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Python For Finance: Algorithmic Trading

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Re: Python For Finance: Algorithmic Trading

#121

Post by legolas2412 »

osrec wrote: post #102
lowpro wrote: post #45

The main issue I found in algo and financial aspects of programming is that the market is a zero sum game, and my intro knowledge of finance and algorithms, even when I know python, are no match for MIT PHD Quants who does it full time. There's no real way to compete with that, and therefore I would lose money, even if the data showed it might be successful in the future, firms and full time workers on algo trading w…

Why do you say it's a zero sum game? If I've learnt anything from my time in finance, it's that the market is definitely not zero sum. The prices you see represent sentiment, not a hard valuation, and someone isn't necessarily losing when you gain. If you really think about it, even entire economies aren't really zero sum as our method of valuation is intrinsically subjective!

If you aren't changing the sentiment, then it is a zero sum game based on the current sentiment.

Adjusted to average growth of stock market (and inflation), it is a zero sum game. You aren't creating value by predicting the future. Just like you don't create value when you predict which lottery ticket will win.

Re: Python For Finance: Algorithmic Trading

#122

Post by rxhernandez »

Berobero wrote: post #100
milcron wrote: post #81

Earlier quoted context omitted.

An economist and a normal person are walking down the street together. The normal person says “Hey, look, there’s a $20 bill on the sidewalk!” The economist replies by saying “That’s impossible- if it were really a $20 bill, it would have been picked up by now.”

This quiq seems to support the original posters thesis, though, no? No one's going to make a living wandering the streets in search of $20 bills.

I think you might be extending this model beyond its boundaries of usefulness.

Re: Python For Finance: Algorithmic Trading

#123

Post by cwyers »

_e wrote: post #109
milcron wrote: post #81

Earlier quoted context omitted.

An economist and a normal person are walking down the street together. The normal person says “Hey, look, there’s a $20 bill on the sidewalk!” The economist replies by saying “That’s impossible- if it were really a $20 bill, it would have been picked up by now.”

This is why models are just for starting a conversation and not for predicting the future. Life has too many variables.

Wall Street isn't paying all those quants to start conversations.

Re: Python For Finance: Algorithmic Trading

#124

Post by ant6n »

SomeStupidPoint wrote: post #110
tryitnow wrote: post #75

Earlier quoted context omitted.

Why on earth do you think the top quant companies will leave alpha on the table for you to snatch up? That sounds too much like wishful thinking to me. Furthermore, if someone is really smart enough to beat the market consistently why on earth would they trade just on their own personal account? Work for a hedge fund and use other people's money to leverage your bets.

Some strategies only work with small investment sizes or require a lot of effort, so don't scale well. Big firms leave tons of (for them) small opportunities on the table, because it's not worth their time. Similarly, there are people who can regularly beat the market that don't have much to offer large funds because their methods don't scale.

Like Buffet who said it's easy to invest even you only have a couple million, and much harder when you have billions.

Re: Python For Finance: Algorithmic Trading

#125

Post by slyfocks »

gnaritas wrote: post #87
tejaswiy wrote: post #27

On a side note, the market continues to do well and I've been noticing this trend of active-trading, real-estate investing gurus crawl out of the wood work selling services. Please do not try to trade actively unless that's your full-time job. Passive investing using index funds is definitely not sexy, but it gets the job done.

> Passive investing using index funds is definitely not sexy, but it gets the job done. Only if you have a significant amount of capital to play with. People looking into active trading are doing it because they don't have the necessary capital to make passive investing meaningful; they're looking for much much larger returns that you can get from an index fund, which necessarily comes with more risk. Traders are gam…

This is extremely reckless investment advice.

Active trading, by definition, incurs higher transaction costs than passive investing. Since transaction costs are generally priced per trade, active trading is more costly on a percentage basis for individuals with less capital.

Re: Python For Finance: Algorithmic Trading

#126

Post by remyp »

ndesaulniers wrote: post #119
hendzen wrote: post #77

If you want to build a real algorithmic trading strategy.. please pick up a real textbook such as Qian's Quantitative Equity Portfolio Management. You should understand the following concepts at a minimum: - Markowitz portfolio optimization (mean-variance analysis) - Beta-neutral portfolios (i.e. using MSCI BARRA, sector ETFs or PCA factors, etc) - Alpha decay - Time series analysis (autocorrelation, GARCH, ARMA proc…

Any others you (or anyone else) recommend?

Evidence-based Technical Analysis by David Aronson is a great intro.

Re: Python For Finance: Algorithmic Trading

#127

Post by martinko »

SirLJ wrote: post #47
lowpro wrote: post #45

The main issue I found in algo and financial aspects of programming is that the market is a zero sum game, and my intro knowledge of finance and algorithms, even when I know python, are no match for MIT PHD Quants who does it full time. There's no real way to compete with that, and therefore I would lose money, even if the data showed it might be successful in the future, firms and full time workers on algo trading w…

Sorry, but this is like saying those CalTech PHD in Computers Science are the best, so no point for me to go into that field... This is like everything in life, not easy, but if you work on it it'll pay out in the end

Not really, since trading is a winner take all game, whereas work in other fields does not have to be.

Re: Python For Finance: Algorithmic Trading

#128

Post by lionyo »

21 wrote: post #62
nickthemagicman wrote: post #25

How is algorithmic trading not equivalent to astrology? Nothing can be predicted because there's way too many confounding factors.

So how do you explain this: When filing for its IPO in March 2014, it was disclosed that during five years Virtu Financial made profit 1,277 out of 1,278 days, losing money just one day.

And that one day was due to a programming error, not a trading error

Re: Python For Finance: Algorithmic Trading

#129

Post by samolang »

hendzen wrote: post #77

If you want to build a real algorithmic trading strategy.. please pick up a real textbook such as Qian's Quantitative Equity Portfolio Management. You should understand the following concepts at a minimum: - Markowitz portfolio optimization (mean-variance analysis) - Beta-neutral portfolios (i.e. using MSCI BARRA, sector ETFs or PCA factors, etc) - Alpha decay - Time series analysis (autocorrelation, GARCH, ARMA proc…

thanks for the recommendation

Re: Python For Finance: Algorithmic Trading

#130

Post by rootsudo »

tejaswiy wrote: post #27

On a side note, the market continues to do well and I've been noticing this trend of active-trading, real-estate investing gurus crawl out of the wood work selling services. Please do not try to trade actively unless that's your full-time job. Passive investing using index funds is definitely not sexy, but it gets the job done.

Don't worry, we have cryptocurrency now. A new, unregulated frontier.
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