5 ms·
There are so many misconceptions on this thread about what makes a good quant trading strategy. First of all, if you're shorting US equities and making 25% ann
by ucha 5y ago
There are so many misconceptions on this thread about what makes a good quant trading strategy.
First of all, if you're shorting US equities and making 25% annually, that would be awesome. Heck, even being flat would be great because a strategy that is long SP500 could also short your equities and be delta-neutral and likely have a much lower volatility for the same return.
Second, so many people are mentioning commissions, trading fees, taxes and so on. Commissions and trading fees are much less than 1 basis point per trade if you use reputable brokerages. That would, at most, amount to a 1-2% in fees per year. Market impact matters but opening and closing auctions are very liquid and represent respectively more than 1% and 5% of the daily volume, probably even more for these kind of ETFs. Shorting fees are also quite small, in the range of 0-2% for liquid ETFs. If you don't hold positions overnight which is your case, you also don't pay to short!
Finally, here's what really matters. Returns by themselves don't matter. If you want a very high return strategy, you can short a long VIX ETF like VXX but every once in a while, you will be down more than a 100% ; it will bankrupt you if your available capital is less than the value of your short. You also need to look at your Sharpe ratio and maximum drawdown. Anyone somewhat experienced could tell you if the strategy is valid by having a look at plot of returns. If it's not too volatile, it could be a good strat.
Edit: addressing shorting fees
- paulpauper 5y agoThis would get killed in a bull market. Financial stocks doubled in 2009
- yaitsyaboi 5y agoYou seem to know your stuff about this. Do you know any good starting points to learn about algorithmic trading? Any youtube channel or book?
- blake1 5y agoIf you’re looking for information on quantitative trading, and are considering relying on a YouTube channel, please just park your money in an index fund and go read about LTCM, Black Tuesday/Friday, Knight Capital, Orange County, and the Global Financial Crisis. Just remember, finance is not like betting on the ponies. It’s worse, because the odds aren’t posted.
- nl 5y agoSpoken like someone who has never done algorithmic betting or trading. It's true there are risks associated with trading. But keep track of the money you have at risk and there is no reason not to have a go. I know more than enough people who have made consistent returns doing algorithmic trading in under-serviced market segments.
- blake1 5y agoActually, I speak as someone who has lost a fair bit of money on algorithmic trading. The pattern I’ve observed is consistent, small gains punctuated by sizable losses. That was in a big market, but if the market segment is small enough, then I would certainly grant that your acquaintances could have had that success. Does put a cap on the gains.
- yaitsyaboi 5y agoI have a day job I just think it would be a fun way to learn some applied ML. Anyway, what’s wrong with learning from YT?
- sbierwagen 5y agoI would expect a youtube channel on stock trading to be similar to a youtube channel about cryptocurrency trading: not just wrong, but actively harmful. Learning about trading on youtube is different from learning about, say, Python on youtube. If a video on programming is incorrect, your program doesn't work. If a video on equity trading is incorrect, the author of the video can take all your money. Video views, upvotes and subscribers can all be purchased. If you have profitable trading strategy that reaps newbies who implement a bad algorithm that you publish in a public video, then you have created a perpetual motion machine. Here's a search for "how to win slots" on youtube: https://www.youtube.com/results?search_query=how+to+win+slots https://www.youtube.com/results?search_query=how+to+win+slot... Thousands of results, millions of views each. Every video is either fake or wrong, by definition. These videos make money for the authors, and the casinos, by taking it from the marks dumb enough to watch and believe them.
- akg_67 5y ago/r/algotrading - Trading Evolved, Andreas F. Clenow - Systematic Trading, Robert Carver - Developing & Backtesting Systematic Trading Strategies, Brian Peterson - Algorithmic Trading, Ernest P. Chan - Algorithmic Trading and DMA, Barry Johnson - Trading Systems, Emilio Tomasini & Urban Jaekle - Evidence-Based Technical Analysis, David R. Aronson - Machine Learning for Algorithmic Trading, Stefan Jansen
- kirse 5y agoI'll spare you the years of money + research, the majority of it all funnels back into "mean reversion" as the core operating principle. Ceteris paribus in terms of information advantages of course. You can get good at eeking out those advantages and exploiting them, but you're talking about making it your job to find financial "security holes" where the reward is printing cash. And there's a lot of really smart people spending a lot of time doing that. And you have to consistently find new holes as each one gets closed by market participants as you reveal your hand. And then you have to ask yourself if that's how you really want to contribute your time to the world. If you don't think it's your calling, best to find products/companies you really believe in and make calculated risk-taking investments. As Carnegie would say "put all your eggs in one basket, and then watch that basket"
- knr2345 5y agoMight checkout this course. The videos are online for free & the syllabus has some pretty good resources as well. http://lucylabs.gatech.edu/ml4t/ http://lucylabs.gatech.edu/ml4t/ The former instructor / creator & author of one of the books eventually joined JP Morgan as a ML research director (cant recall exact title).