Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Ask HN: How to get into quantitative trading?

news.ycombinator.com

Post reply on HN
Print view View original

21–30 of 85 posts

Re: Ask HN: How to get into quantitative trading?

#21

Post by chronic74930 »

worik wrote: post #17

You should know this is a really bad idea, unless loosing money is your goal "Automated" trading, even if there is an edge (and unless you are a crook, there is not) will sink you with transaction costs You should know this.

> You should know this.

Anyone who worked in quantitative trading knows you can consistently outperform the S&P500/VTI/SPY over 20+ year horizons.

Buy and hold passive US equity index funds gives a Sharpe ratio of ~0.7 with annual return of 8-10%. Meanwhile, high frequency trading does upward of Sharpe 10+ with 40-60% annual return, with 10+ year track records, of course.

Hell, even Citadel hedge fund, after their ridiculous 50% performance fee, returned 19% _after fees_ annually to outside passive investors over 20 years. And this is billions of AUM, so the ”quant don’t scale” argument goes out the window.

Why is nobody talking about this? Because the elite politicians and businessmen invest in these very quant funds, and thus suppress any news or regulation. Sucks for middle class professionals with <$5M net worth.

Re: Ask HN: How to get into quantitative trading?

#22

Post by panarky »

chronic74930 wrote: post #21
worik wrote: post #17

You should know this is a really bad idea, unless loosing money is your goal "Automated" trading, even if there is an edge (and unless you are a crook, there is not) will sink you with transaction costs You should know this.

> You should know this. Anyone who worked in quantitative trading knows you can consistently outperform the S&P500/VTI/SPY over 20+ year horizons. Buy and hold passive US equity index funds gives a Sharpe ratio of ~0.7 with annual return of 8-10%. Meanwhile, high frequency trading does upward of Sharpe 10+ with 40-60% annual return, with 10+ year track records, of course. Hell, even Citadel hedge fund, after their ri…

Nobody's saying that alpha doesn't exist.

But before you unleash your automated proprietary model, you should be able to explain why you think you have any edge whatsoever over your far better funded, far more experienced counterparties.

And, no, getting great results from backtesting your model is not evidence of edge in the future against adversaries with access to better data than you have.

Re: Ask HN: How to get into quantitative trading?

#23

Post by cltby »

worik wrote: post #17

You should know this is a really bad idea, unless loosing money is your goal "Automated" trading, even if there is an edge (and unless you are a crook, there is not) will sink you with transaction costs You should know this.

> (and unless you are a crook, there is not)

What sort of shenanigans do you think profitable automated traders are engaged in?

Re: Ask HN: How to get into quantitative trading?

#24

Post by [deleted] »

chronic74930 wrote: post #21
worik wrote: post #17

You should know this is a really bad idea, unless loosing money is your goal "Automated" trading, even if there is an edge (and unless you are a crook, there is not) will sink you with transaction costs You should know this.

> You should know this. Anyone who worked in quantitative trading knows you can consistently outperform the S&P500/VTI/SPY over 20+ year horizons. Buy and hold passive US equity index funds gives a Sharpe ratio of ~0.7 with annual return of 8-10%. Meanwhile, high frequency trading does upward of Sharpe 10+ with 40-60% annual return, with 10+ year track records, of course. Hell, even Citadel hedge fund, after their ri…

[deleted]

Re: Ask HN: How to get into quantitative trading?

#25

Post by chronic62625 »

phibz wrote: post #11

The SEC rules if you're in the US are quite strict. You likely wouldn't be able to do quantitative trading own your own while working at a quant. Though, it might help you get hired as a modeler.

> You likely wouldn't be able to do quantitative trading own your own while working at a quant

Sell-side bank like JPMorgan, HSBC, then yes you are correct.

Buy-side hedge fund or prop shop, no you are wrong. The SEC/CFTC does not care what you trade in your personal account.

Re: Ask HN: How to get into quantitative trading?

#26

Post by andruby »

greenyoda wrote: post #13
radiusvector wrote: post #10

Earlier quoted context omitted.

I'm a trader who runs a couple of profitable strategies. You can generate alpha by implementing quantitative (or discretionary) strategies as long as you adhere to the basic principles of profitable trading with a strong emphasis on risk management. There are a million possible trading strategies, which of these will suit your personality/risk tolerance/system design is a matter of personal choice.

Could you please say more about what the "basic principles of profitable trading" are, or point us to a reference?

I hope there's more to it than "buy low, sell high"..

Re: Ask HN: How to get into quantitative trading?

#27

Post by paulpauper »

prakhar897 wrote: post #9

Noobie Question: Does this actually work? I thought alpha was very little and always fleeting so only big hedge funds generate profit from it.

there is always new stuff if you are astute enough to find it. look at r/wallstreetbets...some guys making tons of $ consistently there, albeit there is lot of survivorship bias too. position sizing is key. you run tests on certain strategies, like buying 0-day calls on dips in the morning, flip for profit at close. Use Kelly formula to optimize position size. etc.

Re: Ask HN: How to get into quantitative trading?

#28

Post by KRAKRISMOTT »

Your biggest problems will be brokers, data, and capital. The coding part of quant finance is surprisingly boring (unless you are doing HFT but most aren't). For infrastructure just use AWS and co-locate next to the exchange (especially if you are doing crypto where everything's in the cloud). For data try https://databento.com/, there are also other sources.

Affordable data, especially tick level L3 data at scale is difficult to get. Having enough capital to make trading worth well (pricing in losses etc.) is also difficult. Direct market access etc. all cost money. Use interactive brokers if you need a compromise between fully professional and amateur. Spend more time on your financial models, and less time building beautiful frameworks. The engineering of quant finance is the least interesting part. Focus on the market microstructure and financial models. If your model is bad, you lose money regardless of how great your infra is.

It's difficult to find a good off the shelf backtester. This ties into your model too. At its core, a backtester is just a for loop. Computation of variables like slippage and integration of monte Carlo Sims is where the secret sauce lies. Those are all proprietary.

Best of luck in seeking alpha

Re: Ask HN: How to get into quantitative trading?

#29

Post by paulpauper »

worik wrote: post #17

You should know this is a really bad idea, unless loosing money is your goal "Automated" trading, even if there is an edge (and unless you are a crook, there is not) will sink you with transaction costs You should know this.

then how does renaissance technologies make so much?

it can be done...no one say it is easy, but it's doable

Re: Ask HN: How to get into quantitative trading?

#30

Post by metabro »

chronic74930 wrote: post #21
worik wrote: post #17

You should know this is a really bad idea, unless loosing money is your goal "Automated" trading, even if there is an edge (and unless you are a crook, there is not) will sink you with transaction costs You should know this.

> You should know this. Anyone who worked in quantitative trading knows you can consistently outperform the S&P500/VTI/SPY over 20+ year horizons. Buy and hold passive US equity index funds gives a Sharpe ratio of ~0.7 with annual return of 8-10%. Meanwhile, high frequency trading does upward of Sharpe 10+ with 40-60% annual return, with 10+ year track records, of course. Hell, even Citadel hedge fund, after their ri…

How many hedge funds are there? A few thousand? How many beat the s&p? Of those how much can be attributed statistically to skill rather than luck?
Post reply on HN