Laurent Bernut was a systematic short seller with Fidelity for 8 years. His mandate was to underperform the longest bear market in modern history: Japanese equities.
Prior to that, he worked in the Hedge Fund world for 5 years.
He now runs an automated Forex strategy and travels the world with his family.
In this episode we talk all about Short selling, creating shorting strategies, the challenges of implementation and how to manage risk. We also discuss the importance of exits, insights into Bear markets, autotrading Forex and why complexity is a form of laziness.
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Topics discussed
- The benefits of developing a strategy on the short side first and why long/short symmetry is important
- Challenges with executing short systems and solutions
- The most important aspect to worry about when short selling
- Finding short candidates in a Bull market and why you should ignore absolute performance
- Tips to creating profitable short strategies
- The importance of exits and how to test them
- Insights into Bear markets
- The 3 wrong questions to ask during a Bear market and the 3 best ones to ask
- A simple method to identifying Bull and Bear markets
- Why complexity is a form of laziness
- Using MT4 as a professional trading platform
- Why being disciplined is a myth
- The type of strategies that work in the Forex markets
- The Common sense Ratio and why it’s more robust than the Sharpe ratio
Resources mentioned in this episode
- Laurent can be followed on his website Alphasecurecapital.com or on Quora
- Check out this excellent article from Laurent called ‘Regardless of the asset class, there are only two types of investment strategies.’
- Recommended books:
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Free download – Trading Edge Visualiser
Download a free copy of the Trading Edge Visualiser tool Laurent uses for his own trading:
Quotes
Top tips from this episode
Here are few of my favourite takeaways from the chat with Laurent this week:
- Short selling – there were so many tips on building short strategies I couldn’t go through them all again but I found it interesting that Laurent says that if you can build a positive expectancy on the short side, the long side will be easy
- The importance of exits – I really liked the quote ‘You can’t achieve superior performance simply by good entry’, which is an obvious statement but it’s also a good reminder on the important of exits and how they can impact trading results. There can often be too much focus on entries.
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Episode Released:
8 November 2015
030 – Highlights from Episodes 1-20
076 – Entries, Exits and Trend Following with Larry Tentarelli
091 – Leveraging Exits with Laurent Bernut
139 – Generating alpha from institutional activity with Jason Bodner
003 – Backtesting Trading Ideas – Cesar Alvarez
Hi Andrew,
Another great episode and I wanted to drill down on what Renault meant when he said, “The Sharpe Ratio is the right mathematical answer to the wrong question.”
Could he possibly expound upon what he meant by this?
Thank you.
Warmly,
Brian
Thanks Brian. I’ve just emailed Laurent for a response, will post it here when he gets back to me.
Regards,
Andrew.
Thank you, Andrew. Looking forward to the response.
Hi Brian, you can see Laurents response on this page:
Sharpe Ratio – the right answer to the wrong question?
Hope that helps.
Regards,
Andrew.
Hey really good episode here very informative and I love listening to a professionals take on the markets and short selling. I feel like if there is anything ive learned it when to get out of the market while short selling. I think most of the trades I make are shorts and that’s in forex, I don’t trade stocks yet. I feel like when the boat is to full on the downside there is always a reaction higher before getting back on the boat again.. I use Fibonacci levels of resistance to find these reaction levels. I find when you find and anchor price from lows to lows or even from highs to lows , as long as you can find the prices being respected it will help you indicate when to jump on and off the boat !! I am a new trader and haven’t made any money yet but am trading in demo and would love to learn more things like this!! keep em coming.
Hey Travis, glad you enjoyed the episode with Laurent.
Since you’re into trading Forex you should definitely take a listen to the episode with Andrea Unger, we talk about Forex in that one too.
Cheers,
Andrew.