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My guest today is Francisco Vaca. 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.
The topic is Trend Following.
In this episode of Trend Following Radio we discuss:
- 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
Mentions & Resources:
- Turtle trader Richard Dennis
- Turtle trader Paul Rabar
- The Sharpe Ratio
- The Sortino Ratio
- Daniel Kahneman Interview on Trend Following Radio
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