Interview, Fireside Chat
Running 55+ Systematic Trading Strategies Simultaneously · Laurens Bensdorp
- Blending multiple return streams across four or five systems creates a robust equity curve capable of recovering from drawdowns faster and sustaining success even when specific systems underperform or markets enter simultaneous decline periods affecting stocks, gold, and bonds.
- Strategies must be designed to handle market evolution and unseen moves, acknowledging that live trading drawdowns will likely be at least double those observed in backtesting and that drawdown expectations of up to 20% may be exceeded during novel market environments.
- Short-selling systems are planned to offset long-side losses caused by the stock market's historical positive bias, typically operating with shorter durations than long-term strategies, while specific strategies may be maintained for rare events like a 1987-style crash despite incurring small losses in normal conditions.
- Portfolio construction involves 55 automated systems with varying lookback periods to spread risk and cover diverse market structures, avoiding manual management to prevent human error while preventing over-optimization in strategies lacking significant losing trade tails.
- Capital allocation should avoid basing decisions solely on best backtested performance to prevent recency bias, and developers are expected to endure drawdowns more effectively than buyers by understanding system pros, cons, and expected behaviors.
- Future plans include developing new strategies focused on the unexpected and corporate risk reduction, with a third book regarding IRA accounts scheduled for publication in the first quarter of next year.
- Traders vary in their ability to build a simple base of systems, requiring between one month and significantly longer timeframes, while mean reversion strategies on commodities are expected to utilize trend following for specific instruments and allow for periods of "pain" during reversion.
- Continuous 100% awareness that the future differs from the past is deemed essential, as systems developed from the ground up enable traders to understand why losses occur, reducing the likelihood of suspending a system during misunderstandings of simulated drawdowns.