How to Build a Trend Following System | Interview with Tom Basso | Hedge Fund Manager

[@RichardMoglen]

Timestamps: 0:00 Introduction 0:30 Tom's background, Learning to Trade, Running the Trendstat Fund 0:34 How to you develop a trend-following system 4:14 Early mistakes Tom made during his career 10:16 Position Sizing Tips. 12:00 Advice for traders who struggle mentally with with taking losses 19:00 What is it like trading so many different markets 23:04 How does Tom handle Market Corrections 29:07 Why Tom focuses on Price action above all else 42:50 How to make sure a strategy is not biased to a particular time period 49:35 Performance Metrics Tom's uses when back-testing a Strategy 1:03:15 Tom's Daily Trading Routine 1:05:10 Tom's Recommended Books for New Traders 1:07:15 Advice for New Traders 1:10:45 How To reach out to Tom

[@martinodriscoll1787]

L

[@RichardMoglen]

Welcome back! For this episode we have a very special guest Tom Basso. Tom is an extremely experienced trader with decades worth of trades under his belt. He was featured in New Market Wizards by Jack Schwager and Trend Following Mindset by Michael Covel. He was the founder and President of Trendstat Capital Management where he developed effective trend following systems which produced extremely consistent returns over many market cycles. In this interview we cover many different topics including mindset, how to build a trend following system, position sizing, and his methods for trading multiple markets. Enjoy!

[@shaunsam1013]

Brilliant interveiw. What a humble man. Could listen to him all day

[@andrewlau9583]

his point about the 10MA/50MA crossing as a simple strategy that mathematically works was eye opening. never thought about it that way

[@ziptrader5746]

Thankss~~~~

[@J_International]

Tom is OG. Such an incredible depth of knowledge that stands the test of time. I really like what he said about the Sortino Ratio and asymmetric risk. I have a saying: People are picky about what price they pay (for stocks) but will sell at any price. It's true downside volatility is not the same as upside -- thus many indicators don't give you the whole picture. It's amazing even with so much evolution in markets and technology how much of what he said applies. I love how relaxed he is at this point in his life. That is the end game all traders should seek. Not thrills or being blued to a screen all day, but a life of low stress and time to do what you want without really any worry about the markets at all. Thank you again for these incredible interviews.

[@rogerioocf]

It`s an honor to listen to Tom Basso!

[@ziptrader5746]

Thankss~~~~

[@falconsooner]

Richard....you are the gift that keeps on giving! I love the different styles of traders you have on your show. Your channel has reenergized my trading

[@RichardMoglen]

That's awesome to hear! Keep at it

[@ziptrader5746]

Thankss~~~~

[@janreichenbach265]

@@RichardMoglen Great interview, fantastic return by Tom last year.

[@gsinghb1984]

Thank you Tom and Richard for sharing some gold with us! Look forward to seeing and hearing Tom at the MTP 2021. Have a good weekend all and enjoy the fight 🥊

[@ziptrader5746]

Thankss~~~~

[@ankurperiwal9704]

There is so much to learn just from these traders experiences. Thanks for the great content! :)

[@RichardMoglen]

My pleasure!

[@build4usrs]

Thank you, Richard. Of the countless KZbin videos I have watched I would rate this one at the top. Your questions were great, the links you have posted are very helpful and overall this was a great and very much appreciated video. I am looking forward to watching other interviews you have done and hopefully will be doing. THANKS!

[@gkrishna1620]

Getting to listen to these market wizards wisdom is very difficult. You make it very simple... So, thanks a lot for that.. keep doing it Richard....!🎉❤❤❤❤❤

[@RichardMoglen]

My pleasure!

[@bimalthakkar5118]

Best interview so far, Richard! You have great ability to adapt to the personality of the guest. Keep up the good work!

[@RichardMoglen]

Thank you very much!

[@ziptrader5746]

Thankss~~~~

[@ahmad-hz7pp]

One of the best interviews about trading

[@RichardMoglen]

Thanks!

[@realpristinecap]

One of my favorite interviews you’ve done so far Richard👊

[@RichardMoglen]

Thanks Andrew! Enjoyed hearing your thoughts on the Space yesterday!

[@ziptrader5746]

Thankss~~~~

[@VictorVelez-p8e]

One of my favorite interviews you’ve done so far Richard. I do like your interviews Richard, a lot. They are so helpful.

[@RichardMoglen]

Glad you like them! Make sure to check out the ones on the traderlion channel

[@Least_Resistance]

Richard, just want to say thank you for the great interview! You are the nowadays Jack Schwager. As a guy attracted by macro and discretionary trading, I find this fascinating and eye-opening.

[@neildonaldson7559]

Great work Richard and crew. Great to feel part of an enlightened investment community.

[@titanstrading]

Really inspiring and realistic approach to real trading... Many gold to grow like a pro 💪 thank you so much!

[@RichardMoglen]

Glad you enjoyed it!

[@amandacharles6720]

Such a great interview, a top 3 for me without a doubt. I highly recommend Tom's book, it is refreshing to have such great value points in a succinct read.

[@RichardMoglen]

Glad you enjoyed it!

[@ziptrader5746]

Thankss~~~~

[@riccardoronco627]

Always a pleasure to listen from you, Tom

[@wellsventures947]

Richard you are deeply appreciated my friend. Love these interviews, better than the Market Wizards books with this info!

[@chungyuanlin]

Great trader and great host. Thanks, Richard.

[@RichardMoglen]

Thanks!!

[@ziptrader5746]

Thankss~~~~

[@wisheye1]

Awesome interview! Would love to see you interview John Carter. Thanks for all your hard work on these Richard!

[@RichardMoglen]

My pleasure! Thanks for watching

[@NorwayRedMaple]

FYI - Automated Stock Trading Systems: A Systematic Approach for Traders to Make Money in Bull, Bear and Sideways Markets by Laurens Bensdorp. Richard, I too am an engineer and I love your interviews! Always insightful.

[@RichardMoglen]

Thanks for sharing!

[@mali4282]

Wow, just wow. I learned so much. Richard and a few other guys are making such good, educational videos...are we finally seeing the beginning of the end of the traditional education industrial complex?

[@ranger5281]

Great interview. Laurens Bensdorp's 2nd book "Automated Stock Trading Systems" is a real gem towards truly understanding benefits from diversification of trading system approaches. Some excellent graphical illustrations. Tom Basso's books are a very good also.

[@RichardMoglen]

Glad you enjoyed it!

[@Yetified_Mayhem]

Beautiful.. I'll watch and listen three+ more times.

[@RichardMoglen]

Awesome!

[@ziptrader5746]

Thankss~~~~

[@figgy163]

Super interview, very laid back, a wealth of great info. Thanks to you both, 🙏👊

[@RichardMoglen]

Thanks Tony!

[@ziptrader5746]

Thankss~~~~

[@te4915]

I do like your interviews Richard, a lot. They are so helpful

[@RichardMoglen]

Glad you like them!

[@Kshatriya006]

great content Richard - loved this interview and very practical !

[@tommyc120]

Thank you for this wonderful interview with an absolute legend

[@RichardMoglen]

Thanks Tommy!

[@ziptrader5746]

Thankss~~~~

[@samdoral4927]

Great Interview, liked All weather approach, position sizing & series of books recommended

[@javiboo]

Great interview like always Richard thank you.

[@RichardMoglen]

Thanks Javier!

[@ziptrader5746]

Thankss~~~~

[@javiboo]

@@ziptrader5746 shut up scammer

[@himanshujain9752]

Best face by smile tom basso sir 😊😊

[@GregsExploring]

Richard: You have a skill for extracting very valuable information from the extremly accomplished traders you interview...thank you, I am responsible for at least half a dozen of the views of each of your videos.

[@ziptrader5746]

Thankss~~~~

[@dkct2010]

good program thanks Richard

[@RichardMoglen]

Thanks!

[@patrickbittnerlamy8628]

True articulate wisdom: simple, yet profound

[@ziptrader5746]

Thankss~~~~

[@fxlemon]

Great trader...also I love his demeanor...a real pro and legend. Thanks Rich!

[@RichardMoglen]

My pleasure! I agree 100%

[@RustyCas999]

Great interview. Both of you are so laid back. Must be an engineer thing. Checking out Tom’s books. OK. Just read the foreword in Covel’s book by Tom’s wife, and Tom is the consummate engineer. Friend of mine from high school got an M.E. degree from MIT and went on to be the CEO at Eaton Vance (he’s chairman of Investment Management at Morgan Stanley after their buyout of EV). I think engineers make great investors.

[@kingshukbarman5930]

I didn't get the position sizing part.did he try to say that, if volatility is high then we should trade with smaller size and bigger size if volatility is low.

[@synthquery]

If you are using a volatility measure ‘like ATR’ to determine position size then your position size is adjusted by design. A higher volatility will result in trading smaller size. In addition, you also want to equalize between the different markets that your portfolio could trade so that your position sizes have similar magnitude. For example… 1 contract of Oil is not the same as 1 contract of Corn. You have to determine what your position size is for each market based on your equity risk and the volatility of the market wanting to be traded.

[@linvestisseurdiscipline3239]

Thanks Richard you make great content ! Keep it up !

[@RichardMoglen]

I appreciate that!

[@karkiification]

what is name of the book? something he mentioned like "Automating portfolio by Lawrence Benz" ....i could not able to find it.

[@RichardMoglen]

Automated Stock Trading Systems: A Systematic Approach for Traders to Make Money in Bull, Bear and Sideways Markets by Laurens Bensdorp

[@karkiification]

@@RichardMoglen thanks Richard…that was superfast

[@ziptrader5746]

@@karkiification .Thankss~~~~

[@rsk_st1294]

Hi Richard, I have a question. If you have more than one position, and one of them is not moving for the day or making losses, is it advisable to double the other one which is moving. ( Intraday)

[@jlovetoysreview399]

Hey Rich I love the pointers

[@253ghostrider]

Any book that he recommends?

[@gregb7967]

at 1:10:18 = he says "easy as breathing". This basically means "procedural memory" has been developed. Developing procedural memory is important for trading success.

[@jamesdoyle59]

Great analogy

[@RichardMoglen]

100%

[@teslamr7333]

Is Tom saying he risks the same amount of capital on a trade and isn't putting the same amount of capital on each trade?

[@GregsExploring]

I also was not clear on this point from Tom.

[@nicksloan8860]

Are you referring to around the 11-12 minute mark? If so, I believe he is saying that he risks a percentage of capital which is the same, obviously the amount will change as your account grows or gets smaller

[@synthquery]

He’s equalizing the risk across all the potential markets his account could trade. If a portfolio is looking at 10 different markets then you have to have the equity available to trade those 10 markets if they all triggered a position at the same time. You have determine your total equity risk and then calculate your position size based on the volatility of those particular markets. What this achieves is equalization across the markets you trade so that the magnitude of the loss or win is on par between markets. An example of this could be that your total account equity risk only allows 1 contract of Oil but that could translate to 10 contracts of Corn to equal the same volatility risk. This means that a 10% gain is the same no matter which market it is as long as the equity risk and volatility sizing being used is the same.

[@davidkaiser3105]

@@synthqueryHow would you calculate this?

[@mohammadfarzan230]

Thanks

[@RichardMoglen]

Welcome

[@alicecellia]

Excellent

[@RichardMoglen]

Thank you! Cheers!

[@Bender249]

awesome

[@minma02262]

What was the software Tom mentioned in development? Love the interview!

[@RainSunRain]

Think he’s not allowed to disclose it yet since its still in testing phase

[@davidkaiser3105]

Update?

[@HNandish]

And in other news, Richard discovered Gillette 😂

[@RichardMoglen]

lmao!

[@YaaALI313]

please more from those interviewers

[@ziptrader5746]

Thankss~~~~

[@jle92708]

Still waiting on how to build a trend following system

[@РодионЧаускин]

Williams David Rodriguez Steven Martinez Sarah

[@christrueman7328]

How chilled is this man...LOL

[@mahditrader2485]

🤑🤑🤑🤑🤑❤❤❤❤👏👏👏👏👏

[@TenTonNuke]

This guy seems to share the same opinion as I do that fundamentals are overrated. The price is going to do whatever it's going to do. Fundamentals just give you talking points to explain why you lost money.