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Ask HN: How to get into quantitative trading?

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

#41

Post by MuffinFlavored »

radiusvector wrote: post #10
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.

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.

Slightly related: what are "big players" more likely to do to get exposure to the S&P directionally: 1. SPY shares long/short on margin/leverage

1. SPY options

1. SPX options

1. /ES e-mini futures

1. a blend of all

Does one trump another in popularity?

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

#43

Post by kwant_kiddo »

this makes me believe you never were in a quant shop, sorry. At least if your goal is making money.

I think it can be a fun project to make an engine, and try to make models, together with some form of ingestion pipeline and finally solve and calibrate the models. Try some simple products, and see how close you can get to real world prices.

Making pricing/risk engines are in my opinion somewhat close to game engines even through that the domain is so different.

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

#44

Post by paulpauper »

bmitc wrote: post #38
bluepizza wrote: post #31

Earlier quoted context omitted.

RenTech remains a touchy subject, as their only high performing fund is closed to external investors. Their available to the public stuff performs much less than their closed fund.

Medallion was open to external investors. They closed it because Medallion has an approximate $10 billion cap before it moves the market too much and starts losing money and thus they just keep it to themselves. So they no longer need capital from outside investors. And why make others money when you can make yourself money? Their other funds can't just do what Medallion does, otherwise you are just increasing the ca…

which is why they aren't successful.

fixed it

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

#45

Post by jairuhme »

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…

Citadel isn't making the bulk of their alpha from simply finding an edge, its making trades in dark pools based on trade information they receive for executing trades. The individual trader won't be able to make trades at the speed required when finding small price discrepancies, nor would they have the capital to really earn anything.

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

#46

Post by jleahy »

MuffinFlavored wrote: post #39
chronic74930 wrote: post #21

Earlier quoted context omitted.

> 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…

Slightly related: what are "big players" more likely to do to get exposure to the S&P directionally: 1. SPY shares long/short on margin/leverage 1. SPY options 1. SPX options 1. /ES e-mini futures 1. a blend of all Does one trump another in popularity?

ES trumps the others.

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

#47

Post by MuffinFlavored »

jleahy wrote: post #46
MuffinFlavored wrote: post #39

Earlier quoted context omitted.

Slightly related: what are "big players" more likely to do to get exposure to the S&P directionally: 1. SPY shares long/short on margin/leverage 1. SPY options 1. SPX options 1. /ES e-mini futures 1. a blend of all Does one trump another in popularity?

ES trumps the others.

Nice, thanks. I wonder by how much. Here is why I ask:

a lot of technical analysis is done on psychological levels related to (in my opinion) SPY strike prices/SPX strike prices/SPX levels.

Yet, /ES is typically 20 points ahead of SPX. For example, there can be a battle zone of support/resistance at 4900 on SPX, but /ES blew past it a day ago. I wasn't sure if one had more power/prominence than the other.

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

#48

Post by jleahy »

MuffinFlavored wrote: post #47
jleahy wrote: post #46

Earlier quoted context omitted.

ES trumps the others.

Nice, thanks. I wonder by how much. Here is why I ask: a lot of technical analysis is done on psychological levels related to (in my opinion) SPY strike prices/SPX strike prices/SPX levels. Yet, /ES is typically 20 points ahead of SPX. For example, there can be a battle zone of support/resistance at 4900 on SPX, but /ES blew past it a day ago. I wasn't sure if one had more power/prominence than the other.

The spread between SPX and ES is purely mechanical. It’s a function of expected future interest rates and dividends over the remaining life of the future.

There is no such thing as support/resistance in reality.

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

#49

Post by bluepizza »

bmitc wrote: post #38
bluepizza wrote: post #31

Earlier quoted context omitted.

RenTech remains a touchy subject, as their only high performing fund is closed to external investors. Their available to the public stuff performs much less than their closed fund.

Medallion was open to external investors. They closed it because Medallion has an approximate $10 billion cap before it moves the market too much and starts losing money and thus they just keep it to themselves. So they no longer need capital from outside investors. And why make others money when you can make yourself money? Their other funds can't just do what Medallion does, otherwise you are just increasing the ca…

It was closed to external investors in 1993, and had gains of 98% in 2008, in the middle of an economic meltdown.

How come they figured it out for one single fund, but aren't able to make any alternative strong strategies except the secret and closed one?

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

#50

Post by chaosmonger7 »

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…

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