Nick Radge, The Chartist, was invited to present at the 2014 Trading Super Investing Future Wealth Forum in Sydney, Melbourne and Brisbane. These are the slides from Nick's presentation. Nick talks about the reality of trading for a living and that perhaps it is better to find a strategy to earn a second income instead.

2. This presentation has been prepared by Reef Capital Coaching ABN 24 092
309 978 (“RCC”) trading as ‘The Chartist” and may contain general advice.
It does not take account of your objectives, financial situation or needs.
Before acting on any general advice you should consider the appropriateness
of the advice having regard to your own situation. We recommend you obtain
financial, legal and taxation advice before making any financial investment
decision.
Past performance is not a reliable indication of future performance. This
material has been prepared based on information believed to be accurate at
the time of publication. Subsequent changes in circumstances may occur at
any time and may impact the accuracy of the information.
AFSL 288200

3. Earn a 2nd Income
NICK RADGE

5. Situational Irony
When actions have an effect that is
opposite to what was intended,
specifically, the outcome is contrary
to what was expected.

6. #1: Work Ethic

8. #2: Making $$$

9. Trader 1
Removes all profits

10. Trader 2
Income $80,000 + reinvest excess

11. Trader 3
Stays working + reinvests all profits

12. Facts
• Profits must not only cover expenses
but also grow the account
• Most people aspiring to trade for a
living do not have a self-sustaining
capital base
• Lake Wobegon Effect – tendency to
over-estimate our abilities.

13. Next...
 How a particular trader had 1 losing day in 1238
 What James Packer knows about “trading”
 The strategy to make you a more consistent trader

14. Earn a 2nd Income
NICK RADGE

15. Core Concepts
The keys to consistency
 What casinos and HFT firms already know
 Strategy basics
 Selecting a universe & commissions
 Using technology

16. FACT:
Most traders aspire to be consistent.
Most prefer to take a small profit often.
Most do so mainly for comfort.

17. Casinos & HFT Firms
Virtu Financial
- 1 losing day in last 1238
- 99.9% winning weeks
Tradeworx
- 86% winning days
- 99% winning weeks
Casinos
- 84% winning days
- 83% of ‘light gamblers’ lose
- 94.3% of ‘heavy gamblers’ lose

18. Frequency Simulation

19. Time Paradox + W/L Ratio

20. Data mining
Curve fitting
Optimisation

21. Casinos & HFT Firms
Tradeworx
- 86% winning days
- 99% winning weeks
- 50% - 60% winning trades
Casinos
- 84% winning days
- 83% of ‘light gamblers’ lose
- 94.3% of ‘heavy gamblers’ lose
- poker, blackjack, bingo, baccarat, all have an
edge of less than 3%
Opportunity = Frequency = Profits

23. Trading The Noise
• Find overbought/oversold points using technical oscillators, such as
the RSI or CCI
• Find overbought/oversold levels using Bollinger/Keltner Bands
• Find extended price moves using sequential up/down days, i.e. how
likely is it for price to reverse after 5 consecutive up/down closes
• Find extended price moves using daily percentage moves, i.e. if the
close is 2% higher than the day's open, how likely is it that price will
reverse the following day
• Find extended price moves using volatility, specifically average true
ranges
• Find extended price moves using gaps, specifically from high/low to
the next open

24. Trading The Noise
• If the close is higher on 5 consecutive days AND on day 5 it gaps
higher, then what are the chances of it reversing?
• If the close is less than a Bollinger band AND the RSI is at an
extremely oversold point, what are the chances of prices reversing
higher?
• If prices rise 2% from days open to close AND gap up the next day,
what are the chances of prices reversing lower?
• If price makes its highest high point in 10 days AND the CCI is at
extreme levels, what are the chances of it reversing?

25. Selecting A Universe
Opportunity = Frequency = Profits

26. Global Equities
Australia: 2952
NYSE : 3198
NASDAQ : 2732
AMEX: 546
ARCA: 1457

27. Drag Considerations
Liquidity / Slippage
Commissions

29. Example Strategy

31. Long Entry
Close > 100-day moving average [ensure long term up trend is in place]
Close < 5-day moving average [ensure short term weakness is in place]
3 consecutive lower lows [sequential weakness confirmed]
Set a limit buy order for the next day if price falls another 0.5 x 10-day average
true range.
Long Exit
If the close is greater than the prior close, then exit the position on the next day's
open.
Short Entry
Close < 100-day moving average [ensure long term down trend is in place]
Close > 5-day moving average [ensure short term strength is in place]
3 consecutive higher highs [sequential strength confirmed]
Short Exit
Set a limit sell order for the next day if price rises another 0.5 x 10-day average
true range.

36. Simulation
Start Balance: $100,000
Start Date: January 1995
Universe: Russell 1000 (inclusive of all historical and
delisted securities)
Minimum Daily Volume: 500,000 shares
# Positions: 20
Allocation per position: Fixed $10,000 (no compounding)
Leverage: 50%

38. Compounded
CAGR: 50.3%
Trades: 20,576 (11,166 long trades / 9,410 short trades)
Win%: 61.1%
W/L: 0.83
MaxDD: -30.8%

40. Long Only?

41. Long Only
Compounded
CAGR: 42.4%
Trades: 12,499
Win%: 63.9%
W/L: 0.83
MaxDD: -34.2%
Long/Short
50.3%
20,576
61.1%
0.83
-30.8%

43. Leverage
Technology

44. The Chartist HFT Portfolio

46. This presentation has been prepared by Reef Capital Coaching ABN 24 092
309 978 (“RCC”) trading as ‘The Chartist” and may contain general advice.
It does not take account of your objectives, financial situation or needs.
Before acting on any general advice you should consider the appropriateness
of the advice having regard to your own situation. We recommend you obtain
financial, legal and taxation advice before making any financial investment
decision.
Past performance is not a reliable indication of future performance. This
material has been prepared based on information believed to be accurate at
the time of publication. Subsequent changes in circumstances may occur at
any time and may impact the accuracy of the information.
AFSL 288200

47. WWW.THECHARTIST.COM.AU