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How To Overcome Cognitive Bias in Investing and Trading | Roy Niederhoffer, R. G. Niederhoffer Capital Management | #45

“We are as humans essentially products of our hardware – that is an insight that I’ve taken with me into the trading side.” – Roy Niederhoffer (Tweet)

Roy Niederhoffer has a fascinating live story that starts with Harvard and neuroscience and continues into his starting a hedge fund in the short-term trading space in 1993. Roy discusses the exciting and bootstrapping beginnings of his firm, the cognitive biases that keep most humans from making good investment decisions, and how his firm stands out from other CTAs. Investors and managers alike will learn a wealth of information from this episode.

Thanks for listening and please welcome our guest Roy Niederhoffer.

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In This Episode, You’ll Learn:

  • How Roy got interested in the financial markets from an interest in computers at a young age.
  • How he started a company that had 30 employees by the end of his high school.
  • How his brother was an early adopter in the Hedge Fund space.
  • How he spent his undergraduate years studying neuroscience.
  • Roy graduated from Harvard and was set to go to Cambridge for neuroscience until he worked for his brother for a summer.

    “If you look at our pitch book from the early part of 1993 it’s very much the same thing we do now.” – Roy Niederhoffer (Tweet)

  • The story of how he started his firm and when he began trading in July 1993.

    “We try to maintain a consistent negative correlation to equities.” – Roy Niederhoffer (Tweet)

  • How the human brain influences behavior and how that translates to trading.
  • Cognitive biases and how to avoid them in the financial market.

    “People hate to loose more than they love to win.” – Roy Niederhoffer (Tweet)

  • What Roy thinks of trend following and how to explain it to the public.
  • The other investors he worked at in his first job out of college, that later became famous investors in their own right.
  • Why Roy’s firm was “employing” a cook and a maid when they started the business in 1993.
  • How he plays in a symphony and keeps up his pursuit of being a musician while running his firm at the same time.
  • What he thinks about the future of the CTA industry.
  • How his model works in an ecosystem of other portfolio management options.

    “Negatively correlated assets tend to work in harmony in a way that people are generally not used to seeing.” – Roy Niederhoffer (Tweet)

  • How they distinguish themselves from other CTAs.
  • An overview of the strategies that his firm does today.
  • How the infrastructure of the business is setup today and the unique opportunities of the short term space.

    “The last two years of sharp ratio are actually worse than chance at helping you predict the future.” – Roy Niederhoffer (Tweet)

  • What he looks for when adding people to his research team.
  • The culture that he has created at the firm.
  • What matters to him when investors look at the track record of his firm.

Resources & Links Mentioned in this Episode:

This episode was sponsored by Swiss Financial Services:

Connect with R. G. Niederhoffer Capital Management:

Visit the Website: www.Niederhoffer.com

Call R.G. Niederhoffer Capital Management: +1 212-245-0400

E-Mail R.G. Niederhoffer Capital Management: info@niederhoffer.com

Follow Roy Niederhoffer on Linkedin

“The way an aircraft flies – that is the way the strategy works. Most of the time the plane is on autopilot, and does a great job of flying itself. Every once in a while it is necessary for the pilot to jump in.” – Roy Niederhoffer (Tweet)

3 Comments

  1. […] A talk with Roy Niederhoffer about cognitive biases. (Top Traders Unplugged) […]

  2. […] more about people who have inspired Kim, including Roy Niederhoffer, Welles Wilder, and John […]

  3. soft skills training for youth on 10/16/2015 at 12:50 PM

    You really make it seem so easy with your presentation but I find this topic to be
    actually something that I think I would never understand.
    It seems too complicated and extremely broad for me. I’m looking forward for your next post,
    I will try to get the hang of it!

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