Marek Chrastina is a professional futures trader and money manager.
His most recent successes are 3rd place in 2020-2021 in The Global Cup Trading Championship and 3rd place in 2021 World Cup Championship of Futures Trading®, and he is currently (at the time of having this interview) in the Top 5 of the new year championship: https://www.worldcupchampionships.com/world-cup-trading-championship-standings
Marek is a long-time user of StrategyQuant, and he also contributed some ideas and features in the recent versions.
Before I ask about WCTCH can you tell us something about you? How did you get to algo-trading?
I would say that it was a natural outgrowth of my previous experience as a risk and portfolio manager combined with natural predispositions and talents, that lean more toward a conceptual and systematic approach. Trading discretionary well and with discipline is boring to me, and I don’t relate to it. Whereas managing algorithmic portfolios is something that suits me.
You finished 3rd last year in World Cup Trading Championships with a very nice 182.4% yearly return, congratulations ?
Did you use StrategyQuant X or our other tools when developing strategies you used in the Championship?
Thank you. Yes, of course, I used different systems in my portfolios, and some of them are created using SQX.
Just to follow up on that. Some of the strategies you trade at the World Cup Trading Championships come from SQ, right?
You trade mainly Futures. Could you share some non-secret details of your WCTCH strategies? Are you trading index futures or commodities? What timeframes do you usually use?
Yes, I trade mainly futures. Indexes, commodities, .. all markets where there is sufficient liquidity. I can find an edge there, and at the same time, the market is technically compatible with execution possibilities.
Until now, I thought that to succeed at the Trading Championship you have to deploy strategies with extreme risk, which implies the possibility of extreme profit. So it’s not for regular trading. If you are lucky, you will “win”, if not, you will fail.
However, from our previous conversation, it seems, that you do not act like this. Even in the competition, you trade strategies basically the same way as you do on a regular account, right?
It’s also about risk adjustment, but I certainly don’t do it in a way where the traded capital is at risk of being wiped out or significantly threatened. That would be pure gambling, and such an approach is not my cup of tea and does not belong in serious trading. But obviously, there is a part of the participants who act as you describe.
Could you tell us a little bit more about the workflows you use for building and selecting the best strategies?
The workflow consists of development and subsequent testing and robustness validation. The development, as such, represents a maximum of 5% of all time and effort in systems development. Robustness testing makes up the largest part and is where I devote most of my time and energy.
Of course, it’s a process, and getting to the functional and robust strategies looks like a funnel with a lot of sieves in it. Each sieve is made up of some sort of stress test or analytical method that helps separate the wheat from the chaff.
It’s a very complex process, where I start by analyzing the results of the development process itself, and the robustness of the development run as a whole, gradually applying various mathematical and statistical as well as behavioral methods to maximize the likelihood that the final strategies that pass all the steps work in the future under various changing conditions.
Do you have any favorite robustness tests that you rely on the most?
In trading, I don’t think in the intent of favoritism but rather meaningful functionality and added value. I use and apply with some weight and order various mathematical-statistical as well as behavioral methods that are part of the selection funnel and can give insight and contribute to the assessment of the robustness of the system.
Do you have any philosophy or insights about creating an optimal portfolio of trading strategies?
In my opinion, there is no optimal portfolio. I can put together an optimal portfolio of the hypothetical past, but that is no guarantee that it will perform optimally in the future. Many traders are looking for optimal inputs, outputs, systems, and portfolios … I think this is a direct path to over-optimization or paralysis from analysis. However, I definitely use best practices and processes to design a well-diversified robust portfolio.
A good portfolio, in my opinion, should be well-diversified across markets and market segments. There are, of course, an incredible number of other details that are essential and need to be considered.
I base my portfolio design – as I do with all other aspects of development and trading – on a combination of mathematical and statistical methods and experience, the logic of how markets work and their interrelationships, discretion, and appropriate timing.
Every portfolio suffers from drawdown sometimes. What is your approach to overcoming it and maintaining confidence in your algos?
My confidence in the systems and the recovery of drawdowns stems from a robust development and testing process. If the development and testing process is set up well, and you don’t compromise on what you include in the trading then I think this forms a strong pillar to lean on.
I see drawdowns as a natural thing. They are part of the plan and the trading. I have a pre-set and clearly defined max risk for each system as well as for each portfolio, and I stick to that. When a system reaches a given level, I shut it down.
Is there any source of knowledge that you would like to recommend to other traders?
I think there have been a lot of recommendations for basically common, well-known trading literature and resources in the trading industry. What I would like to put in the spotlight are the books by Nassim Taleb, which have a lot of value in them.
Do you have any tips about what to avoid or be aware of in algo-trading?
Yeah. I would definitely recommend avoiding :
- Over-optimization of systems
- Interfering with systems under the influence of emotions (or anything else :))
Would you like to share some recommendations to other algo-developers, what to focus on, etc.?
I’ll just summarize the answers to a previous couple of questions here:
- Have a robust development process and robustness testing,
- Don’t compromise on the development process, the choice of systems, or the trading process,
- Emphasize robustness and adaptability of systems,
- Diversify and trade portfolios.
* World Cup Trading Championships® is a contest where traders compete together since 1983. It’s the ultimate way to test trader’s skills and earn the respect of the trading community. The most famous winner was Larry Williams.