Tomas Nesnidal has been a full-time trader for over 11 years, specializing in automated algorithmic trading strategies.
He has experience with a number of trading styles, including option trading, spread trading, statistical arbitrage and market internals but in this episode we’re going to discuss one of his other specialties, breakout trading.
In our chat we discuss the key components of a breakout strategy and how to combine them to create profitable trading strategies. We also discuss the degradation of strategies over time, how to add new life into old strategies and why creative thinking is such an important aspect of successful trading.
In this episode we discuss
- The benefits of trading breakout strategies and what makes a good breakout strategy
- How to build profitable breakout strategies using 4 key components
- The degradation of strategies over time and how to add new life into old strategies
- Using filters to improve trading results
- Adapting strategies to market conditions
- The best timeframes and markets for breakout strategies
Sponsor
Resources
- You can follow Tomas on his website systemsontheroad.com.
Also check out the section below where you can get a free copy of The Breakout Strategy Toolkit, which includes a breakout strategies ebook plus code for 2 breakout strategies, one which Tomas has developed exclusively for Better System Trader!– NO LONGER AVAILABLE- Recommended books:
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Top tips from this episode
- Creativity – Creativity was something that Tomas kept coming back to throughout our chat, highlighting how important it was to come up with unique ideas to test. In fact, he said “the key ingredient to trading is creativity” and that “creativity helps you stay in the game”, which is a very similar message to what we heard from Dr Brett Steenbarger in Episode 25. Toms advice was to constantly think about what new aspects we can bring into a trading concept to make it more unique, try to add your own twist, come up with crazy ideas and test them.
Quotes
Episode Released:
21 February 2016
040 – Algorithmic Forecasting with Larry Williams
054 – From trading ideas to robust strategies
127 – Building Mean Reversion trading strategies with Cesar Alvarez – Part 1
038 – Trading goals with Kevin Davey
016 – Andrea Unger
Great Interview
Cheers Django, glad you enjoyed it!
Andrew.
I just finished the podcast with Tomas. Good one and good timing. I am in the middle of doing research on breakout strategy on commodity ETFs. I got some new ideas to test. Keep up the great work.
Thanks Cesar, glad you enjoyed it.
I got lots of ideas from chatting with Tomas too, so much to test! 🙂
Cheers,
Andrew.
Hi Andrew
How about another round with Tomas – this time on the technical side?
e.g.
1. What technology (software) does he use? Why?
2. What technology (hardware) does he use? Why?
3. Where does he get data from?
4. How does he update it?
5. How does he ensure it is clean?
6. How does he deal with data issues – missing data, bad data etc?
7. How does he implement different strategies – e.g. does he use multiple programs – one per strategy, or does he have programs that can run multiple strategies or does he have a mixture of the two?
8. What issues has he had to face and resolve that may not be obvious to those that have not tried automated algorithmic trading?
9. He apparently works on remote servers – how does he deal with lag when he does not have blistering connection speeds? How much work does he do locally (i.e. on his laptop vs servers)
10. Maybe something on his workflow – how does he take systems from original idea to development to testing to prod?
11. Could he suggest an appropriate set of steps as to how to get into automating systems – maybe from a beginners eyes, then from an intermediate’s eyes and finally what he sees as opportunities arising that he’s considering taking a swing at.
12. How does he find coders.
13. What issues has he had with working with coders
14. How best to resolve these.
15. What unpleasant surprises has he experienced with automated systems behaving in unexpected ways – e.g. buying into too many positions on tanking mkts is a possibility.
16. How does he intergrate with brokers in terms of putting in orders?
17. How many brokers does he have?
18. How many brokers should one have?
19. If > broker, how does he deal with integration with those brokers?
20. Why three servers?
21. Do the servers communicate – if one is down, does one of the others pick up processing?
22. What is genetic programming?
I for one would be interested 🙂
Regards
Dave
Hi Dave,
that is a lot of certainly important questions. I will think about the best way how to touch these topics in the future as well. Either here on BST or on my own blog or both. Right know I am a bit busy with launching my hedge fund, but I will copy your questions to my notepad and will keep them on mind.
Hi guys,
Great interview! I have tested variations of Tom’s BOSS strategy on DAX (which is where I do most of my initial research). I find two things:
– Systems that perform well in 30 min time frame does trade frequently enough to pass my robustness criteria
– It seems to work well in 15 min time frame if some additional filters are applied
Question:
– How would you explain the underlying premise behind BOSS?
To me it looks like:
1) In uptrending market
2) Find pullback
3) Set stop order which is triggered of trend resumes
Is it something along those lines?
Cheers
Peter,
that is a very correct interpretation / observation. Basically, my findings show that breakout after any kind of pullback (I call them “corrections”) are one of the best breakout signals.
Good luck with your trading,
Tomas