CNBC Interview video - best forex trading system for beginners

CNBC Interview video ~ best forex trading system for beginners

Here is the link to my interview on why quantitative models are losing money of late:
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My interview stop loss and the Principle of Latest Information - forex trading strategies work

My interview stop loss and the Principle of Latest Information ~ forex trading strategies work

You can find an interview of me in the July 2009 issue of Technical Analysis of Stocks & Commodities magazine. I mentioned in that interview and also in my book that I believe stop loss should only be applied to momentum strategies but not to mean-reverting strategies. I explained my reasoning better in my book than in the interview, and so I will paraphrase the explanation here.

In algorithmic trading, it is reasonable and intuitive that we should always make use of the latest information in determining whether we should enter into a position, whether that information is price, news, or some analysis. Lets call this the Principle of Latest Information. (If someone can think of a better or sexier name, let me know!)

So lets say we have a stock model based on price momentum, and we entered into a long position based on a recent positive return on price. A few minutes later, the price went down instead of up, causing a big loss on our position. If we now ran this momentum model again, very likely it would tell us to short the stock instead because of the recent negative return on price. If we did that, we would be exiting the previously long position and became flat. This is in effect a stop loss, and it follows strictly from adhering to our model and our Principle of Latest Information.

In contrast, suppose we now have a stock model based on mean-reversion, and we entered into a long position based on a recent drop in price. A few minutes later, the price went down further instead of up, again causing a big loss on our position. If we now ran this mean-reversion model again, it would definitely tell us to buy the stock again because of the ever cheaper price. The model would not ask you to exit this position and take a loss. Hence, adhering to the model and the Principle of Latest Information will not lead to a stop loss for a mean-reverting model.

(Now, if we hold this losing long position long enough, the model will incorporate new historical prices into determining its long or short signals as it retrain itself, as the Principle of Latest Information says it should! At that time, it may indeed recommend that we exit the previously held long position at a loss. But this adjustment takes place at a much longer time scale, and therefore cannot really be considered a stop-loss in its usual sense.)

More generally, I find that at every turn, and not only in the realm of stock trading, applying the Principle of Latest Information always help me to be disciplined and not be afraid to enter into new positions, take loss or endure a drawdown as the case may be.
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Interview on backtesting - forex trading strategies with bollinger bands

Interview on backtesting ~ forex trading strategies with bollinger bands

I have given a 2-part interview (here and here) on the various nuances of backtesting on tradingmarkets.com. Most of the ideas have been covered in my book, but it does serve as a summary of what I consider to be the most important issues.

For those of you who are interested, I may be giving a workshop on general techniques in backtesting in London as well, in addition to my pairs trading workshop. Additional details will be available on epchan.com at a later date.
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CNBC interview - best forex trading system 2014

CNBC interview ~ best forex trading system 2014

Folks, I will be appearing on CNBC tomorrow (Tue, August 14) for a live interview about quantitative trading with Maria Bartiromo. The segment will be aired around 3:20 pm ET.
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