SI73: How too much experience can work against your investments

Feb 3, 2020

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On today’s show, we discuss when having lots of experience can sometimes work against you, why hard and fast rules can be better than making discretionary decisions, the importance of trading in appropriate position sizes, the amount of drawdown that will likely cause you to deviate from your system, the unpopularity of Trend Following strategies, creating an adaptive portfolio that can respond to market conditions, and why Trend Following should play a considerable part in your portfolio. Questions we answer this week include: Should you use Trend Filters to confirm your entry signals? Is the 60/40 portfolio usually less volatile than a typical ‘perfect’ Trend Following portfolio? Do you recommend adding mean-reversion strategies to your Trend Following systems? How do you define short, medium and long-term?

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Episode TimeStamps:

00:00 – Intro

01:11 – Macro recap from Niels

02:41 – Weekly review of performance

14:14 – Top Tweets

55:44 – Mike; Questions 1: Is Trend Following a Dynamic Call Replication strategy?

01:00:39 – Seth; Question 2: Do you use Trend Filters to confirm the entry signal?

01:04:10 – Michael; Question 3: Is the daily volatility of a 60/40 portfolio less than that of the ‘perfect’ Trend Following portfolio?

01:08:12 – Brian; Listener comment regarding the best way to explain why Trend Following should play a considerable part in all portfolios.

01:14:33 – Dave; Question 4: When using multiple lookback periods, should risk per trade always stay the same?

01:16:02 – Yohan; Question 5: Do you scale into a trade throughout the day, depending on market liquidity, or just enter the full trade upon getting the signal?

01:18:27 – Drew; Question 6: What does your day-to-day look like?

01:20:43 – Yohan; Question 7: Why not combine mean-reversion strategies with your Trend Following strategies?

01:25:49 – Paul; Question 8: Would testing markets that you don’t plan to trade, give added clarity to your backtests?

01:29:22 – Singh; Question 9: How do you define short, medium and long-term timeframes?

01:34:01 – Benchmark performance update

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