Laurens Bensdorp
@laurensbensdorp
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Stock trader, Investor, author of 2 bestsellers. FREE trading systems and resources to help you become a better trader:
Joined November 2010
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Here's a thread of how I think about systems. step by step.
See the equity curve and the statistics below on a very simple system:
CAGR: 24,4% since 1995
What are the rules?
Read on the next page;
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Thread 1/8
The S&P500 is down 23 % YTD.
Inflation goes through the roof.
This is a combo of 5 systems simulation:
- UP 5% YTD
- 27% CAGR and max DD 11.7% since 2003
- Sharpe ratio of 1.95
How to do this? Combine 5 non-correlated systems.
Read this thread to understand how.
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Portugal it will be!
The unknown, but already knowing that it will be absolutely great!
The privilege of a trader to choose where to live!
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Trading in bearmarkets and times of crisis can be hard and stressfull if you do not know HOW to do it.
Stay tuned because within 7 days I will provide a complete video course FREE of charge with specific strategies on how to benefit during inflationary times and bearmarkets.
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This is for YOU if you have not yet read my books or want to know more about systematic, automated trading.
I have a FREE course for you:
You will learn ALL entry and exit rules of 10 systems
and position sizing and step up your game
Click below:
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Thread 1 of 4
Bonds -20% YTD
Stocks: - 20% to -30% YTD
Bitcoin -50%,
Also gold is down
Do you have a plan to profit during the war, inflation, and depression?
What if you’re looking at your account equity curve
over the last 20 years and see a 30% CAGR?
And YTD +20%
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Today, my dear friend and trading legend
@basso_tom
has launched his new book "The All Weather Trader"
I had the privilege to pre-read the book a few months ago and you do want to read each page of this!
Buy his book!
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Thread 1/4
In bear markets, long stock systems lose money Period.
What do you need?
Non-correlated systems offset the losses of the long systems
How?
Trade:
1 Mean reversion short on stocks
2 Trend following short SPY
3 Non correlated instuments Take a look:
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Favorite short-selling system:
1. Market is below 7-day exp MA
2. Look for overbought stocks
3. No bio, no energy
4. enter the next day
5. large stop loss
6. Reverts to mean or get out after 5 days
See how it makes money when you NEED it.
DON'T worry about DD or low Sharpe.
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Common issues for systematic traders:
- Over-optimization
- Beliefs that simulation predicts 100% of the future
- Focus too much on components of a single system and expect it to make money in all market types.
Alternative:
Trade a combo of simple, robust, multiple systems
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Here's a video of a complete S&P 500 Trend system which simulation shows a 14% annual return since 1995 with a lot less risk. All rules revealed. A LOT more about systems on Nov 5 and 6 at the live event in Scottsdale with my friend
@basso_tom
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One of the most overlooked in trading system development is: Objectives
The clearer you are what you want to achieve with your system, the easier the development process will be.
At Trading Mastery School we focus a lot on this.
Read more here:
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The most annoying (yet BY FAR the most important) questions to anybody who wants to be successful in trading are:
1. What are your beliefs about the market
2. What is your objective
3. What is your risk tolerance
The actual buy and sell decisions are the easy part.
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The Rules:
I like things simple. Simple is more robust than having too many rules.
Entries:
- The close of the NQ100 is higher than 200 days ago
- Buy market on open the 10 stocks with the highest 200-day percentile return
Exits:
- Stop loss 25%
- Trailing stop 25%
If one of
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This long-only system is still UP by more than 10% for the year.
>15% CAGR since 1975.
Very unusual for long systems since the market has been down so much.
The key is in the different exits.
via
@YouTube
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Enjoying summer view on my balcony in Cascais, Portugal.
Stunning!
To me, it is ALL about the view!
It gives me peace of mind.
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If you look for excitement, trading is NOT the place to be. Good trading should be boring. For excitement, go look elsewhere, go skiing, skydiving or whatever excites you. But if your winning periods in trading excite you too much, you will NOT be able to handle the drawdowns.
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My view on statistics like Sharpe, Mar etc for backtesting.
It is JUST a representation of the past
Looking for "optimum" and best Sharpe is mostly useless.
The future will be different.
A better way:
UNDERSTAND when your systems are supposed to make money and when not.
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Inconsistent execution of a great trading system will lead to ruin.
Trading a mediocre system with 100% consistency year after year can create enormous wealth.
Trade what suits you and within your risk tolerance.
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Trend following vs mean reversion:
MR: small gains, high win% and preferable large trade frequency. The fat tails are generally against you.
TF: Fat tails are your edge. Low win% but the few winners pay for all the losers.
Combine them and your edge increases exponentially.
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The classical Asset Allocation model is broken:
Equity, bonds and gold down.
What to do:
1. Trade long and short
2. Diversify in style: mean reversion and trend following
3. Trade diversified asset classes long and short
4. No predicting. Follow price action
Stop predicting the markets.
YTD Performance:
- Winners: Energies
- Best currencies: Russia, Brazil, and USD
- Grains: Almost flat YTD
- Losers: Precious metals, Bonds, Equity indices, and
crypto.
Forget about classic Asset Allocation.
Follow price action.
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Just finished 2 great days with my friend Tom Basso hosting the Blueprint for Trading success.
Such a great group of traders from all over the world.
Great content, great food, lots of transformations for the attendees, and great questions!
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Here are some links to free systems and info that can help you become a better trader.
I will be adding free content more frequently.
Share if you think it is useful to other traders.
Laurens Bensdorp - Trading Mastery School | Linktree
Trading Mastery School - Free systems
linktr.ee
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Good bye Miami! Had a wonderful time hosting a seminar with
@basso_tom
to a great group of 12 committed traders. So much fun and! Next destination: Brazil!
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Excerpt from my last book. STOP focussing for optimal (and mostly too optimized) simulated performance. They will ALL get drawdown at least double the backtest. Instead; focus on simple systems and then multiply simplicity by adding more diversified, non correlating systems.
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Question:
This is a mean reversion system. Sound, developed very robost and not optimized.
seeing the last 12 month performance, would you:
1. suspend
2. change parameters
3. wait untill it performs again
4. continue to trade
5. anything else?
Answer and let me know WHY!
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Systematic Trading: Art, or science?
It is the art to apply science in the correct way.
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Intro to my last book from 2020:
Although my intention was not to predict, remember:
- Markets do not go up forever
- You can make money in bear markets
- Be prepared for a different era.
- be comfortable whether the market goes up or down.
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Many people now predict a "valentine crash".
All predictors eventually will get it right and then "mister X" says: I predicted" the crash!
They forget how often their predictions were wrong.
Trend following long/short with a stop order will get you in all big movements.
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34.9% of the people said they can handle drawdowns of 30%
Some can, but MANY understimate their pain tolerance when losing money
Imagine being down 30% of 1 MM dollars.
Now you are at 700k
Now you need to MAKE 42.9% to break even.
Think again.
Be careful
Respect risk
Drawdowns are tough and annoying but as a trader you need to live with them
They are also necessary since you risk money
Without risk there is no gain. Period.
Visualize for yourself where your pain tolerance is
Be conservative
What % of drawdown can you handle?
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Good morning Miami! Time for another great day! Meeting and dinner later with
@basso_tom
and preparing things for a great seminar tomorrow!
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Benefits of Trading multiple systems simultaneously: 1. higher risk adjusted return 2. lower system volatility 3. less corporate risk 4. less impact of temporary non performance of a system 5. scalability of systems.
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Required psychological qualities for any systematic trader:
Daily, weekly, and monthly P&L should not affect your mental state at all.
Treat it like a business where you also have each day revenue and expenses, profits and losses.
This is KEY!
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Trading can be hard and challenging.
Having each second direct feedback of your performance seems nice but it can be a big limiting factor.
I like to detach from this immediate feedback.
The biggest reward: you get to choose where and how to live! You can define the rules!
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Would you like to profit in a bear market AND profit from inflation;
This FREE VIDEO COURSE is for you:
- 3 systems for bearmarkets
- 1 system to profit from inflation
Bonus:
- 1 bitcoin system, long/short; UP 50% in 2022 while bitcoin was down 70%
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My thoughts on crypto:
If you made a Sh*t load of money, great!
Crypto brokers are dangerous. I don't place a dime with them
Trade the BTC futures / ETFs long AND short
Be careful. 100% CAGR is not typical
I might be wrong, but not about the risk you are taking
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Often I get the question: Should I change my system, because it does not perform
Often this is a recency bias
If: not curve fitted/over optimized, there is NO reason to change it.
Just understand its weaknesses.
Don’t try to fix if it is not broken.
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How to trade panic and crisis-proof:
- Equity:
Trend following long and short
Mean reversion long and short
- Futures and currencies:
Mainly Trend but some mean reversion, both EOD and intraday.
I.e. diversification, non-correlation, long and short.
Very profitable today.
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If something is too good to be true, it always is.
This also goes for trading systems
Today I created a new system. Sound beliefs, barely optimized, and few parameters.
Extreme high CAGR, no margin but it looks too good.
Way too good.
ALWAYS second-guess your simulation
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Nice!
Both my books nr1 and 2 are on the bestsellers list on amazon in their category.
If you look for systematic trading then this is a great place to start.
Also, to get help click the link below for courses and trading systems that I offer for free.
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Stop predicting the markets.
YTD Performance:
- Winners: Energies
- Best currencies: Russia, Brazil, and USD
- Grains: Almost flat YTD
- Losers: Precious metals, Bonds, Equity indices, and
crypto.
Forget about classic Asset Allocation.
Follow price action.
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You have a backtest, 25 years of history:
Test 1: 100 trades, CAGR 20% max DD 20%
Test 2: 101 trades, CAGR 25% max DD 20%
This is a simplified example where MOST traders choose test 2 for their system
Test 2 just had ONE fat tail in the simulation
Is that replicable?
Nahhh
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Perfect tools while traveling for a trader.
LG Gram 17”light weight and plug-in monitor of 16”
Combined about 3,5 kg.
Fast, stable, 2 screens, 32 gigs of memory.
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We are almost done creating the bear market, crisis, and inflation hedge, FREE course. Stay tuned in the next 24 hours.
As a bonus, we also created a long AND short bitcoin system.
There will be no charge. All rules revealed.
Trading in bearmarkets and times of crisis can be hard and stressfull if you do not know HOW to do it.
Stay tuned because within 7 days I will provide a complete video course FREE of charge with specific strategies on how to benefit during inflationary times and bearmarkets.
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I can't stress enough the importance of high-quality data.
See in the two charts the price of sugar.
The difference is huge (on Feb. 28th a -10% drop vs -1%) and just because one data provider does not back adjust the data.
High-quality data is crucial for simulations.
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Interesting combo of one Long Trend following system, with 2 rules and an SP100 short-selling system.
Volatile, but very robust!
I will hold a webinar on this combo beginning of February.
Stay tuned!
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Chapter 10 of my last book perfectly shows the limitation of any backtest due to a limited sample size.
The future will be different.
You need to have clarity about how your systems will do in other market types than your sample.
You need to have systems for all market types.
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As a mentor for systematic traders, my main job is to make sure that students do the following:
- Understand how to turn objectives into strategies
- Help them to create multiple systems that, combined, have a chance to be profitable in each market type, i.e. an all-weather
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Always nice to have a physical copy of Automated Stock Trading Systems in a language that I do NOT understand a word! Korean! Very cool!
Same goes for Japanese and Vietnamese.
At least the Spanish version I can read.
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Patience is one of the most important habits for being a good trader. Patience in the system developing process so you will not rush things. Patience in the execution process; A trend following trader will spend more than 85% of the time in a a drawdown.
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Since 2012 net return of the US T bond is now negative.
This year bonds minus 16%.
Stocks are down 16% YTD
Gold and BTC down as well.
The classical asset allocation model is broken.
Focus on: Trading multiple assets, multiple styles, long and short.
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Some long systems are profitable this year.
See this one:
This is no recommendation but just a showcase of a system, because of its different exits, that has behaved well.
In general: When the market drops, I expect all my long equity systems to lose.
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This video from Eric Crittenden from Standpoint is so spot on.
The fund has done amazing since its inception, with About 12% CAGR and max DD 9%. Very low vola. It has beaten on a risk-adjusted return 99% of the mutual funds.
It sailed through the COVID crash and was positive
2023 Year in Review - Standpoint CIO, Eric Crittenden, walks through the performance of Standpoint's all-weather strategy.
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Excerpt from my last book:
With backtesting many people look at the CAGR and think that is what they will get.
However, returns come with a lot of variability.
Rolling returns give you a great insight into:
- variability of returns
- impact of starting date of your system
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A simple rotation system on S&P 500 stocks, similar to the one in my first book, The 30-Minute Stock Trader.
This one is a bit higher vola and therefore also higher DD.
So, close to 22% CAGR but a nasty drawdown of 65%
How do we deal with this?
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@prrobbins
Lack confidence in their strategy.
Often because they don't know key aspects of their strategy; When is it supposed to make money, when is it supposed to lose money. Also, a larger-than-expected losing streak is perceived as bad/broken, instead of accepting variability.
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As a systematic trader it is my job to not have any opinion of what the markets will do, neither make any kind of prediction.
It is my job to let my system execute the trades and rely on the long term positive expectancy of my system.
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The importance of NOT following the news but following price action is crucial to any systematic trader.
See here a chart of natural gas;
Although the media were wrtiting that NG prices were going to the moon, the reality is:
Since its peak 6 months ago, NG dropped 72%.
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Honored to receive a signed copy of the soon to be released book about my friend
@basso_tom
. Make sure to buy and read!
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Being rich is not about the amount of money or "toys" you have. It is about being happy, healthy, surrounded with love while your passive income pays for your expenses.
Net worth is useless when asset prices rise, so focus on net wealth that maintains you financially free.
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The catastrophe hedge:
I wrote about it in my book in 2019.
Since then we have had the covid crash and this year the sp500 is down close to 10% and many stocks are down more.
It is a very important component to protect you when the markets fall.
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Good morning from Scottsdale, Arizona. What a beautiful spot to host tomorrow with
@basso_tom
our 2 day seminar to a group of committed traders. The sunrise here in the desert is stunning!
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Human beings have a tendency to make up stories, invent them, thinking that these stories are true!
Remember it is just made up. It is a perception.
More importantly you can change the perception.
Read this book.
Eye opening and for every trader (and non trader) very helpful
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Trading can be a lonely job. Therefor make sure you create a perfect work environment for yourself.
To me that means:
- private office away from home
- absolute tranquility
- breathtaking view
- A big white board of 2x2 meters to map out new new strategies
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For people investing in crypto: don’t take it personally.
It is just LIKE ANY OTHER MARKET: Bull, bear and sideways markets occur. Just the volatility and speed has been higher.
Trade with the trend and apply responsable risk management.
Buying the dip works only in uptrends!
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Brandnew 2-day seminar "Blueprint for Trading Success" with Tom Basso and me.
- 5 non-correlated systems, tested 27% CAGR
- All buy and sell rules Tom uses since his Trendstat days
- Dinner at Prime at the Bellagio, on us!
- Max. 15 spots, only 4 left
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Mean reversion:
The fat tails most likely move against you
ALWAYS use stops, manage risk
--> Fat tails are your risk
Trend following:
Designed to capture the big fat tails. Cut losses and trail profits. Prepare to give back part of the profit.
--> Fat tails are your edge
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Facts vs opinion
As a trader it always is key to separate facts vs opinions
Many experts write about the markets as if they know the truth
Nobody does
Draw your own conclusions but base things on facts
Price action is a fact
Base your decisons on price action, not emotions
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Chapter 8 of my book Automated Stock Trading Systems
One of reasons I trade multiple systems is because every system can go through a period of randomly non performance
Of you have multiple return streams the negative impact of one non performing system is not that impactful.
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Trend following vs Mean reversion:
With mean reversion strategies, generally, the unexpected moves are your enemy.
With Trend following the unexpected big moves are - when designed correctly - your friend.
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Trading is like top sport.
The best top sporters have 100% commitment, confidence, and willingness to continue to improve and be the best.
Day after day, declining to give up.
It is a mental state of a winner, not accepting anything less.
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SELF RESPONSIBILITY:
When we are facing problems/market losses, often our initial reaction is: I blame...
However, WE are always responsible for what happens in our life
Instead of blame, ask how yourself:
How did I create this?
This will make YOU in charge to solve it.
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Consistency and discipline are key to success.
Not only in trading but in ANY business.
Focus on this.
If you lack any of them, WORK on it.
If you have both, be aware that you have a real edge.
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@JoachimMo1985
@basso_tom
A large list!
I always make sure before I start to develop is to ask myself:
In what markets and under what market circumstances is it supposed to perform.
When is it supposed to:
- Make money
- likely lose money
That should give more clarity in asking the right questions.
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Irony: nobody wants to trade a losing system.
But EVERYBODY wants a hedge.
A hedge is an insurance for which you pay a price. A price to be protected when shit hits the fan.
It is up to YOU to decide how much you want to be hedged. The more protection the higher the price!
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"Buying the dip" is the term I most heard over the last few years. Does it work?
Yes, buying the dip works,
But...only when the dip is in an uptrend
When an instrument is clearly in a downtrend, it is not a dip and you should stay away from buying it.
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On my (soon) 50th birthday I will take some time to reflect on the past, though 80% will be focussed on enjoying "the now" and projecting a bright future.
Happiness in life is simple, but we, human beings, have a tendency to complicate things.
Let's aim for joy and serenity!
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Mean reversion strategies:
Low expectancy, high win rate, high frequency.
If your simulation has very high Sharpe and MAR: Be careful!
Could be just luck or too much optimized. Watch out for too many fat tail wins
Be critical for any backtest that looks too good to be true.
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Check out our newly redesigned website which now has filmed interviews and goes deeper into what we do but also how we got started.
From losing consistently to trading more than 50 strategies on autopilot and with zero stress!
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Perfection doesn't exist.
So, accept an imperfect world, accept an imperfect mental state, but...accept it! Work on it to improve it.
Embrace the imperfectness.
An imperfect but profitable trading system executed perfectly can make you millions.
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Have we seen the bottom of the bear market?
Will there be high inflation?
Will energies continue to rise?
Is the 42 year bull market of bonds over?
I don’t know!
Neither do I care.
Price action tells me wether to be long or short and I act accordingly. Just follow the trend.
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52-week return of a diverse selection of asset classes;
What does this tell you?
It is not "the stock market" or "crypto or NFT's".
It is the opportunity in such a diverse market if you are willing to adjust for volatility, follow the trend until it bends, long and short.
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Excerpt from my book The 30-Minute Stock Trader.
Beliefs of top traders.
If I only knew this belief when I started trading it would have saved me so much headache, pain, frustration and development time!
Know your goals and objectives BEFORE you start developing and trading!!
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I really enjoyed this podcast with
@louisllanes
from the market call show. Lots of interesting topics about trading psychology, systems, and testing.
This week's Market Call Show
@laurensbensdorp
, author of Automated Stock Trading Systems joins me. We'll explore his expertise in trading & beating the markets, including the correct approach to backtesting & essential components of every trading system.
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Importance of understanding sample:
- For stocks only decent quality since 1995, so that is what we use for simulation
- This sample has a bullish bias on stocks
- The future might be different
- Take a look at 1928-1950 or 1964-1982
Now think how your systems would perform!
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I will provide suggestions to a solution for each issue with clear examples of a systematized approach with buy and sell rules.
What is your biggest issue in trading?
Let me know how you characterize yourself as a trader.
Be honest to yourself!
Often a solution is easier than you think.
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if you close a long position and are really happy when it drops like a stone the day after you closed it, you have a serious issue of “wanting to be right”. This is not a good characteristic for a trader.
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The main function of "magic" trend indicators is to identify a trend
Their predictive value is LESS than random
If you, however, are able to take all signals, cut the losses, and trail the profitable trades, then you will have a longterm positive expectancy.
Then, stick to it
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The seminar is now fully booked. Nationalities from 4 different continents will be in Vegas in October to attend.
This will be fun!
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A complete trading strategy that is immune to market shocks, bear markets, and inflation, also designed to make money in bull markets, for me, at least consists of 10 legs.
This is different for everybody, but here's a simplified blueprint of mine.
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Overrated statistical measurement:
Trade frequency
10.000 trades vs another system with 1.000, seems to have, for some people, more statistical value.
Yes, in the past!
Be VERY careful.
Some hedge funds bet the farm on their probabilities and went out of business.
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I always listen to
@basso_tom
. If you like to listen to his book in audio format, you can get it now!
Well done Tom!
Audio version of the best-selling The All-Weather Trader book now available. Kindle,iBook/other in process. Available on my website now, listened to with FluxPlayer. Enjoy the listen and the ride!
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Although a systematic trader is not supposed to have thoughts over his / her system performance (they do very fine this year) but.....
Something says inside me: Be F.... careful.
Shit always hits the fan when you least expect it.
Take away: Have worst-case contingency plans.
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Listen to this, any interview where
@basso_tom
is featured is well worth your time! The wisdom Tom has will help each trader, but not only for your trading, but in life as well. I speak from personal experience. Tom has been a major influence on my success in trading and life.
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A greatview is what a trader needs.
It is relaxing and provides you visually with the freedom you have chosen.
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Interesting start of 2023
Long: R2000 stocks and some SP500
Short: Mean reversion systems
Long Gold, silver, platinum, and copper
Long bitcoin, long Euro
Grains in mixed territory
Meats except for hogs very strong
Glad I do not need to guess, just follow the signals!
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Systems spend a lot of time drawdowns.
This is why trading psychologically can be so hard.
To make money, you need to risk money, this means that drawdowns are a part of life for every trader.
Choose your risk wisely, so you will trade within your drawdown tolerance.
Here's what trading is all about in less than 60 seconds...
with Tom Basso
@basso_tom
,
@JasonP138
and
@PKycek
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What defines a top trader:
1. First of all a consistent great track record with a high risk-adjusted return that suits your risk tolerance.
But there is a lot more
2. Have a balanced life
3. Have great health
4. No stress
5. Contribute
6. Be a light to your surroundings.
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