain a well diversed
portfolio simple strategies often Pro
proves more robust than a single
intricate one um now this is for the
point that I often here as kind of like
a comeback I guess in the sense that you
know I say focus on simple strategies
because they most likely will do better
they're going to be less over fits they
may not be incredible returns but if you
create a portfolio then it can be you
know it can do well as a portfolio
strategies but then people will say hey
but like you know hedge fundes are on
some of the most complex strategies
things like that and yes that is
completely true complex strategies do
and can work the problem there is you
have to be quite smart uh to actually
get a complex strategy that is not not
overfit especially when you're dealing
with machine learning and things like
that it is actually a very um delicate
task to accomplish to not just overfit
on historical data and noise and
actually come out with something that
can be working on unseen data as we were
saying before so my realistic um or at
least what I do in my position is I
focus on Simplicity over complexity
because I can get to the end goal a bit
easier than if I just focus on one very
complex strategy now if for some reason
you discovered the holy gra of a
strategy and it was really complex but
it worked on on seen data and it works
on live markets then yeah 100% Whatever
Gets you to return you should use it but
um at least for building a strategies
and things like that I do think simpler
and nor goes better responsibility
breeds Improvement in trading most
problems stem from your decisions
Embrace this hos reality it ows you to
take control analyze adapt iterate and
improve for the next trade blaming
others only leads to stagnation um and
this is a really easy concept I think
but is it's kind of one of those ones
that is harder to exec in real time um
everyone says hey I take responsibility
for my you know my my mistakes and
things like that but when you're
actually In the Heat of the Moment and
you've just made a huge mistake and you
want to blame everything else by
yourself that's when it actually truly
matters and it's the same thing with
like draw downs and things like that um
and at least what I've learned is
anytime I catch myself saying oh no it
was because of this uh I just catch
myself and try and say no actually
potentially could have been my fault
because of this x reason um and the word
potentially there kind of softens the
blow where you're saying hey this this
could be my fault because of this reason
and it's not directly saying hey 100%
this is my fault which can be harder to
you know console within yourself
especially if you've lost money and you
know any Trader knows when you've lost
money it it does hurt I I don't really
care what anyone says that hey it you
know it doesn't affect me at all uh it
does and it's going to feel a bit
at least for a bit um but I think that
responsibility is the only way you
actually move past that that mistake or
that issue and then you actually get
into the important part where you're
analyzing how you made that mistake what
you can do differently next time and
fundamentally there's normally two
groups there's one group where the
mistake was built into the strategy by
itself so maybe it was a risk parameter
you've you overlooked and you should
have actually added to the strategy so
that's something that you need to you
know consolidate in the strategy and
then second is based on execution and
your own handling of that strategy um
now that could be you've changed the
parameter values too often that could be
you changed an individual trade all
those kind of things um where they can
cause to mistakes based on performance
and that's where you really need to take
responsibility thank you for watching
and if you enjoyed please like it and
share with anyone else who might be
interested
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