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zill
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Joined: November 19th, 2010, 12:26 am

Does quantitative trading really work?

November 23rd, 2010, 10:17 pm

To begin, I am a pure math student but with no finance background at all. Now the question, suppose I was to read and understand very well 20 of the most highly regarded quantitative finance books around and be able to do most of the exercises in them etc. Could I then apply (some of the less risky) strategies in those books and consistently make money (at modest returns, say 5% more than what a bank would offer if I had put my money in a bank account) in the markets be it derivatives, bonds or whatever? Let's also assume that I was to work really hard on learning the theory and doing the research on data etc.Any input would be welcomed.
Last edited by zill on November 22nd, 2010, 11:00 pm, edited 1 time in total.
 
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acastaldo
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Joined: October 11th, 2002, 11:24 pm

Does quantitative trading really work?

November 24th, 2010, 2:20 am

Do you think that if you read 20 modern Chemistry books you will be able to turn lead into gold?Do you think that if you read 20 books about tennis you will be able to win Wimbledon and marry Elena Dementieva?Pick up just one (not 20) Finance textbooks and get a feel for what modern Finance is; you will see that it (surprisingly to you) does not really consist of easy recipes for making money.
 
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DevonFangs
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Joined: November 9th, 2009, 1:49 pm

Does quantitative trading really work?

November 24th, 2010, 6:53 am

i) Often the only way QF can help you make money is by getting you a job (in which you don't actually have to trade anything)ii) IMHO "reading and understanding well" 20 books can take a lifetime. But obviously this depends on the definition of "well".iii) What books should I read to get to marry Dementieva?
Last edited by DevonFangs on November 23rd, 2010, 11:00 pm, edited 1 time in total.
 
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DevonFangs
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Does quantitative trading really work?

November 24th, 2010, 6:53 am

 
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farmer
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Joined: December 16th, 2002, 7:09 am

Does quantitative trading really work?

November 24th, 2010, 11:06 am

High frequency quantitative trading really works, because it increased your ability to make wise investment-allocation decisions. Suppose you can make $12% opening a MacDonalds and 13% running a quant trading program. The nice thing about quant trading is the sort of bets you and your competitors make, and the amount you are willing to lose on a single bet, is much more predictable. So you can make a realistic comparison of these two investments based on volatility expectations.Because in quantitative trading you know some rogue trader has not accumulated $800 billion of copper which will be dumped on the market all at once overnight when his firm discovers. That is not a quantitative style. The flash crash was supposedly a quantitative algorithm, but it was not high frequency because they did not use it to sell $4 billion of stock more than once or twice before if that.So quantitative high-frequency strategies make for more orderly markets, where the biggest risk is your competitor either doing something really stupid one time, or being willing to work for less than you - for the risk-free rate perhaps - consistently.
 
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Gmike2000
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Joined: September 25th, 2003, 9:49 pm

Does quantitative trading really work?

November 25th, 2010, 9:30 pm

Last edited by Gmike2000 on November 24th, 2010, 11:00 pm, edited 1 time in total.
 
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Gmike2000
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Does quantitative trading really work?

November 25th, 2010, 10:43 pm

I want to be a trader
 
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tagoma
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Does quantitative trading really work?

December 2nd, 2010, 11:18 am

hello zill.here, people sounds rough. that's the way the world of finance is ...- i would say that understanding some maths is a good point. reading finance books and hard-studying, too.- but, you shouldn't think that you are going to find out recipes to make money in books. that's a matter of model calibration !- nor shouldn't you think that you would "consistently" male money applying a particular technique. it is a fast-paced and fast-changing environment.- on the other side, you will discover that you can implement very basic but profitable trading rules. the other day i was playing around with european rapeseed futures prices (please, don't laugh at me), and zscores (s.d). you actually can money with that ! (i ignore transaction costs and margins).- you should consider Paul Wilmott on Quantitative Finance in your reading list. i like very much when he speaks about the "randomity" of the markets. he then comment that the few funds that beat the market, do it "only by chance" (cf somewhere along the first chapters).- if you want to become a trader, you shouldn't let any doubt comes over you. you want to be a good trader, don't you? then, you will sure make money.- all that above IMHO.
 
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kinderchocolate
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Joined: April 28th, 2010, 1:19 am

Does quantitative trading really work?

December 9th, 2010, 11:48 pm

I think the poster misunderstood what financial mathematics is really is. It's simply a mathematics tools for modeling.
 
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eh
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Joined: March 2nd, 2010, 9:26 am

Does quantitative trading really work?

December 12th, 2010, 11:04 am

Reading books will give you an idea about how to structure profit making trades. The trades that are actually executed by hedge funds are often refined versions of those you read in books (with higher Sharpe ratios).It is very difficult to understand the actual process of executing trades from books. You really need the help of experienced traders. For example, how do make sure that brokers are not squeezing you too hard on fees? When do you roll your futures positions?Finally, the return from investing is random. Suppose you expect to make libor+5% profit in a year, but with 5% probability you will lose more than 5%. Have you the balls and the capital to believe in your strategies after losing 5%? If you are leveraged in your trades, losses could be 15% or more with 5% probability.Making money in financial markets is not easy.
 
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Anthis
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Does quantitative trading really work?

December 12th, 2010, 1:04 pm

QuoteOriginally posted by: eh Finally, the return from investing is random. Suppose you expect to make libor+5% profit in a year, but with 5% probability you will lose more than 5%. Have you the balls and the capital to believe in your strategies after losing 5%? If you are leveraged in your trades, losses could be 15% or more with 5% probability.Who is only 3:1 leveraged today?
 
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029
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Joined: March 2nd, 2007, 6:39 am

Does quantitative trading really work?

December 17th, 2010, 11:10 am

It takes a lot of stamina, experience and time but I know quite a few people how make a decent living out of consistently beating the markets in a systematic fashion...
Last edited by 029 on December 16th, 2010, 11:00 pm, edited 1 time in total.
 
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ThinkDifferent
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Joined: March 14th, 2007, 1:09 pm

Does quantitative trading really work?

December 17th, 2010, 11:24 am

QuoteOriginally posted by: DevonFangsi) Often the only way QF can help you make money is by getting you a job (in which you don't actually have to trade anything)ii) IMHO "reading and understanding well" 20 books can take a lifetime. But obviously this depends on the definition of "well".iii) What books should I read to get to marry Dementieva?well if you keep reading fin. math books, the most you can hope for is marrying Kuznetsova. ...I wouldn't want to post her picture here.