The Algorithmic Advantage 031 - PJ Sutherland - The Complementary Dynamics of Mean Reversion and Trend-Following Strategies
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Dec 12, 2024 PJ Sutherland, a portfolio manager at Sutherland Capital Management, shares his expertise in short-term equities trading, focusing on mean reversion and trend-following strategies. He discusses the balance between emotional trading and data-driven decision-making. Insights into the importance of position sizing are shared, especially from the meme stock craze. Sutherland emphasizes the synergy between mean reversion and trend strategies to mitigate risks and enhance trading success. He also touches on the emotional challenges traders face and the need for tailored trading engines.
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PJ's Trading Journey
- PJ Sutherland recounts his trading journey, starting with early losses due to over-leveraging.
- He transitioned from subjective to quantitative short-term trading after studying under experts and developing his own strategies.
Mean Reversion Basics
- Mean reversion strategies benefit from higher win rates and frequent opportunities due to market oscillations.
- Diversifying entries and exits across the mean reversion curve reduces luck and improves consistency.
Mean Reversion for Smaller Accounts
- Smaller accounts can struggle with mean reversion due to processing demands from diversified entries/exits.
- Use brokers without minimum commissions to trade smaller share amounts and achieve a fuller mean reversion solution.