The Best Environs For Quantitative Trading

Let me verbalize close a theme that is far to a greater extent than mundane than the commons high-brow theoretical discussions of strategies together with algorithms, only that has no less long-term touching on on the bottom line: what is the best portion environs for query together with execution of quantitative trading strategies?

I convey worked inwards dissimilar portion environments before, together with then I experience qualified to offering an informed opinion.

At Morgan Stanley, I huddled over a desk that is semi-partitioned from the residuum of the office: nobody could consider or bother me unless I or they stood up. At Credit Suisse, I shared an portion amongst 2 other prop trading colleagues, 1 of whom was prone to freely sharing his persuasion on diverse electrical flow affairs amongst his officemates. (On the other hand, he complained my biting an apple tree for luncheon was likewise loud for him.) At Maple, a hedge fund inwards New Jersey, I shared an portion amongst close 100 other colleagues on the trading floor, many of whom were prone to same opinion-sharing temptation.

Here at my ain firm, I sit down inwards solitude (except for my cat) inwards my basement office, my dearest classical FM streaming over the internet, my desktop electronically connected to my partner inwards our Chicago office, our trading servers at Amazon together with elsewhere, together with other clients together with partners to a greater extent than or less the world, only unmolested throughout the 24-hour interval unless I voluntarily option upward the telephone or answer an e-mail or 2nd message.

Can y'all gauge which environs is the 1 I notice the most productive? Which 1 has the to the lowest degree stress? And which 1 contributes most to the bottom draw of piece of occupation of my employers/partners/clients?

(Hint 1: read Timothy Ferriss' majority The 4-Hour Workweek. This guy checks his e-mail alone 1 time a week.)

(Hint 2: my trading Sharpe ratio went from negative to >7.)

P.S. I await forwards to coming together some of y'all at the Automated Trading Conference inwards London this Fri (my verbalize volition get-go at 0900), together with others at my pairs trading workshop on the preceding 2 days.

In Praise Of Etf's

I bring learned about years agone that ETF's are foreign as well as wonderful creatures. Simple, long-only mean-reverting strategies that hold upwards real good on ETF's, won't hold upwards on their gene stocks. (Check out a overnice collection of these strategies inwards Larry Connors' majority "High Probability ETF Trading". He has every bit good packaged these strategies into a unmarried indicator, the ETF Power Ratings, on tradingmarkets.com.) Simple couple trading strategies similar the i I discussed inwards my book, every bit good hold upwards much to a greater extent than poorly on stocks than on ETF's. Why is that?

Well, i obvious argue is that, every bit Larry mentioned inwards his book, ETF's are non probable to acquire bankrupt (with the notable exception of the triple-leveraged ETF's, every bit I explained previously), because a whole sector or terra firma is non probable to acquire bankrupt. So y'all tin sack pretty much count on mean-reversion if y'all are on the long side.

Another obvious argue is that though at that topographic point are word which volition touching on the valuation of a whole sector or country, these aren't every bit frequent or every bit devastating every bit word affecting private stocks. And believe me, word is the biggest enemy of mean-reversion.

But finally, I believe that the upper-case alphabetic lineament weightings of the gene stocks every bit good play a business office inwards promoting mean-reversion. Typically, weighting of a gene stock increases amongst its marketplace pose capitalization, though non necessarily linearly. Perhaps large-cap stocks are to a greater extent than prone to mean-reversion than small-cap stocks? But to a greater extent than intriguingly, tin sack nosotros non build a handbasket of stocks, amongst custom-designed weightings, amongst the objective of optimizing its short-term mean-reversion property? I (and others earlier me) bring done something similar inwards constructing a handbasket of stocks that cointegrate best amongst an index. Can nosotros non build a handbasket that is but stationary (with perchance a constant drift)?

Now, perchance y'all volition concord amongst me that ETF's are foreign as well as wonderful creatures.