Systematic trading and Trend Following legend, Perry Kaufman, joins us on the show today to discuss the importance of being comfortable with risk, the benefits of continuously ranking & evaluating markets, the importance of ‘fat tails’ in Trend Following systems, why you might want to use equal risk with every trade, how to avoid being over-correlated, trading single stocks vs indices, opinions on profit targets, and why he generally prefers long trades vs short trades.

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Episode TimeStamps:

00:00 – Intro

01:25 – Weekly review of performance

06:08 – Niels: How does the content in your book, Trading Systems, inform your decisions when building a system, and what do they mean to you?

26:44 – Niels: How do you avoid overfitting your system to accommodate markets that may not perform well in the future?

29:28 – Niels: How do you avoid being over-correlated?

30:17 – Niels: How does your ranking system work when adding or removing markets from your trading universe?

44:19 – Niels: How do you feel about profit targets?

53:06 – Niels: Why do you believe Trend Following strategies will always be successful?

57:00 – Niels: Have you found in your research that long-sided trades tend work better than short trades, and if so, have any hypothesis as to why that is?

01:04:33 – Moritz: What are your thoughts on trading single stocks vs trading the indices?

01:09:54 – Niels question for Moritz: How have you incorporated yourself & Perry’s work on Volatility Targeting into your trading?

01:21:29 – Niels: Are there any new discoveries that you’ve found in recent years that enhance Trend Following strategies, or have we most likely found everything by now?

01:24:45 – Benchmark performance update

01:26:32 – Niels: Which book, that you didn’t write, would you recommend to our listeners?

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