149 – Trading in Probabilities – Scott Hodson

A huge part of algorithmic trading is about stacking the odds in our favour.

Finding statistical edges, and identifying times when probabilities indicate that market conditions are either favourable for a trade or perhaps unfavourable for a trade.

And although probabilities aren’t certainties, they can still be an important guides for traders, so joining us as special guest for this episode is Scott Hodson from Probable Trades.

Some of the things you’ll discover in my chat with Scott are:

  • How to apply probabilities to trading strategies and why looking at cross-sectional probabilities across multiple dimensions of data can potentially enhance trading results,
  • How a Probability Almanac can help track the performance of a trading strategy over certain time periods,
  • Why it can sometimes pay to have a fundamental knowledge of the stocks you’re buying instead of just blindly following trading signals,
  • How analysing risk to reward of past trades can help to determine at what point taking more risk is not beneficial,
  • Why you need to care for your ‘emotional capital, just as much as your ‘trading capital’,
  • A specific type of stop that can reduce the length and size of drawdowns,
  • Shorting strategies as a hedge to smooth out the equity curve and reduce drawdowns,
  • And much more.

''I'm looking for cross-sectional probabilities, probabilities across multiple dimensions of data. If you can get all the probabilities lining up… then you're going to feel pretty good about buying.'' - Scott Hodson Click To Tweet


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''I found that after a certain number of days, if I'm in a trade and it doesn't really go anywhere, I'll just get out.'' - Scott Hodson Click To Tweet

''When you place a trade, you write a check and just pretend it's never going to come back.'' - Scott Hodson Click To Tweet

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