Between Risk and Reward: Perry Kaufman Joins TradingMarkets 2008!
How can you get great returns while avoiding the risks of price shocks, financial instability and other unforeseen events?
Legendary researcher and author of the highly acclaimed New Trading Systems and Methods, Perry Kaufman was one of the first people to ever develop computer models for making buying and selling decisions in the markets. His years of experience as a trader and research have convinced him that traders can remove a great deal of risk through hedged strategies, diversification and deleveraging. We are thrilled to have Perry Kaufman as one of the featured speakers at our traders’ conference, TradingMarkets 2008, this November 14-16, 2008, at the MGM Hotel and Casino in Las Vegas, Nevada.
Perry Kaufman has thirty-five years of experience in financial engineering and hedge funds. Beginning as a “rocket scientist” in the Aerospace Industry, where he worked on the navigation and control systems for Gemini, Mr. Kaufman was in the forefront of market analysis in the 1970s, using computer models for making market decisions.
Mr. Kaufman specializes in the development of fully systematic, short-term trading programs in derivatives and equities as well as asset allocation and leverage overlays. His background covers a wide-range of strategies including FX carry, merger-arb, stat-arb, trend-following, and pattern recognition, with more recent emphasis on risk issues.
At his presentation at TradingMarkets 2008, Perry Kaufman will help traders figure out their exposure to potential price shocks and why corporate disclosure just doesn’t cut it. He’ll also help “take direction” out of your trading as a risk factor through intelligent hedging strategies. Last, Perry will show you how to trade against the market noise, hype and punditocracy.
I spoke with Mr. Kaufman by telephone last week to discuss his work and upcoming presentation at TradingMarkets 2008 this November. What follows is a transcript of our brief conversation.
David Penn: How long have you been a trader?
Perry Kaufman: I’ve been trading since 1971.
Penn: What do you enjoy most about trading?
Kaufman: (Laughs) I enjoy making money!
Penn: What will you be sharing with traders at TM 2008?
Kaufman: The markets have evolved over time, and both the overall market risk and correlations are now much than I can ever remember. What we’ll talk about are
ways to trade that are immune to the price shocks and structural changes that seem to be overwhelming the market.
I’ve traded a lot of different strategies over the years. Some of them have been immune to these moves, others have not. When I first started, the simplest
trend-following systems worked. We weren’t really concerned with risk. Now the markets are more complex and interrelated. Macro trends, the basis of many of
the big hedge funds, have been beaten up by the subprime crisis and now the huge reversals in oil and other commodities markets. But there are ways that traders can make money without exposing themselves to these potentially ugly moves.
Traders need to look more at various types of arbitrage and spreading strategies. I’ll be talking about stocks and stock/commodity combinations. I personally like to find combinations that have one foot in the stock market and one in the commodities market because there’s not as much competition — and it’s a little more interesting.
We’ll talk about pairs trading and spreading. We’ll also talk about the realities of risk and portfolio management. A lot of people underestimate the real risk of
trading because it’s easy to do that. Because of that they overleverage their positions. Of course, they have good company, if your remember that Long Term Capital Management overleveraged on the advice of two Nobel prize winners. But risk management should approached with a little math and a lot of common sense; otherwise it can become a very big problem.
Penn: What does a trader like yourself, who has been in the business for so many years, decades, get out of an event like TradingMarkets 2008?
Kaufman: I enjoy the contact. I like getting to meet a lot of interesting people.
Don’t think that I’m going to give out a bunch of trading strategies that people can just put in their pockets and take home. Instead I’m going to talk about basic
concepts that they can understand and adapt to their own trading. Unless you’ve been part of the development process, you don’t “own” the system, and you’ll never follow it unless you understand it and believe that it will work. You can’t do that with someone else’s system.
I do like the sharing some of the things I’ve learned over the years. I’m nearing retirement so I suppose I’m at a “give back time.”
Penn: One thing I’ve often experienced at trading conferences is the sensation of being overwhelmed by so much fascinating, compelling information. Do you have any advice on how traders can avoid feeling too overwhelmed by all that they are likely to learn and hear about at TradingMarkets 2008?
Kaufman: I think that this broad exposure is a benefit, that the variety is good. Not every trader is going to like or want to use everything they see at a trading
conference.
I think it’s good for traders to see a lot of different approaches and then decide from among them which are the methods and strategies that they would like to adopt for their own trading. You need a comfort level with your trading method.