Trading strategies of a market assistant who has averaged 58% for 27 years


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  • Peter Brandt is a highly skilled trader described in Jack Schwager’s book “Unknown Market Wizards”.
  • Over the years, Brandt has grown from a technical analysis trader to a meticulous risk taker.
  • He explains how he identifies asymmetric opportunities and avoids transactions that slow down performance.

Some legendary traders are born, others are created. Peter Brandt is inspired.

Brandt, who grew up in “poverty,” was already working at one of the world’s largest advertising agencies when he met a friend – a soy trader – for lunch at the Chicago Board of Trade.

Immediately, the auction stalls captivated him and sparked the desire for a career change.

Brandt, who is featured in Jack Schwager’s new book “Unknown Market Wizards”, has pursued a career in trading that includes a 14-year period that began in the 1970s and the current 13-year period that resumed in 2006.

Over nearly three decades, he has averaged an impressive 58% annual compound return, according to Schwager. But when he started trading in late 1975, Brandt was frustrated to find a methodology that would work for him.

He tried point and number charts, seasonal patterns, and spread trading, but it wasn’t until he learned to use protective stops and read Robert Edwards and John’s book. Magee, “Technical Analysis of Stock Trends,” that things have finally changed.

“It gave me a framework for understanding pricing. It gave me a sense of where to enter a market,” Brandt told Schwager. “It also gave me a way to establish where to protect myself in a trade and a sense of where the market might go.”

The so-called bible of technical analysis brought Brandt into charting. By 1979 he was well on the way to commercial success. The following year, he incorporated his company Factor Research and Trading.

From analytical chartist to meticulous risk taker

Chart patterns are no longer an essential part of Brandt’s trading strategy as they are prone to failures and could turn into another pattern.

As charts become “much less reliable” than they were in the 1970s and 1980s, Brandt has moved from one to four week trading models to eight to 26 week trading models. It has also become more selective and would only trade patterns where the breakout crosses a horizontal border, allowing traders to “find out much faster whether you are right or wrong”.

Over the years, Brandt has incorporated protective stops into his trading methodology. “Yes, the risk I’m taking on a trade is much lower now,” he said. “Every time I take a trade, I limit my risk to about 1/2% of my equity from the point of entry. I want my stops to be at breakeven point or better within two or three days. the entrance. “

Brandt had his first bad year as a full-time trader in 1988, losing around 5% after rising 600% the year before. In 1992, his exchanges faltered. He traded his own account for another two years before closing it.

“The fun of trading had left me by then. Trading had become a chore,” he said. “I felt the gap between how I was performing and how I knew I could play. This gap was emotionally difficult for me to live with.”

Asymmetric opportunities and popcorn exchanges

In 2006, Brandt returned to the business after an 11-year hiatus. He had been gone for so long that the world had switched to electronic trading, but his trading strategies and rules still applied.

In fact, when he deviated from his trading rules in 2013 and started adding medium reversion trades, which allow traders to sell on strength and buy on weakness, Brandt suffered a drawdown. 17% over 18 months.

“I had accepted the lie that I had to change because the old ways didn’t work anymore,” he said. “I finally realized I had to get back to basics.”

After this withdrawal, Brandt began to review his equity on a closed deal basis only. “Also, once the trade profits are equal to 1% of my equity, I withdraw half of the position“he said.” So I can give the other half a lot more room. “

Another rule he instituted is to increase the stop once it reaches more than 70% of its profit target. “If I have an open profit of $ 1,800 per contract on a trade with a target of $ 2,000,” he said, “why would I risk giving it all back to earn another $ 200?

By following both rules, he avoids doing what he calls “popcorn trades,” which are profitable trades held too long to the point where all of the profit is ceded or turned into a net loss.

Instead, Brandt looks for asymmetric trades where “the perceived upside potential significantly exceeds the required risk.” He tends to find these opportunities near a “ice line“- a price zone that is difficult to cross but which should provide support once it is.

“If I can find a market with a price breakout where at least half of that day’s range is below the ice line, then that low can be a significant risk point,” he said. .

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