Quant Macro Investing

Risk Taking Disciplined


Feedback from a new friend nicknamed “Blackeyes”,  a graduate student from a local university:




I went through your blog. And following is part of my understanding of quantitative trading.

The aim of trading is clear and simple. Make profit, and more.

Trading strategy is critical in the trading process. At the same time, trader should trade consistently and make sure the emotion will not influence the executions. There is a saying “plan the trade and trade the plan”.

Why quantitative trading could be profitable? Quantitative trading is actually an electronic system which can trade automated according to the rules, or in other words trading strategies, designed by traders. There are several advantages of quantitative trading. Firstly, it is unemotional. Secondly, it is fast. Thirdly, it can focus on the whole market at the same time.

There are already many trading strategies. But we can’t make profit without adjustment. The market environment is changing, which means a strategy that was profitable in the past could be catastrophe in the future. This also implies that even we have a profitable strategy right now, we have to keep an eye on it and prepare for accidents and adjustments. We also have to build the strategies suitable for ourselves out of hundreds of ideas according to our capital, and other available resources.

Before we step into trading in real market, we have to backtesting our strategy using historical data. And we have to pay attention to many pitfalls which will incur big loss even when our strategy has good performance in the past, such as different liquidity cost, survivorship bias, market impact, regime shifts, data-snooping bias, etc..
Risk control and preparations for unpredictable accidents should be kept in mind.

September 7, 2009 - Posted by | Uncategorized

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