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Nick Radge, The Chartist, discusses How To Build A Systematic Relative Momentum Model
About Nick Radge:
As you can tell by my accent, I am an Australian and I started trading in 1985, so just finished my 34th year of trading. I started on the trading floor, the Sydney futures exchange, and then I worked on dealing desks in Sydney, London, and Singapore.
For the first 17 years, I traded only futures and I actually ran my own futures hedge fund up until 2001 and then I switched into equities and I’ll manage money up until 2016.
Now I trade six different systematic strategies. I don’t look at the charts, I don’t draw any trendlines. There’s no Fibonacci’s or there’s no chart patterns or anything like that. It’s all algorithmic trading.
I literally just put my account balance into the model, push the button, it generates the orders, does a position sizing and does everything else. And the six strategies that I trade encompass trend following, which we’ll be talking about today, and also mean reversion.
And I guess the way I like to talk about that is rather than run a portfolio of stocks that is common and what most people do, I run a portfolio of systems and they tell me what to buy and sell.
So today I’m going to explain why I don’t trust analysts or financial advisors or certain industry types. I’m going to explain to you why there’s a very real casualness to risk and why that’s dangerous, especially to new investors and traders, which I’m sure some of you are.
I’m going to introduce you to systems trading and, literally, show you the kind of things I do. And today I’m going to fully disclose a momentum strategy.
Now, I personally try 2 of these, and what you’re going to be seeing today is not too far different from how I manage my own money and how I’ve done it for, for several decades now.
Visit The Chartist at https://www.thechartist.com.au
Momentum Trading Statistics, How to Build a Systematic Relative Momentum Trading Strategy.
Momentum in money is based upon the following essential factors:
Volume:
Volume is the amount of a certain asset that is traded within an offered timespan. Volume is not the variety of purchases, yet the variety of possessions traded– so, if five buyers purchase one asset each, it looks the same as if one buyer purchases five of the asset.
Volume is crucial to Momentum investors, as they require to be able to get in and exit placements promptly, which counts on there being a stable stream of buyers and sellers in the markets. If a market has a high variety of buyers and sellers, it is referred to as a liquid market as it is simpler to trade a possession for money. Whereas if a market has a reduced variety of buyers and sellers, it is considered illiquid.
Volatility:
Volatility is Momentum Trader’s investors’ bread and butter. Volatility is the level of change in a possession’s cost– if a market is extremely unstable, it means that there allow cost swings, while a market with low volatility is comparatively secure.
Momentum investors will certainly choose unstable markets, in order to take advantage of short-term rises and falls in a possession’s worth. As Momentum trading attempts to capitalise on volatility, it is essential to have an appropriate threat monitoring technique in place to shield your trades from unfavorable market movements. This ought to include quits and limits.
Timespan:
Momentum trading techniques are typically concentrated on short-term market movements, yet the duration of a trade can depend upon the length of time the pattern preserves its toughness. This might make appropriates for investors that utilize longer-term designs such as setting trading, in addition to those that prefer short-term designs, such as day trading and scalping.
Just how to start Momentum trading
Recognize the asset you have an interest in
Design Momentum Trader’s trading technique based upon technical indicators and evaluation
Practise trading in a risk-free setting using an IG trial account
Begin trading on live markets by opening an account with IG
Alternatively, you can find out more concerning trading techniques and indicators with IG Academy’s variety of online programs.
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