034 - Interview with Jay Kaeppel - Better System Trader

Jay Kaeppel has over 25 years experience in the financial markets.

He has worked as the Head Trader for a CTA and published a number of popular trading books on Futures, Options and Stock Market Seasonality.

He also spent a number of years writing a weekly column titled “Kaeppel’s Corner” and publishes on his blog “Jay On The Markets”.

He is now Portfolio Manager for Alpha Investment Management, offering strategies such as the ‘Alpha Multi-Income Strategy’ to investors.

In this episode we discuss a number of seasonal tendencies, how they can be integrated into a trading model, the applications of the Known Trend Index and the reasons why most traders fail.

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Topics discussed

The Santa Claus rally – what it is and how to trade it
How to use seasonality to complement other models
Seasonality tendencies around holidays
Monthly seasonal tendencies and a simple monthly seasonal system that vastly outperforms stock index returns
Boiling down the trading process into 4 simple words
Using leveraged ETFs for seasonality trades
The worst performing month of the year (it’s not October)
Converting seasonal tendencies into a trading model
A simple seasonal sector system that takes only 6 trades per year
Diversification vs Specialisation and the impact it can have on trading and drawdowns
Are seasonal trading strategies just data mining?
The Known Trends Index (KTI) and how it can be used in trading
Why most traders fail

Resources mentioned in this episode

Jay can be followed on his website jayonthemarkets.com
The investment management website mentioned is alphaim.net
Recommended books:

The Alpha Multi-income strategy

https://youtu.be/21bWUGDiJKE

Quotes

To find a unique edge in the market it makes sense to look where no one else is looking

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I’m a proud graduate of the school of whatever works

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One of the most consistent trends you’re going to find is monthly seasonal days of the month

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Bad stuff happens, it just does

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There is no one best way to trade

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Top tips from this episode

Here are few of my favourite takeaways from the chat with Jay this week:

Seasonality – Jay mentioned a number of seasonal tendencies along with methods to exploit them, either by including them in existing models, trading them individually or combining them into what he calls the Known Trend Index, which his research has shown increased odds of a favourable move when confluence occurs. Some of the returns he mentioned could also justify further research if that type of strategy interests you, but even if you’re not interested in trading seasonals directly it may be worthwhile keeping them in mind when developing your own trading models.