This episode explores the strategies and psychology behind systematic and automated trading, featuring an interview with Laurens Bensdorp, author of "Automated Stock Trading Systems." Against the backdrop of his personal journey from ski instructor to systematic trader, Bensdorp details his evolution from initially unsuccessful discretionary trading to a sophisticated approach involving 55 concurrently running systems. More significantly, he emphasizes the importance of diversifying across various strategies (mean reversion, trend following) and asset classes to smooth equity curves and mitigate risk, contrasting this with the potentially high drawdowns associated with relying on a single high-growth system. For instance, his experience during the 2008 market meltdown highlighted the need for a robust, diversified approach. Bensdorp also stresses the importance of understanding the underlying concepts of each system, rather than simply adopting pre-built strategies, and the necessity of accepting drawdowns as a normal part of the process. He concludes by discussing his ongoing work on developing strategies to handle unexpected market events and his upcoming book on IRA accounts. This highlights the evolving landscape of systematic trading and the need for adaptable, diversified strategies in navigating increasingly complex markets.
