Tools being used by your trading competition

[Gringotts Bank]

What you seriously think they wouldn't be paid well??

Compared to what they can make doing their own thing from home with their own ideas.

What's to say the really clever ones don't use such positions to gain an insight to insto trading, then make their own algos to exploit what they've learned?

Think about it. You're a quant and you get this awesome idea, and you run it at home and it's a big winner... are you going to take it to work and hand it over to Mr Morgan? Too many vested and competing interests to ever allow major outperformance.

 

[AlterEgo]

If you want to just get so so returns---fine. There is also bank interest.

Well, for me personally, I'm not happy with those returns, which is why I'm actively trading instead. I was just adressing Howard's claim that simple methods don't work. Well here is a simple method that works. And what about your mentor, Nick Radge? His methods also appear to be very simple, like the methods in his Holy Grails book. In fact, wasn't the whole premise of this book about showing that simple methods work? So do these methods not work any more?

If He means This Stephen Simmons

https://github.com/personal

Exactly the type of person You'll/We'll come up against ---More and More.

You could well be right, and maybe these simple methods that work now may stop working at some point in the future as a result. But while my current method continues to work, I'll keep trading it.

 

[CanOz]

What you seriously think they wouldn't be paid well??

Exactly....great salary...risk free!

 

[AlterEgo]

Compared to what they can make doing their own thing from home with their own ideas.

Well they may not be able to make more on their own, as they may not have a large enough capital to work with, so I can see the attraction of trading other people's money, like say trading with a prop firm.

This is my problem at the moment. Even though I am making a large return in percentage terms, my household expenses and taxes that are drawn from the account are preventing me being able to compound the profits in to a serious amount of money. I just wish I had 2-3x the funds to trade with.

 

[DaveDaGr8]

Compared to what they can make doing their own thing from home with their own ideas.

What's to say the really clever ones don't use such positions to gain an insight to insto trading, then make their own algos to exploit what they've learned?

Think about it. You're a quant and you get this awesome idea, and you run it at home and it's a big winner... are you going to take it to work and hand it over to Mr Morgan? Too many vested and competing interests to ever allow major outperformance.

That's why you sign your life away when you join these companies !!!. Something along the lines of "Any and all IP derived by you whilst in our employment remains the companies property".

 

[Gringotts Bank]

Well they may not be able to make more on their own, as they may not have a large enough capital to work with, so I can see the attraction of trading other people's money, like say trading with a prop firm.

This is my problem at the moment. Even though I am making a large return in percentage terms, my household expenses and taxes that are drawn from the account are preventing me being able to compound the profits in to a serious amount of money. I just wish I had 2-3x the funds to trade with.

Leverage.

Solves that problem so long as your DD can handle it.

 

[AlterEgo]

Leverage.

Solves that problem so long as your DD can handle it.

Already doing that.

 

[tech/a]

This

Managing Millions or Billions year on year to a profit is a vastly different and more difficult task than doing the same as a single retail investor.

Answers

Compared to what they can make doing their own thing from home with their own ideas.

Think about it. You're a quant and you get this awesome idea, and you run it at home and it's a big winner... are you going to take it to work and hand it over to Mr Morgan? Too many vested and competing interests to ever allow major outperformance.

This.

 

[Wysiwyg]

If you're really bright and can program at a high level, why on earth would you work for a hedge fund where other people are getting wealthy on the back of your hard work...

Primarily they are computer language skilled and market savvy newbies. Syntax does not maketh the profit. Predicting the direction could be 51% right. Anyway I think it is more encouragement to keep people looking for something better.

 

[ROE]

FA vs TA now it move on to this method vs that method vs this quantz vs data mining

whatever works for you is the right tool, all this stuff are just like fitness and fashion industry
always something new and better, it may be for some people but it may not be for you
what works for you is your edge.

My tools of choice, year 10 algebra maths, reading and simple calculator
it ain't changing any time soon or ever

I am sure it wont blow the light out but it meet my objectives of compounding at least 10% a year, that way my money always command the same purchasing power or better.

I been doing it for 10-12 years, for first 5-6 years I track nothing dont have any tools, then I bought topstock and start punching in the number from 12/13 onward this is what I get. Another 6 months till F16/17 end

 

[DaveDaGr8]

I think the intent of this thread is to think about the changing face of trading.

Will computers dominate the world of trading and cut out the little man ?
What effect will the increase in computers affect our trading strategies ?
Will the tools that we currently use continue to work ?

Howard proposed that our tools will stop working.

I don't fully subscribe to that theory, but only because i haven't seen a change on the landscape. All my tools and systems continue to work and haven't shown any degradation either on the ASX or the US markets.

Having said that, i have tinkered with Adaptive algorithms for a long time so i am getting prepared for the next evolution.

AI itself relies on the trends that we follow continue to behave in a predictable manner. Without this they lose their own predictive ability. AI also needs our tools to continue to work predictably, because again it will use this knowledge to gain an edge by knowing in advance how the humans ( or even other AI ) will react. AI will try and learn market behaviour, not change market behaviour.

So will our tools stop working ? NO.
Will an AI system beat a human system ? YES.

But that's just my opinion

 

[ThingyMajiggy]

it ain't changing any time soon or ever

You make some good points, but I don't think this sounds very healthy either, I've read too many times about stubborn traders who refused to change their ways and it all ends in tears. What always works may not always work. I think you've got to have some open-mindedness about things, but going by my parents, it's hard to budge the "we've always done it this way" mentality

 

[ROE]

You make some good points, but I don't think this sounds very healthy either, I've read too many times about stubborn traders who refused to change their ways and it all ends in tears. What always works may not always work. I think you've got to have some open-mindedness about things, but going by my parents, it's hard to budge the "we've always done it this way" mentality

It all depends on who you are as a market participant, investors, traders or gambler.

I am not a day trader so I dont have to put up with these things, these tools and techniques only temporary affect price in hours, days, weeks or months not years.

No amount of data analysis, HTF programs, and algorithm affect the underlying value of the business over a long period of time, it affect the day to day trading price but it can not and will never change the underlying business value

If you are a retail player and dont have the processing power and capability you may think twice or catch up
or there is a much easier way, these machine wins at processing information quickly and in micro second but they can not process information slowly,

Become a long term value investor with plenty of reading and slowly process and acquire the knowledge over time and you will have an edge.

 

[howardbandy]

Hi ROE --

No offense intended, but the points I am making are precisely the opposite.

My view is that stock selection cannot be better than random without insider information. Assuming insider information is lacking, the best a trader can do is swing trading with high accuracy and short holding period.

In my opinion, and I understand that there may be some disagreement, we (at least in the US) are entering a period with the highest risk in many aspects of our lives that most of us have ever experienced.

The rise in standard of living among the "winners" following World War II is unlikely to be repeated. Quantitative Easing is at or near its end. The Trump Bump may be the last gasp of a bubble in stocks, bonds, and real estate. Globalization and automation were already affecting us, and the political change we are facing is unprecedented. If global climate change is not addressed and effective procedures to stop and reverse it put in place very quickly, the world (people, as well as other creatures) will suffer irreversible harm sooner than we imagined could happen.

The solution for traders is to pay very close attention -- day by day -- and manage trades carefully. Drawdowns are indications of future crises, not opportunities to double up. Please, be very careful.

Best regards, Howard

 

[Gringotts Bank]

Hi ROE --

we ....are entering a period with the highest risk in many aspects of our lives that most of us have ever experienced.

The rise in standard of living among the "winners" following World War II is unlikely to be repeated. Quantitative Easing is at or near its end. The Trump Bump may be the last gasp of a bubble in stocks, bonds, and real estate. Globalization and automation were already affecting us, and the political change we are facing is unprecedented. If global climate change is not addressed and effective procedures to stop and reverse it put in place very quickly, the world (people, as well as other creatures) will suffer irreversible harm sooner than we imagined could happen.

Howard, this is all opinion! Sentiment! Fear! ie. the opposite of a statistical/mathematical approach! Now I'm unsure of your stance.

Why wouldn't you just go about trading as usual, adapting as usual? Surely that's what you're advocating in the OP?

If on the other hand you intuit a coming disaster, and that's a very strong feeling, why not trust that intuition and start scaling in to a big short position?

 

[Gringotts Bank]

uhhh...

ok I'm going to read between the lines. Thanks Howard. I get it.

 

[howardbandy]

Hi GB --

My opinion is that we are entering a period of high risk. You are correct that it is an opinion. I might be wrong. I hope everything works out smoothly.

If I were to just follow my opinion, my inclination would be to take a short position. If I did that without having a set of rules to exit the trade, I could be wrong on timing and, even if eventually right on direction, suffer an intra-trade drawdown causing me to exit the trade at a loss.

Whether my opinion is correct or not, I really do follow my own advice to be mechanical. I estimate risk of drawdown based on recent performance, then trade in such a way that I can manage drawdown. That is -- holding a few days at most whether long or short. Again and again.


Best, Howard

 

[Gringotts Bank]

Hi GB --

My opinion is that we are entering a period of high risk. You are correct that it is an opinion. I might be wrong. I hope everything works out smoothly.

If I were to just follow my opinion, my inclination would be to take a short position. If I did that without having a set of rules to exit the trade, I could be wrong on timing and, even if eventually right on direction, suffer an intra-trade drawdown causing me to exit the trade at a loss.

Whether my opinion is correct or not, I really do follow my own advice to be mechanical. I estimate risk of drawdown based on recent performance, then trade in such a way that I can manage drawdown. That is -- holding a few days at most whether long or short. Again and again.


Best, Howard

Got it.

I'm going to assume you've noticed some changes in the performance of your own systems - prompting the warning of things to come. I certainly have noticed changes with my systems - more so since mid Nov.
I don't have any good short systems, but I can trade the index short using trendlines, and may start doing more of this. Thanks for the heads up anyway.

 

[Wysiwyg]

Here is an example from Quant Connect of a strategy. Fairly basic stuff for beginners.

 

[howardbandy]

Greetings --

In response to questions related to "How do I get started with machine learning?" --

The outline provided by Matthew Mayo of KDnuggets is a good start:
http://www.kdnuggets.com/2015/11/seven-steps-machine-learning-python.html

The seven steps are:
1. Basic Python skills
2. Foundational machine learning skills
3. Scientific python packages overview
4. Getting started with machine learning in Python
5. Machine learning topics with Python
6. Advanced machine learning topics with Python
7. Deep learning in Python

Everything listed is free. Matthew's article gives links to many resources.

For applications in machine learning in general, I agree with the complete list.

For applications specific to trading, postpone Mayo's step 7, deep learning. In its place, substitute additional work with the Pandas library and applications to time series. Listen to presentations by Wes McKinney and Jake VanderPlas; avoid GARCH, wavelets, Fourier series. Unfortunately, there is very little high quality material published specific to modeling financial time series.

-----------------

This article by James Le is an excellent introduction to some of the concepts and algorithms of machine learning:
https://gab41.lab41.org/the-10-algo...ngineers-need-to-know-f4bb63f5b2fa#.c63aei127

------------------

Someone is certain to ask about the choice of Python for the base language -- compared to and rather than R.

Python is a more general language than R; R is more complete in support of frequentist statistics.

Eventually, if / when you are successful in developing machine learning-based trading systems and moving to trading, you will want easy access to the stack of procedures needed to generate trading signals:
1. Retrieve and update data.
2. Retrieve previously trained trading model in preparation for generating new trading signal.
3. Retrieve and update trading history.
4. Retrieve previously trained trading management model in preparation for computation of system health -- position size, estimation of risk, and estimation of profit potential.
5. Compute new signal.
6. Compute estimate of system health and position size.
7. Place trade.

All of these steps can be done within a single Python program. With the exception of step 7, automatically placing the trade, the programs published in my "Quantitative Technical Analysis" book demonstrate. Note that there is an API (the IBPy library) that connects Python to Interactive Brokers.

Note that you can translate and implement your traditional decision tree-based trading models into Python for use in step 2, if you wish. (Decision tree is one of the machine learning algorithms supported by Python.) The QTA book gives examples. Everything else is the same.

Whichever you choose, pick one and become an expert in it. In my opinion, Python is the clear choice. I recommend the Anaconda implementation of Python.

Best, Howard