SI109: Investing like a legend ft. Perry Kaufman
Top Traders Unplugged
Is There a Survivor Bias?
Moritz: Equity indices have a massive survivorship bias because they kick out stocks that are on their way to death. He says short side of stocks, however, is much more difficult to trade. Moritz: Sometimes the correlation benefit that I get just from having short-sided trades on is very powerful.
Systematic trading and Trend Following legend, Perry Kaufman, joins us on the show today to discuss the importance of being comfortable with risk, the benefits of continuously ranking & evaluating markets, the importance of ‘fat tails’ in Trend Following systems, why you might want to use equal risk with every trade, how to avoid being over-correlated, trading single stocks vs indices, opinions on profit targets, and why he generally prefers long trades vs short trades.
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Episode TimeStamps:
00:00 – Intro
01:25 – Weekly review of performance
06:08 – Niels: How does the content in your book, Trading Systems, inform your decisions when building a system, and what do they mean to you?
26:44 – Niels: How do you avoid overfitting your system to accommodate markets that may not perform well in the future?
29:28 – Niels: How do you avoid being over-correlated?
30:17 – Niels: How does your ranking system work when adding or removing markets from your trading universe?
44:19 – Niels: How do you feel about profit targets?
53:06 – Niels: Why do you believe Trend Following strategies will always be successful?
57:00 – Niels: Have you found in your research that long-sided trades tend work better than short trades, and if so, have any hypothesis as to why that is?
01:04:33 – Moritz: What are your thoughts on trading single stocks vs trading the indices?
01:09:54 – Niels question for Moritz: How have you incorporated yourself & Perry’s work on Volatility Targeting into your trading?
01:21:29 – Niels: Are there any new discoveries that you’ve found in recent years that enhance Trend Following strategies, or have we most likely found everything by now?
01:24:45 – Benchmark performance update
01:26:32 – Niels: Which book, that you didn’t write, would you recommend to our listeners?
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