Tools being used by your trading competition

[howardbandy]

Greetings --

I have long encouraged individual traders and small trading companies to improve their analytical skills, particularly in areas of mathematics, programming, modeling, and simulation. The link at the bottom of this posting is a presentation by Stephen Simmons at one of the professional conferences held in 2016 related to use of the Python language. Stephen is a developer working in the commodities trading area of J. P. Morgan in London.

His talk is about Pandas, a Python library developed by Wes McKinney, formerly with Cliff Asness' hedge fund, AQR Capital, about five years ago. Pandas is central to analysis of time series data, and is a popular topic at these conferences and seminars. If you are planning to learn to develop systems using Python, and perhaps machine learning, you will need to learn about Pandas -- but begin with basic Python first.

The first two minutes of the video are the part I recommend everyone hear. Stephen describes that there are several thousand developers working with Python in J. P. Morgan. Add Chase, Citi, ANZ, Goldman Sachs, Shaw, Renaissance, Simons, and hundreds more we seldom hear about.

As I write in my "Foundations" book, the days of chart reading, long term holding, and simple trading algorithms are over. The business of trading is changing with astonishing speed. It is now about applied mathematics, machine learning, Bayesian statistics. Traders without skills in math, programming, statistical analysis, and scientifically developed trading techniques are at a severe disadvantage. Stephen and his colleagues will "eat the lunch" of unprepared traders.

https://www.youtube.com/watch?v=CowlcrtSyME

Best regards, Howard

 

[minwa]

As I write in my "Foundations" book, the days of chart reading, long term holding, and simple trading algorithms are over. The business of trading is changing with astonishing speed. It is now about applied mathematics, machine learning, Bayesian statistics. Traders without skills in math, programming, statistical analysis, and scientifically developed trading techniques are at a severe disadvantage. Stephen and his colleagues will "eat the lunch" of unprepared traders.

Haven't watched the video so can't comment on that.

Can't see how chart reading, long term holding, and simple trading algorithms are over though. Perhaps in the large capital funds world, but certainly not in the retail capacity. Statistics from fundseeder of aspiring retail traders shows discretionary being the highest return group with systematic being the lowest style. This is average from the top 10% percentile of funds so it is not dragged down by wannabe coders testing systems.

I would say your conclusion is very biased. That being said - if one could replicate discretionary trading with maths and science and extract the same results, I would definitely jump on the wagon.

 

[Wysiwyg]

Can't see how chart reading, long term holding, and simple trading algorithms are over though.

Agree. Patterns are ever present and they, as usual, either play out or not.

 

[tech/a]

Minwa / Wysiwyg

Your replies are tantamount to telling Captain Cook the worlds Flat.

 

[DaveDaGr8]

Isn't that Columbus in the 1500's ? and he turned out to be right !!!

Be that as it may, i don't disagree with Howard, but it hasn't happened yet. I have several simple systems that have worked just as well this year as when backtested 10 years ago, with the exception of US Swing trading, which has shown a gradual reduction in profits, but it is still profitable.

I guess the old adage, show me a system that has failed or is showing signs of failing so we have more context to go on.

 

[Wysiwyg]

Minwa / Wysiwyg

Your replies are tantamount to telling Captain Cook the worlds Flat.

On the contrary. Capt. Hook won't need a weather man to know which way the wind blows.

 

[ThingyMajiggy]

I doubt me or any systems I were to make with my 300ms latency is going to be able to compete with thousands of Python developers at JP Morgan(plus the rest of the banks/funds) that are no doubt directly next to the exchanges. Plus I suck at Maths

Oh and I'm yet to see a systems trader OR discretionary trader last, from the time I've joined ASF to now. They've either blown up, lost their edge, stopped because of the stress/lifestyle. Seems to be just a matter of time. I've heard about a few that have lasted for years, or heard interviews etc. but never actually seen or know of one personally, or from here etc.

 

[Porper]

Oh and I'm yet to see a systems trader OR discretionary trader last, from the time I've joined ASF to now. They've either blown up, lost their edge, stopped because of the stress/lifestyle. Seems to be just a matter of time.

I know a few on here that are consistently profitable...both systems and discretionary. That doesn't mean to say they are profitable every month, or even every year. Depends what time frame you use.

 

[ThingyMajiggy]

I know a few on here that are consistently profitable...both systems and discretionary. That doesn't mean to say they are profitable every month, or even every year. Depends what time frame you use.

Yeah I've seen some profitable trades and profitable statements as well, but they never seem to last. But if you have then great

I can only speak for myself and what I've seen or not seen

Anyway this is heading in the off-topic direction so I'll shoosh

 

[Boggo]

....

Oh and I'm yet to see a systems trader OR discretionary trader last, from the time I've joined ASF to now. They've either blown up, lost their edge, stopped because of the stress/lifestyle. Seems to be just a matter of time. I've heard about a few that have lasted for years, or heard interviews etc. but never actually seen or know of one personally, or from here etc.

That's a big statement.

Just because they are not on here getting involved in the production of pages of reasons why Enron style data doesn't fit in with the current stock price doesn't mean they don't exist, they are quietly getting on with their own processes.

They do exist ThingyMajiggy

 

[ThingyMajiggy]

That's a big statement.

Just because they are not on here getting involved in the production of pages of reasons why Enron style data doesn't fit in with the current stock price doesn't mean they don't exist, they are quietly getting on with their own processes.

They do exist ThingyMajiggy

I hope you're right, believe me. I'm not saying its never been done or impossible, seen plenty of profitable stints and moments of wow, I've just never seen it sustained over long periods or know of a very successful trader personally. I know a few traders(and plenty who have attempted it!) and had a stint at a prop shop, seems they're all just getting by at best. But I guess that's all part of it, only the strong survive and getting by is good enough Time will tell I guess, if Howard's suggestion that maybe all this discretionary stuff isn't good enough anymore, we'll see.

Machine Learning/AI certainly seems to be the hot topic in the trading world of recent times.

 

[Boggo]

This book is worth a read for anyone interested in the topic.

Some articles by the author...
http://www.futuresmag.com/author/kevin-j-davey

 

[Wysiwyg]

Traders without skills in math, programming, statistical analysis, and scientifically developed trading techniques are at a severe disadvantage.

That to me is saying there will no longer be trends and range trading will be the only game in town. Like supply and demand of commodities or widgets will no longer influence the market price.

 

[minwa]

Machine Learning/AI certainly seems to be the hot topic in the trading world of recent times.

Manipulation of how the big guys keep their edge. You spread distraction to misdirect. To keep the retails chasing the wrong stuff fed by the media of the newest colorful trendy algos/quants and all that stuff. Feed the hope that a struggling trader can buy a few courses and buy some softwares for a few thousand and compete with the funds at their own game against their billions of dollars invested into engineers/hardware/technology. Follow the herd, stay in the 90% losers.

There definitely are successful retail guys doing it out there - just like there are chart readers/fundamentalists long term holders. Doesn't change anything. Price is price, human psychology is the same. There are 90% losers in trading 50 years ago, there are still 90% losers today with all the improvement in technology as said by some market wizard (forgot who).

 

[ThingyMajiggy]

Manipulation of how the big guys keep their edge. You spread distraction to misdirect. To keep the retails chasing the wrong stuff fed by the media of the newest colorful trendy algos/quants and all that stuff. Feed the hope that a struggling trader can buy a few courses and buy some softwares for a few thousand and compete with the funds at their own game against their billions of dollars invested into engineers/hardware/technology. Follow the herd, stay in the 90% losers.

There definitely are successful retail guys doing it out there - just like there are chart readers/fundamentalists long term holders. Doesn't change anything. Price is price, human psychology is the same. There are 90% losers in trading 50 years ago, there are still 90% losers today with all the improvement in technology as said by some market wizard (forgot who).

Is that you or your mentor talking though? It was mentioned earlier in this thread about biases.

 

[minwa]

Is that you or your mentor talking though? It was mentioned earlier in this thread about biases.

Don't see how that matters ? Still same point being made. My bias is towards the contrarian yes. I didn't say science/maths that Howard proposes can't make money. It has similar odds like chart-reading/long term holding. The common denominator is not actually which method..which is why saying those method's days are over and will get eaten for lunch is really just nonsense. My guess is Howard worded it a bit too over passionate.

 

[VSntchr]

I hope you're right, believe me. I'm not saying its never been done or impossible, seen plenty of profitable stints and moments of wow, I've just never seen it sustained over long periods or know of a very successful trader personally. I know a few traders(and plenty who have attempted it!) and had a stint at a prop shop, seems they're all just getting by at best. But I guess that's all part of it, only the strong survive and getting by is good enough Time will tell I guess, if Howard's suggestion that maybe all this discretionary stuff isn't good enough anymore, we'll see.

I know quite a few successful traders. How long is long enough to classify as a sustained long period?

 

[ThingyMajiggy]

I know quite a few successful traders. How long is long enough to classify as a sustained long period?

You know them personally and seen the results/rewards of their successful trading? and that's all they do? Or know some people on the internet who say that's what they do? Hmm I would say 5 - 10 years, more like 10 though.

 

[Gringotts Bank]

There's another aspect to 'your trading competition'.

I recently spoke to a project manager for IT security and he said nothing can truly be made secure in the online world. Triple firewalls can be penetrated in seconds. The best and brightest in the US cannot stop some of the attacks coming out of Russia & Eastern Europe.

Consider this - Zuckerberg puts tape over his laptop microphone and webcam, because it's that easy for hackers to get access and listen/watch his every move.

Also this - Lenovo laptops concealed special chips designed to collect and transmit data to China. http://www.darkreading.com/risk-man...pcs-after-chinese-acquisition/d/d-id/1110950?

So your charts, systems, trades, keystrokes, voice, phone calls, etc etc. ... all hack-able. Not really a problem for me, but if you have a big account and fancy security on your PC, they see that as a target. In fact this guy said the more fancy your security systems, the more interested they are. They know there's something of value there.

I've mentioned this before, but talented hackers could enter big brokerages, find the best equity curves and front run every move.

 

[ThingyMajiggy]

There's another aspect to 'your trading competition'.

I recently spoke to a project manager for IT security and he said nothing can truly be made secure in the online world. Triple firewalls can be penetrated in seconds. The best and brightest in the US cannot stop some of the attacks coming out of Russia & Eastern Europe.

Consider this - Zuckerberg puts tape over his laptop microphone and webcam, because it's that easy for hackers to get access and listen/watch his every move.

Also this - Lenovo laptops concealed special chips designed to collect and transmit data to China. http://www.darkreading.com/risk-man...pcs-after-chinese-acquisition/d/d-id/1110950?

So your charts, systems, trades, keystrokes, voice, phone calls, etc etc. ... all hack-able. Not really a problem for me, but if you have a big account and fancy security on your PC, they see that as a target. In fact this guy said the more fancy your security systems, the more interested they are. They know there's something of value there.

I've mentioned this before, but talented hackers could enter big brokerages, find the best equity curves and front run every move.

"Hackers" being your own Government using it's compulsory backdoors in devices/software, in the case of Zuckerberg plus he's kind of a big target.

Hackers just expose a flaw that is already there, stop listening to the mainstream media scare tactics about hacking. It's actually not THAT easy, and there are a lot of GOOD hackers, it's not all NCIS Russia and China are the baddies nonsense. In 99% of the cases you, the human, is the weakest link.(bad passwords, phishing scams etc.)

As far as hackers frontrunning the nice equity curves, again sounds more like something out of Hollywood, you'd still need the faster connection to frontrun, to somehow know HOW they're trading, when they're executing, all of which is very hard to get from an equity curve.