Adrian Reid interviews three trading coaches (Nathan, Carson, Adam) about diversification in systematic trading. Key points: start with a single system then expand as market regimes vary; use testing skills (EST) to add mean-reversion or trend systems across different timeframes and markets to smooth equity curves; trading across multiple exchanges (US, AU, CA) or asset classes (stocks, crypto, ETFs, short/seasonal systems) reduces correlation and can improve portfolio performance; layering small, complementary systems can pick up slack during specific market crises; one coach (Adam) reports daily execution takes about 15 minutes.
Questions this video answers
July 15, 2024
15 minutes maximum
Chapters
These are my, these are my coaches and I've worked with all of these guys for, for several years now and they're all amazing traders. And diversification is one of the big steps that everyone makes in their trading journey. So, guys, I'd like to, I'd like to hear from you what one tip or thought you've got that help that maybe would help someone get through the, I guess the challenge that diversification is hard or it's a lot of work or it's a bit scary maybe. And Nathan, let's start with you.
As.
As you go on, perhaps you will start with a single system, but you will notice different market conditions and trends. And EST gives you the skills and the ability to test those thoughts and theories to go into mean reversion if the market is pulling back. And it's really not that scary at all once you have the skills and the knowledge of how to do it properly and you can really build some solid confidence in knowing you are getting more diversified over different time frames, different styles of trading markets. And it's a, it's a rolling ball that becomes easier and easier as you go on. And it's, it's enjoyable, it's really good and.
Really, really lets you build confidence and smooth your equity curve.
Yeah. Awesome. Thank you so much. Hey, Carson, you're, because you're in North America, keen to hear your thoughts because one of the challenges that most traders or many traders have is the nervousness about going offshore out of their home market. And you know, for instance, people in the US will tend to trade the US stocks and people in Australia will tend to trade Australian stocks and people in Canada will trade Canadian stocks. Are your thoughts on that? What guidance would you give people?
I mean, I think it's perfectly acceptable to start with your market and get comfortable and kind of get your feet wet. But, you know, as you, as you start to learn more and you start to maybe develop more systems, it's extremely helpful in terms of like correlation and smoothing out your account equity by going into different markets. Even if, say, you know, maybe there's one particular trading style that's, that resonates with you, maybe you're, you know, mostly a trend follower, mostly mean reversion type of trader. Even if you just stay within kind of like what you're comfortable with, but going to multiple different markets, it can greatly help your portfolio in terms of just smoothing the equity curve.
Yeah, so if you, if I was a trend follower in Australia and I was comfortable with trend following, so therefore I did trend following in the US and trend following Canada. What you're saying is that would make a huge difference.
Absolutely, yeah. And I'll say when I first started, you know, trading systematically this way, I didn't even start in the us I started in Australia. And a lot of people are afraid to do that. You know, it's, it's really not that big of a deal and it's, it's been great for me. So.
Brilliant. Yeah, I'm glad, I'm glad to hear you say that, that it's, it's not that big of a deal because largely a stock is a stock is a stock. It doesn't matter what exchange it trades on. I mean, there's some nuance, but the nuance is pretty minor. And particularly when we trade systematically, you know, the system is doing the work. We don't have to worry about what does this company do and what are their fundamentals like and all that because our decisions are all price, volume based. You know, it's a, it's a technical system. Adam, I want your perspective on trading multiple asset classes because, you know, we start when you first came to me, we started talking about stocks and we crip. We quickly moved over to crypto and we had a little bit of this the other day when we talked. What would you say to people about diversification across, say, stocks and crypto or other asset classes?
I think it's quite key, quite critical. You know, the stock market at the moment's been fairly sideways, but you know, crypto is doing heavy lifting for us this year. It's doing quite well and some of the systems are outperforming. So, you know, there's differences styles and systems and in my head, when you ask me these questions, I was going to come back with something that Carson said about different markets. But another thing that you need to consider is that you're going to have systems that are going to be heavy hitters and you might be, you know, significantly biased towards trend following or mean reversion that can be heavy hitters. But diversification can be found in all kinds of different ways and very small edges can add significant benefit to your portfolio. And talking about, you know, short systems or ETF systems or, or seasonality type systems, I've, I've actually been able to really layer additional system on top of my core heavy lifters that can pick up slack. And, and the key is there is you're looking for particular market conditions. They may be profitable in 2008, 2009, they might be profitable in the COVID crash, but don't give back during other periods. So if you combine that layering and then you combine different market types. Different market.
Different markets, you know, you can really set yourself up for success.
Yeah, brilliant. Brilliant. Now, it all sounds very complicated and like, I know I do this, but. Adam, how long does your trading execution take you each day?
15 minutes maximum.
Nice.
I think I just did my crypto stuff when this started in five minutes. I just took all the. I've got a little spreadsheet which I extract out of the report that we get and I put into my trade tracking sheet and it's all done. You know, tend to avoid all the noise and nonsense on social media and. And I don't even know what I'm holding most days.
Yeah, well, the system does and your spreadsheets do, but consciously you don't need to worry about that.
No, no, I wouldn't be looking at trading view or charts on my phone 10, 15 times a day like I used to previously.
Thank God. All right, awesome, guys, I want to thank you so much for everything you do for the inline stock trading community. You're an amazing, amazing support for our students and thank you for turning up today to. To share your thoughts. So really, really appreciate.
