318 · Dave Mabe - The Shift to Systematic Trading — Building Backtested Confidence | Chat With Traders

The podcast explores the transition from discretionary trading to automated, systematic approaches, highlighting the experiences of Dave Mabe, a trader with over two decades of experience. Mabe details his journey from swing trading to day trading, eventually developing a rule-based gap and breakout strategy. A turning point came when backtesting revealed that a systematic version of his strategy outperformed his discretionary trading, leading him to embrace automation. Mabe emphasizes the emotional challenges in automated trading, particularly during drawdowns, and stresses the importance of pre-planned risk management. He also shares insights on backtesting, cautioning against over-optimization and advocating for a balance between simulation and live trading to build confidence.

Outlines

Part 1: Introduction, Background

Part 2: Strategy, Rules, Risk

Part 3: Backtesting, Automation

Part 4: Scaling, Drawdowns

Part 5: Practical Insights, Execution

Part 6: Future Steps, Resources

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318 · Dave Mabe - The Shift to Systematic Trading — Building Backtested Confidence

Chat With Traders

Part 1: Introduction, Background

Trade The Pool and TastyTrade: Platforms for Traders

Introducing Dave Mabe: From Dot-Com Era to Automated Trading

Dave Mabe's Early Exposure to Markets and Swing Trading

Part 2: Strategy, Rules, Risk

Transition to Day Trading and the Importance of Rules

Gapping Stocks, Breakouts, and R Multiples

Risk Management and the Variability of Trading Results

Part 3: Backtesting, Automation

The Dawn of Backtesting and Humbling Realizations

TastyTrade and Trade The Pool: Platforms for Traders

Essentials in Backtesting and Avoiding Over-Perfection

Gradual Automation and Comparing Live Trading to Backtests

Narrowing the Gap Between Live Trading and Backtesting

Part 4: Scaling, Drawdowns

Statistical Significance and Scaling Wide vs. Scaling Up

Drawdowns and the Importance of Multiple Strategies

Finding Reasons for Drawdowns and Avoiding Curve Fitting

Pre-Planning Drawdown Responses and Using AI for Coding

Part 5: Practical Insights, Execution

Prop Trading, Shorting, and the Ideal Backtest

Learning from Live Trading and Debunking Common Wisdom

Setting Stops and Avoiding Biases in Backtesting

Part 6: Future Steps, Resources

Forward Testing, Confidence, and Diversification

Adapting Strategies and First Steps Toward Automation

Backtesting Software Recommendations and Contact Information

318 · Dave Mabe - The Shift to Systematic Trading — Building Backtested Confidence

Chat With Traders

Part 1: Introduction, Background

00:00Trade The Pool and TastyTrade: Platforms for Traders

Trade The Pool and TastyTrade: Platforms for Traders

01:44Introducing Dave Mabe: From Dot-Com Era to Automated Trading

Introducing Dave Mabe: From Dot-Com Era to Automated Trading

04:08Dave Mabe's Early Exposure to Markets and Swing Trading

Dave Mabe's Early Exposure to Markets and Swing Trading

Part 2: Strategy, Rules, Risk

08:21Transition to Day Trading and the Importance of Rules

Transition to Day Trading and the Importance of Rules

12:10Gapping Stocks, Breakouts, and R Multiples

Gapping Stocks, Breakouts, and R Multiples

15:06Risk Management and the Variability of Trading Results

Risk Management and the Variability of Trading Results

Part 3: Backtesting, Automation

17:29The Dawn of Backtesting and Humbling Realizations

The Dawn of Backtesting and Humbling Realizations

20:02TastyTrade and Trade The Pool: Platforms for Traders

TastyTrade and Trade The Pool: Platforms for Traders

23:56Essentials in Backtesting and Avoiding Over-Perfection

Essentials in Backtesting and Avoiding Over-Perfection

25:35Gradual Automation and Comparing Live Trading to Backtests

Gradual Automation and Comparing Live Trading to Backtests

28:50Narrowing the Gap Between Live Trading and Backtesting

Narrowing the Gap Between Live Trading and Backtesting

Part 4: Scaling, Drawdowns

31:06Statistical Significance and Scaling Wide vs. Scaling Up

Statistical Significance and Scaling Wide vs. Scaling Up

33:51Drawdowns and the Importance of Multiple Strategies

Drawdowns and the Importance of Multiple Strategies

35:23Finding Reasons for Drawdowns and Avoiding Curve Fitting

Finding Reasons for Drawdowns and Avoiding Curve Fitting

37:39Pre-Planning Drawdown Responses and Using AI for Coding

Pre-Planning Drawdown Responses and Using AI for Coding

Part 5: Practical Insights, Execution

40:38Prop Trading, Shorting, and the Ideal Backtest

Prop Trading, Shorting, and the Ideal Backtest

43:46Learning from Live Trading and Debunking Common Wisdom

Learning from Live Trading and Debunking Common Wisdom

45:23Setting Stops and Avoiding Biases in Backtesting

Setting Stops and Avoiding Biases in Backtesting

Part 6: Future Steps, Resources

49:12Forward Testing, Confidence, and Diversification

Forward Testing, Confidence, and Diversification

51:39Adapting Strategies and First Steps Toward Automation

Adapting Strategies and First Steps Toward Automation

53:59Backtesting Software Recommendations and Contact Information

Backtesting Software Recommendations and Contact Information