Trading gurus, drawdowns & trading education

Transcript

Andrew Swanscott 0:01: Welcome to The Trading Panel, the show where we get traders of all different levels of experience, knowledge, backgrounds and we smash them together. I think I used that term a few weeks ago and see what comes out. It's always great discussion to get different points of view. And the brainchild of this experiment, I guess you could call it was Jason from Against All Lods Research. Good day, Hey, Andrew. How are Good

Jason Kurz 0:23: to see you all. Yeah. So basically, today we just are pretty open, have a general discussion about trading. And the main goal of this panel was just to bring people who are actually in the market, people who are actually trading, people who really understand markets and bring it direct for you guys. So please feel free to ask questions, that'll help guide us. We can also talk about whatever you guys wanna talk about as well.

I think that's incredibly important because I don't think when you're first starting out, you don't have many places to go to learn about trading and people you can talk to about trading. And you got people from all different types of trading backgrounds here, you got algorithmic traders, you got systematic traders, you have technical analysis traders, you have intermarket analysis, Whatever you need, even some accounting background.

Right, Steven? So what whatever you need, we we got it.

Steven 1:16: I thought I was here to live trade the meta earnings reaction. That's not Oh, yeah. Yeah. Yeah. You are. That's actually correct. Yeah.

Jason Kurz 1:24: Of course. Of course. What what else would you do here, Steven?

Steven 1:30: So earning season so far so good. Financials have been strong.

Jason Kurz 1:37: What's So going I keep hearing about these moves in there. Like, Tesla was one the other day, and I get don't follow earnings. So I heard Tesla had, like, really bad earnings, and then the stock went up really high. So, once again, the price action dictates everything. What did you see there, Steven? I'm sure you and you guys discussed that today on your show.

Steven 2:01: Yeah. And I think the big takeaway there is, basically, you're saying, Tesla, terrible report, stock higher. This is not easy because it's one thing to be able to forecast the earnings numbers, which that's hard enough. Right? But even when you get that right, you don't know what the reaction's gonna be. So in this case, Tesla fell enough that the bad report was already baked into the cake.

When the numbers came out, the street said, oh, it's not as bad as we expected. And you get a little relief rally. Right? But you don't that's really it's tough to trade earnings for this reason. It's not just about forecasting what the results are gonna be, but then forecasting what the market's reaction to those results are gonna be. So it's kind of two pronged, and they're both hard to do.

Andrew Swanscott 2:48: I think Jason's frozen. I think he is frozen. Yeah. Looks like it. He

Steven 2:53: was just thinking really hard.

Jason Kurz 2:55: We all disappeared. He was talking a while.

Steven 3:00: Am I back? Got connection issues.

Andrew Swanscott 3:02: Yeah. You're back. Yeah. Okay. Okay. Wonderful. Kind of.

Jason Kurz 3:09: Well, what what is it? Am I back or not? Somebody else could cover for me for a second. I don't know what's going on. We

Andrew Swanscott 3:16: can hear you, but your mouth is like a couple of seconds behind your words.

Jason Kurz 3:21: Yeah, somebody else can cover for a second. I don't know what's going on then.

Steven 3:28: I just ramble about stuff that I'm watching. I think last time we shared charts. Right, Andrew?

Andrew Swanscott 3:36: Lot of it cool, actually.

Steven 3:40: Right?

Andrew Swanscott 3:41: We could throw some charts up? We could yeah. We could do that. And I've got a question for Pavel, actually, that I wanted to ask him. I'm gonna log in the back. I'm gonna log in the back. While you do that and Steve, if you want to get some charts ready, wanted to ask Pavel about the crypto space because there was some news. I don't know if it was this week or last week about halving. Was it halving or something like that? What does that

Pavel Kýček 4:12: mean to traders like you, algorithmic traders? Well, to algorithmic traders, it means basically nothing at all. Maybe some bigger volatility over the long term, but yeah, we could see nice scenario of basically selling selling the news. So for example, right now, we are minus 4% on Bitcoin. But other than this, like crypto market these days, after a huge, huge bull market, we are somehow in sideways movement.

So for example, on our portfolios, you can see the exposure between 5% to 10 of the overall capital. So basically no movement or there are, but only sideways with low volatility. So nothing exceptional these days. We can see that markets are basically waiting for some trigger. And if it will be halving over the long term or institutional buying Bitcoin ETF, who knows? Fortunately, I don't have to guess. So

Andrew Swanscott 5:20: I will try. Do you tend to see certain behaviors in the markets when these events occur?

Pavel Kýček 5:29: Well, in which way do you think?

Andrew Swanscott 5:33: Well, I don't exactly know a lot about crypto or halving. Assume it means something about less Like tokens available.

Pavel Kýček 5:41: Halvings. Yeah. I know what you mean. After last halvings, there were some bull markets and some follow-up movements, but there were only, I don't know, three or four, not sure to tell you through because I'm not this typical crypto guy. I'm here for volatility And three or four is not statistics. So I don't like these predictions based on what happened in the past just because it happened three, four times.

It's really far from some serious statistics. So that's why I'm trying not to guess anything like anything at all. Yeah. Oh,

Andrew Swanscott 6:19: sorry. Sorry. I'll cut you off. No, no. I was just going to say.

Pavel Kýček 6:25: Okay. Your turn.

Andrew Swanscott 6:28: I was just going to say the reason I asked is because there's if you look at stocks and this is there tends to be some kind of behavior that's quantifiable leading up to dividends and reporting dates and stuff like that. A good book actually on that is by Nick Raj. And I can't remember the name of it. I'll look it up.

But he did some research and found out that there's actually some behaviors leading up to I think it was dividend date or something like that. And algorithmically you can take advantage of those. Just wondering if it's the same in crypto.

Pavel Kýček 7:06: I also have some models based on dividends for stocks basically also based on Nick work. I think was Nick Rage but not sure right now. But I don't like using these stats for crypto because we don't have enough data sets. So everything is somehow guessing. You cannot be sure or you never can be sure if if this is serial stat. But here, we are far from enough data to say, okay.

We can take it in consideration and make some, like, professional models and trade them because, we really have to keep our models as basic as possible because it is very, very simple to over optimize in this environment with five, six, seven years of data. So super simple models only and not going too crazy with Apologix.

Andrew Swanscott 8:06: Yeah. Yeah. So I'm just looking up that book and it is Nick Raj and it's called profiting from dividend momentum. And I read the book many years ago, so I don't I don't exactly remember what it was, but I'm pretty sure it's, yeah, a couple of days before dividends, stocks tend to exhibit specific behaviors. So it's quite an interesting book to read. If anyone's interested, I think it's only $10 or something. So it's well worth a read.

I believe Nick is a CMT. Right? Is it Nick Ratch? He might be. Yeah.

Jason Kurz 8:41: Yeah. He's he's Australian. Right? Yeah. Yeah. He's Australian. Yeah. Yeah. He has a great book. That that one you mentioned, I think another one's on holy grails. Yeah. This one is perfect.

Pavel Kýček 8:52: Yeah. Yeah. Like, super simple book with many basic strategies that you can use for any asset, basically. Of course, we have to make some tweaks, but this one is great.

Jason Kurz 9:04: My my first Bitcoin system was literally one of his strategies. I think it was a three standard deviation up, one standard deviation down move. And basically, like, you could trade and I used it on Bitcoin crypto strategies actually because it was the only it seemed to be kind of it was profitable and everything, but in Bitcoin, it was really, like, a major outperformer. It outperformed the asset.

And Pavel, that's like and credit for a system to outperform Bitcoin, it's incredibly hard to do, incredibly tough to do. So it was cool that he kind of was the one to show me that was a strategy that you could use to outperform something as crazy as Bitcoin. And like, I'm sure you found the momentum strategies are the ones that outperform Bitcoin. People are always trying to buy the lows on Bitcoin.

And however, it's like it's the opposite strategies that are the ones that really make money.

Pavel Kýček 9:59: Yeah, exactly. Momentum momentum and trend strategies are the ways to go. At least it these are really the low hanging fruits. Midra version struts are great in crypto too, but one really has to know what it is doing. You cannot use any leverage. You have to allocate really small percentage of your overall capital.

And yeah, again, mid reversion strats can also give you like three to four times higher performance compared to broad portfolio of mid reversion strategies on stocks, for example, but trend following and momentum or breakouts are the way to go for sure. Better momentum than typical thirty, forty, fifty days breakout momentum is better, but everything is working. Everything that is taking advantage of huge trends is working.

You only have to have good regime filter that is keeping you out of basically bear markets if you only want to trade to the long side, but it doesn't make a lot of sense. I think it is better to be exposed to longs and shorts too.

Steven 11:17: And can't you just combine those tools? Like, you're talking about trend and momentum. Yeah. I don't know about your system, Jason, or or yours, Pavel, but, like, why not identify primary uptrends and then identify the thirty, forty, fifty day new highs and trade the breakouts in primary uptrends? Right? You're just stacking the odds in your favor.

Pavel Kýček 11:39: Yeah. Exactly. What we are doing is that we are trading 15 strategies these days and more in a way that, for example, I'm using mini version short strategies as being hedged in our momentum long strategies. On the other side, breakout shorts can be nice hedge to trend following longs and so on. So combining them together in a broad portfolio is the way to go.

Especially, I would say, especially in crypto, it makes sense because it's super immature market and we don't know how it will involve. It can be more branding like stocks, more range bound like Forex. We just never know when this is how I want to operate, especially in crypto, because we don't have enough data to expect anything.

Steven 12:30: And there are very material or I should say significant countertrend rallies in crypto. Right? So in other words, I was talking to somebody the other day. They said the Solana's down 30 or 40% from its highs. I'm like, last cycle, it was down 60% right in the middle of, like, a wild bull market. Right? And it happens like that, and you could trade it on the short end. I love that. You have to treat them differently from the longs though. No?

You're you're kinda quicker to take profits on the short side when you're trading mean reversion?

Pavel Kýček 13:01: Depends. Depends basically brand following. I'm I'm reading trend following strategies to long side and short side exactly the same just for the robustness. Miner version, I want to be a little bit quicker on miner version starts to the short side because I don't want to be exposed to the exponential moves to the long side. But the logic behind those strategies are very similar, probably almost the same, and I'm using them in stocks too.

It is more about exits than entries that you want to manage your risk basically by how long you want to stay in position. And yeah, to the short side, especially those quicker breakout strategies have to be quicker. You want to be in a trade for one, two, three days maximum. But again, there are trend following struts through short side with average holding time ten to twenty days.

You just have to be in the positions with the right regime filter basically. Regime filter is crucial for volatility, for trendiness. I love them in general. Just basic one, like nothing crazy, but something very basic based on moving averages, ATR and this kind of stuff are working.

Jason Kurz 14:36: So regime, you mean volatility based or like what type of how volatile the market is at that moment?

Pavel Kýček 14:43: Yeah, volatility, but also trendiness basically. Both are working depends on the strategy because I have strategies that I even don't want to use any regime filter because I want them to be slightly uncorrelated to different similar ones. So that's why I get rid of regime filter just by purpose. Then I also because it is always different, if you build a strategy just for a single strategy or for the strategy being a part of the portfolio.

If I'm running many long trend strategies, let's say, then I don't mind being a little more crazy with mini reversion short struts and being a little bit more exposed to this risk to the long side because I know that my long strategies will cover this risk at least partially. So it is more about the thought process, about the logics behind the overall portfolio than just behind the single strategy.

That's why I'm always having these discussions how I would build the strategy if it should be trading only only this strategy or how you want to build a strategy if it is part of the broad portfolio. This is this is this is these are the logics that I'm I'm using.

Jason Kurz 16:12: Oh, nice. I think that's, it's really important. I think in general, like whatever type of trader you are to have some sort of filter like that, I think it's why you see the, especially like the very, the trend ballers have been doing it forever. And I don't wanna hate on any of them because they've been doing a lot longer than me. They have a much longer track record than I do,

but I've just found that to really have that outperformance and continue to perform well in different environments, you have to have some sort of regime filter, whether it's technically, it could be a macro regime filter, it can be relative strength regime filter. I think there's many ways of doing it, but I think it's important to just be able to specify what type of market you're looking at.

There's sometimes the market's just not conducive to our types of trading. And that's just gotta be a thing where we're comfortable with at times.

Pavel Kýček 17:05: Exactly. Think there are two good reasons why to use regime filters. First is that it is basically your performance is usually better in terms of returns to volatility of your account. And the second one, and it is probably even more important, is capital allocation. Because if you know that you are in a regime that is not good for this particular strategy, you can use the capital for different strategy that is making better.

So for me, the capital allocation part is probably even more important than just the strategy making nicer or better results in general. But then also it depends on the strategy. For example, trend strats, it is really long hanging fruits, low hanging fruits to use regime filters, rent regime filters.

Mineral version strategies are at least from my point of view, it is better to use long short mineral version against each other, and they basically hedge each other and you don't have to use regime filter at all. It really depends. It really depends on the logic you want to trade.

Jason Kurz 18:26: Andrew, could we go through a question already? I think there's two questions on here that are amazing, and one is by Particle.

Andrew Swanscott 18:34: I would love us all to kind of have a chance to talk about that one. I saw that one. That's a good one. Let me put it up on the screen. Particle. I've noticed a general trend of influencers sharing their method of success in market stocks, forex, etcetera. But how can public information on YouTube lead to good results trading the markets? Excellent question. Who wants to have a crack at this one first?

Steven 19:01: It's a curation exercise, right? You have to be a master curator these days. There's a lot out there.

Jason Kurz 19:09: Yeah. What I wanted to talk about it was the first thing I thought was when we're looking at somebody and we're going, okay, well, this person is on the internet, they're talking out loud about what they're doing. I think the thing that really separates good traders from bad traders has nothing to do with, is their information great? Is their information terrible?

Good traders, one, if you're following somebody, understand that nobody's right all the time. So follow the traders who have conversations about being wrong. Don't follow people who say they're right all the time and they get every trade right, and they're great at this, and oh, and if it's down, they're just gonna wait till it goes back up. That's not trading, that's just hoping and that's not real trading.

But also think of it this way, trading isn't the toughest, like trading is incredibly tough, but it isn't because of, I can't explain what I do to somebody. It's that somebody else doesn't have the discipline I do. That's the problem we run into more than anything is that maybe trading the way I do doesn't fit your strategy, your lifestyle, whatever it is. So you have to figure out the way you trade first.

And then once you figure out the way you trade, then comes a hard part. And that's the discipline part, doing the thing that you don't wanna do every single day, meaning that you're going to get a signal in the NASDAQ at some point, and you're going to have to buy it. And maybe you don't want to buy the NASDAQ in your logical brain, but your systems are telling you to buy it, and you just have to do it.

I think the thing I see more than anything else is that people get into this, hey, like, I believe this is how trading should work. Or let's say you buy Bitcoin, you're watching somebody on the internet, and they say to buy Bitcoin, let's say they have a great entry, then when do you get out? You don't know because you're listening to somebody on YouTube.

So what we do here at the panel and any of the things we're involved with, we try to teach people how to trade and create their own strategies for themselves. What I'm doing is trying to show you what I do and how my systems work. And so maybe you can go home and create your own systems because you have to figure out when when are you gonna get into and out of a trade? Yeah.

You can come up with an idea from somebody else, but that doesn't mean you know when to get in and when to get out. So you have to create your own systems, your own strategies. That's going to help you become a very good trader. Public information is just to give you information. Here's the information. This is what we do. This is our conversations. This is my newsletter, and this is what I'm doing as a trader.

But as a trader, you have to be you have to really have something inside yourself that makes you want to do this well and continue to work on it, master it, and continue to understand that you're gonna fail and figure out how that works. The biggest thing that most new traders don't do is risk management because they don't have risk management or any methods of risk management.

Because really it's all position sizing and where your stop is, or if you don't use stops, then it's more position sizing. Like there's a million ways to do this. However, you have to understand risk management in some form, whether it's, Hey, I'm only losing 1% of my portfolio per position. That's a loser. That's how I do it. There's other people who do it different ways.

Pavel could probably tell you a different way of doing, because he doesn't use stops. So basically the goal really is try to find people who are gonna teach you how to use risk management well. Once you learn that and how to manage your risk well and size your positions right, everything else is a lot easier because really you can be wrong a lot. You can be wrong a ton and still make money. People look at trading as a thing of being right.

Right is making money, wrong is losing money. And really, there's even good trades that lose money. It's old Larry Hite quote, good bets and bad bets. But basically when you're looking at this, you have to understand that, okay, as long as I'm following my system, and even though there's gonna be 50% are gonna be losers in there, I'm only losing 1% of my portfolio

but my risk is one to five, meaning I'm looking to gain 5% of my portfolio on my winners and only lose 1% of my losers. This means I can be wrong a lot. I can be I can be right just about 30% of the time and still make money. So really, the goal has to become making money, not caring about being right. And I think human nature dictates that it's really hard for people to do that.

Steven 23:42: Yep. But I'll just add one or two things. Because this is such a loaded question, and we could take in so many different directions. Right? Jason's talking about finding your process and finding yourself as a trader. The question really comes down to me, who should I listen to or, who do I know how to trust on the Internet? You have to figure that out first. Who am I? What is my process? What are my goals?

There's some great content out there I completely ignore. There are fantastic day traders, short term swing traders. It's not for me. I'm not saying it's not good, but it's not good for me. Right? So you have to figure out a lot of things for yourself before you then go to the Internet. There's so much good free information or cheap information. Right?

But more I think as a general rule, he's saying there's a lot of people sharing their success in markets. No one's successful strategy is gonna be a good successful strategy for you. So anybody on the internet who's saying, just follow me, this is how you do it. I'm gonna tell you when to get in, when to get out, what to eat for breakfast, wake up at 5AM, follow my trading routine. Right?

We're gonna do 10 push ups, 20 push ups if we get stopped out. Like that kind of stuff isn't gonna work for you or probably anybody. You have to take the bits and pieces from all of this information that's being shared and kind of make it your own and see how it fits into your world. Right? But thinking that you're gonna find a guru and be able to track them and he's gonna make you rich, that's just really not a reality for 99.99% of people. Yeah.

Too hard? Mean, right, guys?

Jason Kurz 25:17: I think people look for, well, if if you talk to new traders, they're I've had I started my letter not too long ago. And I've always put out information, and I've had a fun for years, but starting a letter has been a very different crowd. And I had people come to me at the beginning and go, man, I wanted signals. Why aren't you telling me what you're buying every day? I'm like, because I'm not buying things every day.

There's not a trade to do every single day. There's trades to do here and there. And so, like, I think at first, like, you're a trader, you're looking for action. And and because you want that action, you're looking for gurus. And those gurus are gonna tell you the action that you want. They might not help you make money, but they're gonna give you that action. And trading shouldn't be fun. Trading should be hard. Sometimes it should be grueling.

Sometimes it should be incredibly boring. So because of all of those reasons, you should really understand that sometimes the best trade is to sit on your hands. The people that you wanna pay attention to are the people that sometimes it's boring. There was literally just the first couple trades in our system has been corn and wheat, and that was just today.

Before that, I feel like there was four weeks of just nothing in the system, and that's gonna happen. That's real trading. Like the market doesn't have to do what I want it to do. Yeah, sure. I'd love to have more action every day. It'd be a lot more fun, but that's not how you make money. And the goal has to be in the end to make money. Yeah. Get get your kicks off somewhere else. Like, I have,

Steven 26:48: hard rock bets. Like, I gamble on there. That's where I have some fun. But, like, my day to day, I'll go to bed at night and be like, wow. I was yelling about Bitcoin miners on YouTube today. That's probably a fade. Like, if I'm too excited, it's not a good thing. Usually, I'm pretty bored, and I'm like a robot, and this is what we do here. You know? And that's that's for the best. If you're having too much fun, probably not a good thing.

And you get Never met a trader having fun making

Jason Kurz 27:15: money at the same time.

Steven 27:17: And and back to the Internet, like, you you get what you're looking for. Right? So one of the best things you can do is just absorb all the best information from all the best traders or investors of all time, listen to their interviews, read their books, and then you start to get familiar with how they think. And, Jason, you already mentioned it. A lot of it, go read Market Wizards. Right? That would be example number one on that list of content.

You start to understand how they think. And while they're all different, and you'll notice that they're all very different processes, they also share similarities, and there's themes there. Right? And then when you're going through and reading a free blog or something on Seeking Alpha, you can immediately, just by the voice and the way the person's talking to you, figure out is this person legit or not?

Is this an article I wanna read to the end or not? Right? Do I wanna keep following this person on Twitter? But it takes work. Right? It it becomes it's it's a bit of a craft digging through all this shit.

Andrew Swanscott 28:12: Yeah. Pavel, were you going to add to that?

Pavel Kýček 28:16: Well, I would say, accept that it will be long term journey for sure. Like, probably more years that one accept. Another one is stop following all the lumber guys. These are usually lying. Not all of them, most of them. And the third one is get your education really because firstly, you have to get your education. I would recommend books. There are a lot of great books from authors that are for sure traders.

And once you get your education, then it is not that hard to go over all these followers or all these influencers, and you will find out pretty quickly that it makes sense or it doesn't make sense at all. But without the education from from some good source, you can do it probably. It's only about guessing. Education is first, in my opinion.

Andrew Swanscott 29:14: Yeah. And the way I look at it, I think it is a as Steve said at the beginning, it's a curation exercise. So there's a lot of stuff out there on the Internet. There is a lot of crap as well as some good nuggets. I think whenever anyone says a trading idea or an approach, I use the trust but verify model. So being an algo trader, I can easily go and, just code up this idea and test it. And sometimes it will work. A lot of times it won't.

But there's a lot of times where this idea, there's some nuances. So maybe Jason might say, he trades this particular thing and this is how it works. And I test it and it's like, well, it doesn't work when I test it systematically, but Jason's got some experience and some nuance to that. So I think you've got to always test ideas from people. And then over time, you'll see, okay, this is what this person is telling me.

I understand their background, their nuance, how they're looking at this stuff. And that's someone that I can trust over time. So I think no matter who you're listening to or what ideas you're getting, you have to be able to verify them yourself because you're not going to have that conviction.

You start trading like that, or you start following them and doing the things they're doing, when drawdown happens, which will inevitably happen, you're not going to have the conviction to follow through. And so you'll end up, and I see a lot of traders do this, jump from guru to guru and they take losses and they go to the next one. And it's just a never ending experience of losses.

I think you need to as going back to what Steve said, you gotta figure out what works for you and then incorporate that into what you're doing because I love his quote there. I just posted it on Twitter. No one's successful strategy is going to be a successful strategy for you. You've gotta work out what works for you.

Steven 31:13: I just dropped I tried to drop a book list. I don't know. Can maybe you can't drop links into the chat. I tried to drop a book list. JC and I have written posts over the years. This is just for technical analysis, but it's a pretty solid list. If the link in the chat doesn't work, because I don't know what I did wrong.

You literally just Google book list, all star charts, and you'll see two posts over the years that we've written our favorite technical analysis books. It's a great start. It's a great start. And there's a lot there's so many good books out there. I don't even know if Market Wizards is on that list, but awesome.

Andrew Swanscott 31:51: Remedy So what what should they Google, Steve? Book list. All star All star charts. Yeah. All star charts. I'll see if I can post it. Which book should I read to learn more about? Okay. Which book should I read to learn more about technical analysis? Is that the one? It looks like it. Here, let me post this in the chat.

Steven 32:20: Guess I'm still learning how to use the internet. There it is.

Andrew Swanscott 32:23: I think what happened is you did a search in Google and you've put the Google search link and it's really long and it's probably crapped out because there's a limit. Yeah, messed it up. Yeah. Now there was another question actually, which we kind of just started touching on or maybe I just started touching on that about drawdown. I'm trying to find it here in the chat Meadow. Here we go Meadowditchy. Let me put this one up on the screen.

Have you ever had a six month to one year drawdown? Yeah. Longer.

Pavel Kýček 33:05: On stocks. I had, for example, on stock algorithmic portfolio, I had great years '21, twenty twenty twenty one basically, and twenty two and a half of '23, I was in a drawdown and I get back to the average, like, my long term average on stock algorithmic trading. So especially in algo trading and especially with higher data time frames, you get longer longer drawdowns for the price that your solution is usually more robust.

So, yeah, one year is something I'm always prepared for.

Steven 33:43: And then the hard part is having the discipline not to abandon your system.

Pavel Kýček 33:48: Yeah. Right. Well, you have to know your strategy. You have to know that these drawdowns are normal. Or if they are if these drawdowns are longer than in backtest or in the past, for example, you have to understand your strategy enough to know that, for example, we are in conditions that weren't favorable for this kind of trading. For example, I have some breakouts on small caps, basically micro caps.

And this this strategy made, like, one and a half higher or deeper drawdown than in the past. But it was perfectly normal because if you if you compare it to what microcaps basically were doing in 2022 and 2023, yeah, they were sinking like crazy. So breakout long on microcaps probably shouldn't be making a lot of money at those times.

Andrew Swanscott 34:47: Yeah. And I think I probably shouldn't have laughed at that question because it sounds like you're in drawdown, but I think we're probably laughing because I think it's such an important part of trading. It's something that you can't avoid, especially at the beginning when you're kind of figuring things out. The way I look at drawdowns is that it's a good learning exercise to see, what is the market telling me?

What is the performance of my strategy or my portfolio telling me? And I would have to say that most of my or a big part of my progress has always been out of those challenging times, figure out a new way. In 2008, I was trading quite a lot of leverage and I was doing really well for a while. And then the market went south and I had a really big drawdown. And out of that period, I discovered market regimes.

Now it cost me a lot of money to discover that. But over time, you tweak your approach and you come up with these new things. They're usually of adversity those come and that makes you a better trader over time. So I'm wondering, you guys, Pavel, Steve also found benefits to drawdowns?

Steven 36:04: The thing about drawdowns is you have to embrace them as a trader because if we're realistic about drawdowns, you're you're normally in a drawdown. By definition, if you're not at a new high, you're in some sort of a drawdown. Right? Maybe not a six drawdown, but a drawdown nonetheless. So get comfortable being in that situation. I assess things more, and I wish I could show you guys, but it's all coffee stained and terrible.

But I keep a tally of my win rate, more or less, literally just on a notepad. And that's more that's better information than actual drawdown for me. So I'll look at something. And if I'm losing, if if I've lost on nine, ten out of the last, 12 trades, I look at that in a bull market and think, oh, wow. Alright. That's fine. Every new losing trade, I know I'm closer and closer to a winning trade because I know how the statistics work for what I do.

So I think embrace it, be comfortable with losing, and understand that it's just a part of the process. You don't wanna look at a losing streak and say, oh, that's terrible. Should I should scrap this. I'm done. You look at a losing streak like that and say, I'm probably about to win. So

Pavel Kýček 37:11: Well, I don't like drawdowns at all. I still don't like them, but especially the deep ones and prolonged ones. But the truth is, as Andrew said, that to me, it's the best learning phase of basically performance because when my equity is on highs, you are always still you are even if you are trading for many years, you are still feeling that, yeah, now it's really this is it. It is running, and it's perfect. And then there is always some drawdown.

So you these are the times when you are pushing your portfolio to be more stable, better, like creating new strategies, uncorrelated ones, thinking about your portfolio and so on. The best periods for working, the worst for self confidence in general.

Andrew Swanscott 38:14: Yep. Jason, did you want to share some insights into drawdown? The original question was, have you ever had six to twelve month drawdown and did you get out of it?

Jason Kurz 38:26: Yes. So six months, yes, 2022. So the beginning of twenty I made all my returns in the beginning of twenty twenty two. Basically Q1, 2022 had a 30% quarter, really good compared to the market having a really terrible first quarter. Most of that was driven by commodities. There was the Russia Ukraine war that broke out, commodities went crazy, ended up having a great quarter, but the rest of the year literally was flat.

I Q4 Q4 was slightly up and the rest of the year was flat and down. Q2 was down, Q3 was down and Q4 was just slightly up. So basically I was in a drawdown the rest of that year. Yes, absolutely, you get out of it. That's also part of trading is to understand, hey, like, what type of strategy am I running? Am I running a strategy that's a trend following strategy and understand that markets don't trend all the time?

And so if I understand that markets don't trend all the time, I can understand that I might be in a drawdown for a significant period of time at times.

Pavel Kýček 39:34: Plus one note to drawdowns, if I can. Marfilos, I really work in here, so usually your life strategy performance will start with a drawdown. That's why it's a good advice. I think it was from Tomasz, Tomasz Nissindel, to start trading your strategy in a drawdown. If you want to get rid of the first drawdown that is especially if you start with new strategy, it's not much comfortable or not comfortable at all,

then starting or waiting for some kind of drawdown, like 30% of maximum drawdown or so makes a lot of sense to me. I'm not doing it anymore, but especially for novice traders or those that are starting, it makes a lot of sense.

Andrew Swanscott 40:21: Yeah. I've seen some really good research on this actually, specifically for algo trading is, I think traders tend to see that a strategy is performing really well in the current market and they jump in and start trading it. And that's usually the worst time because it's over performing and it's likely to stop doing that.

So the research I've seen is it's best if you get a strategy that's kind of around its average performance, depending on how you want to measure that. There's a lot of different KPIs you can use. Or even if it's slightly underperforming because I guess the expectation is that it's going to mean revert in its performance.

I've seen, yeah, it seems a good research that suggests don't start trading a strategy when it's really hot because it's usually the worst time.

Pavel Kýček 41:15: But you can see this behavior also with, for example, our clients, most of them are always starting with us at the equity top, not at some corrections. So it's probably very normal human behavior.

Jason Kurz 41:30: Yeah. I think in general, it's really when you're in a drawdown, like most people like, people think of it like it's a terrible thing. And like, it's like, for me, I'm looking at it on a one year basis. My 2022 year was good, especially compared to the market. Market was down, what, 20% that year. We were up over 20%. So once again, it's a, how do you look at it? I always look at it as one year basis. How am I doing in a year time?

And if I'm up and I'm performing well, I'm outperforming the market, especially, I'm gonna be happy about that. I never think about it like, oh, I have to be making money every day. I think about trading as I forget who said it, but somebody mentioned lumpy returns. I think that's the best way to think of trading.

Like you're gonna have periods of time where the market loves your strategy, and you're having this major outperformance and everything's great. You know, basically for me, Like Q4 twenty twenty, all the way to Q1 twenty twenty two was my best trading years ever, just flying through the market at that point. And then basically you get into this drawdown period, but of course you take advantage of those returns that happened during that great time.

And then when it's the lean time, you understand that, hey, the market's not always conducive to my strategy, so I can just understand that and know that I'm getting chopped up for a little while at times.

Steven 42:54: So I take the point you just made to an extreme. And over the past three cycles, I don't trade at all during bear markets. It's, it has to do not just with trading and the way that my process has evolved, but who I am as a person and my, personal situation. I'll take a year off during a bear market. 2021, the back half of 2021 was a disaster. Major averages didn't peak until January 2022. I was losing so much money.

I was out from July until the end of the year. Or I'm sorry, July until literally twelve months. Wasn't back in until breath bottomed the following summer of twenty three of twenty twenty two. Sorry. But you can do that. Right? Because that's that's what works for my process. One of my favorite sayings is make hay while the sun is shining. Press the gas. Look for the highest beta. Right? Take more risks.

Move out in the risk spectrum during bull markets. And then for me, I take extra advantage of the bull market period. That's the environment that my strategy works in. And then I just don't lose money in the bear markets and wait for the next one. And if there's not a bull market in stocks, there'll be a bull market in commodities or maybe international stocks or cryptos. Right? And you could deploy the same strategy to different asset classes.

So it's not the end of the world if we were to fall into, a Japan situation with US equities. The nice thing about technical analysis is it's applicable. Right? We're just studying the behavior of market participants, supply and demand dynamics. All public markets are very similar.

Andrew Swanscott 44:24: Yeah. Now we've Oh, only got sorry, Jason. I was just going to say we've got four minutes left because some of us have to bail at five two. Now there's a few more questions in the chat. Did anyone see a question they'd like to answer in the next few minutes? We've got a handful left here and we're not gonna have the time to get through them all. I'll let you guys go through quickly.

Steven 44:52: I could talk about basic materials. I think it's XLB above the prior cycle highs. And you can look at the industry groups, whether it's chemicals or copper, steel miners. XME is a good ETF or materials. If they're not above their prior cycle highs, then it's probably a sector that needs more time. You want XLB to look more like XLE, back above the 2021 highs, flipping that old resistance into support. So energy did it.

I don't think energy is gonna move in a different direction than materials. So I think just the breakout sticking for XLE bodes well for XLB. I think we get there And we look back and we say, that those all time highs from last month was just a false start, not some nasty failed breakout, but we gotta see it. Right? So you have a really clear level there. That's that's that's where my head's at for materials.

Jason Kurz 45:50: Dan, I wanted to just add. I saw the average annual return percent for trend following strategies, one strategy, one market. Most of the time, most of it what we do is trade many markets and many different things, maybe even one market, but we diversify inside of that one market. So there's lots of ways to do that.

However, the returns, the more diversification you have, whether you're in one market or trading across different asset classes, that's really what most of the trend followers do. I do post all of my returns on my letter. So if you do see my page and you do go to my letter, you can see all my returns there. You could find me on Substack AAO Research. So all my returns are on there if you wanna check that out.

I think Pavel also shares a lot of his strategies too all the time.

Pavel Kýček 46:41: Yeah. Well, we have also shared a few basically whole codes of brand following strategies on crypto, so you can test them. Crypto is different animal. Like, the trend following on anything else compared to crypto is yeah. The performance is much lower, but on crypto, you can expect on average 100 to 100 plus percent.

Andrew Swanscott 47:09: All right. Well, just about at time now. So how about we start wrapping this up? Steve, you can go first. Where can people find you? Contact you, get more from you.

Steven 47:20: Stock Market TV on YouTube, stockmarkettv.com. The blog and the research, most of it's on allstarcharts.com and Twitter, estraza.

Andrew Swanscott 47:32: Excellent. Jason?

Jason Kurz 47:35: Yeah. So at a o research, there's my substack name on Twitter, j s p one thirty eight, and on YouTube, AAO Research, we got lots of videos with traders. So those of you asking about educational videos, we have a lot of videos with market wizards, Jerry Parker, Victor Sperandio, Tom Basso, and so on. So you want to learn more about this style of trading, definitely check out the channel.

Pavel Kýček 48:01: Yep. Hello. Yeah. Well, my Twitter, or if you want to check some of those ready made strategies that you can try by yourself, you can check our linkrobuxi.com/education where there are, there is many free materials and yeah,

Andrew Swanscott 48:21: that's it. Yep. And for me, Better System Trader. I also have a few interviews on my YouTube channel with other traders if you want to get some free information there and Better Assist Trader on Twitter. So go and check those out. Make sure you follow us so you can get all the content that we like to share. So anyone want to have a closing thought before we finish this one up for today? No? All right. Well, thank you everyone for joining us.

Mehta Ditsy, it's midnight in Bulgaria, right on time. And great questions from Medici today. So thanks for your

Jason Kurz 49:00: contributions and everyone else who was in the chat today. Yes, great questions today. This was a really fun one. So thanks guys for your questions.

Andrew Swanscott 49:08: Exactly. And enjoy the rest of your week. Happy trading. Alright. Thanks. Thanks everybody. Bye.