Richard Brennan joins us for a weekly conversation on Trend Following, where we reflect on the new TopTradersUnplugged mini series and how the beginning of 2023 has been so far. We also take questions from listeners regarding backtesting methods and how Richard uses backtesting to manage risk, rather than predict expected returns. Additionally, we discuss why trend followers should be more aware of uncertainty and outliers, why Richard is a tail hunter and why he compares it to surfing, how Richard deals with change and the importance of understanding the natural cycle of transitions and stable regimes, complex adaptive systems, why everything ultimately moves towards an equilibrium condition where everything stops and how it can be corrected through math, the importance of understanding how a system operates before applying math and that everything is process driven, how Richard thinks of risk in an uncertain world and much more.
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Episode Summary
02:34 - Thoughts on new mini series
09:46 - Battleship still floating?
11:56 - Q1, Markus: Richard's biggest takeaways in his backtesting
18:12 - Q2, Tim: About inconsistencies in the selection process
31:27 - Uncertainty rather than certainty
49:38 - Why not focus on other trends?
56:44 - Outliers - features of liquid markets?
01:03:28 - Everything is a process
01:12:21 - Managing risk in an uncertain world
01:21:24 - Thanks for listening
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