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Quantopian wants to Turn Stock Trading Algorithmic

43 points by gusgordon 13y ago

dantiberian 13y ago
A better title would be 'Quantopian wants to turn stock trading algorithmic for everyday investors'. These techniques are used by quants already (as the article states).
- hkmurakami 13y ago
  Well it's a great way for the average investor to get destroyed by transaction fees.
  - ramchip 13y ago
    Why would, say, a VWAP order cause more fees than the equivalent limit orders?
    - U2EF1 13y ago
      I guess his understanding is that trading algorithmically means trading a lot (it doesn't); at low volumes transaction costs dominate.
- rdtsc 13y ago
  Even better 'Quantopian wants to make money by driving investors to use its service'
pavel_lishin 13y ago
Can't wait for Economics 2.0 to harvest the inner solar system.
mililani 13y ago
"Backtest your algorithm, for free, against our 11-year history" Hahahaha, yeah, I don't think so. If you guys are really interested in this sort of thing, the MOST important thing is to have a comprehensive database free of biases and errors. For example, survivorship bias is a huge deal, and I wouldn't trust any platform that isn't serious enough to have a historical dataset that is longer than 11 years long to be free of these kinds of things.
- nether 13y ago
  https://www.quantopian.com/faq https://www.quantopian.com/faq > The data includes all companies that were traded, including companies that have subsequently gone out of business. This is very important in order to avoid survivor bias. Without this complete data set, your algorithms would be be blind to the possibility of bankruptcy and the resulting losses.
  - hkmurakami 13y ago
    They say this yet the data is only 11 years? 110 years and we'll start talking.
  - mililani 13y ago
    Good to see at least that. Personally, 11 years is not enough time to see enough things to Black Monday or the tech crash. Hell, it's not enough time to see a REAL bear monster bear market. Also, what else is included in the database? So far, it just seems that prices are the only thing included. I looked through their documentation, and I can't find things like valuations and accounting data.
    - nether 13y ago
      It's not perfect, but I don't think it's useless. Historical fundamental data are difficult to come by, the only public (not just internally used at a fund) source I know of is http://www.globalfinancialdata.com/Databases/USStocksDatabase.html http://www.globalfinancialdata.com/Databases/USStocksDatabas... and it costs a lot. The vast majority of algorithmic equity trading uses just pricing though.
      - ajays 13y ago
        Why is this? Why is historical data so hard to find, when in fact the stock market is one of the most computer-heavy operations? These are numerical facts, so I don't think copyright applies either. It just surprises me that the data is so inaccessible.
clavalle 13y ago
So, is this an effort by more sophisticated players to plant the seeds for a new market to reap? You know, since algorithmic trading is starting to dwindle as a cash cow.
- balbeit 13y ago
  I think you may be mistaken. High-frequency trading is becoming less profitable as an industry, but algorithmic trading in general is most definitely not.
  - clavalle 13y ago
    Really? As I understand it the world is quickly becoming saturated and major players are starting to take their chips and leave the table. The risk is quickly catching up to the reward and consolidation into a type of commodity equilibrium is inevitable. What areas of algorithmic trading are escaping the Great Chill?
    - gfodor 13y ago
      "Algorithmic trading" is just a broad umbrella that encompasses any trading system where a computer algorithm is making the trades based upon pre-defined rules. Buying the S&P every Tuesday can be considered "algorithmic trading." And of course, the answer to your question about which algorithms are working, they are the ones on the opposite side of the trades of the ones that are losing. (Or, alternatively, the ones you can't read about in academic papers or books.)
      - clavalle 13y ago
        I am not talking about 'warehouse picking order' style algorithmic trades that are designed to make transactions cheaper or more automated merely for convenience. Equilibrium is coming. But that is Ok. Quants can go into material science and model new and useful materials by studying their higher dimensional black hole equivalents [1]. [1] https://www.simonsfoundation.org/features/science-news/signs-of-a-stranger-deeper-side-to-natures-building-blocks/ https://www.simonsfoundation.org/features/science-news/signs...
triplux 13y ago
A friend of mine is working on something remarkably similar at http://QuantConnect.com http://QuantConnect.com
dave_sullivan 13y ago
I'm going to say a couple of things about algorithmic trading and the knee jerk reactionaries. First--there is an industry that makes pretty good money from practicing algorithmic trading. I work with some of them. Some of them do well. However, on the average, returns in that business are subpar. Then again, on the average, most people are idiots. On the average, most startups fail. "On the average" is usually not taken as a reason to not do something by this community (HN), at least allegedly. Second--there are plenty of reasonable issues to raise whenever this comes up. For instance--your average investor is going to have a tough time of this--for starters due to transaction costs, taxes, etc. Then again, your average investor is going to have a tough time of the stock market in general. Again, the average, by definition, is not impressive and can never do any better than--well--average. But we don't want to be in the average. That's the whole point of much of what we do here. Except when it comes to exploiting financial markets, in which case the average is all that matters? Point being--is it possible to have a reasonable discussion about statistical analysis of markets and what, if anything, might be done to exploit any regularities found? Is it really so difficult to believe that regularities in relative price movements exist? And yeah, I get it--there's something generally slimy about the whole industry, and there have been plenty of hucksters over the years (and in the present). Then again... isn't this true for the entire tech industry, more or less? So, you don't have to take part in it, you don't have to learn about it, but can we PLEASE have a better response than "oh, backtesting, that doesn't work, dur"? I mean, yes, there's a fair amount of "lead into gold" type stuff there--but I really don't think it's an unbelievable stretch of the mind to say that regularities exist in markets. No doubt those regularities change, but wouldn't it be interesting to see how quickly and why? And maybe some people can be better at it than others (that doesn't happen anywhere else right?) So yeah, don't get too excited, but then again, don't be so damned pessimistic. Markets are a system like any other, probably some of the most interesting systems around because they are so hard (some say impossible) to grasp.
- tunesmith 13y ago
  I dunno about average algorithmic traders being idiots. I think people have to have a certain level of smartness to even grasp what algorithmic trading is, let along attempt it. If the average return is subpar, then that's out of the people that are smart enough to be in the business, grasp the concept, and try it enough to qualify for whoever's doing the measuring.
gfodor 13y ago
Honestly the only type of algorithmic trading I would trust is algorithmic trading based at least partially on fundamental data, of which Quantopian has none. Good luck to all you momentum/technical types though, I'll be sitting in the corner reading 10k's.
- kyzyl 13y ago
  I'm not aware of any quantopian algorithms that make use of fundamentals, but that doesn't mean they aren't there. There are lots of fundamentals that are available as processed variables (P/E ratios, etc.) which can be used as an indicators of financial health. Now, certainly that doesn't replace roping off an afternoon and diving into the last 5 years of 10K's to get a real understanding of what's happening with that company, but it doesn't mean that algorithmic trading can't include fundamentals. Indeed, considerable effort has been expended trying to intelligently scrape+process 10K's, which are all available from the SEC, in an (semi-)automated way. Also, as a point aside from the one above, in the ideal world markets would be driven entirely by the real value underlying the securities being traded. But that's not the case. Markets are highly influenced by news, to give one example. So to say that only the fundamentals can be trusted is a little bit narrow minded (in the pure sense of the phrase, not meant as a shot at you). I think that particularly as the time horizons of your positions get longer, it becomes more and more critical to include fundamental data in your analysis.
  - gfodor 13y ago
    I never said algorithmic trading can't include fundamentals, quite the opposite, I just said that until Quantopian includes fundamental data, it's not all that interesting to me. P/E barely scratches the surface, I'm talking about all the data revealed in standard financial statements. If I were ever to trust my money to a security selection algorithm, it would have to analyze more than just price movements.
- theorique 13y ago
  Honestly the only type of algorithmic trading I would trust is algorithmic trading based at least partially on fundamental data, of which Quantopian has none. Why fundamental data?

43 points by gusgordon 13y ago

A better title would be 'Quantopian wants to turn stock trading algorithmic for everyday investors'. These techniques are used by quants already (as the article states).

hkmurakami 13y ago
Well it's a great way for the average investor to get destroyed by transaction fees.
- ramchip 13y ago
  Why would, say, a VWAP order cause more fees than the equivalent limit orders?
  - U2EF1 13y ago
    I guess his understanding is that trading algorithmically means trading a lot (it doesn't); at low volumes transaction costs dominate.
rdtsc 13y ago
Even better 'Quantopian wants to make money by driving investors to use its service'

pavel_lishin 13y ago

Can't wait for Economics 2.0 to harvest the inner solar system.

mililani 13y ago

"Backtest your algorithm, for free, against our 11-year history" Hahahaha, yeah, I don't think so. If you guys are really interested in this sort of thing, the MOST important thing is to have a comprehensive database free of biases and errors. For example, survivorship bias is a huge deal, and I wouldn't trust any platform that isn't serious enough to have a historical dataset that is longer than 11 years long to be free of these kinds of things.

nether 13y ago
https://www.quantopian.com/faq https://www.quantopian.com/faq > The data includes all companies that were traded, including companies that have subsequently gone out of business. This is very important in order to avoid survivor bias. Without this complete data set, your algorithms would be be blind to the possibility of bankruptcy and the resulting losses.
- hkmurakami 13y ago
  They say this yet the data is only 11 years? 110 years and we'll start talking.
- mililani 13y ago
  Good to see at least that. Personally, 11 years is not enough time to see enough things to Black Monday or the tech crash. Hell, it's not enough time to see a REAL bear monster bear market. Also, what else is included in the database? So far, it just seems that prices are the only thing included. I looked through their documentation, and I can't find things like valuations and accounting data.
  - nether 13y ago
    It's not perfect, but I don't think it's useless. Historical fundamental data are difficult to come by, the only public (not just internally used at a fund) source I know of is http://www.globalfinancialdata.com/Databases/USStocksDatabase.html http://www.globalfinancialdata.com/Databases/USStocksDatabas... and it costs a lot. The vast majority of algorithmic equity trading uses just pricing though.
    - ajays 13y ago
      Why is this? Why is historical data so hard to find, when in fact the stock market is one of the most computer-heavy operations? These are numerical facts, so I don't think copyright applies either. It just surprises me that the data is so inaccessible.

clavalle 13y ago

So, is this an effort by more sophisticated players to plant the seeds for a new market to reap? You know, since algorithmic trading is starting to dwindle as a cash cow.

balbeit 13y ago
I think you may be mistaken. High-frequency trading is becoming less profitable as an industry, but algorithmic trading in general is most definitely not.
- clavalle 13y ago
  Really? As I understand it the world is quickly becoming saturated and major players are starting to take their chips and leave the table. The risk is quickly catching up to the reward and consolidation into a type of commodity equilibrium is inevitable. What areas of algorithmic trading are escaping the Great Chill?
  - gfodor 13y ago
    "Algorithmic trading" is just a broad umbrella that encompasses any trading system where a computer algorithm is making the trades based upon pre-defined rules. Buying the S&P every Tuesday can be considered "algorithmic trading." And of course, the answer to your question about which algorithms are working, they are the ones on the opposite side of the trades of the ones that are losing. (Or, alternatively, the ones you can't read about in academic papers or books.)
    - clavalle 13y ago
      I am not talking about 'warehouse picking order' style algorithmic trades that are designed to make transactions cheaper or more automated merely for convenience. Equilibrium is coming. But that is Ok. Quants can go into material science and model new and useful materials by studying their higher dimensional black hole equivalents [1]. [1] https://www.simonsfoundation.org/features/science-news/signs-of-a-stranger-deeper-side-to-natures-building-blocks/ https://www.simonsfoundation.org/features/science-news/signs...

triplux 13y ago

A friend of mine is working on something remarkably similar at http://QuantConnect.com http://QuantConnect.com

dave_sullivan 13y ago

I'm going to say a couple of things about algorithmic trading and the knee jerk reactionaries. First--there is an industry that makes pretty good money from practicing algorithmic trading. I work with some of them. Some of them do well. However, on the average, returns in that business are subpar. Then again, on the average, most people are idiots. On the average, most startups fail. "On the average" is usually not taken as a reason to not do something by this community (HN), at least allegedly. Second--there are plenty of reasonable issues to raise whenever this comes up. For instance--your average investor is going to have a tough time of this--for starters due to transaction costs, taxes, etc. Then again, your average investor is going to have a tough time of the stock market in general. Again, the average, by definition, is not impressive and can never do any better than--well--average. But we don't want to be in the average. That's the whole point of much of what we do here. Except when it comes to exploiting financial markets, in which case the average is all that matters? Point being--is it possible to have a reasonable discussion about statistical analysis of markets and what, if anything, might be done to exploit any regularities found? Is it really so difficult to believe that regularities in relative price movements exist? And yeah, I get it--there's something generally slimy about the whole industry, and there have been plenty of hucksters over the years (and in the present). Then again... isn't this true for the entire tech industry, more or less? So, you don't have to take part in it, you don't have to learn about it, but can we PLEASE have a better response than "oh, backtesting, that doesn't work, dur"? I mean, yes, there's a fair amount of "lead into gold" type stuff there--but I really don't think it's an unbelievable stretch of the mind to say that regularities exist in markets. No doubt those regularities change, but wouldn't it be interesting to see how quickly and why? And maybe some people can be better at it than others (that doesn't happen anywhere else right?) So yeah, don't get too excited, but then again, don't be so damned pessimistic. Markets are a system like any other, probably some of the most interesting systems around because they are so hard (some say impossible) to grasp.

tunesmith 13y ago
I dunno about average algorithmic traders being idiots. I think people have to have a certain level of smartness to even grasp what algorithmic trading is, let along attempt it. If the average return is subpar, then that's out of the people that are smart enough to be in the business, grasp the concept, and try it enough to qualify for whoever's doing the measuring.

gfodor 13y ago

Honestly the only type of algorithmic trading I would trust is algorithmic trading based at least partially on fundamental data, of which Quantopian has none. Good luck to all you momentum/technical types though, I'll be sitting in the corner reading 10k's.

kyzyl 13y ago
I'm not aware of any quantopian algorithms that make use of fundamentals, but that doesn't mean they aren't there. There are lots of fundamentals that are available as processed variables (P/E ratios, etc.) which can be used as an indicators of financial health. Now, certainly that doesn't replace roping off an afternoon and diving into the last 5 years of 10K's to get a real understanding of what's happening with that company, but it doesn't mean that algorithmic trading can't include fundamentals. Indeed, considerable effort has been expended trying to intelligently scrape+process 10K's, which are all available from the SEC, in an (semi-)automated way. Also, as a point aside from the one above, in the ideal world markets would be driven entirely by the real value underlying the securities being traded. But that's not the case. Markets are highly influenced by news, to give one example. So to say that only the fundamentals can be trusted is a little bit narrow minded (in the pure sense of the phrase, not meant as a shot at you). I think that particularly as the time horizons of your positions get longer, it becomes more and more critical to include fundamental data in your analysis.
- gfodor 13y ago
  I never said algorithmic trading can't include fundamentals, quite the opposite, I just said that until Quantopian includes fundamental data, it's not all that interesting to me. P/E barely scratches the surface, I'm talking about all the data revealed in standard financial statements. If I were ever to trust my money to a security selection algorithm, it would have to analyze more than just price movements.
theorique 13y ago
Honestly the only type of algorithmic trading I would trust is algorithmic trading based at least partially on fundamental data, of which Quantopian has none. Why fundamental data?