Systematic trading and Trend Following legend, Perry Kaufman, joins us on the show today to discuss the importance of being comfortable with risk, the benefits of continuously ranking & evaluating markets, the importance of ‘fat tails’ in Trend Following systems, why you might want to use equal risk with every trade, how to avoid being over-correlated, trading single stocks vs indices, opinions on profit targets, and why he generally prefers long trades vs short trades.
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0:00 - Intro
01:25 - Weekly review of returns
06:08 - Niels: How does the content in your book, Trading Systems, inform your decisions when building a system, and what do they mean to you?
26:44 - Niels: How do you avoid overfitting your system to accommodate markets that may not perform well in the future?
29:28 - Niels: How do you avoid being over-correlated?
30:17 - Niels: How does your ranking system work when adding or removing markets from your trading universe?
44:19 - Niels: How do you feel about profit targets?
53:06 - Niels: Why do you believe Trend Following strategies will always be successful?
57:00 - Niels: Have you found in your research that long-sided trades tend work better than short trades, and if so, have any hypothesis as to why that is?
1:04:33 - Moritz: What are your thoughts on trading single stocks vs trading the indices?
1:09:54 - Niels question for Moritz: How have you incorporated yourself & Perry’s work on Volatility Targeting into your trading?
1:21:29 - Niels: Are there any new discoveries that you’ve found in recent years that enhance Trend Following strategies, or have we most likely found everything by now?
1:24:45 - Performance recap
1:26:32 - Niels: Which book, that you didn’t write, would you recommend to our listeners?