Diversification: build uncorrelated strategies

When Dave Mabe backtested his strategy, it outperformed his own discretionary trading — and changed how he approached everything. In this episode, we discuss gapping breakouts, expectancy, systematic trading, drawdowns, and the reality gap between backtests and live execution. A practical conversation for traders serious about building durable edge.

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 simulations.

·        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.

About the guest:

Dave 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

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.

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