Nick Radge has been trading since 1985. He started on the administration side of a stockbroking firm at age 18, discovered trend following by looking over a colleague’s shoulder at a simple moving average crossover on graph paper, and has spent the decades since refining and teaching systematic approaches to markets.
He was a floor trader at the Sydney Futures Exchange, worked for international banks in London, Singapore, and Sydney, and is the author of Unholy Grails – a book that tests multiple trend following approaches systematically across real market data. In this episode, he covers system design, validation, performance measurement, survivorship bias, and the one factor that most determines whether a trader ultimately succeeds.
Watch the full episode below, then read on for the complete breakdown.
Eight Ways to Capture a Trend – and Why Simple Works
Nick’s book Unholy Grails tested eight distinct methods for capturing trends, all built around straightforward concepts. Channel breakouts – buying when price makes a new 100-day high. The 20% Flipper – buying a stock after it rises 20% from a low, exiting on a 20% reversal. New all-time highs as entry signals. Bollinger Bands as both entry and exit mechanisms.
“No way to ride a trend is necessarily better than any other. At the end of the day, hopping on a trend doesn’t have to be that difficult or complex.”
The strategy he continues to use today was developed in the 1990s to trade futures, and is now applied to equities using the exact same logic: a Bollinger Band entry with an adaptive trailing stop. The exit mechanism rarely triggers on the Bollinger Band signal itself – roughly 90% of exits come from the trailing stop, which operates both at the individual stock level and at a broader market level.
Trend Following Is Not Time Intensive
One of the most persistent myths Nick addresses is that trend following requires significant daily attention. His response is direct.
“It takes me less than five minutes a day. I put my account balance into my software, push the button, it generates buy and sell signals and position sizing. It’s not time intensive – that’s absolute garbage. What’s time intensive is reading annual reports, visiting company headquarters, speaking to CFOs. That’s not what we do.”
He acknowledges it took 25 years to build the system to that point. The simplicity is the output of experience, not a shortcut. But once the framework is built, the daily operation is minimal.
Removing Survivorship Bias From Backtests
Nick is specific about his validation process. He uses Amibroker for portfolio testing and Norgate for historical data, and the reason for the data choice matters: Norgate maintains historical constituent lists, which allows testing against the actual composition of an index at each point in time.
This removes survivorship bias. If you test a strategy on today’s S&P 500 constituents using data going back to 1985, you are only testing on stocks that survived – stocks that went bankrupt, merged, or were delisted are excluded. That produces optimistically biased results.
“We have to include stocks like OneTel, HIH – stocks that don’t exist anymore but were major index constituents at the time. The technology and databases available now enable us to do that.”
What to Look for in Strategy Performance
Nick’s performance criteria for a strategy are specific. He looks for returns in excess of 15% annually combined with drawdowns below 20%. Above 20% drawdown, he finds that most real-money traders cannot maintain discipline through the experience – even when they thought they could handle it on paper.
He also tracks win rate (above 45% as a minimum), profit factor, and equity curve smoothness. His reasoning on win rate: below 45%, the frequency of losing trades produces discomfort that most traders resolve by abandoning the strategy before the profitable periods arrive. The turtles operated at very low win rates and very high profit factors – but they were psychologically exceptional. Most traders are not.
The broader point: find a strategy you are comfortable with and will actually apply. A slightly less optimal strategy that you execute consistently will outperform a theoretically superior strategy that you trade inconsistently.
Understanding Why Your Strategy Makes Money
Nick’s advice on becoming comfortable with a strategy goes deeper than paper testing. You need to understand why the strategy makes money and where and why it will go into drawdown.
“Once you accept that drawdown is part and parcel of the journey, then you’re at a better level to be able to trade it. Then it’s just a matter of experiencing it.”
He references the Lake Wobegon effect – the tendency for people to overestimate their own capabilities. A trader who thinks they can handle a 20% drawdown on paper will typically find that in practice they can handle about half that. The difference between estimated tolerance and actual tolerance is consistent and significant.
His suggestion for traders who are uncertain: go in smaller. Do not start with full position sizes. Experience the strategy – including the drawdowns – at a scale where the emotional stakes are manageable. Then build up as confidence increases.
Bear Markets and the Key Decision
One of the significant advantages of a systematic trend following approach is the built-in mechanism for handling bear markets. When stocks fall through their trend thresholds, the system stops generating buy signals and existing positions get stopped out as their trailing stops are hit.
Nick discusses the choice traders face: whether to have an explicit market filter that forces the system into cash during broad downtrends, or to rely on individual stock stops. Both approaches work. The market filter is more aggressive in moving to cash during corrections; relying on individual stops is slower but gives the system more room to stay in strong stocks that are resisting a broader decline.
The adaptive trailing stop he uses operates on two levels for precisely this reason – it accounts for both individual stock behavior and the broader market environment simultaneously.
The Difference Between Successful Traders and Everyone Else
Nick is direct on this question. The difference is not system quality. It is the ability to apply a strategy consistently over the long term.
“Professional traders who have built 10, 20, 30, 40-year track records do so not because their technique is significantly better than anyone else’s. It’s because they apply the approach over the longer term.”
Most people fail for behavioral reasons: they change their system after a drawdown, they jump between approaches after a losing period, or they go in too hard and fast at the beginning. The ones who succeed are willing to experience the difficult periods within a framework they trust and keep applying the rules regardless of short-term outcomes.
This is why understanding why the strategy makes money is foundational. If you know why it works, you know why temporary underperformance is expected and temporary. Without that understanding, every drawdown feels like evidence the system is broken.
Get the show notes & transcript
Related episodes
- Entries, Exits and Trend Following with Larry Tentarelli
- Turtle Trader Jerry Parker on 30+ Years of Trading Experience
- Brent Penfold on Trading Principles, Money Management and Risk of Ruin
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