EP 028: How to avoid ‘predicting’, the purpose of options markets & the 7 components of profitable systems w/ Andrew Falde

Aaron Fifield Podcast 32 Comments

Attracted by the fact that traders can make money in both rising and falling markets, this weeks guest Andrew Falde, left a career in commercial real estate when the GFC hit in ’08 to focus his attention on becoming a trader.

A few years on, Andrew has carved a profitable niche for himself; trading options and designing systems. Both topics which are covered in depth during this interview.

Some of the highlights from this discussion, would be; the way in which Andrew avoids trying to predict the market, and instead thinks of trades as a series of ‘if – then scenarios’. Also, the purpose of why options markets exist is really interesting, as well as the important factors one should consider when designing a system, and how Andrew applies a blend of systematic and discretionary aspects to his own trading.

Got questions?

If there’s something you’re challenged with, or something you want to know more about, then take this opportunity to ask Andrew a question. Whether it’s in regards to trading options, designing systems, or just trading in general – Andrew’s your man, leave a question for him in the comments at the bottom of this page.

“Profitable trading is not about your ability to predict.”

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Lessons learnt in this interview:

  • What Andrew learnt from spending 10’s of 1,000’s of dollars on trading education, and why free education will only take you so far.
  • Andrew talks about one common mistake made by many novice traders: Trying to predict the market. It’s unnecessary and potentially dangerous to your P&L. Instead of predicting, think of your trades as a series of ‘if – then’ scenarios.
  • Why you need the right strategy for the right instruments – get this the wrong way round, and it can be a recipe for disaster.
  • “What do you think the greatest part of trading is, why do you do this?” – Andrew recites a tough question Mike Bellafiore asks traders within the firm at SMB Capital, to get to the root of why you choose to trade.
  • Andrew discusses the purpose of options markets, how they compare to insurance products, the aspects you should understand about options before trading them, and how options can provide significant advantages to traders.
  • Insight to how Andrew uses trading systems in combination with a discretionary approach. And how a similar approach could benefit those who are purely discretionary, or even long term investors.
  • An overview of the 7 Steps to System Trading Success; why risk is the most important factor to consider, and why the projected return is not as important as most people think.
  • Expectancy: Changing your mindset to understand that you can be wrong on a trade more times that you’re right, and still make exceptional returns.
  • The market plays by a unique set of rules that doesn’t exist in other walks of life – Andrew gives a unique answer for why the majority of traders never make money.
  • And much, much more…

Links and resources mentioned:

  • 7 Steps to System Trading Success – Here’s a link to the free video series, created by Andrew. Each video runs for roughly 10 minutes, covering the various metrics and aspects of systematic trading.
  • SMBu.com – To learn more about Andrew, you might like to read through his many articles on the SMB University blog.
  • @AndrewF_SMB – Also be sure to follow Andrew on Twitter to stay up to date with his latest movements.

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