Approaches To Trading

Nick Radge on Approahes to Trading

Nick Radge, also known as The Chartist will share a little background about his approach to trading. These days, I run three different portfolios. My largest portfolio of my largest exposure to the market is a pure trend following strategy. I use to trade a trend following strategy back in the 90’s on commodities –the first seventeen years of my career was basically commodities. Since 2001, I’ve really focused on stocks and today that’s all I do. My main portfolio is a long only trend following strategy, on Australian stocks. We’re quite lucky in Australia, and it’s quite a trendy market. The last few years have been a little bit tough. The Australian market has been going sideways, as opposed to the U.S. markets which are going gangbusters.

Strategies & Portfolios

The two other strategies and smaller portfolios –one is a shorter term momentum strategy, average hold period of about twenty days –again, that’s for Australian stocks. Then I also trade a long only mean reversion system on S&P 500 stocks, and that’s very short term in nature –average hold period of three days. Everything I do these days is 100% systematic but historically when I started it was identical, I didn’t know what I wanted to do when I left school. I got a job basically, accidentally, in a stockbroking firm. I was one day walking through the private client advisory section and there was a guy sitting there doing five and ten day moving average crossovers on a bit of charting paper. I was asking what it was all about and he said, “When the blue line crosses the red, you buy, and when it crosses down through the red, you sell”. I could see the trends and I could see it made sense. By four o’clock that afternoon I was down at the local news agency, and bought my chart paper, and bought my blue pen, my red pen, and started plotting, and that’s where I started trading.

How I Started Trading

I was about 18 years of age then and had no idea. All I was doing was a five and ten day moving average crossover on the equivalent of Euro S&P 500 features. That’s what it was. So that’s how I started.

I had no prior experience at all. I was eighteen, straight out of school, as I said. I didn’t know what I wanted to do. I certainly had no interest in going to University or College. I was just an average student. I guess my goal leaving school was to work in an office building, carry a briefcase, and wear a suit. That was pretty much it, which is ironic. These days I work from my home office, and I don’t think I’ve worn a pair of shoes in years. So it’s changed over the years. I’ve been doing it for 27 years now so things change and that’s how I started.

Systematic Trading

Quite interestingly, I guess I’m still a 100% systematic trader. Effectively right from the word go back then, a five and ten day moving average crossover strategy –even though there was position sizing, there was no risk management, there was nothing. I’ve come full circle and I did a lot of things in between. 1987, I lost twice my annual salary when the market crashed, so I learned a very valuable lesson there. I’ve also tinkered with discretionary trading and that kind of stuff.

I was heavily influenced by Curtis Arnolds’ book, ‘Patent Probability Strategy’, or PPS. Very influenced like that and that was in the early 90’s, 91’, somewhere there. That just resonated with me, and that’s when I really started getting into more systematic type strategy. In the context of that book, I guess it was rule based trading because you couldn’t systemize that kind of stuff from that book.

Rule Based

We still do some of that stuff today, and do it very successfully. It’s very rule based. I personally don’t trade into that. We do offer a lot of that stuff to our clients, and it’s pretty simple. We’re just looking for low risk setups and we get a bit of a run out of those consolidation patents, and we’ll using a trailing stop, and that’s how we create a positive edge. It’s pretty basic kind of stuff. Curtis Arnold, he’s got a pretty bad name over there, and I know he’s done by the authorities that regulate, I think it’s the TCOC. I think they banned him for life, or banned him significantly for talking up his staff. If you can get over there and just listen to what he’s saying in that book, it’s pretty good. There’s nothing special about it, but for me it was a real eye opener, and it set me on the path to full time trading.