Table of Contents
In this interview, systematic trader and author Brent Penfold sits down to share how he builds a calm, rules-driven trading life from Sydney—often finished by 9 a.m.—and why that discipline matters for every retail trader. Penfold, known for Universal Principles of Successful Trading and his follow-up focused on practical tactics, explains why humility, process, and data—not predictions—are the foundation of longevity in the markets.
You’ll learn how Brent Penfold thinks about objective, mechanical strategies; why out-of-sample performance is the best proof of robustness; and how diversification across strategies, timeframes, and markets protects you from single-point failure. We’ll also hit his non-negotiables—design for positive expectancy, calculate a zero percent risk of ruin, trade small, and become a “great loser”—so you can plug his practical philosophy straight into your own playbook.
Brent Penfold Playbook & Strategy: How He Actually Trades
Core Philosophy: Rules Over Predictions
Here’s the heart of how Brent operates: he doesn’t try to guess; he executes. The edge comes from a tested process, consistent risk, and the willingness to be a “great loser” so small losses fund the right to catch big trends.
- Trade a written, mechanical plan; no discretion intraday.
- Measure everything: win rate, average win/average loss, expectancy, drawdown depth, and length.
- Accept that most trades will be small losses or scratches; the few outliers pay for the year.
- If a rule isn’t testable or repeatable, it’s not part of the system.
Markets & Instruments: Broad, Liquid, Independent
Brent spreads risk across uncorrelated markets to reduce single-point failure. You want diversification that actually shows up in your equity curve, not just on a watchlist.
- Trade multiple liquid futures/FX/indices/commodities; avoid thin markets and extreme slippage.
- Cap exposure so that any one sector (e.g., energies) can’t exceed 30% of total open risk.
- If two markets have >0.7 rolling 60-day correlation, treat them as one for sizing limits.
- Keep a consistent contract/venue rollover protocol to avoid data/behavior drift.
Signal Design: Simple, Testable Trend-Following
The entry logic is deliberately simple, so the edge comes from robustness, not cleverness. You want signals that survive regime shifts, not just last quarter’s noise.
- Use price-only signals (e.g., breakout of N-day high/low or moving average cross); no predictive indicators.
- Standard defaults: 20/50-day breakout or a 50/200 SMA cross; trade both to diversify the method.
- Confirm with volatility filters only to standardize stops/sizing, not to veto signals.
- If you cannot code the rule in one sentence, simplify it until you can.
Risk Per Trade: Small, Fixed, Uncompromising
Brent’s non-negotiable is survival—position sizing is engineered so risk of ruin is effectively zero. That means every trade risks a tiny slice of equity.
- Risk per trade: 0.25%–0.75% of equity; hard cap at 1.00%.
- Daily total open risk cap: 3% of equity across all positions.
- If the portfolio open risk would exceed the cap, skip the newest signal rather than oversizing.
- Recalculate the size of each trade using current equity; never “martingale” or add size to losers.
Initial Stop & Volatility Normalization
Stops live where the signal breaks, not where it feels comfortable. Volatility tools make different markets comparable, so one soybean trade doesn’t dwarf a Euro FX trade.
- Initial stop: 2.0–3.0 × ATR(20) from entry or beyond the signal’s invalidation level (e.g., breakout bar low).
- Use ATR-based position sizing: Contracts = (Risk per trade in $) ÷ (ATR value × Dollar/point × Stop multiple).
- If the stop must be unreasonably wide, reduce its size; never shift the stop closer to fit size.
- Round contract size down; never round up.
Exits: Let Winners Travel, Cut the Rest
Edge shows up on exits. Brent cuts losers fast and trails winners with a mechanical rule that allows trends to breathe.
- Hard stop for losers; no “mental” stops.
- Trail using 2.5–3.5 × ATR(20) or a Donchian channel (e.g., highest low/lowest high of past N days).
- Time stop for stagnation: exit if no progress after 3 × average trade duration.
- Take partial exits only if rule-based (e.g., scale 1/3 at 2R, trail the remainder).
Portfolio Construction: Multiple Systems, One Book
He doesn’t rely on a single way to make money. A mix of systems and timeframes smooths the equity curve and reduces dependence on any one regime.
- Run at least two independent systems (e.g., medium-term breakout + long-term MA trend) across the same market set.
- Stagger lookbacks (e.g., 20/50 vs. 80/200) to diversify signal frequency and holding time.
- Limit concurrent new entries to 2 per day per system to avoid clustering risk.
- Pause only on predefined conditions (e.g., tech outage, broker failure); never for “market feels weird.”
Expectancy Math: Build It Into the Plan
Brent thinks in expectancy, not in hunches. You engineer a positive expectancy and then protect it from emotional sabotage.
- Target expectancy ≥ +0.20R per trade over a full market cycle.
- Maintain average win at least 2× average loss; if not, widen winners via exit rules, not by moving stops.
- Track distribution of returns (skew, kurtosis); systems that profit from rare large winners need more trades to manifest edge.
- If live expectancy drops below zero for 200 trades, review assumptions, slippage, and execution—but change only one variable at a time.
Drawdowns: Pre-Authorize the Pain
Drawdowns are part of the design, not a surprise. Brent pre-commits to thresholds so he never negotiates with the market mid-storm.
- Define Max Peak-to-Trough DD allowed (e.g., 15%); if hit, cut risk per trade by 50% until new equity high.
- Add a “soft brake” at 10% DD: reduce new entries by half but continue managing open trades normally.
- Keep a ready-made recovery plan (risk schedule, system health checks) in your playbook.
- Never add new systems during a drawdown; evaluate only at new equity highs.
Daily Routine: Fast, Boring, Consistent
The day is designed to be calm. Do the same simple steps every session so discipline scales.
- Pre-open checklist: data integrity, rollover, margin changes, economic calendar conflicts.
- Scan signals, size positions, enter orders OCO (entry + stop + trailing/target logic).
- Mid-day: no chart watching; check only for fills, rejects, or broker alerts.
- End-day: update journal, equity curve, open risk, and expectancy dashboard.
Execution & Slippage: Respect the Micro
Good systems die from bad fills. Brent bakes execution assumptions into testing and live rules.
- Assume slippage: 1 tick for liquid futures, worst-case 2–3 ticks during volatile events.
- Use limit-at-market techniques for entries on breakouts; never chase more than 0.5 × ATR(14) beyond trigger.
- For exits, prioritize stop orders over manual discretion; speed beats opinion.
- If the spread widens beyond the predefined tolerance, skip the entry—missed trades are cheaper than bad ones.
Journaling & Reviews: Turn Data Into Decisions
He treats every trade as data. The journal isn’t a diary; it’s a lab notebook for system health.
- Record: setup, signal time, size, stop distance, ATR, R-multiple result, slippage vs. model.
- Weekly: review outliers (both wins and losses) for rule violations or market microstructure anomalies.
- Monthly: update performance by system, market, and regime; rebalance market weights if one sector dominates P&L.
- Quarterly: consider one improvement only if it increases robustness (fewer parameters, broader markets).
Psychology: Become a Great Loser
Brent’s edge is emotional engineering. He expects losses and designs his life so that following rules feels easier than breaking them.
- Pre-commit to loss frequency (e.g., 55–65% losing trades) so red days don’t feel like failure.
- Use checklists and OCO orders to remove in-the-moment decisions.
- Keep position sizes small enough that a stop-out barely moves your pulse.
- Celebrate rule-following, not P&L; score each day on adherence, not outcome.
Risk of Ruin: Engineer It to ~0%
Survival is the first KPI. The combination of small fixed risk, diversification, and positive expectancy drives ruin probability toward zero.
- Keep total portfolio risk within capital and psychological limits, and you can execute flawlessly.
- Re-estimate risk of ruin after equity changes ≥ ±10% or after adding/removing systems.
- If ruin probability rises above your threshold, reduce per-trade risk immediately—no exceptions.
- Remember: the only unacceptable drawdown is the one that takes you out of the game.
Trade the rules, not predictions: mechanical signals beat gut feel
Brent Penfold builds his edge by removing guesswork and executing a written plan every day. He doesn’t forecast; he follows pre-defined entries, exits, and position sizes like a pilot follows a checklist. Each trade is a small experiment with known risk, not a bet on what he thinks might happen. When the signal fires, he enters; when the stop hits, he’s out—no negotiating.
This mindset frees attention for the only thing that matters: consistent execution. Brent Penfold measures expectancy, not hunches, and judges himself by rule adherence, not by a single trade’s P&L. If a step can’t be written down and repeated, it doesn’t belong in the plan. The result is calm trading that scales, because rules—unlike feelings—don’t wobble when markets do.
Size small and steady to drive the risk of ruin near zero
Brent Penfold treats position size like a safety fuse—short, reliable, and never adjusted on a whim. He risks a tiny, fixed slice of equity per trade so that any single loss feels like a paper cut, not surgery. This lets him place the next trade without hesitation, which is the only way a mechanical edge can show up. When your size is small and steady, drawdowns become survivable and recovery stays mathematically realistic.
Penfold’s rule is simple: protect capital first, performance second. He sizes using current equity, not peak equity, and refuses to “make it back” by swinging bigger after losses. By capping total open risk across all positions, he ensures one hot sector can’t torpedo the whole book. Do this long enough, and the math tilts in your favor—risk of ruin creeps toward zero while your process keeps you in the game.
Normalize with ATR: set stops and positions by volatility.y
Brent Penfold uses ATR to make every trade comparable, whether it’s crude oil or Euro FX. Instead of guessing where a stop “feels” right, he multiplies ATR to park the initial stop beyond normal noise, then sizes the position so the dollar risk stays constant. This keeps a wild market from dominating the book simply because its bars are bigger. With volatility normalized, the system’s edge comes from rules and expectancy—not from accidentally oversizing on quiet charts.
Penfold’s approach is brutally practical: stop distance is dictated by volatility, and contract count is dictated by the risk budget. If ATR expands, position size shrinks; if ATR contracts, size increases—risk per trade never changes. He trails winners with an ATR-based ex, so trends have room to breathe without turning every pullback into a stop-out. By letting ATR set both the leash and the bite, Brent Penfold keeps trades small, stops honestly, and the equity curve smoother across regimes.
Diversify across markets, systems, and timeframes to smooth equity.
Brent Penfold doesn’t rely on a single “best” setup; he spreads bets across uncorrelated markets, a couple of independent systems, and staggered holding periods. That way, when one edge goes cold, another can still be printing, and the portfolio’s P&L feels like a steady hum instead of a siren. He treats correlation like a position size input—if two instruments move together, he counts them as one for risk. The point isn’t owning more symbols; it’s owning different drivers so the equity curve stops lurching.
Penfold also diversifies by logic and tempo—think a medium-term breakout alongside a slower-moving average trend, each with its own entry, stop, and exit rules. When volatility expands, the faster system participates; when markets grind, the slower system holds the line. He caps how many fresh positions can be added in a day to avoid clustering and keeps sector exposure from crowding the book. Over time, this mix turns streaky trade outcomes into a smoother, more believable curve you can actually stick with—exactly how Brent Penfold keeps trading calm and durable.
Let winners run, cut losers fast, protect expectancy relentlessly.
Brent Penfold builds his exit logic around one idea: losers are expenses, winners are inventory. He takes small losses immediately at the hard stop and never widens it, because protecting capital protects optionality. When a trade moves his way, he shifts to trailing logic that gives trends room while locking in progress. This way,y the few outsized winners have the chance to pay for the swarm of tiny losses.
Penfold’s discipline shows up in the math: average win must exceed average loss, and the exit rules are designed to make that inevitable over time. He refuses to take profits early just because P&L looks good today; the trailing stop decides, not emotions. If momentum stalls, a time-based or structure-based exit gets him flat without second-guessing. By keeping losers small and letting winners breathe, Brent Penfold safeguards expectancy—the quiet engine that compounds accounts.
In the end, Brent Penfold’s message is disarmingly simple: the market doesn’t reward guesses, it rewards discipline. He trades a written, mechanical plan with tiny, fixed risk per trade, so survival is built in from day one. ATR normalizes stops and position sizes, trend rules handle entries and exits, and the equity curve is smoothed by diversifying across markets, systems, and timeframes. He expects frequent small losses and engineers his process so a handful of outliers can carry the year—because expectancy, not prediction, is the engine of growth.
What sets Brent apart is how thoroughly he operationalizes calm. He pre-authorizes drawdown thresholds, caps total open risk, and treats correlation as a sizing input so no single story can sink the book. He journals like a scientist, tracks expectancy by system and market, and changes only one variable at a time. Most importantly, he prizes being a “great loser”: cut fast, never widen stops, and let trailing logic decide the winner’s final act. Follow those rules consistently, and you don’t just trade longer—you trade better, with a portfolio and a mindset built to last.
