SI138: The 'Holy Trinity' of Security Selection ft. Rob Carver

We’re joined today by Rob Carver to discuss the process of selecting single stocks for a Trend Following system, Rob’s holy trinity of security selection, the JP Morgan-backed fund making huge bets, via options, on the market remaining quiet, the knock-on effects from funds who make large, risky bets, the sweet-spot for average holding periods in a Trend Following system, ‘caveman-style’ Trend Following versus scaling in and out of positions, how to hedge against inflation, how Trend Following historically has performed really well in rising interest-rate environments, and thoughts on Tesla’s recent earnings, a lot of which were from government subsidies and selling bitcoin.

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In this episode, we discuss:

• Which stocks to select for a profitable Trend Following system
• Rob's 'Holy Trinity' for selecting securities
• The ripple effects of large funds who make large and risky bets
• The most profitable holding periods in Trend Following systems
• 'Caveman-style' Trend Following
• How to hedge against inflation
• Trend Following's success in rising interest-rate environments
• Tesla's recent earnings

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Episode TimeStamps:

00:00 - Intro

01:36 - Macro recap from Niels

04:27 - Weekly review of returns

09:38 - Discussion on Tesla’s recent earnings

25:13 - Q1; Matt via the Top Traders Unplugged free voicemail service: How do you select single stocks as a Trend Follower?

35:02 - Q2; Alfred: Does backwardation lead to price rallies?

41:10 - The fund who are now nicknamed ‘Gamma Hammer’ for betting on tranquil markets

48:07 - Q3; Riccardo: What does Rob think about mean reversion strategies, and how they can be complimented with Trend Following? What are your thoughts on Systematic Macro strategies, and how do they compare with Trend Following?

57:16 - Q4; Michael: How long would it take to convert a system made in Microsoft Excel, to Python?

01:00:20 - Q5; James: What do you think about exiting winning trades in stages, rather than at once?

01:06:08 - Hedging against inflation

01:11:06 - Benchmark performance update

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