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.
Learn more about your ad choices. Visit megaphone.fm/adchoices
Chat With Traders