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mbunea
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Posts: 50
Joined: March 26th, 2015, 11:39 am

HAM Finance

November 21st, 2016, 2:49 pm

HAM Finance

I've come to realize a disturbing truth: I'm a HAM quant :|
Like there is amateur radio, I think there is amateur finance.

In fact I have a long history in HAM radio, my interest for electronics and particularly radio started in gymnasium, around 5'th grade.
I was fascinated by the radio and perfectly understood the QUALITATIVE principle of operation of an electrical oscillator, the LC series circuit. The capacitor stores energy as electic field, discharges on the inductor which stores energy as magnetic field, then discharges back on the capacitor, all while losing some of it due to friction on the residual resistance of the circuit, unless an active element is introduced.

There were electronic kits to buy and assemble radios from, or ready-made formulas to customize parameters such as oscillating frequency.
But I wanted to understand and be ready to design / change stuff at will, not just to solder stuff or monkey-copy formulas. And understanding was a painfully slow process, took roughly 10 years.

Within gymnasium I got the Ohm's law (Kirchhoff's voltage law) and could work some particular configurations of Kirchhoff's current law but it was obvious to me that I'm missing the mathematical apparatus (systems of equations) to help me work with arbitrary networks. Took until 11'th class in high school to learn about systems of equations, which clarified things for circuits containing only "static" components - resistors and sources, but it didn't shed any mistery on the "dynamic" ones: capacitors and inductors. It killed me that I didn't have a clue why the oscillating frequency is 1 / (2*PI*sqrt(LC)). Only in the 2'nd year of electical engineering-based university I finally understood, and it's all differential equations.

So it fucking took 10 years to get from QUALITATIVE to a QUANTITATIVE grasp of things, but I got to it. I freely designed and built my oscillators and they worked as predicted!
Of course I was no match for the professional telecom industry, but I knew how things worked and that oscillator design at the level of arbitrary networks was something very few of even my enginner colleagues could do.

And now, the same thing with finance. I'm working since 10 years as a developer moving shit around (messaging), and occasionally monkey-copying and soldering some ready-made formula into the application.
All while struggling to actually UNDERSTAND, but having noone to talk to or care about. 

And I understood. I built my "electrical oscillator", or options trading engine in my case. I can't compete with the professional telecom industry but at least I'm not losing money, and actually am making a little bit.
It's hard because consistent margins for retail traders like me happen very rarely and if I'd enter into lower probability trades, I'd lose my capital.

And I'm caught into the worst world possible, the world of HAM finance. I'm too inquisitive and knowledgeable of the fundamentals to be happy with being just a developer and at the same time I'm too chaotically self-taught and lacking any form of reputable credentials (not even my employer wants to hand me the official title of quant because in their saying a quant is nothing but a glorified developer and they don't need that). So in all my applications to a quant position I've never ever gotten an interview.

But I'm getting plenty of interviews as a plain developer in the finance industry, and I think I'll take one. At least it's in London, as opposed to Eastern Europe, where I'm currently located.
Right now I'm fairly pissed on the local developer material and reckoned that just like you can't reason about software development with pig farmers, the same you can't talk quant finance with local software developers.
I hope London is different, or at least I'll meet some real quants.
 
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ArthurDent
Posts: 5
Joined: July 2nd, 2005, 4:38 pm

Re: HAM Finance

November 21st, 2016, 3:59 pm

I hope London is different, or at least I'll meet some real quants.
Beware, a lot of the big city quants are long on mathematical formulas and short on trading common sense. Be very selective about who you learn from and what you learn.
 
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mbunea
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Posts: 50
Joined: March 26th, 2015, 11:39 am

Re: HAM Finance

November 22nd, 2016, 10:51 am

Of the guys who post or lurk here, how many would openly admit they are HAM? :P

Is is possible that of the 106,224 members this board has, I am the only amateur and all the rest are hardcore professionals, employed by well-capitalized hedge funds and investment banks, all generating systematic, predictable and consistent returns?

What I recognize now is that in order to get to the professional level, I need to associate myself with other HAMs. I'll share my part of the knowledge but I expect them to bring the same thing to the table.
What I have now:
 - Theoretical knowledge and a published paper on a new option pricing model (closed-form, slight variation of Black-Scholes).
 - Practical experience and countless failed attempts at building market-beating models.
 - A subscription to EOD stock and options market data which I use to research and trade
 - A Java application used to backtest/validate models and strategies, then scan for live opportunities and trade them if profitable enough.
At the moment, I'm entering the trades manually in Interactive Brokers, as I don't have anyways enough capital to trade so much as to need to automate this.
But I need to automate this and also, apart from "attack" trades also place "join" (market making) trades, and that's something which absolutely
needs automated. Like, an attack trade is either executed or I'm cancelling it immediately. Market making trades need to be live monitored,
especially if there's a lot of them.
- Ideas on enhancing the application I have so far both in a developer perspective (add live market data, executions, position & pnl handling)
  and on a trading/quant perspective.
- Of quant finance, I need a reviewer of my current models and strategies and need to discuss my ideas (or hear some other ideas) before actually
  starting to work on/implement them. That's because 90% of them fail and perhaps this rate can be improved.

If anyone is interested in a collaboration with the purpose of improving each other's perspectives and possibly a joint venture, please private message me.
 
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Paul
Posts: 6604
Joined: July 20th, 2001, 3:28 pm

Re: HAM Finance

November 22nd, 2016, 3:15 pm

Is is possible that of the 106,224 members this board has, I am the only amateur and all the rest are hardcore professionals, employed by well-capitalized hedge funds and investment banks, all generating systematic, predictable and consistent returns?
I'd estimate that most are professional, in the technical sense that they get paid for doing this. 
If anyone is making money it is because in the long run and on average economies grow and bankers syphon off a good percentage of results of the the hard work of others.
Oh, and in terms of knowing what they are doing, I'd say assume that 100% are clueless (in terms of maths, or business, or anything really) and you won't go far wrong.
So relax and take the ca$h.
P
 
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mbunea
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Posts: 50
Joined: March 26th, 2015, 11:39 am

Re: HAM Finance

November 23rd, 2016, 7:26 am

Holly funk, 106,224 professional quants! :|
 
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mbunea
Topic Author
Posts: 50
Joined: March 26th, 2015, 11:39 am

Re: HAM Finance

November 23rd, 2016, 7:27 am

106,223 actually, forgot to count me out :)
 
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mbunea
Topic Author
Posts: 50
Joined: March 26th, 2015, 11:39 am

Re: HAM Finance

November 23rd, 2016, 7:38 am

Everyone claims to be wildly successful but the reality is much more modest.
Beating the market consistently is exceptionally hard, most of the claims I get to look at are just temporary lucky shots.

My approach is incremental. Build something, run it, see why it fails, figure out a possible fix, run it again, see why it fails :)

Over time, the fixes and knowledge accumulate to the point where right now at least I'm not losing money. I would also make some if markets weren't so damn competitive compared to my models (i.e. I'd need to sell / buy at higher margins).

So I hafta either improve my models in order to make money at the current margins, or find out fresh markets.

I'm approaching the problem from both directions :)
 
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ppauper
Posts: 11729
Joined: November 15th, 2001, 1:29 pm

Re: HAM Finance

December 19th, 2016, 10:13 am

HAM Finance

I've come to realize a disturbing truth: I'm a HAM quant :|
pork bellies futures?
is that sharia-compliant?