Risk1 Reward3 - Systematic Trading

This week we explore crisis management for systematic trading.
It is about stabilizing the decision maker when the system is under pressure.
It is about learning how you respond when structure breaks, confidence shakes, and uncertainty becomes personal.

Crisis management in trading is the ability to protect decision quality when outcomes temporarily disconnect from effort.

Not one bad trade.
Not one difficult week.

But a phase where your usual feedback loop stops working.

In this exploration we walk through:
What actually breaks first when a trader faces destruction
How to navigate chaos without abandoning process
How to rebuild from the ruins without reinventing yourself

Every trader eventually meets this moment.
The moment when execution feels heavy.
When hesitation replaces flow.
When the real battle shifts from the market to your own inner state.

This is facing your inner demon.

Crisis management is the bridge between survival and long-term edge.

Topic 13: Crisis Management for Systematic Trading.

Think in odds. Act with discipline.

11 hours ago | [YT] | 0

Risk1 Reward3 - Systematic Trading

The Five Stage Framework for Developing Personal Trading Edge :
If edges decay and copying fails, the only path forward is developing something unique. The starting point is self assessment. Four personal variables determine which type of edge aligns with a trader's strengths. Risk tolerance, meaning what is actually endured during drawdown, not what is theoretically comfortable. Time availability. Analytical style. And execution temperament.

Stage one: Exploration.
Stage two: Specialization.
Stage three: Quantification.
Stage four: Personalization.
Stage five: Continuous adaptation.

For detailed explanation do check out our latest episode - Trading Edge : Develop Your Consistent, Repeatable Advantage in any Market.

Video 12 in the First Principles of Trading series

Think in odds. Act with discipline.

2 days ago | [YT] | 0

Risk1 Reward3 - Systematic Trading

In 2016, McLean and Pontiff studied 97 trading strategies published in academic journals.
Returns declined 26% on out of sample data. Expected. Some overfitting, some noise.

But after publication, returns declined another 32%.
Traders read the research. Deployed the strategies. Crowded the same signals. The inefficiency shrank toward zero.
Total decay: 58%.

Notice what happened. The edge was real. The math was valid. The strategy worked. Until it was shared.

This is the nature of edge. It is not static. It does not wait. It rewards the first and punishes the crowd.

If everyone knows about it, it is not an edge.

The latest video in the First Principles of Trading series explores why edges decay, the six forms edge takes, and a framework for developing one that cannot be copied because it is built around the person executing it.


Think in odds. Act with discipline.

3 days ago | [YT] | 0

Risk1 Reward3 - Systematic Trading

This video explores edge development, the distinction between borrowed advantage and personal advantage in systematic trading.

It examines through academic research, adaptive market theory, and alpha decay evidence why the question is not whether a strategy works, but whether its advantage belongs to the person executing it.

1)The nature of edge Why edge and strategy are not the same thing. Six forms of trading advantage, informational, analytical, behavioral, structural, execution, and organizational, and why alignment between edge type and personal strength determines sustainability.

2)Why edges die McLean and Pontiff studied 97 strategies published in academic journals. Returns declined 58% after publication. Andrew Lo's adaptive markets hypothesis explains this as biological, not mechanical. Markets evolve, participants adapt, and advantages that can be observed can be competed away.

3)Developing personal edge A five stage framework. Exploration, specialization, quantification, personalization, and continuous adaptation. Why edge cannot be copied because genuine advantage is built around constraints, strengths, and execution patterns that are unique to the individual.

The video carries this through an original narrative: a junior trader shadows a senior performer for six months. Same rules. Same markets. Same information. Opposite results. The senior's edge was never in the rules. It was in execution shaped by years of calibration the junior had not yet lived.

The insight is not that copying is wrong. It is that borrowed advantage has no root system. It cannot survive the first real storm.

This is Video 12 in the First Principles of Trading series.

Think in odds. Act with discipline.

4 days ago | [YT] | 0

Risk1 Reward3 - Systematic Trading

The Anatomy of Edge :
Edges come in different forms.
But real edge is never a single trick. It is a system.

> Informational edge
Processing legal, systematic data before it is fully absorbed by the market
alternative data, satellite signals, web traffic, transaction flows.
Not privileged access. Structured observation.

> Analytical edge
Interpreting the same information everyone sees differently.
Blending technical, fundamental and quantitative frameworks into a single decision logic.

> Behavioral edge
Executing the process when pressure is highest.
Staying aligned when emotion pushes deviation.
The ability to be different when being different is uncomfortable.

> Structural, execution and organizational edges
Market access, lower friction, thinner competition.
Speed, automation and precision.
Teams designed for alignment, not hierarchy.

A clear real world illustration is Renaissance Technologies and its flagship Medallion Fund.
Over decades, it delivered extraordinary consistency including strong performance through extreme market regimes.

The culture behind it was shaped by mathematicians, physicists and cryptographers not traditional Wall Street profiles and guided by one shared modelling framework.

As Jim Simons once put it:

“Patterns of price movement are not random.
But they are close enough to random that extracting an edge is neither easy nor obvious.”

The real lesson is simple:
Edge is a repeatable process of finding, measuring and sustaining advantage over time.

Think in odds. Act with discipline.

📷 Jim Simons photo: Gleuschk / Wikimedia Commons / CC BY-SA 3.0

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5 days ago | [YT] | 0

Risk1 Reward3 - Systematic Trading

Efficiency is not binary.
This single reframe changes how you approach markets.

The debate between "markets are efficient" and "markets are inefficient" has raged for decades.

Academics on one side. Traders on the other.
Both convinced the other is wrong.

Andrew Lo at MIT offered a third path. The Adaptive Markets Hypothesis.
{Link to original MIT research paper in Author's comment}

Efficiency exists on a spectrum.
It shifts as the number of competitors changes. As information flows faster. As technology evolves.
Markets can be rational and irrational depending on conditions.
Opportunities appear and disappear as populations adapt.

Notice what this means in practice.

An edge that worked in 2010 may not work in 2025. Not because the logic failed. Because enough participants discovered it.
The strategy got arbitraged away.
Meanwhile, new inefficiencies emerge elsewhere as conditions change.

This is why copying someone else's strategy rarely works long term.
By the time it becomes public knowledge, the environment has already shifted.

The question is "what conditions exist right now, and how is the competitive landscape adapting?"

Survival belongs to those who recognize the environment they're in.
Not those who insist the environment conform to their beliefs.

Think in odds. Act with discipline.

Topic 12: Discover Edge for Systematic Trading.

#AdaptiveMarkets #TradingEdge #SystematicTrading #MarketEfficiency #AndrewLo #RiskManagement #AshimNandi #Risk1Reward3

6 days ago | [YT] | 0

Risk1 Reward3 - Systematic Trading

This week in our First Principles of Trading series, we explore how to discover a trading edge.

Discovering an edge is not about copying what works for others.
It is about developing clarity around what you already bring into
the decision process.

A trading edge is a consistent, repeatable advantage that produces positive expected value over hundreds of trades.

Not 1 trade.
Not 10.
HUNDREDS.

In this exploration we walk through:

What edge actually means and how it differs from strategy.
Why edges evolve over time, and what actually drives that evolution
How to discover and develop an edge that is genuinely yours.

Every trader's path is unique.

The information you notice.
The way you process it.
The patterns that become visible through experience.

Your edge lives where your personal strengths meet a real opportunity in the market.

It is about developing clarity under uncertain conditions

Topic 12: Discover Edge for Systematic Trading.

Think in odds. Act with discipline.

1 week ago (edited) | [YT] | 0

Risk1 Reward3 - Systematic Trading

From Constraints to Design

Strategy design does not begin with rules. It begins with constraints.

Honest Audit. Observe actual behavior under loss, uncertainty, and time pressure. Review past trades. Where did decisions degrade? That is your real constraint.

Method and Mind Alignment. High drawdown systems require high drawdown tolerance. Fast systems require fast decision recovery. Mechanical systems require rule oriented minds.

Emotional Load Scaling. A strategy executable at small size may collapse at larger size. The same percentage drawdown feels different at different account levels. Position sizing is part of design.

Recovery Protocols. Rules for reduction, pause, and reentry after losses. Not hoping discipline holds. Designing for when it does not.

Fit Before Optimization. A lower expectancy system executed consistently outperforms a higher expectancy system executed inconsistently. Select for fit first. Optimize after.


This is strategy design for systematic trading. The art of building a system around the only variable that actually matters : YOU.

Think in odds. Act with discipline.

1 week ago (edited) | [YT] | 0

Risk1 Reward3 - Systematic Trading

The point where process and person become indistinguishable.

Where decisions stop requiring willpower because they emerge from identity.

Where discipline isn't forced but flows from alignment.

This is what mastery actually looks like.
Not perfection. Not certainty. Not arrival.

Integration.

The trader becomes the strategy. The system becomes the self.

The search ends where it began.
Die Suche endet, wo sie begann.
यत्र आरम्भः, तत्र एव अन्वेषणस्य अन्तः।

With you.

Think in odds. Act with discipline.

1 week ago | [YT] | 1

Risk1 Reward3 - Systematic Trading

This video explores strategy design as the integration layer of systematic trading. It uses the story of Kung Fu Panda as shared experiential understanding to carry abstract trading truths into felt recognition.

1. What separates strategies that work from strategies that don't.
Why fit determines results more than rules. How alignment between system and operator creates consistency. What repeatability actually looks like.

2. The four personal variables every strategy depends on Risk tolerance. Drawdown capacity. Time horizon. Execution triggers. These are not preferences. They are constraints. A strategy that ignores them will fail slowly or violently.

3. From rules to fit Why a lower expectancy system executed consistently outperforms a higher expectancy system executed inconsistently. Why strategy design begins with constraints, not rules. Why the system only works when it includes the person executing it.

After watching, you will stop copying strategies and start designing around the only variable that matters: YOU.

Process will replace emotion. Decisions will become ordinary.

This is Video 11 in the First Principles series.

Think in odds. Act with discipline.

1 week ago | [YT] | 0