pedma
@pedma7
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Building my systematic trading portfolio to 7-figures in AUM, and sharing what I learn along the way | Not Financial Advice
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Joined May 2020
It took me 7 years to realize, and I will tell you in 2 minutes. 1. Most things that make money in markets are already discovered.
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This is Kristjan Qullamaggie. He's a swing trader, who turned $9,100 into over $80,000,000 from 2013 to 2021. In 2021, he was featured as the 15th highest income earner in Sweden. Here’s Kristjan's story:
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This is Richard Dennis. In 18-years, he turned $400 into $200,000,000. He wanted to prove that trading could be taught to anyone. So he started the Turtle Traders program. Over the next 4 years, the Turtles earned a combined profit of over $100,000,000. The Turtles story:
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This is Chris Camillo. In 2021, Chris was featured in Business Insider for turning $20,000 into $42,000,000, during his 15-year trading career. His trading style, is one of the most interesting I've ever read about:. - Social Arbitrage. Here’s Chris's story:
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ChatGPT now helps you backtest Simple Trading Strategies. No more wasting 100's of hours building code from scratch for bad ideas. Here’s how to do it for free, in less than 10-minutes:
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This is the Daniel Negreanu. 6x poker world champion and 7th richest poker player in the world. He said: "If you focus on the result, you're focusing in the wrong place." . Here's my favorite 7 poker concepts that made me a better trader:
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This is Jesse Livermore. At 30 years old, he made $33,000,000, in a single day. In 1929, at the peak of his career, he was worth $1,400,000,000, in today's money. Despite all of his successes, his life was a roller coaster that ended in tragedy. Here's his story:
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This is Jim Simons. He is the founder of the most secretive and successful hedge fund in the world. As of 2024, Renaissance Technologies has $106,000,000,000 under management. His net worth is around $31,000,000,000. Here’s Jim's story:
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This is Stanley Druckenmiller. He's a billionaire investor and former hedge fund manager. In 30 years, his fund had an average annual return of 30%, with no money-losing years, and $12,000,000,000 under management. His investment philosophy:
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This is Bill Perkins. He made $100,000,000 in a single year, trading natural gas and oil. He's an American hedge fund manager and high-stakes poker player, whose fund had $500,000,000 in assets under management, as of 2023. Here’s Bill's story:
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Charles Harris is a swing trader who turned $35,000 into over $10,000,000 from 2019-2021. By 2022, despite having almost 3 decades of trading experience, he lost most of it. Here's short summary of his story:
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This is Gary Stevenson. In 2011, he was Citibank's most profitable trader in the whole world. He also:.- Traded nearly $1T a day at his peak.- Became a millionaire at age 26.- Retired at age 27. His trading strategy? Borrowing and Lending Money:🧵
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This is David Tepper. In 2012 he received the largest single paycheck in the world for a hedge fund manager:. $2,200,000,000. In the 1970's, he paid his college tuition trading an options arbitrage strategy, and today his fund manages over $6B. His strategy? Buying bad debt:
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This is Dan Zanger. He's famously known as a swing trader, who turned $10,000 into over $18,000,000 in just 2 years. Unlike many similar stories, his returns were audited and later verified via his IRS records. Here’s Dan's story:
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This is Larry Hite. Despite being dyslexic and partially blind, he became one of the most famous hedge fund managers of all time. His fund was the first ever to hit $1,000,000,000 under management. His message? Become the best at taking losses:
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This is Ed Seykota. He's a trend-follower that from 1972 to 1988, turned a $5,000 account into $15,000,000. One of the first traders to develop, and implement, mechanical trading systems. He's one of the most successful self-taught traders alive today. Here's his story:
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This is Paul Mulvaney. In 2024, The Mulvaney Global Markets Fund is up 124%. Their AUM increased from $299,000,000 to $465,000,000 just in the last 3-months. Their strategy?. 100% systematic trend-following:
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Over the past 6 years, I've watched and read 1000's of hours of trading content. And the truth is, >98% of them are complete waste of time. Here's a logical concept that completely changed how I think: 🧵
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This is Ray Dalio. He went from nothing, to being the 42nd richest man in America. As of 2024, his net worth sits at $15,400,000,000 . He is the founder of Bridgewater Associates, with $124,000,000,000 under management. The "Holy Grail of Investing"?. Diversification:
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Statistical Arbitrage is a quantitative trading strategy used by hedge funds. Its aim is to exploit statistical mispricing's between assets. Here’s a brief explanation:
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This is Jerry Parker. At 25 years old he was given $1,000,000 to trade. He had never traded in his life. But in the next 5 years, he and the remaining group, made over $175,000,000 trading. 9 lessons from 36 years of trading experience:
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The best way to reduce your portfolio volatility:. Volatility Targeting. Here's 8 steps to understand volatility targeting (and save time):
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4) The Breakout Trade. Let's systematize his strategy:. 1) Initial driver move of >30% in the last 12 weeks.2) Sideways consolidation of 2-8 weeks.3) Consolidation average > 10/20/50 SMA.4) Enter trade on the breakout.5) Stop loss at low of breakout day.6) Stop loss < 1*ATR
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Linear regression is one of the best tools in quantitative trading research. But 99% of traders and investors don't understand it. ❗️. Every trader needs to understand how it works: 💡
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It took me 7 years to realize what it takes to become a great trader, and I will tell you in 2 minutes. 1. Even a bad or mediocre trader can make a profit over many years. That is not the definition of a great trader.
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3) Position Size & Risk. Kristjan says that one shouldn't hold more than 30% of account size in a single position overnight. And the risk per position should be 0.25%-1.5%. On a $10,000 account, a single position shouldn't exceed $30,000, and the risk per trade would be $150.
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4 robustness techniques used by professional traders. 1. Data Snooping Checks
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Every industry has a few books that will teach you 90% of what you need to know about it. Here are the 24 books in systematic trading:. (ranging from learning basic python to advanced quantitative analysis).
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2) Characteristics of a Social Arb Trade?. a) Finding a new narrative.b) Is this information important to move revenue of a publicly traded company?.c) Is this information important to move the investors perspective of the company?.d) Is the public aware of this information?
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This is George Soros. He's a hedge fund manager with a net worth of $6.7B. In 1992, he famously bet against the British pound, making a total profit of over $1B. He has donated more than 64% of his original fortune, $32B to charitable causes. Here's his investment philosophy:
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By 2021, Kristjan Kullamägi had made millions trading Episodic Pivots. 3 years later, he claims that the edge is still there. Everyone seems to agree with that. It's one of his most known strategies and everyone needs to know if it still works: 🧵
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Covariance Matrix is often mentioned in quantitative trading research and papers. But 99% of traders and investors don't understand it. Here's how it works in a simplified format:
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3) $20,000 into $2,000,000 from 2007 to 2010. Chris looks for game-changing events in real life, that have an impact in publicly traded companies. The trick is to find trends, that Wall Street hasn't picked up on yet. He calls this an information arbitrage investment.
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Harvard University has a library of free online courses. No payment is required. Here are 7 courses to scale your quantitative trading skills:
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I'm a systematic trader. For the past year I've researched 80+ trading strategies, for myself and my clients. I found that most failed trading strategies all dance around the same problems. Here's the top 5 mistakes when building trading models and how you can avoid them:
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5) Exit Rules. Let's also systematize his exit rules:. 1) Selling 1/3 or 1/5 of the position within 3-5 days after entry.2) Move the stop to breakeven.3) The remaining position has a trailing stop loss using the 10/20 moving average. 4) Exit if price closes below the trail.
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Numerai is a crowd-sourced AI hedge fund. They paid $72,002,141 to data scientists to beat the market. Despite these efforts, since 2019, it has underperformed the S&P500. Why is trading the hardest problem in the world?
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Looking for new trading strategies?. Here are my top 10 places to look at in 2024:
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He mentions that he blew his account 3 or 4 times, for 2 years, before becoming profitable. Despite his early failures, as most aspiring traders experience, he continued to improve. Gradually he went from a losing trader, to breakeven, and 2013 was his first profitable year.
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Trading psychology is a made up concept. It won't turn you from unprofitable, to a profitable trader. Here's what it actually is, and how you should think about it (big thread):
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4) The Hunger Games Movie. Chris had never heard of The Hunger Games book when a co-worker mentioned it to him. Everyone was reading it, she said. In the following 6-months, after making this book into a film, Lion Gate, who never had a blockbuster film, doubled in price.
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2) Cutting losses is hard. What makes really good players is recognizing a situation that is very dangerous, and to jump ship. Even if their hand initially was really good. Most people won't cut their losses in a desperate attempt to recover. That's a very dangerous game.
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1) Edge is Subtle. At the highest levels, you're not going to find blatant edges to exploit your adversary. Most edges will be very subtle. The same happens in the most liquid markets where there are no obvious or easy edges. Most edges are subtle and not easy to capitalize.
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1) Audited Returns. Jack Schwager wrote about Chris on his book Unknown Market Wizards, and for that he audited Chris's full track record. Also Business Insider looked at Chris's returns in 2021. Over a 16-year period, Chris claims to have had a 60%-70% annualized return.
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7) Mental game. If you focus on the result, you're focusing on the wrong thing. You should focus on making the best possible decisions. And that doesn't mean you automatically win, it just means you're doing your best. The distribution of wins and losses is random.
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2) Who is Kristjan Qullamaggie. Kristjan is a self-funded trader from Sweden. He's mostly known for making 10's of millions of dollars as a swing trader. He started as a day trader back in 2011, at the age of 23 years old.
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6. Abnormal returns are usually derived from taking abnormal amounts of risk (extreme example: drug dealers).
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2. Given that, if you think you discovered something new, I'd bet on two things:. a) Either you don't understand what really is you're extracting from the market .b) You made a mistake somewhere.
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Charles claims that trading shouldn't be that hard. If people followed these 3 rules, they'd make a fortune over time:. - Don't fight the trend.- Cut your losses quickly.- Let your winners run. How hard can that be, he asks.
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Mastering Excel with ChatGPT is a must if you can't code. Most trading strategies can be backtested in Excel. Here's how to how to do a backtest in Excel with ChatGPT, in less than 15-minutes:
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9) Top Lessons. a) It's not about what you think, it's what you notice around you. b) Most trader/investors don't have patience, one of the most important aspects of good trading. c) Competing where you have advantage over competition. d) Accepting that no trade is a sure winner.
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7) The Importance of Patience. Trading in general requires patience. But for Chris's style of trading, even more so. He mentions that he might go months, without placing a single trade. Sometimes he has a big trade every 1 to 2 years. Most people don't have that patience.
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QUICK INTRO TO SHARPE RATIO. This is a quick guide for anyone interested in Sharpe Ratio or already using it and trying to make sense of some of its nuances. Bookmark it for your own study.🔖
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7) Jesse's Strategy. The strategy was fairly straightforward:. a) Enter long positions in breakouts and short positions in breakdowns.b) Trail the position on an opposite signal.c) High volume stocks. The same principles that momentum and trend traders use to this day.
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4) Obvious is Obviously Wrong. Too many investors look at the present for their decisions. The problem is that, the present is already priced in. One needs to think out of the box, into the future and bet against the obvious. If you invest in conventional wisdom, you'll lose.
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Here's a more systematic way of looking at it:. a) Markets must be trending.b) Breakout + increased volume.c) Buy the breakout and short the breakdown.d) Increase position size on the way up.e) Stop loss.f) Risk a fixed % of capital per trade. Pretty standard stuff.
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Looking forward to get into the weeds of these two books. I knew Robert Carver book was quite good but never got around to reading it.
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6) Trade Examples. Here we have an example of a trade, that fit the parameters of Kristjan's strategy. It can be summarized to taking positions on breakouts, of strong uptrends. During a great market regime, this strategy will shine.
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5. Keep risk as apparent as you can, that way you have a better shot at controlling it.
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1) Returns. There's many stories online, of traders with large returns. But in most cases, it's hard to find validation for those stories. I found this article, where Kristjan was listed as the 15th top earner in 2021, in Sweden. Link in sources at the end of the thread.
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5) Hail Season. During the spring and early summer, there's hail season. This season, in some years, can cause so much damage, that it has a financial impact in roofing companies. The key is in finding out if it's a bad hail season, before anyone else, and placing a bet on it.
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I lost over $20,000 trading in the first 3 years. Despite spending 8h-12h a day trying to figure it out, It wasn't until my 5th year that I recovered it all. Now I am operating on a positive margin. Here's 6 things I'd have done differently to get there faster:. 🧵.
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The systematic trader who turned $10,000 into over $1,100,000 in a single year:. Larry Williams. He won the World Cup Championship of Futures Trading in 1987, with a 11,376% return, through mechanical and discretionary trading strategies. Here's Larry's story:
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6) How to Find Trends. There's a lot of ways to find the information that Chris needs for his trading. No single source is perfect. It needs to be in aggregate. Few examples:.- Twitter.- TikTok.- Comments on content.- Facebook. Just places where people talk about stuff.
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I've made close to 175% net return on my crypto portfolio since 2023. I didn't use leverage or day-traded. Just a pure old swing momentum system on a weekly timeframe. Below is my plan going forward:. 🧵
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9. The data will tell any story that you want, if you beat it long enough.
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Overfitting is a silent portfolio destroyer. Your model looks great on paper, but not in real life. Here are 5 simple ways to ensure your model is not overfitted:
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5) The Trading System. a) Position Sizing. The Turtles used a concept called "N", which represented the volatility of a market. This "N" was measured using the ATR of the last 20 days. The idea was to risk a small percentage of equity on each trade, around 1-2%.
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3) Investing Philosophy. Stanley likes to put all his eggs in one basket and watching that basket quite carefully. An unconventional approach to what its normally taught. He prefers to allocate to a few ideas that he has high conviction on.
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4. The naive pursuit of risk elimination, will most likely make it morph into something, that is not as apparent as it could be.
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If you think that using a fixed position size on every trade is optimal, you are wrong. There's a better way to approach position sizing. Here is a simple explanation of the Kelly Criterion and why it's so important to consider its benefits, but also its risks↓
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7 common backtesting mistakes I made in my 1st year that I’m avoiding 7 years later:
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I've also made an article with the strategy and full code in python. Despite some of the rules being pretty discretionary, we can still make them systematic. The results were interesting. Here's the tweet about it:.
Today I've released on my research newsletter an article exploring the system employed by Kristjan Kullamägi (@Qullamaggie) but applied to crypto. In this article I'll cover:.- His initial journey.- Position sizing and risk.- The strategy and rules he used.- Backtest of his
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By my 4th year trading, I had lost a cumulative amount of 20,856.28€. At that time, I had a job where I was making 1,145€ a month. I had lost ~2 years worth of income. I almost quit. 4 years later:. - Recovered all.- Made multiples of that. What changed?. 🧵
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13. Compete in places where your skillset is at least slightly above the average competition.
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Today I am writing my 30th article on trading strategies. Over the the years, I've researched 100's of trading strategies. One of the most frequent questions in my DM's is:. - Where to find trading strategies in crypto?. Here's my top resources to find strategies: . 🧵
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Today I've released on my research newsletter an article exploring the system employed by Kristjan Kullamägi (@Qullamaggie) but applied to crypto. In this article I'll cover:.- His initial journey.- Position sizing and risk.- The strategy and rules he used.- Backtest of his
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Current state of the crypto market:. ADA:.- Down ~89%.- Recovery to ATH ~832%. SOL:.- Down ~89.58%.- Recovery to ATH ~860%. AVAX:.- Down ~90.22%.- Recovery to ATH ~922%. FTM:.- Down ~94.44%.- Recovery to ATH ~1699%. Plenty of opportunities for next bull cycle. Be prepared.
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How did I build my "MBS" trading bot 👇. I am not a mathematician or a computer science guy, and yet I've built and deployed multiple profitable models into the market. In this thread I'll write about how I build bots and also share what to AVOID when building systems ⚠️. (1/x)
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For this 1 reason, 97%+ of traders lose money. No, it ain't psychology. It's having no statistical edge. You don't need fancy coding or expensive platforms to test your edge. There's a simpler solution. excel. How to backtest a full trading strategy using only excel:. 🧵
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1) The Benefit of Being the Best. At one point, Renaissance charged the highest fees in the world. A traditional hedge fund charges 2% flat fee and 20% performance fee. Renaissance charged 5% flat and 44% performance. Why did they charge more than double than other funds?
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Here's Jim Simons talking about finding subtle anomalies and putting them together. If an edge is really obvious, trust me, everyone knows about it. Which negates it. All edges have limited capacity, and in a competition, like trading is, everyone's fighting for their share.
8) Collective of Subtle Anomalies. It's all about finding things that might be predictive, and testing them. By getting multiple subtle anomalies, they built a model that was more predictive. The equations for prediction are not that elaborate. But prediction is not all.
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4) Chasing the wins. Beginners luck can be detrimental. Never confuse luck with skill. If you continue to chase down past wins, despite not being worthwhile anymore, you will eventually destroy your finances. In markets, edges decay all the time. Adapt.
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7) Philosophy. Kristjan sees trading as a numbers game. The strategy itself is not ground-breaking. Breakout trading has been documented for decades. His focus is in being in the largest trends, taking a lot of bets and keeping the losses small.
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11. Focus on what makes money today, not on future potential problems.
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10) Conclusion. Chris's style of trading is very interesting and outside what's considered the "norm". His source of "alpha" comes from picking up on new, potentially impactful information, that is not widely available yet, and making a bet on it. I hope you've enjoyed it!.
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I don't want to romanticize trading, but it's Sunday, and here's some thoughts. The pursuit of becoming good at trading, has brought me so many opportunities, that someone like me, with a below average high school diploma, from an unknown school in Portugal, shouldn't have had. .
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7 in 10 traders blow up their portfolio. That figure is probably even higher. I had to find out their portfolio-destroying habits. 7 ways these traders think about risk so that you can do the opposite:
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1) Early Story. Richard Dennis started as a runner in the trading floor, at the age of 17. He originally borrowed $1,600, and used $1,200 to buy a sit at the MidAmerica Commodity Exchange. The remaining $400, he used for his personal trading.
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1) Becoming a Trader at the Age of 14. Jesse Livermore began to make short-term predictions on price action, based on what he was seeing on the tape. He started to become decent at it. So he went on to place his first trade.
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8) Risk. When we enter a trade, we never know all the risk factors associated with that trade. We need to accept that we don't know all information about a particular trade and still take the risk. There's no certainties in this game, even if the thesis seems solid.
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I've read and watched 1000's of hours of trading content. There's 1 thing that guarantees profitability. 1) Real Alpha. But a lot of things get in the way of finding it. Here's 1 method to increase your odds:
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