SI231: The Perfect Fit for Trend Following ft. Richard Brennan
Top Traders Unplugged
Niels Kaastrup-Larsen
4.8 • 670 Ratings
🗓️ 19 February 2023
⏱️ 78 minutes
🧾️ Download transcript
Summary
Richard Brennan joins us to reflect on the learnings so far from the new CTA series. We also discuss how to set your stop loss when entering a new position and why you should not allow your trend models to go "backwards", how to fit your model to price data and why it is important to understand the signal to noise ratio in your trading to avoid overfitting. Additionally, we discuss how random entries can work for your models, but why they are not truely random and the challenge of separating luck from real signal, why it is preferable to have an under-fit model as opposed to an over-fit model when developing a trend following system and how to reduce your chances of having an overfit solution. We round off our conversation discussing why trend following is not as easy as it might seem and much more.
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Episode TimeStamps:
03:17 - Reflecting on the CTA Series
09:55 - What happened this week?
12:42 - Q1, Jordan: Regarding setting stop loss when entering a position
15:39 - Q2, Mark: Entry lookback vs exit lookback?
19:23 - Signal to noise masterclass
36:03 - The Tom Basso experiment
46:34 - The challenges of creating models
52:40 - Avoiding overfit - Don't pick the "best" parameters
57:23 - Avoiding overfit - Apply the Golden Rules
01:00:19 - Using visual mapping
01:03:50 - Avoiding overfit - trade multiple markets
01:07:34 - Trend...
Transcript
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| 0:00.0 | You're about to join Neil's Kostrup Larson on a raw and honest journey into the world of systematic investing and learn about the most dependable and consistent yet often overlooked investment strategy. |
| 0:13.0 | Welcome to the Systematic Investor Series. |
| 0:26.0 | Welcome and welcome back to this week's edition of the Systematic Investor series with Richard Brennan and I, Niels Castleblaston, where each week we take the pulse of the global |
| 0:29.9 | markets through the lens of a rules-based investor. If you're new to the show, I hope that today's |
| 0:37.0 | episode will trigger your curiosity enough |
| 0:39.0 | to check out the back catalog and listen to past episodes that you may have missed, |
| 0:42.9 | like my conversation with Mark last week, where we discussed, among other things, the difference |
| 0:48.1 | between long-sided and short-sided trades, as well as the difference between short-term |
| 0:53.7 | and long-term volatility |
| 0:55.6 | and how trend following navigates some of these different parameters. |
| 1:00.9 | Also, I would encourage you to listen to the midweek episode where this week I spoke to Jacob |
| 1:05.6 | Shapiro, Roger Hurst, about both the current geopolitical landscape as well as how that translate into the global macro |
| 1:12.9 | environment that we're experiencing at the moment. And of course, not least, I hope you're |
| 1:18.1 | enjoying our new CTA series where Alan and I have managed to line up pretty much the decision |
| 1:24.5 | makers at most of the largest CTAs firms in the world for some very meaningful |
| 1:29.4 | conversations on many of the most important topics and I don't think that it's been done before |
| 1:35.9 | in terms of rounding up all of these people more or less at the same time to give like a |
| 1:40.4 | snapshot of our industry at this point in time. |
| 1:44.9 | So I hope you're enjoying this and appreciate all the time and access we've been given |
| 1:49.5 | from these true industry leaders. |
| 1:53.1 | So when you're done listening to Rich and I today, |
| 1:55.1 | perhaps you will find some time to check out these different series. |
... |
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