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The Ultimate Systems Trader

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  1. Power Of The Mind
    8 Topics
  2. Natural Laws Of Trading
    7 Topics
  3. Introduction
    6 Topics
  4. Systematic Trend Following System
    12 Topics
  5. Mean Reversion Trading System
    12 Topics
  6. Momo Stock Trading System
    10 Topics
  7. Slow and Steady System
    7 Topics
  8. Conclusion
    9 Topics
  9. Bonuses
    8 Topics
Module 8, Topic 3
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Which Trading Systems to Trade

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Download: Video | Transcript

In the previous video, I spoke about the holy grail of trading. having multiple systems working for you.

The question is which trading system should you trade?

That’s a good question.

To answer that you must understand the characteristics of the different trading systems that you’ve learned so far.

I’m going to cover the primary three of them.

Characteristics of different trading systems

Systematic Trend Following System

  • Usually does well during a crisis or a recession
  • Moderate risk
  • Moderate return

Crisis or recession

This is a trading system that usually does well during a crisis period during the recession and of course, when the market is trending, across the different asset classes.


This system has moderate risk according to our backtest.

We have a maximum drawdown somewhere between 20-25% depending on how far your look-back period is.

Moderate Return

The average annual return is about 17-18% a year over the last 2020 over the last 22 or 23 years.

Mean Reversion Trading System

  • Good during neutral and bull markets
  • Moderate risk
  • Moderate return

Good Neutral and Bull Markets

This system is good when the stock market is bullish or the stock market is kind of neutral range bound, this system will do ok.

But when the bear market or crisis, needless to say, this is a long-only stock trading system, you will likely get affected during the bear market.

Moderate Risk

In terms of risk, this is a moderate risk. I think the maximum drawdown so far is about 32-33% based on our historical backtesting.

Moderate Return

This is between 20-21% across our backtest.

MoMo Stock Trading

  • Good during bull markets
  • Higher risk
  • Higher return

Good During Bull Markets

This system does well during bull markets. Trading the NASDAQ stocks in particular.

Higher Risk

The maximum drawdown based on historical testing now is more than 50%.

However, the upside to it is that it also offers a higher return

It’s a higher risk, higher return system.

Now that you understand the different characteristics of this trading system.

The question is which trading system should you trade?

Which Trading System Should You Trade?

It depends on a few things If you are just getting started.

What do you prioritize more?

Let’s say you have investment portfolios that are exposed to the stock market and you want to protect yourself during the crisis/recession period, then it’s a no-brainer to start with the systematic trend following

But maybe let’s say you don’t have any exposure to the market as well and you want to be executing trades pretty regularly and to have a good chance of making money almost every single year that you can consider starting with the Mean Reversion Trading System.

Maybe you are someone who likes high risk and high return, you don’t mind, seeing your account drop 50-60% at any point because it’s money you can afford to lose. Then the MoMo stock trading system is something for you to consider.

Depending on your goals, and your needs, each of these trading systems could meet your needs, depending on what you need.

As we discussed earlier, trading multiple trading systems, here are some combos that you can consider once you are ready to trade multiple systems.


Systematic Trend Following + Mean Reversion Trading

STF: 50%
MRT: 50%

The way to do it is very simple.

Let’s say you have 100K capital, you look at 50% of your capital to systematic trend following and 50% to mean reversion trading.

It’s kind of like equally weighted.

That’s the first combo that I recommend most traders to consider starting with.

Because again of the relatively smooth equity curve.


For those of you with maybe more capital or you want to have a bit more diversification, you can consider combo number 2.

Systematic Trend Following + Mean Reversion Trading + MoMo Stock Trading

STF: 40%
MRT: 40%
MOMO: 20%

But this time one is a bit different.

We are going with a 40% systematic trend following, 40% mean version trading, and 20% stock trading system.

Why does the MoMo Stock trading system have only 20% weight?

Because as you know, this particular trading system, it has a high risk and as well higher return.

So again, to kind of like help you sleep better at night, I dial down the risk exposure to the Momo stock trading system.

This way, I believe it will also fit most traders because you don’t have such a huge exposure to this higher-risk trading system.

And of course, what I shared with you here are just templates.

They’re not cast in stone.

If you’ve traded long enough, you’ll understand the characteristics of different trading systems and you have your personality that well, and you want to tweak the percentages, feel free to go ahead.

These are just template Ideas for you to consider.

With that said,

I wish you good luck, good trading.

I’ll see you in the next video.