Michael Grech’s was perfectly positioned for a career as an algorithmic trader after studying Geophysics, working in the Oil and Gas industry, building capital after selling a successful food business and turning his hand to investing in the Stock market. What’s more his programming background gave him the skills to master quantitative trading.

Today, Michael trades Stocks, ETFs, Futures, and Options using mostly Mean Reversion setups and in today’s interview you get a chance to learn exactly how he does it…

Podcast Interview


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Recommended Books

Schwager on Futures Technical Analysis by Jack Schwager

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Key Lessons

  • [10:48] You want to try and control what you can. You can’t control what the market is gonna do but you can control your expenses, you can control your slippage, and so you need to try and do that whenever you can.
  • [11:59] My whole approach now to investing is you need a basket of strategies that rely on different assumptions so that they are not correlated with each other and you’re trying to exploit different market properties.
  • [12:48] The most important thing I look at is the Risk-to-Reward ratio. That is my number one criterion I look at.
  • [14:35] I make sure that when I develop a strategy, I backtest over a very long period of time at least 10 years or more.
  • [17:23] Quantopolis has 6 different strategies and even though 4 of them are similar, they reply to different markets and they don’t go in and out always at the same time.
  • [18:49] It’s easier to find strategies that have the benefits on the longer timeframe.
  • [20:46] It’s very important, even though it’s a technical strategy and you have rules to follow, that you have a basic understanding of what the strategy is doing.
  • [25:09] For an active trader like me volatility is your friend.
  • [29:39] I don’t know if I have an edge unless I backtest and quantify it.
  • [30:17] For you to have confidence in the strategy, you need to be able to have backtesting and by backtesting I mean not 1 month or 3 months, it has to be 10 years. It has to be solid.
  • [30:38] The nice thing about quantitative trading and the approach I think is that all the psychological preparation is done in advance.

Click Here For Michael’s “Strategy of the Week” Download

  • [31:19] You go in there with a strategy that you believed will make money over time and if the market goes against you in this trade then so be it.
  • [36:24] 99% of the time the strategies don’t work. Most of the stuff I tried doesn’t work. It’s very hard to find something that works.
  • [37:13] Do your homework, don’t spin your wheels, try and backtest everything, and see where you are.
  • [38:16] A hundred-million-dollar Stock will behave very differently than a one-billion-dollar Stock.
  • [40:04] What you need to remember always is that technical indicators are derived from the chart. Technical indicator essentially is just a simplification of the price action.
  • [44:27] I think its very important to keep your exits and entries clean.
  • [45:50] Whatever platform you do, whatever method you use, I don’t think you should be trading unless you have mastered backtesting.

Michael’s Trading

  • He trades Stocks, ETFs, Futures, and Options
  • 100% of his portfolio is based on the quantitative approach
  • He doesn’t use classical trading platforms such as TradeStation
  • Risk-to-Reward ratio and the consistency are the most important things he looks at
  • He tries to find something that is at least having a risk-to-reward value of 1 or higher
  • He manages his risks by knowing the drawdowns and how much money he puts in trades
  • He is using 6 different strategies
  • He has a portfolio of 25 to 30 stocks in his retirement and savings accounts
  • Most of his strategies are based on the longer timeframes
  • He doesn’t trade markets that aren’t liquid
  • He does some combination of technical and fundamental analysis for his Stock trading
  • He uses the 3-month and 6-month charts to determine where the market is at
  • Most of his setups are mean reversions

Michael’s Strategy of the Week

  • He uses the Mean Reversion strategy.
  • He uses the standard Bollinger Bands in any timeframe.
  • He enters when it hits the lower Bollinger Band (Delta B) and sets his stop loss.
  • He exits when it rises above the Delta B.

Click Here For Michael’s “Strategy of the Week” Download

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