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How I became a Professional trader

Nick Radge 300I was unwittingly introduced to trend following.

A friend worked for a big, well established stock broking firm, and he was looking for a clerk. So it ticked all my boxes; I got to catch a train to work, carry a briefcase, and wear a suit and work in a building. So I started as a clerk straight out of school, working in the commodities section of a stock broking firm. They had a small dealing there that dealt in interest rate and bond futures, here in Australia.

One day I took a stroll around the office and I walked past the equity private client advisors. There was one guy and he had some chart paper in front of him –this is 1985 before computers. He was doing a five and ten day moving average crossover of the share price index futures, which is the same as the S&P 500 futures. I’m looking at this chart and I asked what he was doing.

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Investing for your Retirement

Nick and Trish RadgeDo you have a retirement fund?

For our retirement Trish and I have used a trend following strategy called the Growth Portfolio since 2006 and we trade it within our SMSF (Self Managed Super Fund). The Growth Portfolio accounts for about 85% of the value of our retirement account and we have accumulated a retirement fund valued well over $500,000. The Growth Portfolio trades the Australian market, it’s a long-only trend following strategy that trades about fifty times a year.

Then, outside our super fund we operate about four different strategies, both mean reversion and momentum. These strategies are income orientated and more active. One of the mean reversion systems I trade does about eight hundred trades a year. I don’t think the Australian tax office would be happy to see that happen in my retirement account.

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Amibroker for Building and Testing Trading Systems

design trading systemsCraig Fisher and I work together to develop systems using Amibroker. Craig is the best coder I’ve come across and he is a great mentor to our Trading System Mentor Course students.

So why AmiBroker?

Amibroker is inexpensive, it can do anything you want; it can automate processes, it can do explorations, it can do Monte Carlo simulations. We are able to do position sizing inside AmiBroker. It is able to format our orders so they can be sent straight to the broker platform. We had a corporate client, as an example, who wanted their own trend following strategy built, which we did –they were managing money for clients. One of their requests was that they had their dealer running the system on a day to day basis. Their compliance department wanted to do an audit of the orders the system was generating, in the orders that the dealer was placing for his clients. So AmiBroker enabled us to have a CSV file sent straight into the compliance department’s Dropbox. That way, every time the dealer pushed the order button, they were sent the orders and then I could go back and see what orders the dealer had actually placed for the client.

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How do you know if your trading strategy is no longer working?

dollar signsLet’s say you’ve got a long only trend following system. A long only trend following system is not going to do particularly well in a sideways market or a downwards market. That’s a fact of life. It is designed specifically to profit extensively when the market is trending up. Again, this comes back to why your system works, and it won’t work if the market is going sideways or the market is going down –but that does not mean it’s broken. It’s like buying a Porsche, driving it out to the beach, and then taking it back to the dealership and saying, “Mate, this Porsche doesn’t work on the beach!”, I mean you just wouldn’t do that. It’s not designed to go on the beach, and same with a long only trend following system. It is designed to make money when the market is trending higher –which most stock markets tend to trend over the longer term to the up side.

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How Long is a Trading System valid for?

Inspirational Trading QuotesQ. When you go live with a system, how long do you actually expect it to last for and continue to give you a trading edge. Do you anticipate that it may only be good for a certain amount of time, whether that’s a couple years? Or, if it’s truly robust, should it continue to work for maybe ten or more years?

A. If you have a truly robust system it should continue to work extensively. Now, that’s not to say that you can’t learn more things about the market, you can’t learn more things about your system, you can’t learn more things about yourself, and therefore you can make adjustments to that system. I think every strategy is a work in progress. We rarely make adjustments but we certainly have made adjustments in the past to our systems because we have learned new things or technology has changed, which has enabled us to test our systems in different ways. A very good example of that is I can now strip out resource stocks from industrial stocks, as an example. I can test those different segments of the market because they’re very, very, different kinds of stocks.

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