9/27 Andrew Falde - Methods for Low Drawdown Trading

We are delighted to have Andrew Falde talk to us remotely from Florida. He will explain how it is possible to trade options (and/or stocks, ETF's, Forex etc.) and maintain a smooth and steep equity curve with low drawdowns and fewer adjustments. We approached Andrew based on requests from our members. He has kindly agreed to talk and interact. I recommend this talk strongly for everyone at all levels. We have people coming from as far away as Fayetteville to be here for it.

Andrew will focus on a high level approach to trading systems, applicable to options systems, but also applicable to any trading methodology, including discretionary trading of stocks etc.

It will be refreshing to hear the perspective of someone who is familiar in detail with the well known strategies such as M3, Bearish Butterfly, Road Trip, Weirdor, as well as technicals-based trading with moving averages etc., but who abstracts to a higher level where the exact details of these systems do not matter. He will show that you do not need to get into the trading rules of individual systems in order to decide whether to trade systems as part of a portfolio!

Andrew Falde is the Principal of Falde Capital http://www.faldecapital.com/ , and one of the principal options traders for SMB Capital Management in New York, (alongside John Locke). He also manages a hedge fund and individual accounts, and on a lesser scale, does some mentoring through SMB Capital. He has been one of the leaders in the Options Tribe competitions. He has spent many years developing a sound approach to testing and combining technical indicators and trading systems of all kinds.

He likes to explain how even non-quantitative individuals can, and should, do testing, even without elaborate tools.

Andrew will show that it has far more important to trade a number of "good" trading systems with different edges than it is to spend all of one's efforts finding and trading one "perfect" system. He believes that this is a common trap.

Limiting drawdowns allows the use of leverage to make greater profits. To limit whipsaw losses, you can vary the size, width, and time of your trades, based on current market conditions.

He trades multiple options (and other) systems simultaneously and has done extensive back tests of combining them in various ways. He will show graphs illustrating the improved smoothness of the equity curves that can be achieved with this approach. He will also show how the need for adjustments can be significantly reduced to get close to achieving "no touch options".

He uses the long term trend (defined by whether we are above or below the 200 days moving average) to weight position size. He also finds an edge in factoring in short-term mean reversion.

Andrew does not merely aggregate multiple systems randomly. He looks to include some that are neutral (M3, Road Trip, Weirdor, Rhino), some that performed well in bear markets (Bearish Butterfly, VIX on dips, Call Ratio Spread, Broken Wing Butterfly), and some for Bullish times (Short UVXY, long Stocks, short Puts with filter).

His back testing research showed, for example, that some of the most consistent winning systems, when filtered, are the Parking Trade (Dave Thomas and Tim Pierson), the Weekly Bearish Butterfly, and short deep in the money Puts. But there is room in his approach for many more systems than these.

Andrew invites extensive interaction during the meeting. We will have a mic. and you can ask questions.

Out of courtesy, we will also ask Andrew about his own or SMB's training programs or other services.

Andrew will talk and interact with us for about an hour, starting at 6:30 pm. After he drops off after 7:30 pm, we will have our own review and discussion of this subject among ourselves for a further hour. Any and all are welcome to present something very briefly during the second hour and even bring a slide or two if they wish. I see that a number of members who are very experienced traders have RSVP'd, so I believe this part also will be a great discussion.

We will break by 8:45 pm, and then anyone who can join a smaller group at Ted's Montana Grill at 9 pm (next Southpoint) is welcome to do so. Usually this draws about 10-12 people.