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In this episode, we explore:
• How Dave got introduced to markets: From early exposure to investing through his family to actively seeking more control over his capital and moving from swing trading into day trading.
• Why rules matter: The transition from discretionary decisions to systematic frameworks — and why trading without a process is a fast path to inconsistency.
• Backtesting as a “superpower”: What backtesting really does for strategy development and confidence in your edge.
• Reconciling backtests with real life: Practical realities of execution, slippage, and market structure — and how to build a feedback loop so your live results get closer to your imulations.
• Drawdowns and mindset: How to handle periods where a strategy doesn’t behave as expected, and why many traders quit in drawdowns rather than at all-time highs.
• Scaling a trading business: The difference between scaling size versus scaling breadth — and why uncorrelated strategies matter.
• Practical first step for systematic traders: How to start adding structure to your trading with backtesting, even if you’re not a programmer.
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About the guest:
Dave Mabe has been a professional trader and technologist for over two decades. As a former CTO of Trade-Ideas, he has unique experience at the intersection of algorithm design, real-time market data, and automated execution. Outside trading, he writes a popular daily newsletter on backtesting and systematic strategy development, and hosts the Line Your Own Pockets podcast focused on systematic approaches to markets.
Links + Resources:
• Link to Better Backtesting — Dave’s free multi-day email course on building strategies and improving them over time.
• Trade-Ideas, Amibroker, RealTest — examples of backtesting and strategy development platforms discussed in context.
Sponsor of Chat With Traders Podcast:
Trade The Pool: http://www.tradethepool.com
Sponsor of Episode 318:
Tasty Trade: http://www.tastytrade.com/chat
Time Stamps:
Please note: Exact times will vary depending on current ads.
00:00 Intro and Background
08:29 Stock Selection and Systematic Trading Rules
11:32 Position Sizing, Expectancy and Risk Management
16:50 Discovering Backtesting and First Backtests
18:40 Backtesting Principles, Sample Size and Common Pitfalls
20:34 Gradual Automation and Live Trading Implementation
22:17 Trading Journal and Reconciling Backtest vs Live
27:27 Scaling through Automation: More Trades, Better Results
29:26 Drawdowns, Psychology and Handling Setbacks
34:14 Tools, AI and Software for Backtesting and Coding
39:56 Common Trading Myths Debunked (Partials, Stops)
48:01 Getting Started: Practical Steps, Resources and Closing
Trading Disclaimer:
Trading in the financial markets involves a risk of loss. Podcast episodes and other content produced by Chat With Traders are for informational or educational purposes only and do not constitute trading or investment recommendations or advice.