048: John Ehlers discusses indicator lag, applications of Digital Signal Processing (DSP) in trading, the MESA approach, Cycles and regime switching.

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, plus more: What is this pattern and can something identified over 80 years ago really have any relevance to trading today, Does the pattern still work and what is it suggesting the markets could do for the rest of 2017, And how could this pattern be applied to trading today? Brent is even going to share 1 application of this pattern with some very interesting backtest results so you don’t want to miss that.   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.

28 Sep 201719min

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 solution? In this weeks Thursday trading thought Gary Hart from trendfinder trading systems is going to share his approach to this problem.  We pickup the conversation discussing changes in the markets over time.   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.

21 Sep 20179min

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 portfolio, if you can overcome these challenges. Today's guest, Luca Giusti from QTlab, is here to discuss options with us, explaining: The benefits of trading options systematically, The challenges of testing options strategies and the solution, Why volatility is such an important aspect of trading which can’t be ignored, How to factor market volatility into trading strategies to reduce risk and increase performance.   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 Sep 201731min

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 these but to keep it short for this Thursday Trading Thought I’m going to share 3 that stood out to me. Hope you enjoy them!   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.

15 Sep 20177min

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 traders of all levels can become susceptible to the dangers of Fear, Hope and Greed. So how can we manage them so that it doesn’t impact our trading? In this weeks 'Thursday Trading Thought' Brent Penfold is going to share some practical tips on how to overcome these 3 dangers, so let head on over to our chat with Brent to see what he has to share.   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.

7 Sep 201711min

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 evolution on trading model longevity and how to address them, Plus a few questions from listeners.   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.

4 Sep 201738min

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 our health, well-being, relationships and other areas of our personal lives. But by being able to identify issues and putting plans in place to address them, we can make better trading decisions. So how do we do that? In today’s Trading Thought we’re going to hear Laurent Bernut explain a technique that he uses, plus he also shares a 'jedi mind trick' that can quickly reset some of the mental states traders can get into.   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.

1 Sep 201711min

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 discuss the process of combining edges, filters, conditions into a trading system. A common practice when building trading strategies is to combine indicators or filters to see how that particular combination impacts performance, however this practice can be overused or abused, leading to curvefit strategies that don’t perform so well in live trading. In today’s episode we're going to hear one solution for this problem, from our guest Art Collins, who is going to tell us the process he uses to combine edges while reducing the risk of overfitting, so let's hear from Art.   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.

25 Aug 20179min