010: Perry Kaufman discusses applications of market noise, mitigating price shocks, volatility and using the Information Ratio to monitor strategy performance.

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.

17 Helmi 20175min

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.

10 Helmi 201714min

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.

5 Helmi 201736min

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.

2 Helmi 20179min

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.

26 Tammi 20174min

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.

22 Tammi 20171h 3min

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.

19 Tammi 20177min

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.

12 Tammi 20175min