Introduction: Carlo Zarattini is actually a trained mathematician. However, his family history suggests that the markets were already in his blood. After completing his math studies in Padua, the native Italian earned a Master’s degree in Quantitative Finance from USI Università della Svizzera italiana and Imperial College Business School in London. He also worked as a quantitative analyst at BlackRock, where he developed volatility and trend-following strategies. Later, Carlo Zarattini founded his company, Concretum Group, based in Lugano, Switzerland. Together with a small team, he develops various strategies that are traded on his own account as well as for part of the family’s assets. His company also supports institutional clients with quantitative approaches for equities, futures, and options. One tool co-developed by Carlo Zarattini that may be of particular interest to private traders is R-Candles(https://r-candles.com). It’s the first backtester for discretionary traders. We also discuss this in the interview
MARKO: Your father was a successful hedge fund manager. Could you tell us more about him?
CARLO: My father was a high school teacher in physics and mathematics in Treviso, a town near Venice. In Treviso, there was a small exchange where you could trade stocks and options of Italian companies. In the early 1980s, my father developed a pricing model for options using his knowledge of physics, mathematics, and probability. This allowed him to identify arbitrage opportunities in these markets. However, over time, the models became standardized, inefficiencies reduced, and the assets under management grew. As a result, his hedge fund started trading also systematic trend-following and mean-reversion strategies in liquid futures markets in the early 1990s. By the early 2000s, the fund had evolved into a hybrid systematic-discretionary macro hedge fund. Notably, there wasn’t a single losing year in the first 20 years, with a maximum drawdown of less than 10%. In 2002, due to capacity constraints, a decision was made to launch additional classical funds. Unfortunately, my father passed away in 2003 at just 51 years old. I was only 15 and not yet interested in the markets, but one could say that the markets are somehow in my blood.
MARKO: How has your own career in the markets developed so far?
CARLO: After completing my Master’s in Quantitative Finance at USI Lugano, I had to decide whether to pursue a PhD or work in the industry. I decided to remain a Master’s student for another year and enrolled at Imperial College Business School in London. Through a research project on volatility strategies with a professor, I was able to introduce myself to a portfolio manager at BlackRock. This was outside the traditional application process, bypassing HR, and shortly after, I was on board. The portfolio manager became my mentor. We were only a team of two but managed a portfolio of systematic strategies worth around 500 million USD, part of a much larger multi-asset fund. It was a major step for me, and I was amazed that we could handle everything thanks to efficient workflows, such as outsourcing actual trading to investment banks.
MARKO: What happened next?
CARLO: I had the idea to start something of my own. So, I resigned and worked with the professor again on our volatility strategies, and we traded on our account. During this period, my learning curve continued to rise steeply. Later, I founded my company.
MARKO: What is your trading philosophy today?
CARLO: I view the markets from a quantitative perspective, considering all strategies that we broadly classify as statistical arbitrage. These range from long-term passive stock engagements to active intraday trend models. As long as empirical analysis shows an advantage, I want to trade it. I don’t limit myself to systematic approaches; I also study the trading methods of well-known discretionary traders like Mark Minervini or William O’Neil, who combine technical analysis with fundamentals. Unfortunately, a reliable backtest of such approaches is challenging and prone to error, especially when focusing only on historical winning stocks. This can lead to unrealistic expectations and significant frustration in real-world implementation.
MARKO: On the other hand, very successful discretionary traders often achieve the best results.
CARLO: Yes, successful discretionary traders have the best intuition. But this can’t easily be replicated. One has to find ways to turn it into rules. A classic example is price action trading, where there’s great potential to systematize approaches in detail. This exciting project, in collaboration with some known discretionary traders, led to our free tool @R_Candles_
MARKO: Can you tell us more about that?
CARLO: Discretionary traders can use it to test and practice their intuition based on price action and technical analysis. The tool is based on a large database of U.S. stocks that is historically accurate, including those that no longer exist, thus considering survivorship bias. The trick is that the charts are displayed without tickers or dates, so users don’t know what or when they’re trading. This removes perception biases that can come from knowing a stock’s historical performance when the name is visible. In R-Candles, one can focus on pattern recognition, clicking through daily charts to make discretionary trading decisions. The unique backtesting function also allows traders to adjust their stop losses and profit targets retrospectively, assessing the impact on their results.
MARKO: How many systematic strategies do you trade yourself?
CARLO: It depends on how you count, as each strategy is traded across different markets and timeframes. On the highest level, we have eight to nine approaches. These include a momentum strategy on U.S. stocks, a VIX futures approach for switching between Risk-On and Risk-Off phases, and a long/short options portfolio. On options, we exploit a dynamic mispricing between VIX and SPX options using a relative value approach. We also trade a longer-term “passive” options writing strategy in long-term options, a trend-following long/short futures portfolio, a long-only ETF timing strategy, and a long-term, passive ETF-based portfolio focusing on U.S. and European equities. Additionally, we have approaches published in our papers, like a version of the Opening Range Breakout and an intraday momentum strategy.
MARKO: That’s a lot! Could you explain one of your strategies in more detail?
CARLO: Sure, let’s take the Opening Range Breakout. We published this in the paper “A Profitable Day Trading Strategy for the U.S. Equity Market”. It’s based on the classic idea that a stock breaks out from its opening range. Toby Crabel wrote about this as early as 1990, so the idea isn’t new. However, our backtests showed that the optimal range is the first five minutes of the trading day. We only open long trades if the first five-minute candle is positive and the price subsequently breaks above its high. Conversely, short trades require the first five-minute candle to be negative, followed by a price drop below its low. We also tested an additional filter based on “Stocks in Play”, a concept introduced by Mike Bellafiore in his book “One Good Trade”. This filter, which focuses on stocks with high trading volume due to news or major events, significantly improves the classic strategy’s success rate.
MARKO: Thank you, that sounds very interesting. Could you briefly touch on the intraday momentum strategy you mentioned?
CARLO: We describe the strategy in our paper “Beat the Market”. This approach trades the SPY, the world’s largest ETF on the S&P 500 index. The idea is to define a “Noise Area” where we assume unpredictable noise. We compare the current day’s intraday movement with the average movements of the past 14 days at the same time, which can be complex but is available as an indicator called “Concretum Bands” on TradingView. If prices remain within the bands, no trade is made. However, if the price breaks out of the bands, it signifies a significant movement relative to recent history, potentially driven by supply-demand imbalances. We follow the trend direction every 30 minutes to avoid extremes and overtrading. The bands themselves, along with the day’s VWAP, act as trailing stops. Otherwise, the position is closed at the end of the day.
MARKO: Do your systematic strategies also allow room for discretionary adjustments?
CARLO: I wouldn’t consider discretionary adjustments but rather the application of additional filters. We take the basic strategy and apply specific filters that may prevent the strategy from trading in particular cases. For instance, with the Opening Range Breakout, we use filters that help identify situations where market divergences—like the S&P 500 and Nasdaq-100 moving in opposite directions—could indicate a potential false signal. This selective approach allows us to refine the strategy while maintaining a systematic framework.
MARKO: Momentum-based strategies seem to dominate your trading. What’s the advantage of this category?
CARLO: Procyclical, trend-based momentum strategies can benefit from more market participants trading them, but they also increase crash risks, which can destabilize markets. Mean-reversion, countercyclical strategies, on the other hand, have a stabilizing effect, but too many investors focusing on them reduce achievable movement amplitudes.
MARKO: How do you implement your trades in practice?
CARLO: Signals are mostly generated in MATLAB, my scientific development and testing environment, and sent to the broker for execution. The process is fully automated, but we constantly monitor the algorithms to ensure smooth operation and correct order execution.
MARKO: How do you weight the individual strategies in the portfolio?
CARLO: We use a pragmatic approach based on our confidence in the strategies and their out-of-sample results. We do not use leverage on the strategy level to minimize risks. Instead of academic measures like Value at Risk, we rely on worst-case scenario analyses, as academic methods often underestimate real-world risks. Since we manage our own capital rather than investor funds, we prefer a large buffer and target a modest return of 10% per year with small drawdowns.
MARKO: How do you go about integrating new strategies into the portfolio that look promising in backtests?
CARLO: I’m pragmatic here too. Rather than running the strategy on paper for a while out of sample, I prefer to trade it immediately with small real money amounts. This provides a realistic, market-aligned feeling. For example, we allocate $100,000 to a new strategy and trade it for six months. If everything goes according to plan, we increase the capital allocation.
MARKO: Looking back, what have been your biggest aha moments or realizations?
CARLO: There weren’t any major “aha” moments, but I had two key realizations in my career. First, I understood the practical implications of the “law of large numbers”, which reduces the role of chance in trading. If you have a trading system with a 60% win rate and a 1:1 win-to-risk ratio but only trade once a month, there’s about a 20% chance you’ll lose money over a year. This can be frustrating when you know your system has an edge. So, it’s better to develop strategies that trade more frequently. Secondly, I stopped focusing on fundamentals and news. For systematic traders, it’s tempting to follow macro events and fundamental news, but these factors often add noise and dangerous biases to automated systems and risk management.
