This SIMPLIFIES Algorithmic Trading

0:00 welcome to undiscovered Traders today we're talking to nowel even if you're 40% right most of the time you will still make money H he is up near the quarter of a million more can I have your algorithm so can I give you like $10 a month for it or $15 a month or it it's not for welcome to undiscovered Traders the podcast that focuses on the charts stats and Edge of the latest six figure verified traders who have not been

0:26 interviewed before today we're talking to nowel originally from is it Morocco yes but now in Montreal Canada H he is up near the quarter of a million Mark we're going to go through his his profit curve some stats and an insight into his algorithmic style which is really interesting we don't get too many but first how are you how's the life of a full-time Trader in Canada I'm good thanks for asking stepen and first of all thanks for having me

0:58 yeah I'm in Canada as you know have a winter pretty rough so we're gonna start there so I'm gonna present myself I was born and raised in cablanca city in Morocco and at the age of 13 my family immigrated in Canada so I've been trading algorithmically since 2013 fulltime so my journey started with a deep passion with financial Market but I quickly realized that emotion often

1:28 Cloud the decision Mak making that's when I turned to algorithmic trading where I could build system to automate my strategy removing the emotional component and make data driven decision also another way why I choose algorithmic trading is because like many other I've tried chat room follow Trader account you know subscribe to trading signal and as you know most of them didn't deliver and I eventually

1:58 came across a website that audit Financial gurus and it asked them to provide financial statement and or tax document to provide to prove the trade with their real money and the only one who could prove their track record will were algorithmic Trader from then on my algo Journey started so yeah I I trade mainly breakout I don't know if you're

2:29 familiar between between breakout or me reversion breakout algo tend to have low winning rate so you have around 40% success ratees so that may sound counterintuitive but you can be profitable even if you have 40% success rate the key here is to have nice win to loss ratio so if you risk 100 you need to make 200 even if you you're 40% right most of the time you will still make money let's have a quick look at

3:00 your profit chart just to see how you're doing I'm curious how you how you literally started to learn this this entire thing but I I absolutely understand the the 40% win rate when you're picking up 2 to1 3 to one as a as a former short seller I used to have or still a short seller I used to Bost an 80% win rate but then I would lose all of the money that I'd gained in a

3:20 single day so on the one that went wrong so I we we know we we we're all familiar with the with the the risk reward Concepts but yeah if you want to just share screen we'll bring up we'll take a look at your k for nice yeah so is this your this is your algorithmic account so this is my year-to dat profit I can remove you know the the date this is one account so I have

3:48 multiple account but for the sake of transparency I've connected this one so as you see the tracking start in late 2018 start 2019 in now you can see my Equity chart is a little bit Wiggly you know not like the the short seller it's pretty smooth after that you see a big loss you know it's a different style but you know with break out like like I said you have

4:18 4 it's a real TR it's a stable stable yeah stable but you know a little bit Wiggly because when you have a 40% success rate you all always have you know a losing stct so you may have 15 20 trade in a row that are losing so that's why you see this you know small drop down after that you see a big win so this is the reality behind it so with gamef what I like with it so you

4:50 can identify the symbol that you are profitable so me as an analo Trader I always want to see which you know asset is performing more than the other one and you know here you can see this is my year today profit but only stocks because in this account I I also trade future option with the help of algo signal so here I'm showing only stocks because the future Ops option side is a

5:22 little bit more complicated for the sake of simplicity so here you see this is my pnl for this year on this around 73k per for this year and you can see also that with k for is nice you can see your top P symbol you can see here that algo made a lot of money on Nvidia Apple shop TMF it's the 3x ETF treasury bond Netflix Amazon and you can also see my bottom symbol that's I'm not

5:54 performing so well so for me as an algo Trader I always say that it's it's like a soccer match you always want to keep your A+ player on the field and remove the less performing one so it's easier for me to identify with the help of kinfo and yeah so so far we knock on wood it will continue like that with next year yeah so this is my you can see stocks

6:25 you can see future but overall this is year to date profit and this is all the profit for this account on since the late 2018 no it's amazing how you it's amazing how you've you've linked that's kall Pro for those that don't know you can there's a free month trial if anyone wants to take it it's free to anyone who's got an account but it's amazing how you you use kall and you use the data in line with your algorithm

6:55 with the analogy of a a football player and I mean that's that's really how you think about it right it's like the these stocks are performing really well with the algorithm I'm going to keep them on I can add more to the position size these ones aren't something wrong I need to look into the data is that how it is mostly exactly 100% you kind of rebalance you know you see the good performing one you put more money onto

7:20 it and the bad one you replace them so so far you can say I have some Messi in the in my team I have mbappe and Ronaldo and that's I have to replace them it's it's it's and you've got some division two and division three players but don't worry they'll they'll get substituted for the next the next Ryon stall but like like Al whenever people talk about algorithms everyone gets scared because they sound really complicated so like do you have a

7:49 background in something similar as a job or like how did you learn this this is a nice question because I really don't have any coding background you know I can code some basic stuff you know but on my journey I found out that there is some software they are trading system builder software so I only use this software so I use strategic w x so basically it is a software where you can select a

8:21 bunch of indicator you know RSI Binger band you name it vwap and so on and after that the software we're going to is going to do you're going to do a lot of simulation you're going to smash all these rules together and it will come up with some trading system so I have multiple system that I don't even understand the logic that I trade why I trade them because I have a robustness process that's filter out all

8:49 the curve fitted strategy because with this kind of trading system builder most of the time it will yield curit strategy you know so it will look sexy on the back test but when you go live you're going to start losing money because the system is not robust enough to trade with unseen data so that's why it's important to have a workflow that will filter out the curve fit one and will give you only the robust one you know so

9:21 this software so let's say I want to trade an RSI system you know basic mean reversion system I will select it in strategic want X it will generate the code so from that I can choose okay I want the code in Easy language you know with trade station or ninja Trader or any other platform it will generate the code for me and from that I will be able to trade it live and connect it directly to my

9:48 broker account so short answer I don't really have a big background in coding I know some basic stuff but with the help of the software I'm able to trade knock and wood successfully so far but I mean it's amazing because I think it's commonly said in trading that learning a trade isn't extremely difficult to find an edge most Traders can do within one or two or three years

10:19 but to manage the emotional aspects of it and not take that ridiculous draw down to not lose patience one day is the is the big problem that happens I mean I know strategies with 80% win rates I know strategies that with 70% win rates I know that the point to get in and out I've back tested them against samples of thousands of data so but I don't really have the time to sit in front of the

10:38 market all day so but I like the research so for someone like me or anyone else who I've described this strategy is Kind of Perfect is it or would you say oh well to be honest the difficult part is trading a strategy with 40% success rate okay I think as a human we always want to trade something about 70 80% and you know Let It Go but what I found out based on my test thing most of this High win strategy will tend

11:09 to fail in live environment and you have a higher chance that your strategy will perform if you have sub 40% win rate I know it's counterintuitive but this is what I found out so the the when you have like 10 loss 10 loss a losing streak 15 loss losing street it's hard psychological but if you have tested your system you have do you did the calculation you know

11:40 I don't know if you're famous with the risk of room you know probability tell me so basically it is a way of sizing your algo so for instance if you size 2% of your max account and your win rate is about you know 30% and your win loss ratio is about I don't know of 1.5 your risk of run is pretty high I mean we can do it here it's pretty easy I can

12:11 I can show it here this yeah you can go here and see risk of room it's it's really so let's say you have a you know payoff of about 1.5 you risk 100 right but you make 150 your accuracy says 30% and you risk 3% of your account see risk through 99% so maybe you can work on the

12:44 accuracy maybe 5% you are still nearly guaranteed of losing all your money so you need to size your account accordingly so if you have 40% and you risk 100 to make 200 and let's say you risk 0.5% drop to zero right so with this information you know even if you have five 10 15 loss in a row you are pretty

13:17 much you know not guaranteed but you won't you won't be rued yeah so so this is the idea behind you need to size accordingly with your algo of course you will have some algorithmic that will not perform they will fail in life but you need to replace them with new one so this is the tough part of the job you always need to monitor your strategy and you know this one okay it's having a dry down is it normal compared to the back

13:49 test if it exceed the dry down of the back test I'm going to turn it off I'm going to replace it with a new one so yeah basically so how much of your time goes into watching the charts and how much of your time goes into just managing the algorithmic data and results good question well with strategic want X for other similar trading system builder you can build some workflow so if you have a server you know dedicated

14:20 server that's run 247 you what I do is I'm always running my system data minor so I will choose to run it maybe on the NASDAQ maybe on under stock Nvidia whatever and it will yeld me some strategy the goal for me is to have a lot of good player on the bench that are ready to play you know sometime it take a lot of time you know sometime you can mine for nearly a week and you won't

14:51 find something that is tradable and you need to look for another symbol another stock another Market and so on but the biggest chunk of my time go into monitoring so at the end of the day I always look at how my algo are performing you know is it you know the L that I have today is it normal is it something that is comparable to the back des and so on so for instance on this

15:22 account I trade the the one that is tracked by kfo I trade around probably 80 to 990 Al so if you monitor it on any Alo can take a little bit of time but you know you have to do it to to continue to perform yeah I mean I guess it's I guess what you're doing is you're defining an edge and then you're refining The Edge so you define in and then it's just refin refin refin refin oops I took that out and me

15:49 results have got worse I need to probably put that back in it's it's a constantly refining The Edge like like you constantly train a football player to make them the best fre kick taker best penalty taker best right winger same thing yeah yeah sure sure definitively especially when you have Dre down you know we are all human when you have dreadon you start doubting yourself maybe you start losing it so when you monitor you track you gain

16:17 the confidence back so you say okay this is a dad like the other one so I will just need to continue to execute my trade like I did in the past and I came back from this TR down ni can I can I have your algorithm do can I give you like $10 a month for it or $15 a month or is it it's not for sale is there a price for these things I'm happy to work with your algorithm I

16:39 don't M I'm happy I trust you well yeah I have a course with my partner where we sell algo algo trading course and now we're thinking about leing some algo so the idea you know this is what I like with gameo you know you have to have skin in the game you know you if you trade this you have to show me that you treade it live with your real money so if you pay you know a

17:05 monthly subscription at least you want to know that the developer the trader traded which his is running so yeah you know it's a it take a lot of time but it pay at the end it pay or or I can just use your algorithm and I'll I'll put some money in but well we we'll say we'll say I'm just joking maybe I can find a way to pay but do you want to break down we've talked a lot about I

17:29 just want to ask how how did you get into this was it specifically because you saw the most profitable Traders verified in the algorithmic Traders is that how you got into it yeah like I've said know I've tried many style you know many chat room Twitter account trading signal subscription and it didn't work out you know and when I I I came across a website that tried to bust you know all the yeah the guy was a machine man

17:59 like you if you don't give your tax document your financial statement your broker statement you are considered a fraud direct and the only one that were able to provide their tax document the finance statement where you know the algo Trader so from that on this is was this was a good way you know a good you know way to to to identify which strategy best so this this is why I

18:31 started algorithmic trading on my end no very but did you read any books on it to get started because I just people hear the word algorithm and get scared yeah I I did read some book but the thing is in algo trading world people are secretive with their algo you know they don't want to share it because if they share it many people will trade it and you know they will lose the edge they will need to try a new one the the

18:57 the information that I found is basically that that served me is finding a good robustness system because the the first obstacle was okay you need to learn how to Cod but it take a lot of time but the solution that you found is okay there is some trading system builder that can find algo for you so this was a good solution from that on okay this system builder will generate a lot of curvefit system so most of them

19:25 will not perform life but some of them will perform so what's what's the feature the function on this algo that's make them still perform in live environment so that's was the challenge so you have to do a lot of research a lot of back testing a lot of what we call incubation you know I don't know if you're familiar with the term incubation I know the way but not in trading okay so incubation so basically

19:56 when you build a system you know you have the in Sample data out of sample data and from that on if you think that this algo is robust enough you're going to put it on Sim basically so for the next three month four months you're going to see how it perform if it perform well you know especially when there is a volatile Market you know if it's a bull market everyone makes money you know but you want a data set where

20:21 there is a lot of chop you know a lot of volatility if your algo survive this kind of price action it you have a high likelihood that it will continue to perform in the past so you have to have a lot of Argo Inc incubation and this is where a strategic b x is useful because you have a lot of algo that you can incubate and in the end at the end you will select the one that you like the

20:47 one that seem to be robust the one that have a good risk adjusted return a good sharp ratio good profit factor and so on very interesting I think without without further Ado we'll take a look at your strategy if if you're kind enough to be one of the few algo traders that can give an insight into their own system yeah yeah sure I'm going to share a simple strategy that you can build with strategic want X

21:15 it is the turnaround Tuesday strategy like I've said you know this strategy you know it's only a you can click you don't need to code so the the logic behind it we have to be Monday the day have to be Monday so you can see here day of week equals Monday just check I think you're not on I'm seeing K4 still I oh oh maybe let me share again okay so this is the rule of the

21:44 strategy we call it turn turnaround strategy so you can see that the day of the week is Monday the close has to be lower than the open so you you are expecting a red day on a Monday and you hold the strategy for one day only so let me show you here yeah you you only hold for one day here you can see it has been tested on Apple see yeah you have nice profit Factor you have a nice winning rate for

22:16 instance this one is about 58% and you can generate the code based on the platform of your choice trade station strategy Point s sorry Ninja Trader meta Trader and so on so this is the other side of the strategy give a moment here so here you see exit after one bar you see one bar only yeah and you know

22:47 simple stop loss of 5% so usually the robust strategy are simple you don't have many rule so if you have two rule close a red close on a Monday and you hold for one bar and this strategy has been tested well over many years you can see it's still profitable so for the an analytical people that will say oh look you have a low annual return here you know 1.9% you

23:17 see this is just a test you know if you tested for instance on U proo upro is a two time spy ETF you know I'm going to show you the result they are pretty interesting here so this is the result on uo uo like I've said is a 2X the Spy ETF you know you're trading the market you can see that your yearly average return is about 15% your drw down pretty much normal

23:51 14% And you have a nice winning rate you know and you see with this is with the kind of thing that you have to do as an algo Trader you start with an idea even if the result doesn't look as good but you can you know take the same strategy test it on another sample for instance the market because there is some people who say yeah if you trade only Apple you know how do you know that

24:15 Apple will still be performing in the next year in Nvidia maybe your it's you know it's survivorship bias so there's solution for that you can trade the ETF of track so you can see it's pretty H you know it's tradable for 15% return 14% drw down nice profit Factor nice winning rate and like I've showed you with the you know the risk of Ru

24:46 calculator you can calculate the sizing of this strategy you know how much will risk to avoid a potential room the goal is to have multiple strategy like that to avoid the you know if it stop working you can replace it easily with another one and so on also I'm going to share another thing that I like with kinfo I don't know if a lot of people use it is you can extract all your trade into a CSV

25:19 file so my goal right now is to reduce the Vol volatility of my H curve because as you as you saw it's a little bit Wiggly because it's it's a breakout algo breakout algo is not as smooth as the main reversion or the short only Center this is a test that I did maybe it can help somebody else that will watch this video so this is a pretty straightforward graph what I did is I extracted all my trade put it in

25:53 Excel and I try to simulate if you know I am better at reducing my position size if I hit 5% Dr down is it better will it generate more profit will I have a better sharp in the future and so on so here this is the my performance the Blue Line This is the performance from Kimo you see it's a little bit Wiggly you know yeah but what I simulated is okay I try to reduce my

26:26 allocation by 50% if I hit a 5% Dr down and strangely enough you make more profit you know you can see the the green line you make more profit and you have lower dry down and I also try to see if I reduced my allocation by 75% when I hit 5% dry down and ironically enough you make more profit you see this is a big

26:57 big difference between the red line and the blue line and it's you know you you have lower dry down yeah you can have you know the only downside is you have you know a lot of you know stagnation at some point because you reduce the size so it makes sense you will not make back the profit as easily as before but you reduce the dry down but when it's time to to to break out it catch the the

27:25 full amount so this is interesting I was able to do it because of kinfo ability to extract trade and yeah another thing is when the equity hit a new alltime high the position size go 100% so it go back to the initial position sizing so yeah I hope it helps somebody who Tred to refine his process no I think it's I think it's an amazing

27:57 it's an amazing way to educate people on a different style of trading because you know the the main Educators with the biggest voices are more or less saying the same kinds of things of of like day trading without an algorithm you take the trades trade between 9 and 11 but it's a completely different strategy that you've got that's formed in a completely different way so it's it's really good for opening people's eyes but what what would you

28:25 say if someone knew wanted to get started tomorrow what what what's the first steps of the day and what's this platform is this platform the one that you just mentioned earlier the x is it X trade yeah strategic want X so first thing first the fact that we have king for now you can track the most Prof profitable Trader and try to to to learn from them so this is the first step to do I'm I'm well aware that there is

28:52 better Trader than me and and so on but just by choosing a good educ is by by itself can save you a lot of money so with kinu it's easy to do second thing if you want to go the to take the route of algo trading try to use system builder trading system builder like strategy point x it's really a nice software it will save you a lot of time you don't need to learn how to code because

29:23 learning how to code take a lot of time so you may you know abandon the idea because it take a lot of time but with trading system builder it's much easier you have a lot of tool that you can use to filter out curit system that and also this software there is always new updates you have a nice customer service there's a lot there's a big community that will help you out if you have some question and so on so yeah strategic

29:54 s can help you but the most important thing is that you you need to have a well defined process to filter out Cur fit system so this is the key so I know a lot of people who TR who trade Al go based on trading system builder but are not successful because their process of filtering out is not good so you need to choose an educator that's trade the same style as you successfully with their real money so you can reproduce

30:25 this kind of result because thing is some people will try I'm sure you're aware of that some people will follow really successful educator that have a k for account but they don't have the same result the thing why because maybe and probably he's not using the same position size you know but with algo you are really you know digging into the number so if you're trading trading analo okay what is the allocation what

30:57 is your average loss what is your max loss what is your max Trad down what is your worst Trad down in the best have you sized accordingly so if you mimic this kind of statistic in your own trading in your own account you will highly likely have the same performance that than your educator because you're replicating exactly the same Playbook exactly the same allocation and strategy and so on so yeah hope it helps no it makes fall sense just to one or two

31:29 questions to close out but just to say we we'll drop your details we'll drop the platform details in the in the YouTube description if anyone if anyone wants to click or the needed or they want to learn a little bit from your style of your trading do you ever lose sleep at night looking at an algorithm and thinking you just one tweak away from a multi-million dollar strategy no not really do you know what I mean on no yeah yeah no no I

31:54 understand what you mean but no multi-million dollar you need to use leverage because you can find a really nice strategy that's work well in life you know environment with real money but you know you need to trade some pretty liquid instrument and you need to press heavy size you know you can't buy a Lambo if you you know you allocating only $20,000 you need to press heavy you

32:26 know you know when you look at the best Trader of all time you know Dron killer you know Ed seota you know the Jim Simons so their annual rate you know the best one I think is Jim Simons it was 66% per year and these guys was trading like multi billion so the best of the best made 66% in a year so how much do you need to make a million in one years so you need

32:58 probably a lot of money I got it it's a long game it's it's the long it's the long it's the long path of millions right it's the long game yeah yeah sure makes sense do you think algorithmic trading will eventually just wipe retail out yes because emotion are really hard to control really really hard you know you know even if you have the discipline it will come a day or two I don't

33:31 know your dad or mom died you know and you have a position on and you know you don't have the energy mental Clarity to take a trade to close the trade you know we are human so we are weak by definition because we have emotion but with ago trading you know it's automatic it will buy it will sell there is no discuss discussion around it and you know you can close the computer and go other thing you know that's may be

34:03 helpful for you but I think in the future yeah especially you know with chat GPT right now you can easily code an algo you know and and if you put in the work it's easily doable but you know on my end this is based on my experience I know I'm weak man I know with emotion you can it's easy you know you take the trade you think it's when it's going to go higher it hit your stop mental stuff

34:29 you know there's a lot of people talking about mental stuff it hit your stuff you you know and you still you will still lose more money that you thought of so that's why I prefer AR good trading it keep me in check for my hand for me my emotions are all over the place so it's probably the if I'm ever going to make it in trade in Alo is probably the way forward as well and it's going to wipe

34:49 retail anyway so you may as well get in now yeah yeah I mean it's it's it's really it will help it will really help and a lot of people especially on the the short side you know I've heard like recently there is the Ticker on Twitter drug drug a lot of people out and because if if you had an algo even if there is a halt and it go beyond at least you will you will exit with a loss

35:17 but if you think oh it's gonna drop back it's tough game good now it's been fantastic to talk to Fantastic to hear your experience fantastic to see pretty enlightened by this New Perspective so appreciate your time if you've got any final words I I'll let you have them before we close out well first of all thanks for having me it was a pleasure to meet you too stepan and yeah for the all the trailer that are watching that are

35:46 struggling you know everyone has a different path just for my end you know I've blow up a lot of account in the past I even loow money and a blow this account but with persistence consistency and having the right Mentor the right patient you can you know you can make it you need to be patient patient will help you a lot in consistency don't don't be optimistic future look

36:19 PR thank you