• iTunes
  • Twitter
  • Facebook
  • Google+
  • Instagram
  • Youtube
  • Email
  • Home
  • Courses
  • eBooks
  • Library
  • The Empowered Trader Club
  • BST LIVE
  • About
Better System Trader

Better System Trader

Better System Trader is the podcast and blog dedicated to systematic traders, providing practical tips from trading experts around the world.

132 – How to track poor performing trading strategies

http://traffic.libsyn.com/bettersystemtrader/BetterSystemTrader-Episode132-HowToTrackPoorStrategyPerformance.mp3
Play in New Window|Download

A few weeks ago I got the fright of my life.

I found myself in a situation where I could potentially be crushed by a car, or perhaps even a bus or truck.

As I’ve mentioned in the past, I like to go riding on my mountain bike, and when I ride my bike, I like to go pretty fast and do things that perhaps the casual rider may think is a little crazy.

On this particular day, I was hurtling down my street like a missile, however, I didn’t realise I was about to find myself in a situation that could potentially put my life in danger.

At the end of my street is a pretty busy road, it’s one of the major roads for the suburb that I live in, and as I was approaching the intersection I squeezed on my back brake to start slowing down.

But as I squeezed the brake lever, barely anything happens.

I hardly slow down at all.

So I squeeze the brake lever more, and then as hard as I can, until the brake lever can’t go any further, but I’m still not slowing down, and now I’m much closer to speeding into oncoming traffic.

Now luckily, I’ve still got the front brake, however it can be dangerous to try braking from high speed with just the front brake, it could be quite easy to brake too hard and end up flying over the handlebars onto the road.

Anyway, I managed to stop just before I get to the traffic, and I take a quiet moment to pause and reflect on what’s just happened.

And then I remember…

Over the past few months, my back brake has started losing its effectiveness.

In previous rides I’d noticed that I had to squeeze the brake a lot harder to stop and I’d even considered taking the bike in for a service to get the brakes fixed, but it had slipped my mind and on this day I had completely forgotten about it.

I was aware of the brake performance degrading, but I hadn’t kept track of it until it was almost too late.

One of the challenges we have as traders is keeping track of strategy performance and trying to determine when a strategy has degraded enough that it’s time to stop trading ir, or take it in “for a service”.

There are a number of metrics and techniques we can use to monitor strategy performance, and we’ve covered quite a few of them on the podcast already. Today I want to share an approach that can be used to measure not only how much a strategy degrades from in-sample to out-of-sample, but also how the strategy degrades over time, so you can determine when it’s dangerous to keep trading it.

But this technique doesn’t just do that, it can also indicate if a strategy is potentially curve-fit or overoptimized.

Sounds pretty good right?

Let’s listen to Perry Kaufman now as he explains what this technique is and how we can use it.

    Get the Transcript

    Subscribe to Better System Trader and never miss another episode!

    subscribe-with-itunes-button stitcher soundcloud android

    Please support the podcast by giving an honest Rating/Review for the show on iTunes!

    Episode Released:

    9 November 2017

    • facebook
    • linkedin
    • twitter
    • google+
    • pinterest
    • stumbleupon
    131 - Which strategies work in l...
    133 - Building Mean Reversion tr...

    Related Posts

    • 116 – Building entries without curvefitting
    • 005 – Building Trading Strategies – Kevin Davey
    • What do you expect?
    • 075 – Green Eggs and Traders
    • 010 – Matching Strategies with Markets – Perry Kaufman

    Next issue (Mar 2021):

    Get the new "The Empowered Trader" monthly newsletter, direct to your door (yes it's printed!)

    Click here for more info

    Want to build robust trading strategies that actually work in live trading?

    Click for more details

    What pro traders are saying about BST

    "The key to better system trading is information.  As a system trader himself, Andrew has unique capability of asking insightful questions that extract the skills of each guest."

    John Ehlers www.mesasoftware.com

    "Being a trader himself, Andrew drives insightful conversations that uncover gems of practical knowledge that can improve your trading today"

    Kris Longmore robotwealth.net

    "What really makes the BST podcast stand out is that Andrew is also an experienced trader and can therefore provide incomparable quality and depth in any interview. Thank you for endless inspiration."

    Tomas Nesnidal systemsontheroad.com

    "I get some of my best ideas from listening to other market participants and Better System Trader is a great resource of conversations with trading professionals."

    Michael Cook thetradingmasterclass.com

    "Professional, to the point and relevant content. Better System Trader should be followed by anyone with an interest in our field."

    Andreas Clenow followingthetrend.com

    "The Better System Trader podcasts have become an invaluable resource... There's no other podcast around that covers the subject in so much breadth and depth."

    Alan Clement helixtrader.com

    "BetterSystemTrader is an amazing resource of valuable information, Andrew is always able to ask the right question at the right time to deliver the best content possible, a must listen for anybody interested in trading!"

    Andrea Unger skilledacademy.com

    "Knowledgeable and credible guests talk about useful topics in an interesting and engaging discussion. What's not to like?"

    Robert Carver systematicmoney.org

    "Andrew seems to have a knack for getting the world's most famous traders to share valuable insights about how they trade for the benefit of the trading community."

    Andrew Gibbs halifaxonline.co.nz

    "Better System Trader is an invaluable resource that I've gleaned tremendous amounts of information from over the years. I wouldn't be the trader I am today without having found this resource. Please keep up the great work."

    David Bergstrom buildalpha.com

    "Andrew loves traders and draws the most informative and engaging responses out of them."

    Art Collins artcollinstrading.com

    "Listening to BST is a requirement for everyone on our team."

    Bert Mouler profluentcapital.com

    "I really enjoy the wide variety of topics and perspectives shared in the podcasts and with the interviews done by someone with real life trading experience"

    Tim Rea thetradingmasterclass.com

    "If you have been looking for that little extra nugget to transform your trading, you will find it at Better System Trader."

    Laurent Bernut alphasecurecapital.com

    "If I had to listen to one trading podcast only, it would be Better System Trader. I am always learning new things and getting research ideas from Andrew’s guests."

    Cesar Alvarez alvarezquanttrading.com

    "Andrew is a master at asking difficult and relevant questions."

    Perry Kaufman perrykaufman.com

    "Andrew has interviewed some great people and I have picked up some useful new insights. His integrity, trading knowledge, light-hearted attitude, curiosity and enthusiasm shine through and enhance each of his podcasts. Given the quality of the information and the price (free!) any serious trader would have to be a fool to not take advantage. Keep it up my friend."

    Bob Pardo pardocapital.com

    Trading stocks, options, futures and forex involves significant risk of loss and is not suitable for everyone. Past performance is not necessarily indicative of future results.

    © 2015 Better System Trader · Disclaimer & Terms · Privacy Policy · Sponsor