5 years of brutally honest systematic trading advice in 13 minutes.

Summary

In 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

00:00

🤑 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.

05:02

📉 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.

10:03

💡 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.

Keywords

💡Systematic Trading

Systematic trading refers to a methodical and rule-based approach to trading financial markets. It often involves the use of algorithms and quantitative models to make trading decisions. In the video, the speaker emphasizes the importance of systematic trading for its ability to provide a structured and repeatable process, which is crucial for consistent performance and minimizing the impact of emotions on trading decisions.

💡Execution

Execution in trading refers to the act of buying or selling a security or financial instrument. The speaker mentions that focusing on execution is more important than rushing into trading with a large capital. It implies that traders should first perfect their trading strategy's implementation before scaling up their capital commitment, ensuring that they can effectively execute trades according to their strategy.

💡Capital

Capital in the context of trading represents the money used to invest or trade in financial markets. The video script highlights that while new traders often believe more capital is the key to success, it's more important to refine trading strategies and execution skills. Capital is also noted to be prone to loss, especially in the initial stages of a trader's journey.

💡Transaction Costs

Transaction costs are the fees and charges associated with buying and selling securities. The speaker points out that these costs can significantly impact profitability, particularly for smaller accounts, as they can 'eat into' a large percentage of the profits being made. This underscores the importance of considering all costs when trading.

💡Strategy Development

Strategy development involves creating a plan or set of rules for trading that is intended to produce profits. The speaker advises prioritizing the development and testing of trading strategies, preferably with simulated or low capital, to understand market dynamics and emotional responses to trading without significant financial risk.

💡Adaptation

Adaptation in trading means adjusting one's strategies and approaches in response to changing market conditions. The video emphasizes that successful trading requires perpetual research and strategy adjustments, as markets shift and what works today may not work tomorrow. Adaptation is a key skill for long-term success in trading.

💡Strengths

In the context of the video, strengths refer to an individual's natural abilities or areas where they excel. The speaker suggests focusing on areas where one naturally excels, such as data and statistics for a systematic approach, as this can lead to faster progress and a better fit for one's personality, which is crucial for consistent performance.

💡Risk Management

Risk management is the process of identifying, evaluating, and controlling risks associated with trading. The speaker shares personal experiences with risk management, noting the importance of sticking to proper risk management practices to avoid significant losses. This includes setting maximum loss limits and managing risk over different time frames.

💡Algorithmic Trading

Algorithmic trading is a method of executing orders using pre-programmed trading instructions that use algorithms to determine the timing, price, or quantity of a trade. The video script discusses the conversion of trading strategies into algorithms and the importance of backtesting these algorithms to ensure they perform well before live implementation.

💡Out-of-Sample Data

Out-of-sample data refers to a dataset that was not used in the original training or fitting of a statistical model. The speaker stresses the importance of testing trading strategies on out-of-sample data to ensure they are not overfitted to the historical data and can perform well on new, unseen data in live markets.

💡Complexity

Complexity in trading strategies can refer to the intricacy and number of variables involved. The video script advises favoring simplicity over complexity, as complex strategies are more prone to overfitting and harder to maintain. Simpler strategies are often more robust and easier to test and implement effectively.

💡Responsibility

Taking responsibility in trading means acknowledging and owning one's decisions and their outcomes. The speaker encourages traders to embrace responsibility for their actions, as it leads to improvement and learning from mistakes. Blaming external factors for trading failures can lead to stagnation, whereas self-analysis and adaptation can foster growth.

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

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