TTU28: How to Bridge the Gap Between Philosophy & Rules ft. Scott Foster of Dominion Capital Management – 2of2

Top Traders Unplugged

Niels Kaastrup-Larsen

Business, Business News, Investing, News

4.8 • 670 Ratings

🗓️ 4 September 2014

⏱️ 86 minutes

🔗️ Recording | iTunes | RSS

🧾️ Download transcript

Summary

Welcome back to the second part of our interview with Scott Foster, President and Founder of Dominion Capital Management.

In this episode, we learn the philosophical rules that drive his firm, and how he bridges the gap between the philosophy behind his decisions and the models he creates. We discuss the increased governmental involvement in the markets and the adjustments that Scott has had to make to adapt to new signals. Finally, we learn the personal habits that help Scott succeed. Thank you for listening to Part 2 of our conversation with Scott Foster.

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In This Episode, You’ll Learn:

Why Scott does not worry about model decay due to the principals with which he runs his firm.
How to bridge the gap between philosophy and rules.
How he created the Sapphire program, his firm’s signature service, and what it took to create it.
How increased government involvement in the markets has changed his system and made him adapt to new signals in the markets.
Why and how political feedback and involvement are affecting the markets and short term trading.
How his firm is able to so expertly predict to potential customers their drawdowns and how they contain them.
That investors spend too much time dissecting the drawdowns and not enough time looking at why and how they made money.
The principals of behavior finance and the underlying philosophical principals such as self attribution bias and loss aversion.
How alone time and contemplation have led to 80% of Scott’s best trading ideas.
The hardest part of being the President of a fund and why it is not the trading.

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Resources & Links Mentioned in this Episode:

Learn more about illusory superiority, the bias that the Lake Wobegon effect is name after, or Lake Wobegon itself, a fictional town in Minnesota.
Learn more about Mean Reversion, which Scott’s firm looks at closely in the models they use.

Follow Niels on Twitter, LinkedIn, YouTube or via the TTU website.

IT’s TRUE ? – most CIO’s read 50+ books each year – get your FREE copy of the Ultimate Guide to the Best Investment Books ever written here.

And you can get a free copy of my latest book “Ten Reasons to Add Trend Following to Your Portfolio” here.

Learn more about the Trend Barometer here.

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Transcript

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0:00.0	You're listening to Top Traders Unplugged, episode number 028, where I continue my conversation with Scott Foster, founder and president of Dominion Capital Management.
0:12.3	This episode is sponsored by Saxo Bank.
0:15.5	Welcome back to Top Traders Unplugged, where the best traders in the world come to share their experiences,
0:21.3	their successes, and their failures. Let's rejoin the conversation with your host,
0:25.8	veteran hedge fund manager, Niels Kastrop Larson.
0:45.4	So that kind of is the only way of answering the question of how do we staff our company and why do we do things the way that we do?
0:51.6	But that was a very important explanation and it ties into so many other things.
0:54.4	And I want to go further than this,
0:57.7	but I want to actually ask you a question that actually doesn't relate to short-term trading.
1:00.8	Sure.
1:01.1	But it's my kind of trying to understand what it is you're saying
1:06.9	and putting into a slightly different perspective.
1:09.4	And that's relates to more generally speaking about trend following.
1:14.1	Because obviously, as we know, you mentioned 1994,
1:17.2	and I remember seeing, you know, all the great guys sitting lined up
1:21.2	at a conference in Chicago and talking, you know,
1:24.8	about a very difficult period.
1:26.2	But they were convinced that this was just, you know, a a very difficult period, but they were convinced that this was
1:28.3	just, you know, a difficult period and things would come back. But, but, but let me ask you this.
1:34.6	Trends in markets in general, not necessarily short term, but just generally. Is that kind of based
1:42.1	on universal truth? Because at the end of the day, trends reflect human behavior
1:46.9	and human behavior will never change.
	...

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