OVERVIEW
In my trading process—where I am currently 1st in the World Cup Trading Championships and finished 3rd in 2025—two traditional trading approaches are combined: discretionary trading mixed with algorithmic trading.
Algorithmic Component
I rely on my algorithms for entry and exit signals. These provide mathematical precision for timing.
Discretionary Component
My macro investment policy determines which assets I am willing to enter using those algorithmic signals.
This combination turns a decent algo strategy (as good as can realistically be achieved) into one with a true edge through discretionary decision-making on growth, inflation, and government policy.
The Key Insight
The signals posted in our products ARE the algorithms. The grading system (A-E) represents the discretionary macro overlay that determines tradability.
Understanding Tradable Assets
A factor that can determine a Grade A or tradable asset can be defined like this:
| MACRO REGIME | BEST ASSET CLASSES | WORST ASSET CLASSES | BEST EQUITY SECTORS | WORST EQUITY SECTORS | BEST EQUITY STYLE FACTORS | WORST EQUITY STYLE FACTORS |
|---|---|---|---|---|---|---|
|
↑ Growth ↓ Inflation |
Equities, Commodities, FX | Fixed Income, USD | Tech, Consumer Discretionary, Communication Services, Industrials, Materials, REITs | Utilities, Consumer Staples, Health Care | High Beta, Momentum, Leverage, Secular Growth, Mid Caps | Low Beta, Defensives, Value, Dividend Yield, Small Caps |
|
↑ Growth ↑ Inflation |
Commodities, Equities | Fixed Income, USD | Tech, Industrials, Financials, Energy, Consumer Discretionary | Utilities, Communication Services, Consumer Staples, REITs, Health Care | Secular Growth, High Beta, Small Caps, Cyclical Growth, Momentum | Low Beta, Dividend Yield, Value, Defensives, Size |
|
↓ Growth ↑ Inflation |
Gold, Commodities, Fixed Income | Credit | Utilities, Energy, REITs, Tech, Consumer Staples, Health Care | Communication Services, Financials, Consumer Discretionary, Industrials, Materials | Secular Growth, Momentum, Mid Caps, Low Beta, Quality | Small Caps, Dividend Yield, Value, Defensives, Size |
|
↓ Growth ↓ Inflation |
Fixed Income, Gold, USD | Commodities, Equities, Credit, FX | Consumer Staples, Health Care, Utilities | Energy, Tech, Financials, Industrials, Consumer Discretionary | Low Beta, Dividend Yield, Quality, Defensives, Value | High Beta, Momentum, Leverage, Secular Growth, Cyclical Growth |
There will be choices at your discretion, but this is a nice general guideline for you to understand the process a bit more.
Trading frequency is low, with the objective of focusing only on very high-probability plays. This allows benefits like no stops, which mathematically increases the probability of alpha generation.
LONG-TERM INVESTING APPROACH
For long-term investing, I only like buying companies in an uptrend that are obviously strong fundamentally, but my preference is very skewed towards price action rather than fundamentals.
If you buy on a downtrend, it might not matter how good the company is if the trend and market disagree. Price action tells you what the market believes—fundamentals tell you what you believe.
If the market goes up 66% of the time, it is just way easier and way less stress to always be long than short. The odds are stacked against shorts in the long run.
Lifecycle Investing
For position sizing in long-term investing, I recommend the Lifecycle Investing approach, based on the book Lifecycle Investing by Ian Ayres and Barry Nalebuff:
Lifecycle Investing — Ian Ayres & Barry Nalebuff
I personally would use this as a guideline for investing position sizing. The core concept challenges traditional age-based allocation.
Tip: You can get an Audible free trial and listen to it for free.The Core Concept
A summary for those who want the key insight from the academic paper:
The Retirement Paradox
You should use leverage to try to match your exposure before retirement. Consider: if you have $1 million at 50 and it moves 10%, you lose or gain $100k. But if you have $500k at 40, you lose or gain only $50k.
So why would you risk so much more at retirement than before?
If the market is expected to continue upwards, you might as well use leverage earlier in life. There are some very interesting concepts and math results in the full book.
Options & Leverage
If you're interested in a way to calculate the cost of interest on an option (normally the cheapest way to leverage), we have an Excel formula sheet that makes it easy.
Send us an email at [email protected] to request the free Excel formula sheet for calculating option leverage costs.