Robert Carver: Pepperstone: The classic mistakes traders make in system design - PursuitOfEdge/podcasts GitHub Wiki

  • some people like Phds are overqualified and are too in love with their system and don't respect the randomness of the markets
  • doesn't know how to define bbands (interesting)
  • mean reversion: price - moving average
  • keep indicators as simple as possible, but prefers EMA over SMA
  • when it comes to risk management, he considers always using the same stop loss and always using the same position size "too simple" because it doesn't account for the different risks in the markets
  • all of his systems are pretty much public on the internet
  • trades momentum, carry, mean reversion, short volatility
  • doesn't target sharpe ratio or returns, but targets risk, and return hopefully comes out as a happy byproduct
  • the most important thing in his system is targeting risk and controlling it
  • the more volatile something is, the less you need to hold to get the same amount of risk
  • the best diversification is across instruments and then across asset classes
  • in stocks look at geographic location, sectors
  • there are different ways of picking up momentum but that itself is not that valuable because they all do the same thing
  • ATR(14) is like annualized volatility
  • trades about 120 markets, plans to increase to 200
  • on any given day about 12-15 positions on
  • most common mistakes: 1. too much leverage, 2: trading too frequently, 3: overfitting
  • stddev 20% a year is holding the SP, so most traders should be comfortable with this, so since we target 20% we don't need leverage so we use 1
  • BTC vola is 8%/yr, so we would only use 1/4
  • if you're having a bad year, and you're targeting 20%, you might lose 10%. if you're targeting 200%, you'll have no money left