SI173: ‘Trend Following + Nothing’ Part Two ft. Jerry, Moritz, Rob, Mark & Rich
Top Traders Unplugged
Using Sharp Ratios in a Negative Scu Strategy Is a Bad Idea
Markets should be measured based on trades rather than daily returns. Negative skewed strategies are a much more pleasant experience, but it's harder to risk manage. We're all somewhere in the middle - where do we lie?
Today we continue our special Part 2 end-of-year episode featuring all co-hosts of the show, together at the same time, to discuss why you should be invested in numerous different markets, why more Trend Following firms should be trading single stocks, the optimum amount of systems to run at the same time, whether diversifying across markets or diversifying across systems is more important, some thoughts on positive skew, and defining outliers. We also review how 2021 went for each us, including our best and worst markets to trade, the lessons we learned, and the biggest surprises.
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50 YEARS OF TREND FOLLOWING BOOK AND BEHIND-THE-SCENES VIDEO FOR ACCREDITED INVESTORS - CLICK HERE
In this episode, we discuss:
- The reasons for trading different markets
- Why Trend Following firms should trade single stocks
- The optimum amount of systems to run at the same time
- Diversification across markets versus across systems
- Skewness
- How to define outliers
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Episode TimeStamps:
00:00 - Intro
01:20 - Would you rather trade 100 markets with 1 system, using 10 different timeframes? or would you rather trade 50 markets, using 3 different systems, using 5 different timeframes?
08:33 - How much ‘positive skew’ do we need?
27:04 - Diversification as a means of risk control, versus as a method of finding outliers
36:14 - Defining outliers and some thoughts on the number of expected outliers per year
45:03 - Can be momentum traders be placed in the same category as Trend Followers?
48:13 - Should we care that bubbles exist, or just enjoy the profitable trends? Have the markets gotten any smarter over the years?
52:52 - How Trend Following and Systematic Investing narratives & terms have changed over the years
01:12:55 - A review of our best and worst markets to trade during 2021
01:16:10 - The lessons we learned from 2021, the biggest surprises, and our most regrettable decision from the year
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