If you use any of the following arbitrary inputs in your process- ask yourself why?
1. Dealing at the Open.
2.Dealing at the Close.
1/4
3. Using low footprint strategies like VWAP for execution. Strategies that are in fact the antithesis of adding alpha during the execution phase. 4. Cutting 1/2 of your position when in profit or loss (why half? Why not 16%). 5. Relying on free data or execution.
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6. Trading economic fundamentals/data release strategies without NLP and latency advantages and without proving to yourself that the data has anything whatsoever to do with the future distribution of prices.
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7. Treating today the same as yesterday in terms of, for example, stop loss magnitude.
4/4
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I find it difficult to converse with quantitative, discretionary or gut feel traders/analysts who have not studied:
The great stock and grain attempted (and successful) corners of the late 1800’s.
The real and alleged activities of one JP Morgan in the 1920/30’s...
1/6
The ‘real’ tech/stock mania and crash between, say 1968 and 1974.
The move in the USD in the 1970’s after President Nixon severed the $35 nexus to Gold... (Also the reactions of the European financial sector and the eventual actions by the Swiss).
2/6
FED Chairman Volker’s actions to kill inflation and lower the long term cost of capital for the US government for the next 38 years.
A correspondent asked a few days ago who are my top follows...
@timebargains He has deleted his prior tweets and was force limited to what he could share... is now able to start sharing thoughts again. Every word is gold. I expect activity on his twitter account again soon.
1/7
The genius @cloudy_cl shares some trades live... and they are genius. He runs/owns over half a dozen quants like me.
Don't be shocked by his cussing :)
He is taking a break at the moment but should be back in a week.
2/7
The incomparable @darjohn25. He trades different to my style (we do spot he mostly does options from what I gather), but is a spectacular human and a mind to learn from. The net results are always similar... paths are different is all.7
3/
Market conundrums: 1. I need a definition of the word ‘Trend’ for any market to test.
2. Prices move but if your risk tolerance is the same as the market then normal path dependency or an exogenous event will take you out.
1/5
3. The market rewards those trading low probability scenarios (long smooth trends) until it decides to reward higher probability, lower risk reward reversionary approaches. 𝙏𝙝𝙚 𝙩𝙧𝙞𝙘𝙠 𝙞𝙨 𝙞𝙣 𝙩𝙝𝙚 𝙨𝙬𝙞𝙩𝙘𝙝.
2/5
4. PM’s/Traders/‘Investors’ 𝙈𝙐𝙎𝙏 take risk. There is less career risk implementing your strategy at full size than there is hiding under your mothers skirts.
5. Often the best entries occur at the most inconvenient times. This must be embraced.
3/5
I need to think about the next big strategy and the possibility (indeed the likelihood) that I won’t discover it.
I have posted about a massive ML/AI experiment that didn’t succeed (not giving up but… tik tok, tik tok).
2/5
Despite my background and quant trading bona fides, I am increasingly drawn to the Idea that the highest future returns will come from quantitative trading rules applied by experienced discretionary traders.
3/5
Here is an interesting (although heavily contrived) experiment that is very helpful in *actually understanding* path dependency and, done often enough, can lead to some very good ideas.
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Take three markets that, on a close to close basis, tend to have a correlated ‘sign’ (+ or -).
Put another way, all three tend to close in the same direction over time.
Maybe EURUSD, GBPUSD & AUDUSD. What’s intriguing from a research angle is the different paths...
2/6
that they take between the opening and the close. (Or any two points in time really)
Things worth trying to quantify:
* Leads and lags between them.
* Absolute and relative sizes of moves.
* Reactions to ‘X’ time period highs and lows.
3/6
For my sins, I am ‘experienced’ enough to have seen all of ‘Macro’, ‘L/S Equity’ and ‘Trend Following’ implode inward to varying degrees (Clearly, firms have survived in all three).
1/4
One notes, regrettably, that it is beginning in the ‘Quant’ space. I believe I am qualified to state with some measure of certainty, the reasons-
* Most new entrants come from the same echo chamber schools with the same knowledge.
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* Very, very few have actually bought or sold anything in their lives.
* A completely baffling belief that being a world class programmer means they will find better systematic alpha than a ‘non programmer’ given excellent testing software.
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