Marco Nigro is a business executive who chose Systematic Trading as a tool to actively manage his assets as an alternative to simply keep them in the bank.
After the first peak of earnings of around 60,000 euros, he met the enemy of every trader: the drawdown. And it is exactly in this negative phase that he saw his earnings fall by as much as 30,000 euros. So he refocused his attention on the Unger Academy teachings and, together with the support of the community, he managed to reorganize his portfolio for better risk control, up to recover all the losses and see new peaks in his equity line.
Marco is a student of mine who started his career with “Trading Systems Supremacy”, thanks to which he managed to create his first strategies. He then started to trade them live. As the number of systems grew, he wanted to better understand the methods of evaluation through “Trading System Evaluation” and the correct approach to position sizing through “Mastering Position Sizing”. To complete his training and make the most out of the skills he learned, he then wanted to know more about the principles behind the correct portfolio management, studying “Portfolio Secrets”.
I suggest you take a look at this interview, where Marco gives very interesting advice especially to those who are still trying to find their own way in Trading.
Was there any change from the previous interview? On which markets do you operate mainly and why?
Nothing much has changed since last time.
Surely the attitude has changed a little. Over time, you surely acquire a bit of detachment and a greater – how shall I put it -a greater ability to be a bit aseptic about the performance of the single trade.
I have added a few things in order to always follow the concept of maximum diversification, but after all, I didn’t add a lot of other markets.
I always trade the stock index, I added the Hang Seng – which is the Hong Kong index – just to diversify also the time zone issue, but more or less I trade the same underlyings, so energy, metals, some grains like wheat and soy, but more or less it is the same.
Now I can’t remember exactly the markets I was trading when we talked last time, but the only thing I can tell you is that I have simply extended the strategies to every market. Maybe at that time, I had only 2 systems on oil, now I’ve got 5, that’s it.
How are you structured? Which platform, broker and data feed do you use?
I‘ve just been sticking to Multicharts, Interactive Broker and IQFeed.
I also have something going on TradeStation, but just because there are a couple of strategies that can only run TradeStation.
One of these uses the COT (Commitment of Traders) which therefore needs to run there, and then I also noticed that for some very slow strategies on daily bars, TradeStation is slightly more accurate.
So let’s say I still have 90% of my strategies on Multicharts.
I must admit that I have also tried other brokers, because I had heard of alternative brokers than Interactive Brokers who have a bit lower slippage, but actually I didn’t have a great time with them. I mean, they work, they do their job and so on, but I have experienced that Interactive Broker has a more reliable interconnection, even easier to manage thanks to its entire infrastructure.
Once you compare it with others, then you realize that the interconnection between platform and market is much more valid. So I’ve been sticking to this infrastructure here.
What results did you obtain after studying with the Unger Academy?
If I’m here doing this interview, it’s because I have reached the next goal of gaining €50,000.
I feel more and more satisfied to have started this journey with Andrea Unger and his teachings.
Because, you know, when you enter this world of speculation on the financial markets, there are always so many offers buzzing around you.
There are those who call you from abroad to offer you some kind of winning strategy, and I see that there are so many people that make it easy for you, so the impression you get is that they even want to scam you.
Actually, I must admit that Andrea and his team were twice as good at entering a market full of scammers, while he teaches you something concrete instead, a method that you can also improve and customize.
And I can say that he also warns you about the risks of trading.
Basically, in my opinion, a trainer from this world must first be very clear about the risks of exposure and overinvesting, you don’t have to bite more than you can chew, and that you should risk only a percentage of your capital for each trade.
I can still totally picture in my mind the first videos of Andrea, some of which were even free, where he talks about money management and he shows you the martingale and the anti-martingale, and then he makes you mathematically understand that if every time a trade goes wrong you double the bet to make up, the end is really near.
Actually, it’s exactly the opposite that can really pay off in the long run, and this somewhat warns you against the difference between intuition and concreteness.
In any case, it is clear that the concept of being able to outperform the market is getting more and more complex and sophisticated.
Consider that in the world of buying and selling financial instruments, there is always some sort of war going on between those who think the market will go up and those who think it will go down.
I think I have read somewhere that the market is the place where buyers and sellers meet, both thinking about making a good deal.
If one buys 1 ounce of gold for $1,500 and the other sells it, the first one is thinking that one minute later the gold will be worth more, while the other is thinking that it will be worthless.
One is wrong and the other is making the right move instead.
So, the lesson I’ve learned is that there are several opportunities in the markets, some inefficiencies that can be exploited even by small operators. We don’t necessarily have to be a bank to take advantage of them, so I have become more and more aware of this.
One thing I’ve noticed in this personal evolution is that I tend to risk less and less as compared to when I started. So as my account is growing I am not applying big rules for expanding the exposure. I mean, when I started, taking a $1,000 stop loss was perhaps the limit of acceptable risk. Now I could move up to $2000, but I always stay on $1000 because over time I experienced that when the drawdowns occur, you experience the downs of your equity with a bit of anxiety.
So maybe it is better to earn a little less, but also risk a little less.
At least this is the lesson I have learned, always following the recommendations of the most experienced and capable individuals.
What were your initial capital and the worst drawdown you had to cope with?
I started with a capital of around € 40,000, and when I got to €100,000 (then with a gain of €60,000) I had a drawdown of €30,000.
If something like this had occurred to me at the beginning I would have surely quit, because then it was really hard to react. But this event helped me to understand that the markets are always full of tricks, so if you are going through a good period there is no guarantee that this will always be the case, and the same applies for a bad period too. It doesn’t mean it will be always bad.
Well, surely that drawdown occurred at the same time as a crash on almost every market. Maybe at the time, I was a bit overexposed on shares, so my systems seemed to go crazy, they couldn’t get anything right.
So since then I have increased diversification and I have also put in place more advanced equity control systems, which is what Andrea also teaches in another path, that is, to keep an eye on the systems and, if they begin to show signs of failure, then I switch them off promptly and not wait for them to fall apart completely.
Then you have to leave these systems where they are and keep checking them to see if their equity goes up again, because the underlying market dynamics realigns with the history of that market, and only then you can turn them on again.
The lesson I’ve learned is that you must avoid unnecessary overfitting on a system that no longer works and that you insist on keeping it live just because in your backtest you were satisfied with the metrics.
What advice would you give to those who are still looking for their own way in trading, both the algo and the discretionary?
I definitely recommend to study hard about the testing approach, and therefore have a basic platform, whatever it is.
There are many, I prefer the one recommended by Andrea, but there are so many.
Just a few days ago I met someone who uses ProRealTime, which I have heard is a valid tool. I’m not familiar with it, but the number analysis is essential for me, that is backtesting and seeing that the idea you have in mind or that is recommended works somehow.
So my suggestion is to always try things before putting them on the market.
Many people say that you should then do the so-called paper trading, which is a simulated trading process.
I partially agree on this, because it’s okay to do it but not too long, maybe a month or so, because your real experience will be on real trading, on real operations.
With a simulated trading, you are always a little detached from reality, or if there is a technical error, maybe the platform just gets stuck and things don’t work out, you minimize it, while when a problem occurs to your real account, and you lose €1000 due to a technical error, you surely experience this situation with a different state of mind.
You need to react and realize that you have to take it into account and gain experience from this. Then, of course, you need to diversify in terms of markets, but also of techniques and ideas.
I have met someone who had several systems on Fib and Dax featuring the same exit more or less, and when those markets started to get crazy he experienced a lot of problems because in reality, he didn’t have so many systems because the strategy engine was the same.
Those who know me, and those who have seen it, know that I am a fanatic of all-round diversification, because I am totally convinced that the more diversity there is in your portfolio, the more you can guarantee yourself that when things go wrong, there is also something else that goes right, so there is compensation.
Is there something more you want to add?
There is something I would definitely say, especially to young people: before even thinking about live off trading, you should evaluate a bunch of options.
In my opinion, the advantage of algorithmic, automated trading is that you can basically do it while you do other things as well.
Unlike those who do it in a discretionary way, that is manual (even if there is a protocol, you still have to enter it by hand and stay in front of the screen for hours), systematic trading allows you to distribute your working hours over the day, and in the weekend you can go deeper, study a system, then put it on the market and you can do something else.
Well, it should be a job that offers you the opportunity to check from time to time if you get an email about fixing something, so not all jobs are suitable.
Then, it also depends on the personal ability to keep calm while you have everything live.
However, someone might think “I just want to do this in my life because I’m getting great results”. Well, I don’t recommend it. On the contrary, especially young people who are less capitalized should first increase their capital by doing another job in parallel.
Profits gained with trading must remain there, you don’t have to use them to live on, so they can grow faster and then, once you get an increased capital, you can decide to go full-time.
This is my sincere advice. In my opinion, if you have a drawdown for 3 months and you have incomings from a different source, you can overcome it psychologically much more easily than those who need to use their earnings from trading to pay their bills. You never know what your profits will be and when you will reach them.
There may be a month with very good results and then 3 months of dead calm.
So I personally managed to be a little more detached from the curve trend just because I don’t live off the trading income.