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Ep. 361: Francisco Vaca Interview with Michael Covel on Trend Following Radio

Francisco Vaca
Francisco Vaca

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Francisco Vaca can be called a second generation turtle trader. He worked with Richard Dennis at C & D Commodities, and for the last 15 years has been closely associated with Paul Rabar. He is now the Co Chief Investment Officer at Rabar Market Research.

Before he became a trader, Vaca was a particle physicist and worked at the famous Fermi lab. This is not an insignificant fact, as his background in mathematics and statistics became very useful in his career as a trader.

In this second interview with Michael Covel, Francisco Vaca talks about evaluating the short-term and long-term performance data of fund managers, the benefit of using trend following systems across the entire time spectrum, trend anticipating techniques, and using modern technology in trading.

In this episode of Trend Following Radio:

  • The importance of distinguishing between long term and short term track records
  • “Alpha” and “beta” trading strategies
  • How the holding period length affects the risk-reward profile and return streaks
  • The benefits of diversification across different holding times
  • Using high frequency trading technology in long term trend following
  • How correlations are often misinterpreted
  • Knowing the limitations of your tools

“The best performing system historically is not necessarily the best system going forward” – Francisco Vaca

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Francisco Vaca: The ‘Turtle’ Scientist

I spent some time with Francisco Vaca a few years back in Florida. He offered a nice view on my book ‘The Complete TurtleTrader’:

“Regarding your new book [“The Complete TurtleTrader“], I can say that after hearing the turtle story many times from many of the people that are part of the story and after reading many articles about such story, this is by far the most entertaining, inspiring, extensive, and honest story of the turtles I have ever read.”

Vaca’s background? He currently is an associate with original Turtle Paul Rabar. How did he get started?

“…a friend…told me there was a job for a programmer at a commodity trading firm. He had thrown away the job ad, so I picked it out from the garbage! It turned out to be at C&D Commodities, which was co-founded by Richard Dennis of ‘turtle’ fame.”

That ‘find the ad in the garbage can’ was long after the original Turtle experiment. Read a recent article on Vaca (PDF).

Francisco J. Vaca: Second Generation ‘Turtle’

For those familiar with my book The Complete TurtleTrader you know that chapter 13 is about trader Salem Abraham. Abraham is what I call a second generation Turtle — as he was heavily influenced by Turtle Jerry Parker. Another second generation Turtle? Francisco Vaca. Vaca (who I met a few years back in Florida) has been also influenced by Richard Dennis and Paul Rabar. He reached out to me last night:

“Hi Michael, I hope this e-mail finds you well. Since you like to follow those of us that came out of C & D Commodities [Richard Dennis’ original firm]. I hope you will find interesting the interview I had with Managed Account Research, Inc…released two weeks ago.”

Thanks. Here you go (PDF).

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