# Q&A with Robert Pardo



## nizar (28 August 2007)

He's the author of:  Design, Testing, and Optimization of Trading Systems  

http://www.pardo.org/files/Robert Pardo Market Beaters chapter.pdf

Well worth a read.


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## nizar (28 August 2007)

> Is your approach totally mechanical?
> Yes. The only thing that’s not mechanical is when we do the re-optimizations each year; there’s human evaluation of the results which is not done mechanically.




The bottom of page.7.

Any thoughts on re-optimisations?


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## nizar (28 August 2007)

Not sure who the interviewer is but he's asking all the right questions.



> How do you differentiate a large but acceptable losing streak from one that negates your perceived boundaries? Have you ever had one go beyond accepted parameters?
> 
> Yeah. The day that the U.S. said diplomacy is dead in the Iraqi situation we were long bonds everywhere, short stock indices everywhere, long energy and short the dollar. We had the worst day in our trading history. We just decided that that’s what happens once in a while. We didn’t feel there was anything out of the ordinary.
> 
> ...




Curtis Faith (in his book) also mentions that we should accept that maxDD be double that which was encountered in testing. ie. if we get maxDD of 25% in testing, be ready to accept 50% when trading live.


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## nizar (28 August 2007)

THis article is GOLD.
His book must be a winner as well.


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## howardbandy (28 August 2007)

Greetings --

Bob Pardo's book has a 1992 copyright date.  I'd recommend borrowing it from a library before spending the money to buy it.  You'll note it is not included in my list of recommended reading:
http://www.quantitativetradingsystems.com/resources.html

I'd recommend the books by Van Tharp and David Aronson.

In 1998 Bob called me looking for a job.  

Thanks,
Howard


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## nizar (28 August 2007)

howardbandy said:


> Greetings --
> 
> Bob Pardo's book has a 1992 copyright date.  I'd recommend borrowing it from a library before spending the money to buy it.  You'll note it is not included in my list of recommended reading:
> http://www.quantitativetradingsystems.com/resources.html
> ...




Why is it not on your list?
No good?

Van Tharp iv got a copy and read it a while ago but its not really related to systems testing and design.


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## nizar (28 August 2007)

howardbandy said:


> In 1998 Bob called me looking for a job.





Point taken


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## Bob Pardo (6 September 2007)

Aussie Stock Forums 09-05-2007

Hi Nizar,

Thanks for your kind words.

Art Collins (http://www.pardocapital.com/pgl_consult_collins.html) is the interviewer of the interview with me to which you posted a link.  It is the lead interview in his very fine -- though rather poorly titled -- book Market Beaters.  Art, by the way, also makes his primary living from trading.  He is also the author of three other excellent books http://www.pardocapital.com/pbl_team_collins.html.

It may be of interest to note that -- the opinions of Mr. Bandy and Mr. Tharp aside -- DTOTS is still considered one of -- if not the -- best and most thorough introductions and manual for the testing and optimization of a trading system.  Additional information about DTOTS is available at our website http://www.pardocapital.com/pbl_pardo_dtots.html.

It also may be of interest to note that an extensively updated and expanded 2nd edition will be available 02-2008 http://www.wiley.com/WileyCDA/WileyTitle/productCd-0470128011.html.

It may also be of interest to know that I am a professional trader -- also a consultant, coach, mentor and software developer -- and commodity trading advisor and have been such since 1996 (sorry Howard, I have no recollection of ever contacting you for a job, let alone in 1998, although I do talk to a lot of people about a lot of different things . . .) For additional information see http://www.pardocapital.com/pcl_index.html.  I have enjoyed a strategic alliance with Dunn Capital Management since 1996.

For those who think the techniques in the book are "outdated" it may be of interest to know that our current trading program XT99 has posted a return of +305% (http://www.pardocapital.com/files/XT99 Current Barclay.pdf) as of the end of July and since inception.  As of July 2007, XT99 was +37.5% YTD.  Preliminary estimates for August are +11%.

In addition, XT99 has been fortunate to have been cited over 25 times (http://www.pardocapital.com/pcl_rank_all.html) for top performance by Barclay and Futures magazine.

XT99 was originally created using the techniques presented in DTOTS.

PCL still uses the basic techniques in the book.  Of course, we have added a few things since then.  I am the inventor of Walk-Forward Analysis (which is trademarked by PGL) and which is one of the main focal points of DTOTS and EOTS (the 2nd edition.)  I would not trade any strategy which was not tested in that manner.  Nor will PCL.

By the way Van Tharp, since you made the comment that DTOTS is "not really related to systems testing and design,” I guess you might want to consider giving it a reread for that is ALL that it is about.  Just Google the name of the book or my name and see what everybody else says about it . . . 

Regards,

Bob Pardo
rep@pardocapital.com
www.pardocapital.com


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## nizar (6 September 2007)

Bob Pardo said:


> Aussie Stock Forums 09-05-2007
> 
> Hi Nizar,
> 
> ...




THanks for dropping by Bob.
I have already ordered a copy of your book. Amazon rates it well and so does some others on here that i respect.
Nice strategic alliance -- From what Iv read about him, Bill Dunn is already up there with the great ones.


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## It's Snake Pliskin (6 September 2007)

Bob Pardo said:


> Aussie Stock Forums 09-05-2007
> 
> Hi Nizar,
> 
> ...




Hi Bob,

Nice to see some big names from the states dropping in to post.

I have a copy of the Market Beaters book which is very good, though in need of a good editor. Thanks for giving me the opportunity to read your thoughts.

Snake


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## nizar (6 September 2007)

Bob Pardo said:


> By the way Van Tharp, since you made the comment that DTOTS is "not really related to systems testing and design,” I guess you might want to consider giving it a reread for that is ALL that it is about.




Sorry Bob.
A bit of a misunderstanding there.

When Howard recommended Van tharps book (post#5), my response to Howard was that Van tharp's book is not really related to systems testing and design.


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## howardbandy (6 September 2007)

Hi Bob --

Thanks for your responses.  

I am looking forward to your new book.

While in graduate school, I published a paper on walk-forward testing, and called the process exactly "walk-forward", in about 1969 or 1970.  I just got through looking through my files for a copy, but didn't find it.  I don't claim to have invented the process or the name, just a long history of working with modeling and simulation.

Thanks,
Howard


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## Temjin (7 September 2007)

nizar said:


> Sorry Bob.
> A bit of a misunderstanding there.
> 
> When Howard recommended Van tharps book (post#5), my response to Howard was that Van tharp's book is not really related to systems testing and design.




That's what I was thinking too. 



> If you had a decent system and you wanted to make 50 grand a year, you probably need to trade with between 250 and 500 thousand dollars. If you’re going to make 10 percent a year, you’re doing pretty good. Fifty thousand off $250,000 is 20 percent a year. My compound rate of return for the last three years is 40 percent, which makes me the fourth highest performing advisor for the past three years.
> People hear stories about a floor trader who makes $300,000 a year trading with maybe $100,000. They figure, "well, if he can do it, so can I." It’s not the same thing. Floor traders can leverage their clearing houses in a way that isn’t possible for the average person trading as an outside retail customer. .​





Bob, I am very interested in your comments on this particular answer in your interview. 

I don't particular agree with it because with the advancement in technologies and leverage capability, one could yield a much higher "absolute" return system (though reward/risk ratio may still be realistic) through trading multiple markets using extremely short intra-day data, thereby creating far many more opportunities. 

Back in the old days, i guess this is impossible for one person because he/she would be physically impossible to monitor and trade such many opportunities. 

But nowdays, people have developed fully automatic adapative intraday trading systems, which is statistically proven with valid backtesting/optimising methods, and trade them on large number of markets that gives them lots of trading opportunities. Since the execution itself is fully automatic, the markets can be traded 24 hours a day as well, adding to the overall profit edge.

I have seen evidences (though not through personal experiences YET) of such possibilities. 

Regardless, your book has been on my wishlist for several weeks now. Really looking forward to order it, but you say there is a second edition coming up on 2/2008. Don't know if i can wait that long though. ​


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## nizar (18 September 2007)

Iv finished reading this book today.
I must say i would highly recommend this to anybody serious about system testing and design.
Looking forward to the sequel.


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## Bob Pardo (3 October 2007)

nizar said:


> The bottom of page.7.
> 
> Any thoughts on re-optimisations?




Hi Nizar,

There is a great deal on this subject in DTOTS and more in EOTS.

Bob Pardo


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## Bob Pardo (3 October 2007)

nizar said:


> THanks for dropping by Bob.
> I have already ordered a copy of your book. Amazon rates it well and so does some others on here that i respect.
> Nice strategic alliance -- From what Iv read about him, Bill Dunn is already up there with the great ones.




Thanks Nizar.

Yes, Bill is considered by many to be one of the great ones.

Knowing him personally as I do certainly only confirms that.  He was a pioneer technical trader and one of the first and best professional CTAs.

Bob Pardo


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## Bob Pardo (3 October 2007)

nizar said:


> Sorry Bob.
> A bit of a misunderstanding there.
> 
> When Howard recommended Van tharps book (post#5), my response to Howard was that Van tharp's book is not really related to systems testing and design.




Thanks for the clarification Nizar.  I am of the same mind about his book.

Bob Pardo


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## Bob Pardo (3 October 2007)

It's Snake Pliskin said:


> Hi Bob,
> 
> Nice to see some big names from the states dropping in to post.
> 
> ...




My pleasure.


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## Bob Pardo (3 October 2007)

howardbandy said:


> Hi Bob --
> 
> Thanks for your responses.
> 
> ...




Thansk Howard.  I look forward to your opinion of it.  It is at least twice the length of the original with a lot of new material.

I would like to read your paper on walk-forward testing if you are ever able to locate it.

I would also like to read your book if you would be so kind as to forward a copy to me.

Regards,

Bob Pardo


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## Bob Pardo (3 October 2007)

Temjin said:


> That's what I was thinking too.
> 
> 
> 
> ...




Hi Temjin,

Regarding rates of return, I agree with you.  

In the context of the interview, Art was asking what it takes for the "typical" or "average" trader to earn that money.

There is a section in EOTS which discusses Perfect Profit -- a concept which I invented and first formulated in DTOTS -- for different markets and time frames and the vast profit potential which this suggests.

There is also an extensive section which discusses how trading strategies and strategy development software has really lagged far behind current computer and communications technology.

Yet, even that being said, true rocket scientists like Jim Simons and David Shaw, while leading the pack in returns for hedge funds, still are falling far short of what is theoretically possible.  

In EOTS, I have tried to raise the bar of returns expectations considerably.  I hope to prove the point myself with new projects for PCL.

And, by the way, XT99 was +11.86% for 08-2007, +53.78% 2007 YTD and +354.03% since Inception.

Preliminary estimates are +14% for 09-2007.

Regards,

Bob Pardo


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## howardbandy (3 October 2007)

Hi Bob --

Information about my book, "Quantitative Trading Systems," is available at the book's website:
http://www.quantitativetradingsystems.com/index.html

You'll be able to read the contents, preface, index, and two complete chapters.

There is a page with testimonials and reviews:
http://www.quantitativetradingsystems.com/testimonials.html

And a page that is getting a lot of hits with links to a variety of resources:
http://www.quantitativetradingsystems.com/resources.html

If you would like to swap review copies of my book for your new one, that would be fine.  Either respond to this posting with a mailing address and personal email address, or email me privately at:
howard_at_quantitativetradingsystems.com

Thanks,
Howard


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## Bob Pardo (17 March 2011)

Feb 14, 2011 10:50 ET
Pardo Capital Reports 2010 Annual Return of 25% From Flagship XT99 Diversified Product

Introduces New Multi-Advisor, Multi-Strategy Managed Futures Product

CHICAGO, IL--(Marketwire - February 14, 2011) - Pardo Capital Limited (www.pardocapital.com), a commodity trading advisor (CTA) providing managed futures products to qualified eligible persons (QEPs), reported 2010 annual return of 25% from its flagship XT99 Diversified trading program. Pardo Capital Limited was established in 1996 and has a long and successful track record in the managed futures sector. 

"Managed futures have recently stepped into the spotlight among alternative investments demonstrating their potential to deliver superior returns, even during periods of volatility, political uncertainty and poor performance in bond and equity markets," said Robert Pardo, President and Founder. "Futures may provide direct access to global macroeconomic trends, from commodities to currencies and stock indices.

"For example, consider our flagship trading strategy, XT99 Diversified, a top-ranking managed futures program, which generated a return of 25.26% in 2010." Since inception in June 1999, XT99 Diversified has generated a 19% annualized rate of return. The product has been repeatedly ranked in the Top 20 in a number of CTA performance categories by BarclayHedge. Its proprietary models and research methodology include technical and pattern analysis, advanced numeric and statistical methods, optimization methodology and Walk-Forward Analysis™.

To expand its ability to provide managed futures exposure to clients, Pardo Capital Limited established Pardo Financial Group LLC (www.pardofinancial.com), which recently launched the Pardo Strategic Alpha Fund, a multi-advisor managed futures product for QEPs. This product's multiple strategies attempt to exploit price movements and inefficiencies in global futures markets. This approach capitalizes on a source of alpha which thrives, unlike the stock market, on all types of market conditions. 

Managed futures rely on regulated CTAs who generally use proprietary trading strategies to invest in futures contracts across a broad spectrum of commodities, metals, currencies, equity indices and interest rate products. Pardo Financial Group allocates assets across a team of such CTAs. The CTAs chosen by Pardo Financial Group each have a unique approach to the markets and an original and well-funded research and development process. These seasoned managers bring experience ranging from institutional trading and market making to financial engineering to quantitative modeling.

"We believe a managed futures asset allows investors to access potentially exceptional returns offered by futures markets, combined with strong risk management and independent and instantaneous valuation of positions and performance," explained Pardo. "We utilize a blend of extensive quantitative analysis and management capabilities to create an investment product that offers flexibility to access worldwide macroeconomic opportunities."

The multiple-strategy approach allocates investor assets across unique systematic CTA strategies implemented on multiple time frames and applied to over 40 liquid markets worldwide. These strategies include trend following, counter-trend, intra market spreads, pattern recognition and volatility arbitrage. By combining unique and diverse managers and methodologies, Pardo Financial Group offers investors true portfolio diversification and comprehensive risk management, and with daily transparency.

"A successful managed futures product relies on a sophisticated array of technological tools, algorithmic modeling, and experienced managers to recognize and capitalize on these opportunities," Pardo explained. "We have been employing and continually enhancing these capabilities for more than a decade."

Pardo Capital Management Team

With more than 30 years of futures industry experience, Robert Pardo has established a reputation for success and innovation. As a software developer, consultant, author and CTA, he has made numerous contributions to the industry-wide use of algorithmic software applications and the many forms of automated trading now in use globally. A graduate of Northwestern University, Pardo has received multiple honors as a top trader, published more than 13 trading software applications, and written two authoritative books on trading strategy development and validation.

Jeffrey Roy, Principal of and Director of Strategic Development for Pardo Financial Group LLC, has been a futures industry professional for 20 years, during which he has actively traded futures markets, played key roles in the growth of several futures brokerage firms, consulted to institutional trading firms on quantitative trading strategy development and analysis, and was the architect and COO of a quantitative CTA asset management firm. A graduate of Loyola University of Chicago, he has served as a trading strategy portfolio consultant for individual traders, multi-national trading firms and banks.

Inanc Tarhan, PhD, is the Senior Quantitative Research Scientist for Pardo Capital, and is responsible for programming, advanced research and development and emerging technologies. He has more than eight years of research and trading experience in the futures markets, with experience designing successful systematic quantitative trading strategies and developing automated algorithmic trading systems. He is a graduate of Bogazici University in Istanbul, Turkey with a B.S. in Electrical Engineering and Physics, and received his doctorate in Physics from the University of Delaware.

Chris Pardo, Director of Business Development, is responsible for driving strategic initiatives for business development and marketing as well as providing back-office support. He oversees and monitors Pardo Capital's proprietary trading systems and software. He is a graduate of Indiana University.

PAST RESULTS ARE NOT NECESSARILY INDICATIVE OF FUTURE RESULTS

This document is not intended as, and does not constitute an offer to sell or solicit any person to purchase an investment. Any mention of an investment named in this document is neither a recommendation nor a solicitation. Any offer or solicitation must be made only by means of a delivery of a disclosure document and/or other informational document prepared by Pardo Capital Limited or its affiliates. No person should rely on any information in this document, but should rely exclusively on a disclosure document and/or other informational document prepared by Pardo Capital Limited or its affiliates when considering whether to invest.


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