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Yes. I've developed a simple strategy that algorithmically trades cryptocurrencies (mainly ETH and BTC because volume, but it would apply successfully to any of the others as well). The strategies are simple, they are based on simple technical indicators, and result in about 2 trades executed per day. The strategy can be applied to "normal" equities as well but it performs particularly well on cryptocurrencies due to…
Pure voodoo
Earlier quoted context omitted.
There isn't an easy answer for this. Large hedge funds have entire teams whose only job is to collect, process, and clean data.
I know, which makes me wonder how/why people are doing algorithmic trading on the side when they don't have a reliable way to backtest. I don't want minute by minute data. Average price for the day is fine with me. Or max/min/average.
Careful... If I was making a lot of money via an algorithm; I'd want to keep it secret. Otherwise, once other people knew about my algorithm, they'd try to game the system.
Using a simple EMA crossover signal with RSI and volume support is quite sufficient to make lots of good trades, one big reason being the fact that a lot of traders actually use the very same indicators, and self-fulfilling the prophecy.
It takes more than just reading a few indicators to consistently trade successfully, but my point is that many 'algorithms' and 'trading systems' only really work when they are well known.
I hacked together my own scripted system that would arbitrage cryptocurrency across exchanges. It worked (for the most part), but it's been abandoned now. The best way I can think of to describe why is to say that while the low hanging fruit exists, there's far too little juice in it for it to be worth the squeeze. Others have explained that the problem they've encountered is counter-party risk in that some exchanges…
I spent the last few months trying to build an arbitrage bot and ran into exactly the same issues. If there's a big price differences there's always a reason, either deposits or withdrawals are temporarily offline, or the fee for transferring or depositing is too high, or for some very small coins it can takes ages to transfer (one transfer took 6 hours, another took a whole week!). Otherwise the volume is so low tha…
At least one exchange that I know of was front-running me.
I'm not saying which exchange it was as I don't want to get trouble for outing them - but it was definitely going on.
I tested this by putting in orders at times of low activity (i.e. nothing for minutes, then I'd place an order, and the best offers would be taken up by a "bid" that came in ahead of me. This could happen in theory but when it's happening as the order is received there's no realistic chance of it being anything else).
To run a successful strategy requires strong signals (indicators that dictate what to buy/sell and when), execution (actual filling of orders on exchanges), risk management (which can include statistical risk modelling as well as draw-down controls), and infrastructure (the wrong type of bug can be costly enough to kill the whole operation!).
As mentioned earlier, there is overlap in the skills and experience required for these broad categories, but people in the quant hedge fund/asset management industry typically specialize in one. This is where larger shops have an advantage. The entire strategy is only as good as its weakest link. Its common for people who haven't worked in the space to focus mostly, or even exclusively, on the signals and infrastructure aspects.
If you were to group most of the successful quant funds out there by alpha time horizon you would see that funds within the same bucket are generally running very similar types of strategies using very similar signals (the general concepts behind successful signals/execution of varying time horizons are actually not that complicated, but just might take a while to explain). Again, that's not say its easy to do. With most of the equities and derivatives markets getting ever more efficient, tighter coordination and implementation of the entire strategy pipeline (signals, execution, risk mgmt, infrastructure) can lead to significant Sharpe/Information ratio improvements.
If you wanted to get a feel for how some successful people in the industry think about the problem, I would recommend reading through the following books in roughly the corresponding order:
1 - https://www.amazon.com/Efficiently-Inefficient-Invests-Marke...
2 - https://www.amazon.com/s/ref=nb_sb_noss_1?url=search-alias%3...
3 - https://www.amazon.com/Active-Equity-Management-Xinfeng-Zhou...
And I didn't personally like this one so much but its quite popular among the more "academic" types
4 - https://www.amazon.com/Active-Portfolio-Management-Quantitat...
I hacked together my own scripted system that would arbitrage cryptocurrency across exchanges. It worked (for the most part), but it's been abandoned now. The best way I can think of to describe why is to say that while the low hanging fruit exists, there's far too little juice in it for it to be worth the squeeze. Others have explained that the problem they've encountered is counter-party risk in that some exchanges…
If someone says they will pay you $3 for an apple, you don't run out and buy 100 tons of apples. You first need to see how much they will pay for the second apple, the third apple, a ton of apples, 10 tons of apples, etc.
I made some good money (millions) in 2017 by algo trading crypto. Now in 2018, the bear market is on, but my pnl is still decent. I collected data, trained models, wrote execution strategies, automated everything. I was successful because I was moving fast, trying things, breaking things, etc. While crypto was and still is my turf, I think I could also do well in the stock market. The problem is that the entry barrie…
Wow, congrats and well done. Looks like you don't have to apply to jobs anymore ;) - What was your initial investment? - And did you have any trading experience to come up with those strategies or learned on the go?
learned on the go, but had access to friends in hedge fund business
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Interactive Brokers has a paper trading account. so you can test your trades in real time but not make any money. I couldn't image going into production right away. My algo are good, but they also have some loops that kept buying stock, when it should have stopped. Thankfully it was just paper trading.
I backtested thoroughly and paper traded before going live. Paper trading is nothing like real money trading. That's also one of the first things you learn, it's like a different dimension.
A newer quant will be incentivized to create an equity strategy because the data is available and the markets are liquid. Because the equity markets have been automated for so long, a lot of the inefficiencies and arbitrage opportunities have been leveraged. If a user were to come across an opportunity, it would most likely disappear quickly, which then can lead to your strategy hemorrhaging capital.
An alternative would be to secure data feeds and invest time in less heavily traded securities, trading liquidity for reduced competition. This becomes a much scarier idea, because you may not be able to exit your positions if they slide away from you. It would generally be hard to get the right to trade these securities without large amounts of capital or a big name behind you, but this is part of your advantage.
I wonder whether the premise of your question is faulty. If you ask enough people: "In your last 100 flips of a coin, did you get more than 60 heads?" some will truthfully say "Yes." Unfortunately, that does not mean there's anything special about their coin-flipping strategy, or that you will be able to generate a successful coin-flipping strategy. My guess is what you really want to know is "What is my expected gai…
The market is negative sum, so any abstract strategy has an expected excess return which is negative. It should be everyones assumption without competing evidence
Algorithmic strategies include such gems as "buy on mondays and sell on thursdays", and there is no inherent magic to them making them better than my "buying stocks with names I like".