SI132: Overcoming Recency Bias for Better Decision Making ft. Mark Rzepcyznski

In our continued conversation with Roy Niederhoffer, we discuss risk management, drawdowns, why negative correlation is so important to Roy, and what gets him out of bed every morning (and what keeps him awake at night). Learn more about how to create a balanced and diversified portfolio or what it takes to be a manager.-----50 YEARS OF TREND FOLLOWING BOOK AND BEHIND-THE-SCENES VIDEO FOR ACCREDITED INVESTORS - CLICK HEREIn This Episode, You’ll Learn:What has changed by the fact that more and more trading decisions are made by computers instead of humans.The issue of model decay in Roy’s field.Why he has constructed his trading program the way that he has.His ten-step process from idea generation to putting it into the system. The research process laid out.How his firm does research.How position sizing plays a role in the short term space.How he keeps model slippage to a minimum.Risk management and how Roy deals with it.When to use discretion to reduce risk.What he learns from going through a drawdown.How he keeps investors in the firm during a tough time.How he personally deals with drawdowns.How he measures the effectiveness of his research.If his risk tolerance went down once he had more money under management.What the biggest challenge is for Roy in the short term management space.What investors are not asking him during due diligence.What makes him go into work everyday.Books that Roy recommends reading for managers and investors.How the office environment affects how investors perceive a firm.About downside protection and negative correlation.-----Resources & Links Mentioned in this Episode:Roy mentions the Extraordinary Popular Delusions and the Madness of Crowds.He recommends Reminiscences of a Stock Operator.Roy highly recommends Thinking, Fast and Slow.Follow Niels on Twitter, LinkedIn, YouTube or via the TTU website.IT’s TRUE ? – most CIO’s read 50+ books each year – get your FREE copy of the Ultimate Guide to the Best Investment Books ever written here.And you can get a free copy of my latest book “Ten Reasons to Add Trend Following to Your Portfolio” here.Learn more about the Trend Barometer here.Send your...

20 Nov 20141h 23min

Roy Niederhoffer has a fascinating live story that starts with Harvard and neuroscience and continues into his starting a hedge fund in the short-term trading space in 1993. Roy discusses the exciting and bootstrapping beginnings of his firm, the cognitive biases that keep most humans from making good investment decisions, and how his firm stands out from other CTAs. Investors and managers alike will learn a wealth of information from this episode.-----50 YEARS OF TREND FOLLOWING BOOK AND BEHIND-THE-SCENES VIDEO FOR ACCREDITED INVESTORS - CLICK HEREIn This Episode, You’ll Learn:How Roy got interested in the financial markets from an interest in computers at a young age.How he started a company that had 30 employees by the end of his high school.How his brother was an early adopter in the Hedge Fund space.How he spent his undergraduate years studying neuroscience.Roy graduated from Harvard and was set to go to Cambridge for neuroscience until he worked for his brother for a summer.The story of how he started his firm and when he began trading in July 1993.How the human brain influences behavior and how that translates to trading.Cognitive biases and how to avoid them in the financial market.What Roy thinks of trend following and how to explain it to the public.The other investors he worked at in his first job out of college, that later became famous investors in their own right.Why Roy’s firm was “employing” a cook and a maid when they started the business in 1993.How he plays in a symphony and keeps up his pursuit of being a musician while running his firm at the same time.What he thinks about the future of the CTA industry.How his model works in an ecosystem of other portfolio management options.How they distinguish themselves from other CTAs.An overview of the strategies that his firm does today.How the infrastructure of the business is setup today and the unique opportunities of the short term space.What he looks for when adding people to his research team.The culture that he has created at the firm.What matters to him when investors look at the track record of his firm.-----Resources & Links Mentioned in this Episode:Learn more about Roy from his wikipedia article.Niels mentions that listeners should also check out the Top Traders Unplugged episodes with Kathryn Kaminsky.Follow Niels on Twitter, LinkedIn, YouTube or via the TTU website.IT’s TRUE ? – most CIO’s read 50+ books each year – get your FREE copy of the Ultimate Guide to the Best Investment Books ever written <a...

17 Nov 20141h 18min

In the second part of our conversation with the founder of Whitmore Capital Management, we learn the daily challenges, and lessons learned right from the founder and owner of a fledgling firm. We dive into discussions on risk management, drawdown, attracting outside capital, and much more.-----50 YEARS OF TREND FOLLOWING BOOK AND BEHIND-THE-SCENES VIDEO FOR ACCREDITED INVESTORS - CLICK HEREIn This Episode, You’ll Learn:How many currencies Mark trades and if he thinks he will trade more in the future.About how he diversifies his system.A case study of the Russian Ruble.His use of charts when looking at currencies.A discussion of cognitive biases.How he compares his system to trend following and how the two models can work in harmony.How he enters and exists a trade using his system.Why he is an “every end of two weeks” trader.How much capital he would like his strategy to manage and how much it can feasibly manage.How he defines risk and manages risk.How he deals with drawdowns as a fund manager.What he learns from going through drawdowns.How he goes about doing research for his strategy without a research team.How he sees red flags in his strategy and when he has changed his model.How Mark goes about marketing and getting interest from investors in his strategy and fund.How he plans to avoid becoming more risk averse as the firm grows.What he thinks about the “key man” issue and what he is doing to plan for the eventuality of leaving his business to someone else.How he decided the location of his business.What the hardest thing will be for him as he tries to grow the business.What investors should be asking him that they are not.What it takes to become a great trader in Mark’s view.What he learned from the baseball card market in the US during his university years.What he has learned from past failures.His favorite books and why he recommends them.-----Resources & Links Mentioned in this Episode:Mark has authored many white papers on currencies, including:Currency Investing: An Alpha-Rich EnvironmentHow to Invest When Both Stocks and Bonds are OverpricedThe Case for Currencies as an Asset Class Becomes StrongerBooks that Mark mentions and recommends:Winning The Loser’s GameThe Obstacle is The WayEconomics in One LessonThe Structure of Scientific RevolutionsFollow Niels on <a href="https://twitter.com/toptraderslive"...

13 Nov 20141h 23min

Our next guest started his firm back in 2012, and we’re talking to him at a special moment in the company’s evolution as it starts to gain outside capital and make its mark in the industry. Listen in to gain insights into how a manager started his firm in the current environment, the inside view on currencies as an asset class, and much more.-----50 YEARS OF TREND FOLLOWING BOOK AND BEHIND-THE-SCENES VIDEO FOR ACCREDITED INVESTORS - CLICK HEREIn This Episode, You’ll Learn:How Mark was interested in finance from a very early age and learned from his adoptive parents.About his time studying macroeconomics in college.The story of his career and how it took a windy series of turns before heading into the financial market.His time studying currencies when he was in law school and his time as lawyer.How he started getting into the financial markets by investing in stocks in the late 90s.How he quit his job as a lawyer and planned to go into the financial services sector.His ventures into the currency markets and why he considered them in the first place.How he started by managing his own money.What he sees in currencies as an asset class and how he describes that to investors.How the currency market has changed throughout the years.How he decided to launch his business in 2012 and how he got organized to take outside capital.How he built the organization and his business.What kind of organization he would like to grow into in the future.Why culture in a small company is a very important issue.How he looks at track record, being such a young company.How he created the models he uses for his strategy.The example of the Euro and what Mark predicts for the currency in 5 years.His thoughts on the Swiss Franc and the historical context of its value.The Singapore Dollar and how it is likened to the Swiss Franc.How many currencies he trades.How he thinks about diversification.-----Resources & Links Mentioned in this Episode:Mark mentions the book A Random Walk Down Wall Street in this episode.Mark has authored many white papers on currencies, including:Currency Investing: An Alpha-Rich EnvironmentHow to Invest When Both Stocks and Bonds are OverpricedThe Case for Currencies as an Asset Class Becomes StrongerFollow Niels on Twitter, LinkedIn, YouTube or via the TTU website.IT’s TRUE ? –...

10 Nov 20141h 22min

Welcome to Part 2 of our conversation with researcher and co-author of one of the definitive books on trend following. In this conversation, we dive into the the models that she used in writing the book, as well as her thoughts regarding risk management, what you should be asking a manager during due diligence, and what the future holds for the managed futures industry.-----50 YEARS OF TREND FOLLOWING BOOK AND BEHIND-THE-SCENES VIDEO FOR ACCREDITED INVESTORS - CLICK HEREIn This Episode, You’ll Learn:What Kathryn looks at when evaluating the track records of managers.Her thoughts on the recent performance of trend followers.About price range compression.If she has a favorite statistic to look at when analyzing a manager.How she and her co-author came up with the trading strategy that they use in their book.Why the exit from a position is just as important as the entrance.What trend leakage is.Her views on how inflation and other environmental changes affects trend following strategies.About diversification.About risk management; how Kathryn defines risk and what is important to look at in risk management.Kathryn explains the topics of hidden and unhidden risk.What kind of drawdowns should be expected from a trend following model.A discussion of the drawdowns that trend followers have experience in the last few years.Seeing drawdowns as a buying opportunity.How to detect if a manager’s models and system has stopped working.The biggest challenge for the CTA industry right now.What she would ask of David Harding.What questions investors should be asking of managers when doing their due diligence.What personalities traits a good trend following manager should have.Her thoughts on regulation, especially for smaller managers.What her plans are for the future and how she sees the managed futures industry going forward.-----Resources & Links Mentioned in this Episode:Kathryn’s book is: Trend Following with Managed Futures.Is this Time Different? Trend Following and Financial Crisis.Following the TrendOutlierDavid and GoliathLean InKathryn’s TED talk on Convergence and Divergence.Follow Niels on Twitter, LinkedIn, YouTube or via the <a href="https://www.toptradersunplugged.com/" rel="noopener noreferrer"...

6 Nov 20141h 5min

Our next guest is different than any guest we’ve had before, as she is not a fund manager but has spent much of her life’s work researching and writing about the topic of trend following. She is a true thought leader in the managed futures industry and you’ll learn a lot from the animated discussion we have regarding the history of trend following and how she co-authored her latest book on the subject.-----50 YEARS OF TREND FOLLOWING BOOK AND BEHIND-THE-SCENES VIDEO FOR ACCREDITED INVESTORS - CLICK HEREIn This Episode, You’ll Learn:About Kathryn’s upbringing in Nashville, Tennessee.About her time at MIT where she went for electrical engineering.How her internship at a bank in France got her on the path to work in the financial industry.About her teaching financial engineering with Andrew Lo.Through her teaching and research, she became interested in technical analysis and trend following.How Kathryn went to the Stockholm School of Economics.When she left academia and joined RPM in Sweden.How she met Alex Greyserman and how she came to write a book with him.The history of trend following as she lays it out in her book.How trend following at its core is quite simple.What Kathryn likes to do outside of work.Her work life balance and her life in Sweden.Her view on the building blocks of trend following.Her quest for acceptance of trend following in the academic community.Where the term Crisis Alpha came from and what it is.About Convergent and Divergent strategies.About the Adaptive Market Hypothesis that she writes about in the book.What the CTA Smile is and what it really means.What she would look for when building or critiquing a research team.-----Resources & Links Mentioned in this Episode:Kathryn’s book is: Trend Following with Managed Futures.Learn more about Andrew Lo and MIT.Follow Niels on Twitter, LinkedIn, YouTube or via the TTU website.IT’s TRUE ? – most CIO’s read 50+ books each year – get your FREE copy of the Ultimate Guide to the Best Investment Books ever written here.And you can get a free copy of my latest book “Ten Reasons to Add Trend Following to Your Portfolio” here.Learn more about the Trend Barometer here.Send your questions to <a...

3 Nov 20141h 8min

Welcome to Part 2 of our conversation with Managed Futures expert and President Mike Harris of Campbell & Company. In this episode we delve into the specifics of Campbell & Company’s trading programs, how models are added or removed, and the importance of risk management. This episode also explores the managed futures industry as a whole and is a must-hear for anyone looking to gain knowledge about this strategy.-----50 YEARS OF TREND FOLLOWING BOOK AND BEHIND-THE-SCENES VIDEO FOR ACCREDITED INVESTORS - CLICK HEREIn This Episode, You’ll Learn:About Campbell & Company’s trading program.How they create a trading strategy.Why they use a hypothesis driven system to add new models to their programs.About the peer review process they use before adding or subtracting models.When do you remove a model? How do you know when it isn’t working anymore?About position sizing and why its important.How they look at risk through something called Vertical Risk and Horizontal risk.Campbell’s systematic approach to risk management.How he deals with drawdowns.Why he worries about systemic risk and natural disasters.Why Mike thinks redundancies are so important.The risk of regulation.How these strategies tend to perform when interest rates go up.The trend of the managed futures industry and why it has been dominated by European firms in the past 10 years.What people need to become a successful manager: humility is “at the top of the list.”Books that Mike recommends.What he would do differently if he could talk to his younger self.The importance of managing work and life balance.What the future looks like for Campbell & Company.-----Resources & Links Mentioned in this Episode:Learn more about Baltimore and Johns Hopkins University.Hedge Fund Market Wizards by Jack SchwagerTechnical Analysis of the Futures Markets by John MurphyTrend Following with Managed FuturesFollow Niels on Twitter, LinkedIn, YouTube or via the TTU website.IT’s TRUE ? – most CIO’s read 50+ books each year – get your FREE copy of the Ultimate Guide to the Best Investment Books ever written here.And you can get a free copy of my latest book “Ten Reasons to Add Trend Following to Your Portfolio” <a...

30 Okt 20141h 9min

This episode goes in-depth into the history of one of the most well-known managed futures firms in the world, Campbell & Company. We explore the beginnings of the company, how they have dealt with challenges a long the way and how they have succeeded to overcome them, as well as the current state of the company and the systematic models their products are built on. Our guest is current President of the company, Mike Harris, and you’ll hear about how he entered the industry as well as his path to becoming Campbell’s President.-----50 YEARS OF TREND FOLLOWING BOOK AND BEHIND-THE-SCENES VIDEO FOR ACCREDITED INVESTORS - CLICK HEREIn This Episode, You’ll Learn:How Mike explains what he does.How his grandfather gave him money to invest in his first stock as a child.How his interest in the financial markets started young and how he structured his whole education around working in this industry.About his first job out of college.About his time as a Futures Broker.How he joined Campbell & Company in 2000, starting at the European Trading desk.How he came to be President.The story of how Keith Campbell started the firm in 1972.The history of Campbell & Company.How they dealt with drawdowns in 1994 and ’95.Why Mike has always been an avid reader.How Campbell’s 2nd President, Bruce Cleland ran the business for 20 years and how I met him back in 1993.What the company’s product offering looks like today.How the company’s 130+ employees are organised.How they outsource things on the technology side of the business.What he looks for when adding staff to his research team.How Mike builds a strong company culture.How investors should make sense of the track record of Campbell & Co since they have such a long history.Changes they have made to the trading models after 2007 and 2008.The ways the company uses long term, medium term, and shorter term systems.Where the company wants to grow and how big it wants to get.-----Resources & Links Mentioned in this Episode:Learn about a Carry Trades.Learn more about short-term mean reversion.Follow Niels on Twitter, LinkedIn, YouTube or via the TTU website.IT’s TRUE ? – most CIO’s read 50+ books each year – get your FREE copy of the Ultimate Guide to the Best Investment Books ever written here.And you can get a free copy of my latest book “Ten Reasons to Add Trend Following to Your Portfolio” here.Learn more about the Trend Barometer <a...

27 Okt 20141h 9min