The Algorithmic Advantage

Experts dive deep into the world of diversification in trend following trading strategies. Topics include market vs. strategy diversification, capital requirements, volatility smoothing, and more. Special focus on the benefits and challenges of diversification in improving risk-adjusted returns and capturing trending opportunities across various markets.

In an insightful episode of "The Algorithmic Advantage" podcast, we are joined by Gary Antonacci, a notable figure in the finance sector, best known for his innovative dual momentum investment strategy. With an illustrious background that includes an MBA from Harvard and substantial experience in various facets of the financial industry, Gary shares his journey from working in brokerage to collaborating with trading legends in managed futures, and ultimately to his pivotal discovery of momentum investing. This strategy, which he meticulously developed and shared through his influential book, Dual Momentum, has significantly impacted the investment models used today by many family offices and significant investors. I thought it was interesting to hear Gary clarify, post-show, why he chose the terms he did for absolute and relative momentum, and I thought it would be well worth sharing here. Essentially, he prefers ‘relative’ to ‘cross-sectional’ and ‘absolute’ as opposed to ‘time series’ momentum. Cross-sectional applies when you segment a single market into group rankings such as deciles based on returns over a given lookback period. Relative momentum is more inclusive. It includes this but also can be applied when you compare the performance of different assets. It makes no sense to refer to that as cross-sectional momentum. Absolute momentum makes more sense than time-weighted momentum since all momentum looks at economic time series in the form of asset returns. Investors are familiar already with relative and absolute returns. Referring to momentum the same way makes intuitive sense. Visit the website for links to resources discussed on the show: www.thealgorithmicadvantage.com Please share the show with someone and help us get the word out there!

In this engaging podcast episode, Joris Bastien shares his unconventional journey into the world of quantitative trading, originating from his mathematical background and leading to innovative roles in the finance sector. Bastien discusses his transition from IT development to becoming a pivotal figure in trading system design, emphasizing his unique approach of leveraging quantitative hedge fund strategies to create versatile trading systems. His narrative highlights the importance of adaptability and seizing opportunities in the evolving financial landscape. Delving deeper, Bastien reveals his methodical approach to trading, prioritizing system diversification over traditional asset diversification to manage risk more predictably. He also shares his insights into the future of trading, particularly the role of cryptocurrencies like Bitcoin as alternative investment vehicles. Bastien's story is not just about his professional evolution but also a testament to the power of innovation and strategic thinking in the dynamic world of finance. Get in touch with Joris: x: https://twitter.com/quantaraxia li: https://www.linkedin.com/in/jorisbastien/ w: https://www.quantaraxia.com/

Recorded: 12 Dec 2023 In this episode of the Algorithmic Advantage podcast, we chat with our friend, legend ‘original turtle trader’, Jerry Parker. The discussion traverses Jerry's remarkable journey, beginning with his foundational experiences in the renowned Turtle Program, where he gained invaluable knowledge in trend following and risk management under the guidance of expert mentors. Jerry shares his transition from learner to leader as he recounts the challenges and triumphs of starting his own fund, Chesapeake, highlighting the importance of adapting trading strategies, managing investor expectations, and the crucial interplay of trading skills with essential business acumen. The conversation then shifts to explore the evolution of Jerry's trading methodologies. He talks about his team's relentless pursuit of refining their trend-following strategies, incorporating a wider array of markets, and experimenting with innovative approaches like trend-following spreads. Jerry's commitment to the core principles of trend following, balanced with a willingness to embrace new market opportunities, is a recurring theme. He also candidly addresses the psychological aspects of trading, emphasizing the mental resilience required to navigate market pressures and maintain unwavering faith in one’s system. Throughout the episode, Jerry's insights offer a deep dive into the complexities and nuances of professional trading, making it a must-listen for anyone interested in the art and science of market trends.

In this episode of The Algorithmic Advantage podcast, we dive into the fascinating world of quantitative trading with Dr. Tom Starke, a renowned expert in the field. With a rich background in physics (PHD) and engineering, Tom shares his unique journey from academic institutions and engineering firms to the dynamic arena of stock trading. His transition from a structured scientific career to the unpredictable financial markets offers invaluable lessons for anyone intrigued by the intersection of technology and finance.   Throughout the episode, Tom delves into the nuances of quant trading, discussing the blend of art and science in strategy development, the importance of micro alphas for diversification, and the challenges of risk management in today's volatile markets. He also sheds light on the potential of AI and machine learning in trading and offers a glimpse into the future role of quantum computing in finance. His insights not only illuminate the complexities of algorithmic trading but also emphasize the necessity of continuous learning and adaptability in the ever-evolving world of finance. Recorded: 12 Dec 2022. www.thealgorithmicadvantage.com

In this insightful second episode with Horizon3, Sanj and Paul delve into the complexities of systematic trading and the evolving landscape of the financial markets. The discussion kicks off with a critical look at traditional trading dogmas, emphasizing the importance of diversification and the challenges faced in adapting strategies to the dynamic post-Global Financial Crisis environment. The conversation then pivots to a nuanced analysis of current macroeconomic trends, focusing on the implications of central bank policies, the nuances of inflation, and the need to move beyond conventional wisdom in risk management. As the episode progresses, listeners are treated to an in-depth exploration of Horizon3's unique trading model, highlighting the integration of advanced risk controls, pattern recognition, and digital signal processing. This is followed by a compelling segment on the potential impact of quantum computing on financial markets. The speakers share their macroeconomic outlook, predicting a severe recession and a resurgence of inflation, urging investors to be strategic in their approach. The episode concludes with a teaser about Horizon3's upcoming initiatives and technological innovations, inviting listeners to stay updated through their website and LinkedIn. This podcast is a must-listen for anyone interested in understanding the intricacies of trading and investment in today's rapidly shifting economic landscape. Get in touch with Sanj & Paul from Horizon3: w: https://h3im.com/ li: https://www.linkedin.com/in/stayfrosty/ li: https://www.linkedin.com/in/paulnetherwood/

In this engaging episode of The Algorithmic Advantage, we explore the fascinating world of quantitative trading with experts Sanjeev Lakhanpal and Dr. Paul Netherwood from Horizon3 Investment Management. The discussion highlights Sanjeev's unique journey from physics to finance and Dr. Netherwood's transition from scientific research to trading systems development, illustrating the diverse skill sets in the field. Key focuses include the innovative use of Digital Signal Processing (DSP) to analyse market trends and the integration of adaptive pattern recognition in trading strategies, showcasing Horizon Capital's unique approach to navigating the complex financial markets.   Get in touch with Sanj & Paul from Horizon 3:   w: https://h3im.com/ li: https://www.linkedin.com/in/stayfrosty/ li: https://www.linkedin.com/in/paulnetherwood/

In this enlightening episode, we tackle the often-misunderstood topic of discerning genuine trading opportunities from the noise in market data. We challenge the traditional reliance on visual methods like Technical Analysis, which can be misleading, and argue for the superiority of quantitative methods. We delve into the intricacies of serial correlation and its importance in identifying enduring trends, which are essential for successful trend-following strategies. Through a detailed examination of real versus randomized market data, we demonstrate that a trend's visual appearance is not a reliable indicator of its tradability. The episode goes further to reveal that while numerous price series may visually present as viable for trend-following, only those with a quantifiable bias—verified through rigorous statistical methods—can provide traders with a substantial edge. Our discussion underscores the profound implications of trading on trends backed by actual market bias versus those that are the product of random movements. These insights are indispensable for traders seeking to elevate their strategies from gambling on visual cues to capitalizing on statistically validated trends, making this episode a must-watch for anyone serious about trading in the financial markets. Buy the data randomizing tool: https://www.buymeacoffee.com/algorithmicadvantage/extras https://www.thealgorithmicadvantage.com

Alan Clement, a seasoned trader and strategy developer, shares insights into systematic trading in equity markets. He discusses mean reversion, trend following, and volatility trading strategies, emphasizing the importance of diversification. Alan also highlights the nuances of trading equities, adapting to market conditions, and risk management. He explores building and testing strategies to avoid overfitting, including out-of-sample testing and Monte Carlo simulations.

The financial Markets are in a perpetual state of flux, constantly evolving with changes in technology, shifts in regulatory landscapes, and the dynamic entry and exit of market players, all while business cycles ebb and flow.   In the face of such uncertainty, how do we navigate these turbulent waters? How can we effectively process the barrage of information available? Does the conventional wisdom of "buy and hold" withstand scrutiny when faced with substantial drawdowns of 50% or more? How do we truly maximize returns and minimise draw-downs? Are there secrets to investing hidden in plain sight?   Within the intricate tapestry of the market's daily dance, where buyers and sellers engage in the complex choreography of the free-market system, noise and confusion abound. Yet, amid this chaos, certain traders and investors have thrived over extended periods. They've capitalized on discerning patterns amidst the clamor, leveraging systems and methodologies that exploit fundamental, enduring human behaviors such as fear, greed, and the propensity to follow the crowd...  and follow trends.   There are some time-tested, quantitative processes that were refined by the legendary Chicago traders Rich Dennis and Bill Eckhart and they passed these skills on to a group of budding naïve traders in the 1980s. These traders became known as 'the turtles'. With us today is one of those trainees, who now has a track record that extends many decades, and a new breed of adherents to these principles…   Enter the modern-day "turtles" that adhere to a "classic trend-following" approach. How do they navigate the markets, and what adaptations have they made? What principles guide their actions? Well, what better way to unravel these mysteries than to spend a few days in Sydney with them, which is exactly what we've done, and here we are on beautiful Pittwater Harbour, at the offices of ECCM on Scotland Island, talking 'classic trend following' around the barbie with the legends of the game! …